Rendered Imperfect - Case Study Example

When A Contract May Be Rendered Imperfect: A Case Study Test Case Edward Grayson had worked abroad for sometime so when he went home to marry Frances Gurney in February 2008, they had no house of their own and had to establish domicile in an old house owned by Edward’s cousin, Charles Woodward, for which they would pay £650 per month. Three months after Edward and Frances occupied the house, Charles came to visit and complimented the couple for the improvements they introduced on their own initiative, saying he liked the wallpaper in lively red, orange, gold and purple colours. Edward told Charles he and his wife spent £600 for the whole redecorating works, which Charles is obliged to reimburse under a practice in UK that requires landlords to assume payment for all interior decorating of homes done by tenants. Charles said he did not consider Edward and Frances as tenants, their occupancy of his house being a family arrangement but he nonetheless agreed to reimburse the £600 as a way of showing his appreciation to the nice work done by Edward and Frances on his house. However, Charles’ wife Drusilla dissuaded him from making the payment upon hearing of the plan, objecting primarily to the choice of wallpaper colours. Drusilla told Charles: “You’re not paying them a penny. The colours they have chosen are disgusting. We’ll redecorate the house as soon as they moved.” Thus influenced by his wife, Charles phoned Edward the next day to say he changed his mind about paying. Edward then riposted that if Charles reneges on his word about paying the £600 in May, he would not pay his monthly rent of £650 for June. So when by the end of May Edward failed to receive a £600 cheque from Charles, he instructed his bank to withhold the £650 payment for his rent falling due in June. Can Charles take legal action against Edward for refusing to pay his June rent while insisting that it is within his right to avoid reimbursing the latter for that home improvement expense? Which of Charles and Edward is liable for breach of contract? Relevant Principles of Law There is a popular notion that a contract is more binding when the agreement is expressed in written form and less enforceable when done verbally or when there is a special relationship between the two parties involved. On the first point, the law is clear that a contract is equally binding and enforceable whether written, oral or implied (Findlaw, online). In our test case, the contract for Edward and wife Frances to pay £650 in monthly rent for their occupancy of Charles’ house is either an implied and oral agreement or both. Either way, it is just as enforceable as a written contract since Charles presumably offered his house to Edward, Edward accepted the offer for a certain consideration, and there was an intention to create a landlord-tenant relationship. A contract does exist even if Charles and Edward are cousins or even brothers. According to the contract law, a contract is formed once there is an offer, acceptance, consideration and an intention to create legal relations (Boone; Commercial Contracts, online). All of these elements seem to be present when Edward and his wife Frances occupied the house of Charles. When Edward and wife declined to fulfill their part of this agreement by withholding payment for their June rent, they in effect breached the contract on their occupancy of Charles’ house. Breach of contract may be legally excused only in cases of force majeure, in which the contracting person cannot comply because of circumstances beyond his control. Thus, breach of contract is often defined as the failure without legal reason to comply with the terms of a contract. In the case at bar, there is no overpowering reason for Edward and his wife to withhold their monthly rent. Even the special relationship between Edward and Charles could not be used as an excuse by Edward for this action because, as set in Barton v Armstrong (1976) AC 104, when there is any special relationship between the contracting parties, only the court has the responsibility to determine whether a relationship of trust and confidence exists for it to render the contract invalid or imperfect (McKendrick, 2005). Legal Advice The legal remedy available for Charles and his wife Drusilla is to file a civil action against Edward and his wife for breach of contract in a single act involving non-payment of money payable. Based on the contract law in England and Wales, Charles may claim for such payment or apply for an interim injunction to prevent the breach (‘Lectric Law Library). As indicated, Edward and wife are expected to justify their non-payment of their June rent as a quid pro quo after Charles refused to reimburse his expense for the home decoration that he (Edward) and his wife Frances had undertaken. However, Charles stands in solid ground here since there is no law that says landlords are under obligation to reimburse tenants for any improvements they introduced in the rented house. This is only a custom or practice popular in UK. In fact, when Charles promised the £600 reimbursement to Edward and Frances he did so more out of goodwill than anything else. Charles made it clear then that he only planned to pay as his way of saying thank you to Edward and Frances for what he thought were their nice work. In other words, the supposed payment was more of a family gesture than a regular landlord-tenant exchange. The problem was that his wife Drusilla objected, mainly because of the choice of wallpaper colours. If the £650 monthly rent set by Charles for the use of his house by cousin Edward and his wife is lower than the prevailing market rates, then it is indeed a family arrangement. In this case, the contract is between family members and there is a possibility that the court may vitiate that contract. That will happen if the court decides that the contract never came into existence because of the special relationship, one or both parties declare the contract ineffective at their behest, or neither party has recourse to a court for remedy (McKendrick, 2005). This means that Charles is entitled to the monthly rent and he may or may not reimburse the £600 he promised to Edward. In breach of contract cases, the courts usually exhaust all means for the two parties to reach a private agreement or agree to an out-of-court settlement, especially when there is no public interest involved and none of the parties has engaged in willful and gross negligence. Another reason is that in countries like UK and the US, punitive damages are generally not awarded for breach of contract. What the courts often do is enter an equity decree or award an injunction or specific performance. If Charles insists on prosecuting Edward for breach of contract, the legal costs and fees he might sustain are not commensurate with the £650 he would collect from Edward. Moreover, the family relationship will be ruined forever. References 1. Boone, K. “Consideration.” Available online at: http://www.kevinboone.com/lawglos_ConditionsAndWarranties_html 2. Commercial Contracts. “Formation of Contracts.” Available at: http://www.out-law.com/page-396 3. Findlaw. “Breach of Contract.” Available at: http://smallbusiness-findlaw-com/business-forms-contracts/business-forms-contracts-overviews-breaching-html 4. Helpline Law. “Terms, Conditions and Warranties.” Available at: http://www.helplinelaw.com/docs/saleofgov/3.php 5. ‘Lectric Law Library. “Breach.” Available at: http://www.lectlaw.com/def/6113.htm 6. McKendrick, E. (2005). “Contract Law – Texts, Cases and Materials.” Oxford University Press. Read More