Contract Law - Breach of Contract and Remedies - Assignment Example

 Contract Law Law of Contract: Law of contract is not something classic, archaic or out of date subject. The contract law forms a body of rules and regulations that form a living area in which we take part on daily basis. In a society, the law of contract is a mean and method used for ensuring social order. The contract law that is used today is the nineteenth century contract law. Its foundations are built on the theories of discrete agreements and promise. These have now been overtaken by a greater emphasis on concepts of reasonableness, good faith, reliance, fairness and other open-ended notions. For each case that comes under the law of contract the approach implied is a mixture of both the classic and new models. However according to some commentators the, modern contract law lacks clear and distinct principles itself and therefore each case has to be treated according to its specific circumstances and conditions. (Mulcahy. Pp 3-4. 2008) A proper law of contract is very important in a society where the trading and exchange of goods and services are important factors in maintaining the economic order. In many of the developing capitalist societies the proper regulation and support for exchange processes of trade and goods and services have to be there. (Mulcahy. Pp 6. 2008) Breach of Contract and Remedies: A breach of a contract is a situation in which one of the parties involved in the contract refuses or fails to fulfil its obligation or duty under the contract without giving any legal excuse or cause. The aim is to put the contract to an end without fulfilling one’s liability. The breach of the contract is usually at the stake of one of the parties involved in the contract and for this reason law gives several remedies for the breach of contract. The remedy that is employed for the breach of a contract depends upon the type of breach, its method, nature and seriousness. When there is a breach of contract the harmed or injured party can claim compensation from the damages that resulted from the breach. The breach declares that the contract is discharged or released and in so doing the involved parties are released from obligations under the contract or forced to perform the obligations. (Fitzgerald and Olivo .pp 129. 2005) The remedies that are generally available in the event of a breach of a contract are damages, specific performance, injunctions, rescission, discharge, quantum meruit and substantial performance. (Fitzgerald and Olivo .pp 131-145. 2005) In the given scenario, there are four types of contracts that took place. We have examined the issues in the scenarios with the help of Judicial and Statutory provisions as follows. 1. Scott and Brown: The first contract was between Scott and Brown for purchasing 50 bags of flour that were actually stolen by Brown. Scott did know that Brown had stolen the flour bags but still paid £10,000 under the agreement. First of all according to The Sales of Goods Act 1983, the contract of sale lacks the implied warranty as the seller is not the owner of the goods being transferred. (Furmston. Pp 50-52. 2000). Here in this case we see that the contract is illegal by statute on formation. A contract, which is expressly or impliedly prohibited by statue, will be void. A simple and classic example of such kind of contract is sharing or passing of the proceeds of stealing. (Gillies. Pp 163. 1988). In such a case the real owner that is from whom the flour bags were stolen can sue any of the person who were part of the contract and possess the goods. This creates a fear of the illegal contract and therefore Scott refuses to take the delivery. Scott knew that the goods being sold was stolen thus they were illegal in performance and hence the contract was an illegal one. According to the law of contract, goods or the money paid cannot be recovered generally if the contract is illegal. (Youngs. Pp 379. 1998). If we assume that Scott was not in pari delicto that is he was not to be more blamed than the defendant (Brown). The court in such a case would take an action that would be intended to impede the carrying out of the contract. For this the best thing to do in such a case, the court would hold that the money paid should be recovered to the plantiff. On the ground of public policy, on principal and on authority, if we find that the money has been paid under a fraudulent contract, and the parties are not in pari delicto, we ought to hold that it may be recovered back. (Finch. Pp 649. 1886) Though, Scott entered the contract with full acknowledgement of the fact that the flour bags were stolen. Scott made the payment in advance but the transaction was prohibited when he did not take the delivery. Under the principle when the transaction or the contract is prohibited by positive acts, to save one set men from another they are said to not to be in pari delicto. (Finch. pp 648. 1886). Even if there is no illegality, the person who suffers from the breach of contract is not always restricted to an Action given in the contract. One who pays for goods and gets none, or rightly rejects those that he does get, can bring an action in unjust enrichment for restitution of the sum paid. ( Birks, 2000) Thus, Scott’s money can be recovered under the above stated principles. He can sue Brown. If we assume that he was in pari delicto. That is equally guilty of illegality even then there is a remedy as he did not take the delivery and backed out before the fulfilment of the contract. Remedy for Breach of Contract: In this case Scott can seek restitution as he resiled from the illegal contract before the purpose of illegality was attained. The court would not deny him any relief even if he is in pari delicto and participis criminis. A similar type of case was that of Bigos v Boustead (1951) 1 All ER 92. (Thompson Pp 76. 1991). According to the law of contract, the person can reclaim the money that was transferred or paid under the illegal contract if he or she repudiates in time. The statement tells us that there are two conditions that must be satisfied. First the Repudiation should be in time and second it should talk place voluntarily that is before a regulatory body intervenes. An example of the case is Hastelow v Jackson. The court held that "If two parties enter into an illegal contract, and money is paid upon it by one to the other, that may be recovered back before the execution of the contract, but not afterwards”. Similarly in Taylor v Bowers, the money paid can be recovered before the contract has been executed.( Swadling. 2000) Another remedy for the breach of such a contract was the payment of money. Under the unjust enrichment doctrine when a contract is breached at the expense of one of the party the other gets an illegal benefit. In this case even when Brown had stolen the good he was still getting paid and as Scott paid but did not take the delivery so it was unjust. Under the principle the actual wrongdoer should not benefit from his or her wrong doing. Thus if a person in the contract has unjustly enriched or benefitted at the expense of other will have to make compensation by paying back the money. (Fitzgerald and Olivo .pp 131-145. 2005) Therefore in this case, Scott can reject the delivery of good, reject the goods or can claim any losses in the breach of the contract through damages. (Furmston. pp 55. 2000) Scott v Ms. Short: The second case in the given scenario is that of between Mr. Scott and Ms. Short. The case is that Scott gave a room on rent to Ms. Short so that she could easily carry out her trade while Scott got a source of livelihood in the form of rent paid. In this case, Scott knew that purpose for which Ms. Short wanted the room. In the first place the contract was illegal. This again was an illegal contract as it was clearly connected to sexual immorality and any contract which is for an immoral purpose is illegal. An example of the case is of Pearce –v- Brooks [1866] when a carriage was rented out to a prostitute for carrying her trade. (Marsh and Soulsby. Pp 170. 2002).According to the law of contract any contract that does something legally wrong cannot be enforced. Prostitution is not illegal act in itself in English law but it is immoral. Thus contracts that promote sexual immorality and are converse to public policy are declared unenforceable and void. (Jones and Benson .Pp 69. 2002) Ms. Short left the room and hired another one without paying any of the rent that was due but the contract being illegal could not be enforced. This was a contract that promoted illegality and hence Scott has no claim. Scott cannot be called innocent of illegality. If he would have been innocent than he could have recovered the rent if he would have immediately evicted the renter like in the case of Jennings v Throgmorton (1825) Ry & M 251 Remedy for Breach of Contract: As mentioned earlier the contract is unenforceable as it is illegal and against the administration of justice. However under keeping in view some facts like Mr. Scott was in need of money and short of funds as well as the clause of unjust enrichment a claim against Ms. Short is possible. In this case if one puts the illegality of the contract at one side, the plaintiff (Scott) has the right to sue Ms. Short for fraud. (Birks, 2000) 3. Ms. Short v Madam George The third case described in the scenario is that of Ms. Short and Madam George. Ms. Short changed her profession to a musical career. She had paid in advance an amount of £12,000 out of the £ 20,000 for hiring the hall. The hall before the first concert was held was destroyed by fire. The claimant in this case Ms. Short was at loss as she had already paid in advance and had no alternative venue for concert as compensation. In this case not only Madam George but also Ms. Short is clearly at a loss. The hall that was completely destroyed by the fir exists no more and hence the contract is void. There is no more way to carry out the contract as there is no alternative for the venue of concert owned by Madam George in this case. The loss to Ms. Short is the payment she made in advance and wanted to recover it from Madam George. The non-performance of the contract is an accidental event in which neither of the two parties was involved or was responsible for. Even the contract did not contain any clause as an alternative strategy in case of an accident that lead to non performance of the contract. In this case we see that it was after the formulation of the contract that the contract became impossible to perform. In this situation the involved parties are partially or wholly relieved from the obligations under the contract. If we examine the case of Taylor v Caldwell (1863) 3 B & S 826 there was a similar situation in which the concert hall was destroyed by fire. And the court declared the contract frustrated. Any money or transferred property in case of a frustrated contract can be recovered and Ms. Short does have a claim here. The reason for frustration of the contract here is the Destruction of the subject matter. Without the hall the contract is impossible to be followed. The contract was for a future time and the payment was made in advance, the accident was not foreseeable and the contract was said to be executed when the hall was used. Therefore when the contract frustrated fulfilment of the contract Ms. Short has the claim to recover her money. (Stone and Devenney. 2010) Remedy for Breach of Contract: Here the contract has frustrated. The frustration of the contract is mainly due to two factors and one of them is the impossibility. In this case the ground for frustration of the contract is the Impossibility of performance. In English law if there is an impossibility to perform the contract is rendered void. This is because of the change in circumstances. The circumstances can be legal or physical impossibility of the subject of the contract. The circumstances were not foreseeable and at the time of formulation of contract the accident was not expected. Destruction of the object of the contract here in this case makes the contract frustrated according to English law of contract. (Rossini. Pp 22. 1998) The breach of contract in this case is the claim for money paid and damages only. When the contract is released or breached it cannot be performed and therefore plantiff can ask for refund restricted to the claiming damages only. (Fitzgerald and Olivo .pp 131-145. 2005) 4. Madam George and Okon: The fourth issue given in the scenario is that of Madam George and Engineer Okon. For starting up her new business she made a contract with Engineer Okon who was from another country to supply her with twenty standing fans. In the contract initially there was given that two of standing fan would be delivered each day however before the final date of end of contract a kind of amendment was made and the contract was appropriate that fans would be delivered before the last date. Madam George made the payment in advance but before the final day war broke out between the two countries. In this case, the outbreak of war is again a condition in which the contract is frustrated as when war broke out it was not possible for Engineer Okon to supply the fans. This again being a case of impossibility of performance. Outbreak of War is a factor clearly stated for the frustration of a contract. The good cannot be delivered in a war and hence outbreak of war prevents the performance of a contract. (Needham .Pp 509. 1999).A similar type of case was that of Metropolitan Water Board –v- Dick Kerr & Co [1918]. Remedy for Breach of Contract: In both the cases of breaking out of fire and outbreak of war, we can say that the money paid in advance was recoverable. After 1943 when the Frustrated Contracts Act was enforced, money paid under a frustrated contract is recoverable and money that was to be paid does not remain payable. In addition, the Frustrated Contracts Act provides that the injured parties can recover any incurred expenses in connection to the contract or at least retain the relevant sum of value from money received. (Kouladis. pp 118. 2006). In this case the injured party was that of so she could recover the money while Okon could not keep the sum of money earned as he did not supply anything or meet the obligations under the contract. References Mulcahy, Linda. 2008. Contract law in perspective. Taylor & Francis. Gillies, Peter. 1988. Concise contract law. Federation Press Youngs, Raymond. 1998. English, French and German comparative law. Routledge, Marsh, S. B. And Soulsby, J. 2002. Business law. Nelson Thornes, Jones, Hugh and Benson, Chris. 2002. Publishing Law . Routledge Thompson, Neil. 1991. The rights of parties to illegal transactions . Federation Press. Stone, Richard and Devenney, James, 2010. Text, Cases and Materials on Contract Law . Routledge Rossini, Christine. 1998. English as a legal language . Martinus Nijhoff Publishers Fitzgerald, Jean and Olivo, Laurence M. 2005. Fundamentals of Contract Law . Emond Montgomery Publication. Finch, Gerard Brown. 1886. A selection of cases on the English law of contract. . Clay in London Needham, David. 1999. Business for Higher Awards . Heinemann. Birks, Peter (2000) "Recovering Value Transferred Under an Illegal Contract," Theoretical Inquiries in Law: Vol. 1 : No. 1, Article 6. Viewed 11th May, 2010: http://www.bepress.com/til/default/vol1/iss1/art6 Kouladis, Nicholas. 2006. Principles of law relating to international trade . Springer. Furmston, Michael. 2000. Sale and supply of goods . Routledge, Swadling, William. 2000. “The Role of Illegality in the English Law of Unjust Enrichment.” Oxford U Comparative L Forum. . Viewed 11th May, 2010: Read More