The Doctrine of Substantial Performance: Mark and JETS - Case Study Example

The Doctrine of Substantial Performance: Mark and JETS Introduction The failure to abide by the stipulations of a contract are tempting for businesses who may find opportunity to recoup perceived losses or even lost contracts for additional incomes. The case of Mark provides a breach of contract of which the question arises out of the right of Mark to pursue damages as well as the right of JETS, the other party, to receive payment from Mark as stipulated in the contract they were both bound. Contracts are executed for several reasons but mainly to protect the interests of the signing parties. Contracts are binding agreements between parties. There are important elements of a contract including the offer to provide what the other party may need, an acceptance on the part of the party being proposed to, considerations, capacity of the provider, and the intention to make the relationship legal (Gilham, 2010). In the case of Mark and JETS, it can be established that Mark desired and needed the services offered by JETS, specifically, the provisions that (d) a Hamletjet 1000 must be available, and one of a list of designated pilots must be on call, 24 hours a day; (e) all pilots will have a jet at the ready for clients’ use within 30 minutes of receiving a request from a client. Since the stipulations were clear, it is assumed that the offered services are vital and strictly followed by both parties and that any violation of the stipulation would render breach of contract or even economic loss on the part of Mark. In the instance that Mark needed a Hamletjet in February 11, and that immediately informed JETS about this need was part and covered by the contract. It is expected that in 30 minutes, the Hamletjet will be available for Mark. Failure of the JETS to provide a transport for Mark is a breach of the stipulations. Inducing Breach of Contract Under the doctrine of substantial performance, Lord Mansfield indicated that in common law, it is a term in the contract that creates an obligation to be performed by one party to the contract, and subsequently, further obligation arises on the side of the other party (The Modern Law Review, 1975). The condition upon which the entire contract, or as a whole, becomes dependent on the conditions indicated on the contract, of which two had been violated by JETS in the disadvantage of Mark. It should be noted that no further agreement was taken after the failure to deliver on the part of JETS. Had the two parties – Mark and JETS – met and discussed to create a new agreement, the case could have taken the route of Hughes v Metropolitan Railway Co., of which Lord Cairns stated that: It is the first principle upon which all courts of equity proceed, that if parties, who have entered into definite and distinct terms involving certain legal results, afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them when it would be inequitable having regard to the dealings which have taken place between the parties (Hughes v Metropolitan Railway, 1877). Lord O’Hagan, on the same case mentioned, noted the failure of one party to oblige upon the agreement of both parties, to which, he commented, “They entered into a covenant: and if they have failed to fulfil their undertaking they must abide the results, however onerous, unless the circumstances excuse their default in the view of a Court of Equity. But if they acted, or failed to act, through a mistake induced by the conduct of the Plaintiff: if they were misled by it into the belief that his strict legal right was abandoned or suspended for the time, he cannot be allowed to take advantage of the forfeiture which was so accomplished.” In Lumley v Gye, it had been ruled out that liability depended upon the contracting party having committed an actionable wrong. Wigman J said, “It was undoubtedly prima facie an unlawful act on the part of […] to break […] contract, and therefore a tortious act of the defendant maliciously to procure […] to do so…” (238). Each of the terms of a contract are conditions or warranty and plays a relative importance in the contract. The nature and the consequences of the breach of contract affects the decision, and conditions are essential stipulations that both parties agree as promises to be performed, delivered, or fulfilled. As such, any breach on the conditions may cause the aggrieved party to terminate the contract. This meant that the parties are no longer bound to further obligations, and that damages may be claimed by the innocent party. It is to be fully understood that the conditions of the contract are the very causes that the contract came to be. Already, the failure to perform any one of the conditions is an indication that the contract had not been honoured. The two conditions were the main reasons that Mark agreed to be bound by the costly contract with JETS. These conditions are that there will be a 24-hour availability of a Hamlet jet for Mark, and that availability commences 30 minutes after he informs JETS of a need for a Hamletjet. In the instance in February 11 that JETS failed to provide for a similar transport and service for Mark, the contract has been violated and that claims for damages should ensue on the part of Mark. In Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, the importance of the stipulations of a contract was highlighted. In the decision, it was stated that, “a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and which was in fact so acted on. In such cases the courts have said that the promise must be honoured where parties enter into an arrangement which is intended to create legal relations between them and in pursuance of such arrangement one party makes a promise to the other which he knows will be acted on and which is in fact acted on by the promisee, the court will treat the promise as binding on the promisor to the extent that it will not allow him to act inconsistently with it even although the promise may not be supported by consideration in the strict sense and the effect of the arrangement made is to vary the terms of a contract under seal by one of less value.” It has been suggested in Tarleton v M'Gawley 1 Peake NPC 270 that damage to economic expectations is sufficient to found a claim. There was an intention on the part of JETS to make-up and subsidise the service with another but the options had been both damaging to the other party, that is Mark. “Damaging” meant that Mark would either succumb to using a competitor’s (Bargain Planes) service or be late in his business appointment, both of which were also two hours available after Mark made a call to JETS. In claiming for damages, it is only consequential that Mark stops paying JETS of any other monies as stipulated in the contract which JETS violated first. As Lord Macnaghten reserved his opinion on whether Lumley v Gye, “"[W]here the act itself to which the loss is traceable involves some breach of contract or some breach of duty, and amounts to an interference with legal rights…the immediate agent is liable” (151-152). Compensatory Damages Under section 1.05, the aim of compensatory damages is to compensate the plaintiff for the loss he has suffered, that is, the loss of the contract with BIG SHOT which he was about to meet in February 11. In addition to this, as Lord O’Hagan stated in Hughes v Metropolitan Railway Co, “If there was real misleading and bonâ fide mistake, it does not matter that the Plaintiff acted honestly and without indirect purpose of any kind. The facts of the misleading and mistake are enough to prevent the forfeiture, although they had their origin in no corrupt intention.” Restitutionary Damages Restitutionary damages have arisen from common law understanding of extracting monetary remedy measured by the gain made by the defendant instead of the loss suffered by the plaintiff (Doyle and Wright, 2001). This may also apply on the case of Mark as the court will see to it that the contract and violation thereof will not cause the defendant (JETS) any income as a result of their actions or failure to do their part, and to remove any profits or other benefits which the defendant has obtained as a result of the actions to the plaintiff (Mark). Instead of compensatory damages which might assume the incomes gained by Mark from a contract with BIG SHOT, it is more appropriate to seek Restitutionary damages. Loss on the part of Mark were evident in the failure of attending the meeting with BIG SHOT who was about to sign a contract with Mark. The conditions stipulated in the contract between Mark and JETS were clear. The two provisions were the main reasons why Mark have chosen to pay premium and enter into a contract with JETS, which was to address his business demand to be ready to meet clients at any days and time with enough notice. In Olley v Marlborough Court Ltd (1949) 1 KB 532), it was stated that reasonable notice be given in order for the parties to be able to perform their end of the contract. For the part of Mark, he gave notice to JETS and that he expected, as stated in the contract, that a transportation will be ready in 30 minutes to service him. As specified by Somervell L.J. in Williams v Roffey Bros & Nicholls (Contractors) Ltd (1989), The learned official referee regarded H. Dakin & Co. Ltd. v. Lee [1916] 1 K.B. 566 as laying down that the price must be paid subject to the set-off or counterclaim if there was a substantial compliance with the contract. I think on the facts of this case where the work was finished in the ordinary sense, though in part defective, this is right. It expresses in a convenient epithet what is put from another angle in the Sale of Goods Act, 1893. The buyer cannot reject if he proves only the breach of a term collateral to the main purpose. I have, therefore, come to the conclusion that the first point of counsel for the defendant fails, (Somervell L.J., 179G). It is clear with JETS that the business and work of Mark requires him to travel on short notice. The premium fees that JETS charges equally substantiate the kind of service they provide, and of which Mark expected. The corporate jet company (JETS) has been engaged by Mark for his kind of lifestyle – that is travelling around the country at short notice. It should be noted that under the contract condition (d), there is a 24 hours on-call pilot designated for Mark, who will be ready in 30-minute notice (e). It is only right that upon the failure of JETS to provide in February 11 a service as promised in the contract, Mark has the option to go on or reject the contract. He has opted to reject, and therefore, no longer obligated to pay the monthly payments of £15,000, and to further claim for damages such as the £20,000 he initially paid JETS. Had there been an absence of failure on the part of JETS, the contract could have been implemented continuously as well as enforceable. There was a perceived wrongful act on the part of JETS for making Mark believe that a 30 minute notice is enough for the availability of a jet or transport that will bring Mark to his desired destination. It was not also indicated in the case nor in the agreement whether there was an impossibility to enforce the request of Mark in February 11, which meant that Mark will travel from Warwick to Edinburgh, both in the United Kingdom. In the case Transfield Shipping Inc v Mercator Shipping Inc (“The Achilleas”) [2008], the court ruled that damages apply for delays in delivery and actual damages covered by the contract. In the case of Mark, extraction of the incomes from JETS for the failure to provide for a jet in February 11 may apply. In addition, the failure of JETS has signalled the end of the contract because JETS failed to provide for what has been promised. In another case Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, the contract was enforced between the parties and that a verbal agreement which was agreed by both parties subsequently waived the validity of the first. It was therefore necessary that the defendant had to pay the Plaintiff the agreed amount on their second verbal agreement. As for the case of Mark, there was no subsequent agreement that invalidated the first contract; therefore, he can file for claims of damages based on the violated contract. In addition, it was suggested in Colbeam (1970) that “The distinction between an account of profits and damages is that by the former the infringer is required to give up his ill-gotten gains to the party whose rights he has infringed: by the latter he is required to compensate the party wronged for the loss he has suffered. The two computations can obviously yield different results, for a plaintiff’s loss is not to be measured by the defendant’s gain, nor a defendant’s gain by the plaintiff’s loss. Either may be greater, or less, than the other,” (122 CLR, 25). This is a deterrent effect that will not also financially benefit Mark to excess aside from his losses. This meant that the defendant’s gain consisted of the plaintiff’s (Doyle and Wright, 2001). In Strand Electric & Engineering Co Ltd v Brisford Entertainments Ltd., the court decided that, “If a wrongdoer has made use of goods for his own purposes, then he must pay a reasonable hire for them, even though the owner has in fact suffered no loss. It may be that the owner would not have used the goods himself, or that he had a substitute readily available, which he used without extra cost to himself. Nevertheless the owner is entitled to a reasonable hire ... The claim for a hiring charge is therefore not based on the loss to the plaintiff, but on the fact that the defendant has used the goods for his own purposes. It is an action against him because he has had the benefit of the goods. It resembles therefore, an action for restitution rather than an action of tort.” This is in keeping with Lord Woolf statement that “‘if the court is unable to award restitutionary damages for breach of contract, then the law of contract is seriously defective,” (Blake [1998] 1 All ER 833, 845.) Therefore, it was important that Mark pursue JETS for all the losses that he had to suffer based on the contract and failure of the JETS to implement the conditions of the contract. Whilst it is tempting on the part of Mark to also pursue other losses caused by JETS’ failure to transport him to Edinburgh in February 11 to sign a contract with BIG SHOT, this will be going too far, and beyond the scope of his contract with JETS. There has been no indication or attached clauses to that effect that where failure of JETS to deliver Mark to his destination, JETS will be liable for all financial losses of Mark, perceived or actual. It will be too much on the part of Mark to go after a perceived income from a contract with BIG SHOT. While a meeting with BIG SHOT was definite, the contract with BIG SHOT was not, which meant it was not enforceable and protected by law. This also meant that even though there was a high assurance for Mark to sign a contract with BIG SHOT, it was not yet fully implementable. Therefore, Mark cannot ask from JETS the expected and lost incomes from the contract with BIG SHOT. Conclusion As provided for by the United Kingdom Contract Law or the Contracts (Applicable Law) Act 1990, the contract between Mark and JETS is a legal relationship enforceable by law. This meant that both parties were bound to fulfil the stipulations or conditions set on the contract. Where JETS failed its promise to provide a transport to Mark on a day covered by the contract, the contract has been violated and that the innocent or aggrieved party, or Mark, can claim for any damages that has been the result of the failure on the part of JETS. It is therefore conclusive that Mark should file and claim for damages as well as stop paying the monthly fees to JETS after the failure to deliver on the part of JETS has commenced. However, it is questionable on the part of Mark to ask for damages from JETS aside from restitutionary damages. Whilst it may be highly possible that Mark should have gained a considerable amount in being present at Edinburgh in February 11 due to the impending contract signing with a client, the contract with BIG SHOT and Mark remained a proposal that needs to be validated prior to being protected and enforceable by law. Therefore, Mark should limit the damages to restitutionary by its nature that only gains by JETS must be returned to Mark for JETS’ failure to comply with their agreement. Reference: Blake [1998] 1 All ER 833, 845. Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 Colbeam, (1970) 122 CLR 25, 32 (‘Colbeam’). Gilhams. 2010. Term: Contract. Accessed from http://www.gillhams.com/dictionary/276.cfm Hughes v Metropolitan Railway Co [1877] UKHL 1 (5 June 1877) Lumley v Gye [1853] EWHC QB J73 Doyle and Wright. 2001. Restitutionary damages. Melbourne University Law Review. Journals MULR 1. The Modern Law Review. 1975. The Doctrine of Substantial Performance: COnditins and conditions precedent. The Modern Law Review, # Vol. 38, No. 4, Jul., 1975 Strand Electric & Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246, 254–5. Tarleton v M'Gawley (1790) 1 Peake NPC 270 Olley v Marlborough Court Hotel [1949] 1 KB 532 Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 Williams v Roffey Bros & Nicholls (Contractors) Ltd (1989), Crown Copyright Read More