Force Majeure, Frustration and Privity - Coursework Example

Introduction The essence of contractual laws has always been to ensure that parties that enter into a particular contractual agreement are protectedfrom unfair treatment. The UK law duly recognizes a contract as a legal binding. In essence, the parties that enter into the contract are obliged under the law to fulfill that which they promised in the contract after the contract is signed by both parties. There are instances when parties entering into a contract have been misled or taken advantage of due to existing loopholes within the contract. There are also cases where one party in a contract has sought to withdraw from a contract at a later stage thereby putting the other party at risk of losing. However, there are also cases where contracts can be deemed ineffective due to some unavoidable circumstances that have been encountered by either or both parties entering a contract. The case of London Village Entertainment is one such case. Despite having contracted to host the Brazilian Cultural Festival of Music and Dance, and receiving payment of £5000 they were unable to fulfill their end of the bargain after the area of North London was hit by a surprise hurricane. In providing legal advice to London Village Entertainment, important aspects to consider will be; establishing whether there was an instance of unfair treatment for either of the parties with regard to the contract, the extent of damage caused and the implication on the parties and the effectiveness of the contract after the incident. Force Majeure Force Majeure is a term used in contractual law to refer to occurrences that are natural and are beyond human control that affect the effectiveness of a contract. According to EU regulations which the UK also conform to, Force Majeure remains valid only when an external occurrence beyond the control of the party dependent on it takes place and the effects of the occurrence could not have been avoided1. In looking at the hurricane that interfered with the capacity of London Village Entertainment, it is advisable that London Village Entertainment assumes a Force Majeure situation and avoids taking any liabilities. Although in the UK contract law Force Majeure is not clearly defined and in most instances the courts are left to decide, in most instances damages caused by natural calamities are considered Force Majeure. In addition, the organizers of the event and Caliente should also not assume responsibility because the occurrence was beyond the control of neither of them. The cancellation of the event should therefore proceed because the occurrence has affected the root of the events which was to have the major concerts indoors. In the case of Krell Vs Henry in 1903, the judge was forced to order cancellation of the contract because proceeding with the contract would have been pointless2. Proceeding with the concert in this case is pointless because the major attraction would require the use of indoor stages despite the fact that such a clause was not mentioned in the contract. In essence, Caliente and London Village Entertainment should not contest the cancellation of the contract because the effectiveness of the contract has been compromised. Despite the fact that Caliente had spent significant amount of resources in the preparation of food, the fact still remains that the effectiveness of the major event has been compromised. The only step that can save Caliente and perhaps London Village Entertainers significant losses, would be for London Village Entertainers and the event organizers to review the contract to include only the outdoor events. Otherwise the contracts should be terminated. Frustration The tort laws make compensations necessary even in instances caused by natural disasters if it is ascertained that there was negligence in part of one of the parties. However, in this case tort laws are inapplicable because there was no way that London Village Entertainers could have foreseen the hurricane or even predicted that it would cause such damage that would interfere with the event. In essence, before the hurricane took place there is no indication that either of the parties entering the contract had the intention of abandoning the contract. However, after the occurrence of the hurricane there is reason enough to believe that the contract had already been frustrated. Despite the fact that Caliente will incur a lot of losses as a result of the cancellation, they are not in a position to demand for compensation either from the event organizers or London Village Entertainers. On the other hand the event organizers are also not in a position to request for compensation from London Village Entertainers. In a similar case of Taylor Vs Caldwell, the judge decided that the owners of the building could not be forced to pay event organizers for losses even though the organizers had hired the building through a contract. This is because the building had been destroyed by a fire less than a week before the concert3. In essence, the owners of the building could not be forced to pay because prior to the fire they had not shown any deliberate intent to violate the contract. Therefore, the fire could not be blamed on either of the parties. Therefore, even with the termination of the contract none of the parties will be in a position to successfully request for compensation. The only way that the parties can mitigate the losses already incurred is to enter into a new contract that will allow for the proceeding of the outdoor event alone. However, the event organizers have already ruled out the option due to the fact that the main event was to occur indoors. Privity In the current state of affairs the issue of privity will prevent any direct dealings between London Village Entertainers and Caliente. The major contract in this case is the contract signed between London Village Entertainers and the event organizers. The minor contract which is completely independent of the major contract occurred between even organizers and Caliente. Therefore, Caliente can neither request for compensation from London Village Entertainers nor sue them for the damages caused by the hurricane. This is despite the fact that the hurricane has affected both of the parties. In essence, “obligations cannot be enforced on a third part” or the third party cannot be compelled to demand any compensations. In the case of Tweddle Vs Atkinson, two fathers had entered into a contract to give money to their son and daughter in law money of the two of them got married. However, one father failed to give the money and was taken to court by the son in law. The court ruled that the son in law could not be forced to pay the money because the contract did not initially involve the two fathers. This occurred despite the fact that the son was the beneficiary of the money4. In essence, Caliente can only seek compensation from the event organizers because the contract they signed was with event organizers and not London Village Entertainers. In addition, London Village Entertainers cannot argue that the contract should not be terminated because it will lead to monetary loss for Caliente because the two parties are not directly involved in the contractual agreement in question. Remedy The most appropriate and sound remedy in this case that will be applicable to all the parties without further monetary loss will be the termination of the contract. According to UK legislation, termination of a contract should follow a serious breach of the contract by either of the parties that have entered into the contractual agreement. In this case, the general realization is that there has been a serious breach of the contract even though none of the parties are responsible. In any case there is no reason to suspect that the event organizers will benefit from the termination of the contract. The seriousness of the case is that the event organizers might not be able to generate enough income even to strike it even for the money they invested. Furthermore, people might refuse to attend the concert on the basis that they will not be able to view the main events. In the event that two parties; A and B enter into a contractual agreement and party A for one reason or another fails to fulfill the full requirements of the agreement so that party B will not benefit the fully from the agreement, then B is free to terminate the contract5. Therefore, it is advisable that all the parties involved in this case considering termination of the contract as the best option. Conclusion The analysis of the case of London Village Entertainment, event organizers and Caliente, the general realization is that the occurrence was totally an act of God that neither of the parties had control over. Furthermore, there were no legal provisions of exemptions with regard to such occurrences that were drawn in the contract. Therefore, no party should be held liable for the lack of the fulfillment of the contract. The hurricane is the cause of the frustration being experienced in the contract and the effect is that it has destroyed the main theatre. The theatre is not at fault because it had not foreseen the hurricane and because it could not have been repaired in time for the event. Therefore, none of the parties should expect to be compensated by the theatre. The rule of privity is also applicable in this case because there seems to be in existence two separate contracts; the one between London Village Entertainers and even organizers and one between event organizers and Caliente. These two contracts should be treated as separate with respect to the rule of privity. Finally, the most applicable remedy for the case is for all the parties to allow for the termination of the contracts entered and perhaps engage in new contracts where possible. Bibliography Cartwright, P., Consumer Protection and the Criminal Law, Theory and Policy in the UK (2001 Cambridge). Chen-Wishart, M., Contract Law (2008 Oxford University Press) Harris, D., Campbell, D. & Halson, R., Remedies in Contract and Tort (2002 Cambridge 2nd Edition). Knowles, R. J., 200 Contractual Problems and Their Solutions (Sage 2011) Whincup, H. W., Contract Law and Practice: The English System with Scottish, Commonwealth (Kluwer 2006). Read More