Legal Aspects of Contracts - Case Study Example

CASE STUDY ON CONTRACT LAW By of the of the of the School 13 September Advise Bonnie whether she is entitled to terminate the contract with Ozzblock and sue for damages. 1. Breach of contract Bonnie, the owner of project Total Eclipse entered into a contract with Oswald Block, owner of Ozzblock pty Ltd. The contract was intended to last for 3 years and cost Bonnie $60000 to hire for exclusive printing services of his promotional materials, specifically scratch tickets in the case. In the midst of circumstances, while offering printing scratch tickets for the client, Ozzblock Company makes an error where instead of printing only one ticket embedded with Eiffel Towel promotional image for project eclipse, one out of five of the printed tickets offered in the free holiday carried the image. The situation is that they had a written contract, where under clause 7, the printer “guarantees that it will exercise reasonable care in proof-checking all materials for any errors in printing prior to delivery.” The question arises whether by allowing one in five tickets (instead of sole ticket) to be printed (containing the promotional image (Eiffel Towel) and which were released out into the market) is a breach of contract. One, if Ozzblock failed to carry out an obligation (exercising reasonable care in proof checking printed tickets for errors before delivery) under the contract, then it results to breach of contract. Second, if breach of contract does exist, how aggregating is the damage and does Bonnie have a right to terminate the contract? Rules in termination of a contract Termination of contract on the ground of breach of contract sounds reasonable yet requires adequate evidence to prove necessary. According to ACL, a non breaching party has a right to terminate the contract if “a provision of the contract permits discharge for breach in the circumstances, the other party repudiates the contract or the breach is sufficiently serious” (n.d.). In the past case of Koomphatoo Local Aboriginal Land Council v Sanpine Pty Limited, failure for sanpine to adhere to its awarded accounting obligation, whether an essential or non essential term of the contract was sufficiently serious to warrant a right for the termination of the contract (Oxford University Press, 2010). However, there are cases where wrongful termination occurs or discharge of a contact due to its breach is a poor consideration, especially in cases of minor errors and less serious damages upon evaluations. Bettini v Gye case provides for a wrongful termination of contract lacking justification under their terms of contract, which nullified Gye’s right to terminate the contract (Grace, 2010). Application From Bonnie’s case, you realize that they entered into an agreement with their 7th clause carrying quite a fundamental term, precisely a condition precedent to the Ozzblock performance of his obligation. It was Ozzblock’s obligation to ensure it fulfils ‘reasonable care’ and conducts thoroughly checks for any errors. Regardless of how the payment plan for the contract occurs, then it means Bonnie would have spent quite a considerable amount for poor/unexpected services that would cost his due to Ozzblock inability to execute agreed on, reasonable care and exercise proof checking. There is a breach of contract, which is serious enough (already in protracted litigations with a number of seniors who claim to have won the trip out of printing errors on Bonnie’s promotional project) to justify the termination. Although Ozzblock could argue that based on exclusion clause number 8 to escape liability for errors arising from faulty typesetting work by the printer or any of its employees, it would be binding itself. One, Bonnie would argue that a minor (not an employee as without pay), not fit to serve was allowed to tamper with his promotional project or hold Oswald accountable for his negligence in service delivery. Second though the exclusion clause is enforced by the signature, under the common law, an employee would be someone working for you, whom you have the right to control what they would do and how in the workplace, least to mention they work in exchange for wages (IRS 2014). The child cannot fit the employee category, and if so Ozzblock need to prove it and explain why he/she was left unsupervised as an employee. Despite the exclusion clause, Ozzblock had the obligation to proof check ‘prior delivery,’ which in the case feels to been neglect. Conclusion Bonnies has a viable argument to terminate the contract and sue for damages, out of breach of contract with serious effects. 2. Duty to mitigate damages It is obvious that under certainty of the breach of contract Bonnie was placed in tough position for failure of ozzblock to fulfill reasonable care on its part. Only one Eiffel Towel image was to be printed in a scratch ticket that Bonnie’s company intended to finance for the trip. Unfortunately, printing several of them introduced additional number of winners whom the company had not planned for, hence contributing to tarnish the image of Bonnie’s company. It hence should be considered whether Bonnie as the injured party should terminate the contract as a way of mitigating damages. Rules in mitigation of damages In the event that the client realizes that a breach of contracts is causing him damages, under the common law, he is entitled to use reasonable means to mitigate the loss (Penfold, 2012). Failure to mitigate the loss the injured party could definitely affect the amount of recovery when the court assesses the situation. From Bulkhaul Ltd v Rhodia Organique Fine Ltd [2008] EWCA Civ 1452, the defendant established that the claimant had failed in its duty to mitigate damages (“edwardswildman.com,” 2009). Plaintiffs to need to give concern and rather than wait for the problem to accumulate or ignore the breach, they can take a reasonable step (e.g temporally termination or seek alternative services). Application Considering Total Eclipse project had already began and succeeded to deliver the scratch cards for promotional service out into the market, Bonnie had to take a quick, but reasonable measure to prevent further loss on his part. There was already a tainted image of the firm on accusation of dishonesty and accumulating litigations affecting his firm. Should Bonnie terminate the contract, Ozzblock would stop the printing services, allowing Bonnie to claim damages, and prevent further errors that put his firm in the damaged position, or forcing him to take additional costs. Conclusion Bonnie termination of contract is feels reasonable enough and he can claim more than minimal damages on accounts of litigations and damage to firm’s reputation. Advice Bonnie whether Ozzblock will be able to rely on clause 8 to escape liability for Bonnie’s loss 1. Negligence on the part of plaintiff Bonnie entered into a contract with Oswald and signed the agreed terms. These two are family friends and entered into business deal worth of heavy investments. However Bonnie been given a written contract does not take time to read the contract, but signs on to accept and proceed with the service without suspicion of the such a terms like exclusion clause number 8. If part of Bonnie’s failure to assess the terms of contract, then he would e held liable for his negligence either at the entry of the contract or to correct it afterward. Rules for negligence Under the common law, people entering into the contract are required to read the terms of agreement before any formalities. Signing a contract made it legally binding even if one did not take it upon themselves to deeply look into the terms. With clear evidence that one had ample time to read the document prior its execution and acknowledgment (but failed to), without coercion to sign the document, but signed it freely and willingly, then he/she violates the duty to care: consider Jean Dobler v. Oleta Story, 268 F.2d 274. The common law makes it a genral duty to read the contract before signing anything. Otherwise, if a situation covered in the contract arises without knowledge of its existence in the written terms, one be held liable for negligence of his duty to read the agreements. Application Bonnie drew himself to the trap and without due consideration signed the contract to legally bound him. He entrusted a friend and regardless of how close they were makes poor excuses in the name friendship. For the fact he had left his reading glasses, he was not forced to sign the contract that very day in the office. Matters of urgency in signing the contract were not there and he had all the time to read the contract even if on a later time. He neglected his duty to read the contract stipulated in the common law, and hence fails to establish the content of his agreement and exclusion clause 8 which could intentionally serve to damage his firm. Hence, ozzblock could argue that for Bonnie’s failure to read or even give notice would cause the exclusion clause to be enforceable and be part of the contract based on UCC section 2- 207 (Calamari, 1974). Conclusion Ozzblock has substantial claim of negligence to read the contract, which may exonerate him from Bonnie’s loss. 2. Limitation of liability The contract that Bonnie signed to contained a clause that tended to exclude Ozzblock from certain responsibilities. The question is whether the exception made in the clause did have the power to limit the liability of Ozzblock for actions named in the specific clause. If limitations did exist, then to what extent? On the other hand, though it could exist, was the clause effective Rule for Limitation of liability When available in a contract, they restrict the rights of the parties involved. Exclusion clauses have in the past been used to prevent omissions by other parties or entry into illegal action for the accrued liabilities. To enforce, a signature, or by notice amongst others are necessary. For example, LEstrange v F Graucob [1934] is an example of a signed contract with an exclusion clause that bounded the party to complete payment of a machine even though warranty for its fitness was excluded (insitelawmagazine.com, n.d.). Application Bonnie already fulfilled an action to incorporate the exclusion clause. By this Ozzblock passed over the liability to Bonnie in circumstances of printing errors resulting from typesetting or employee error. However, Ozzblock need to have a strong argument to preclude the mistake from the child’s action which was would be Oswald responsibility to care for. Bonnie would take advantage of the statement ‘proof checking prior delivery’ despite the clause, on the claim that every printed material required to undergo the process. This would give room to substantiate Ozzblocks negligence on his part. However, if bonnie could manage to make an argument based on defendant’s strict construction of the clause using ambiguous words, he can drive to make the clause ineffective (White & Case LLP, 2012). Bonnie could explore on ambiguity of the clause to evaluate what was meant by the phrase ‘faulty typesetting work.’ Conclusion Both parties have a fair ground to escape liability for the damages. Most likely Ozzblock would rely on it on the fact that Bonnie signed it. References Calamari, J. H., 1974. Duty to Read: A Changing Concept. Fordham Law Review 43.3. pp. 341-362. [online] Available at: http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=2144&context=flr[Accessed 15 September 2014]. Discharge by Breach. n.d. [online] Available at: http://www.australiancontractlaw.com/law/termination-breach.html [Accessed 13 September 2014]. Grace, T., 2010. The Termination of Contracts for Breach. . [online] Available at: http://www.feg.com.au/documents/TerminationpaperTRG10.10.pdf[Accessed 13 September 2014]. Insite Law Magazine. n.d. [online] Available at: http://www.insitelawmagazine.com/ch8exclusionclases.htm[Accessed 15 September 2014]. IRS, 2014. Independent Contractor or (Self Employed) Employee. [online] Available at: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee[Accessed 13 September 2014]. Jean Dobler v. Oleta Story, 268 F.2d 274 (9th Cir. 1959). [online] Available at: https://www.courtlistener.com/ca9/2gSr/jean-dobler-v-oleta-story/[Accessed 15 September 2014]. Mitigation of Loss: What is Reasonable? 2009. [online] Available at: http://www.edwardswildman.com/Files/Publication/7e884b11-20df-43bf-aa87-184e892f2bbc/Presentation/PublicationAttachment/dc470756-2684-4c33-a945-098e7af54ac5/Mitigation%20of%20loss%20-%20what%20is%20reasonable%20-%20February%202009%20-%20EAPD%20article.pdf[Accessed 13 September 2014]. Oxford University Press. 2010. Case summary 2 High Court Cases. [online] Available at: http://lib.oup.com.au/he/Law/sanson2e/ch03/sampleanswer_casesummary2.pdf[Accessed 13 September 2014]. Penfold, C., 2012. The Law handbook: Your Practical Guide to the Law in New South Wales. 12th Ed. [online] Available at: http://www.legalanswers.sl.nsw.gov.au/guides/law_handbook/pdf/Ch12_contracts.pdf [Accessed 13 September 2014]. White & Case LLP, 2012. Paris Energy Series No. 6: Exclusion Clauses: Navigating the Minefield. [online] Available at: http://www.whitecase.com/files/Publication/8605a2fb-9f4d-4d61-a9bf-f7c66e74ab1f/Presentation/PublicationAttachment/1a3c0891-e8d4-4192-a73a-1089e4d216ec/article-Paris-Energy-Series-6-Dec-2012.pdf[Accessed 15 September 2014]. Read More