Highland Yacht v Jim Nimitz - Case Study Example

Written Brief: Highland Yacht v. Jim Nimitz I. ment of the Facts The case Highland Yacht v. Jim Nimitz falls under the law of contract as well as under the law of sale of goods. Jim Nimitz accepted to purchase a boat from Highland Yacht at $50,000,000. On the other hand, Highland Yacht sold the boat to Jim Nimitz at the agreed price. However, Jim Nimitz requested for a modification on the boat, which cost Highland Yacht an extra $4,000,000. The requested modification was neither formally agreed nor even signed as a different contract from the initial contract of sale. While Highland Yacht expected that Jim Nimitz would pay for the extra cost of the modification, Jim Nimitz expected that Highland Yacht would modify the boat at a cost inclusive of the initial price of $50,000,000. II. Issue (Legal question) The issue under this case is who should bear the responsibility of paying for the extra $4,000,000 that was used for the modification of the boat, which was never agreed upon by the two parties under the term of contract. III. Application of the law to the facts A contract is an agreement that exists between two willing parties (Forte, 47). The law provides that for a contract to be considered as legally binding, three major elements should exist. There should be an offer by one party, then there should be an acceptance from the other party and finally there should be a consideration for the contract (Langdell, 133). Thus, under the case Smith v Hughes LR 6 QB 597 [1871], the law defined an offer as the promise to give out a commodity in exchange for something of similar value while at the same time establishing that a contract is legally binding, if the offeree accepts the terms of the contract as originally offered by the offeror, without altering the terms (Best and Barnes, 56). Under the case Highland Yacht v. Jim Nimitz, an offer was made to sell a boat at $50,000,000 and Jim Nimitz accepted to purchase the boat without altering the terms of the offer. In this respect, the legal requirements for a legally binding contract were met, and thus both Highland Yacht and Jim Nimitz were legally bound to perform their respective parts of the contract. However, upon purchasing the boat, Jim Nimitz requested that the boat be modified to suit his interest. The problem is that the two parties did not enter into an agreement regarding liability of the costs of modification. According to the law of Sale of Goods Act (1930), the principle of good faith assumes that the parties to a contract will deal fairly (Forte, 21). Further, where the goods are sold by description, the case Beale v. Taylor [1967] 3 All ER 253 defined that such goods shall meet the quality and standards of the description of the goods (Tepper, 72). On the other hand, where the goods are sold by inspection, meaning that the buyer has already seen and inspected the goods being sold, then the description of the goods can be modified to suit the observed variations. According to the Pre-existing duty rule of the law of contract, a party that is performing a legal duty should not expect a consideration for the performance (American Law Institute, 2343).In this respect, the parties involved in the performance of a contract should perform the contract without expecting to be rewarded further. The law has provided two major ways thorough which parties to an agreement can modify the terms of contract, so that the parties can realize more benefits than the ones originally stated in the contract offer. First, the parties must renegotiate the term of contract, so that the parties can include the new terms of contract that will confer the expected new benefit (American Law Institute, 2343). According to section 2.209(a) of the Uniform Commercial Code (UCC) [1952], where the parties to a contract seeks to modify an existing contract so that new terms of the contract can be introduced, a written letter of consent by the party seeking the modification should be signed, and presented to the other party for signing (American Law Institute, 2343). Section 2.209(b) of the same legal provisions offers that the requirements of the statute of fraud, which provides that any contract that equals or surpasses $500 should be adjusted through signing a written letter of consent, must be met (American Law Institute, 2343). Therefore, considering the fact that the contract under Highland Yacht v. Jim Nimitz was worth $4,000,000, then any alteration in the terms of this contract to the benefit of either of the parties or both, should be established through a written consent. Therefore, the fact that the parties under the case Highland Yacht v. Jim Nimitz engaged in the modification of the contractual terms to confer Jim Nimitz with the benefit of a customized boat, means that they must resolve the liability dispute under a different provision of the law. The second avenue that exists for resolving a contract modification dispute where the parties to the contract have not signed a written letter of consent is through the assessment of the implied terms of contract, since there is no certainty as to who is responsible for footing the extra cost of modifying the boat. This avenue has been created by the provision of the law under section 89 of the Restatement, Second of Contracts [1981], which provides that a contract modification may not necessarily require an independent consideration or even a written consent, if the parties involved in the contract can consent and mutually agree to the new modification (American Law Institute, 2343).Therefore, the parties can enter into a mutual consent agreement to gain the extra benefits without altering the original terms of the contract. Under the case Highland Yacht v. Jim Nimitz, the parties to the contract did not renegotiate the new terms of contract, but rather engaged in the modification of the boat based on the expectation of the fulfillment of the principle of good faith and fair dealing (Forte, 21). Entering into a mutual consent with changing the initial terms of contract requires that the parties to a contract will observe the doctrine of fair dealing and the doctrine of good faith, in order to sustain the mutual agreement (Forte, 27). According to the case ACAP LLC v. LPL Holdings, Inc. [2004], the principle of good faith and fair dealing is established through the parties involved in a contract behaving in a manner that is fair and beneficial towards each other (Best and Barnes, 39). This principle was established under the case Angel v. Murray, 322 A.2d 630 RI [1974], where the ruling established that for two parties to be able to enter into a mutually consenting agreement to modify an existing contract without signing a letter of consent, the parties must enter into the agreement before the contract has been fully performed either by both parties or by one of the parties (Tepper, 36). The provision of this law also require that the modification should have happened under conditions which were unanticipated by either of the parties to the contract, and that finally, the modification done to the contract must be fair and equitable to the parties involved (Langdell, 107). Thus, given the above provisions of the law, it follows that Highland Yacht v. Jim Nimitz has fulfilled only two requirements of the modification of a contract under the provisions of section 89 of the Restatement, Second of Contracts [1981] (American Law Institute, 2343). First, the situation under the case Highland Yacht v. Jim Nimitz fulfills the first requirement that the modification of a contract without signing an independent letter of consent specifically for the new terms introduced should occur before one or both of the parties to the agreement has completed performing the contract (American Law Institute, 2343). In this case, while Jim Nimitz has purchased the boat at $50,000,000 and completed his part of the contract, Highland Yacht is yet to complete its side of the deal, because it is still in possession of the boat that was being modified, and thus has yet to deliver the boat to Jim Nimitz in order to complete the contract. Second, the situation under the Highland Yacht v. Jim Nimitz fulfills the requirement for modifying a contract without signing an independent written agreement for the new terms of the contract, requiring that the modification should be equitable and fair to the parties to the contract (American Law Institute, 2343). This is because; the cost of the modification of the boat was 4,000,000, while the initial cost of the boat was $50,000,000, an indication that the price at which the boat was modified was fair to Jim Nimitz. IV. Decision (Conclusion) The parties to the contract can only resolve the modification liability dispute through applying the provisions of section 89 of the Restatement, Second of Contracts [1981], which requires that signing an independent consideration is not necessary, if the two parties to the contract can agree on the basis of mutual consent (Best and Barnes, 42). Thus, the two parties can enter into a mutual agreement for settling the cost of the modification of the boat. Alternatively the case can be presented to a court of law for determination. If the case is presented to a court, the court will rule in favor of Highland Yacht through relying on the principle of good faith and fair dealing, which expects a party to a contract to pay for the goods/services delivered. This is because; considering the fact that the cost of the modification is fair to the parties while the modification has been requested before the boat is delivered to Jim Nimitz, the court will find that Jim Nimitz is liable for paying the cost of the modification. Works Cited American Law Institute (ALI). Uniform Commercial Code, 1967. p. 2343. Print. Best, Arthur, and Barnes, David W. Basic Tort Law: Cases, Statutes, and Problems. Austin: Wolters Kluwer Law & Business, 2007. 39-81. Print. Forte, Angelo D. M. Good Faith in Contract and Property. Oxford [u.a.: Hart, 1999. Print. Langdell, C C. A Selection of Cases on the Law of Contracts: With References and Citations. Union, N.J: Lawbook Exchange, 1999. Print. Tepper, Pamela R. The Law of Contracts and the Uniform Commercial Code. Clifton Park, NY: Delmar Cengage Learning, 2012. Print. Read More