A Comprehensive and Incisive Outlook on the Various Aspects of USA Contract Laws - Research Paper Example

Name: xxxxxxxxxxxx Course: xxxxxxxxxxxx Institution: xxxxxxxxxxxx Title: USA Contract Law Date: xxxxxxxxxxxx @ 2009 USA Contract Law Introduction Contract laws in the USA revolve around obligations that are established through agreements which are expressed or implied by two or more parties. Essentially, contract laws in the USA have become standardized due to the adoption of a uniformed commercial code. Nevertheless, there are significant differences in the interpretation of contract laws depending on the extent in which a particular state has stipulated its common law on contracts (Speidel, Ayres & Murphy 1984). This paper seeks to present a comprehensive and incisive outlook on the various aspects of USA contract laws. This paper will discuss how the court case between Taylor versus Caldwell has introduced considerable confusion into the understanding of the nature of contractual liability. Moreover, this paper will discuss why it is highly misleading to conclude that the compensation of the plaintiff is the main objective of contractual liabilities. Question 3: Taylor versus Caldwell The court case between Taylor and Caldwell (1863) 3 B. & S. 826, 122 Eng. Rep. 309 raises legal issues on the nature of contractual liability. In this court case Caldwell, the defendant allegedly permitted Taylor, the plaintiff to use his Newington Musical Hall. The two parties entered into a contract agreement that Caldwell was to retain the ownership of the Hall while Taylor was merely allowed to use the Musical Hall for his concerts for four days. According the contract, the charges of hiring the Hall per day for the concerts were 100 pounds. On the other hand the contract stipulated that the Hall needed to be in good condition although there were no provisions that expressed the possibility of a disaster impinging on the condition of the hall. Prior to the date of the concert the Hall was allegedly destroyed by fire nonetheless, neither of the two parties was at fault for the disaster. The concert could not take place since there was no other suitable base for the concert to be conducted. Taylor in turn sued Caldwell for on the grounds of contract breach since he could not rent the music hall. The judge presiding over the case judge Blackburn ruled the case in favor of the defendant, in this case Mr. Caldwell. The key issue in this case was whether or not the contract was still enforceable even after the Music Hall was destroyed by the fire outbreak. Moreover, it is questionable on whether the performance of a contract inherently depends on the presence or absence of an individual or an object. In this case Judge Blackburn argued that the rule of contractual liability has been set forth and if the performance of the contract essentially depended on the continued existence of an asset then impossibility of performance is justifiable. In instances whereby the parties involved acknowledged that the contract performance cannot be fulfilled due to the existence of a particular asset, this is then not a positive contract since there is a condition that has been implied stating that parties can be excused from performance in instances when the alleged asset ceases to exist without the fault of the two involved parties (Speidel, Ayres & Murphy 1984). Nevertheless, if one of the involved parties expressed warranty that the asset will continue to exist this party is inevitably liable for contract breach if the asset ceases to exist. Whenever a positive contract is instigated the contractors are to perform the agreements of the contract or pay for damages despite of the fact that in cases of unforeseen tragedy, the performance of the agreed terms in the contract becomes impossible to execute. This rule is essentially applicable in instances when the agreements of the contract are absolute or positive and subject of any conditions have not been expressed. In contracts revolving around the service of a particular person, the contractor is not liable for any performance if that individual ceases to exist despite the fact that the terms of the contract will have been breached. Legal issues in this court case point out the objective of impossibility since it would have been impossible for either of the two parties to perform the agreements of the contract. Especially in a case whereby the involved parties did not express risks during the time that the contract was being set off. Therefore the court is bound to declare that the losses incurred should be let to lie where they fell. For instance in this case the plaintiff suffered the losses of the income invested in the preparation of the concert. The defendant on the other hand suffered the loss of loosing his music hall in the fire destruction. It is worth noting that this rule is applicable only when neither of the two parties is responsible for the destruction of the alleged person or asset. Case Analysis Evidently, the court case of Taylor versus Caldwell has introduced enormous confusion in understanding the nature of contractual liability. Contractual liability demands that obligation is assumed by either of the contracting parties in regard to the terms agreed in the contract. The contract that Taylor and Caldwell had entered into saw to it that the music hall was leased to Taylor at a fee for the four concert series. In preparation for the concert Taylor spent money for advertising and other general preparations for the concert. In the contract there was no clause that expressed what would happen in case there was a problem with the music hall .The contract was sealed with the phrase “God’s will permitting” .The two parties would have indicated in the contract what would be done if a situation arises, that causes the performance of the contract to be impossible. It is apparent that this court case has exposed certain discrepancies in the nature of contract liability. Taylor expressed contentious legal grounds for suing Caldwell for breach of contract. He argued that reliance damages compensation should be rendered to him for not being able to use the hall for his concert even after investing a lot of money in advertising and other general preparations for the concert. He further argued that he should be given benefit of bargain that were equal to the profit he would have made if the concert took place. It was also possible for Taylor to mitigate the damages that had occurred by covering and hiring an alternative music hall and the sue Caldwell for the cost difference between the rent he paid and £100/day. Conversely, Caldwell argued that the destruction of the music hall by fire was not his fault therefore he was not to be held liable for breach of contract. The court on the other hand found that due to the fact that contract performance had become impossible neither of the two parties was to be excused from the duty that they had agreed upon in the contract. In this case the rule of absolute liability inherently applies to definite and positive contracts and not those that express condition that underlie in the contract (Speidel, Ayres & Murphy 1984). The continued presence of Caldwell’s music hall was essentially an implied condition that could have led to the fulfillment of the conditions in the contract. Neither of the two parties was responsible for the fire outbreak in the music hall therefore this renders the performance of the contract by the two parties as impossible. It is evident that both Taylor and Caldwell contracted on the basis of the continued of existence of the music hall. Despite the fact that the contract had no clause in regard to a fire outbreak the court assumed that the deal was off soon as the music hall was destroyed by fire. This court case raises enormous confusion in the nature of contract liability since in most cases when there is a definite and positive contract in regard to performance, the contractors must perform according to the agreed terms in the contract failure to that compensation is in most cases rendered to the plaintiff (Mulcahy& Tillotson 2004) The ruling of the court in this case was to large extent in reference to the Roman law and the civil law of France. The stipulations of both laws declare that the existence of a particular asset is imperative in a contract and whenever that asset ceases to exist or is destroyed through means that are not culpable to the two parties, both parties should be freed from the obligation of compensation of any form. The ruling of the court in this case is analogized to a situation whereby a contract requires the person to perform but the person allegedly dies before they are able to go on stage and perform (Speidel, Ayres & Murphy 1984). Under the common law of England, the estate of the performer would not be held liable. In the case a breach of contract and loss is apparent however it is questionable on whom the losses fall on. It would not be fair if the defendant was liable for the losses incurred since they are not at fault on the other hand it is not fair that the losses should be laid on the plaintiff since they are also not at fault. It is therefore apparent that the court case of Taylor versus Caldwell has introduced enormous confusion in understanding the nature of contractual liability. This case raises the question, “who is to absorb the losses?” (Speidel, Ayres & Murphy 1984). Corresponding court cases Prior to the case of Taylor versus Caldwell opposite doctrine in regard to contract law was practiced. For instance in the landmark case of Parridine versus Jane (82 Eng. Rep. 897 (K.B. 1647), Jane leased land in England from Parridine. Subsequent to these lease, the land in which Jane rented was invaded. In this case Parridine, the plaintiff sued Jane for failing to pay rent in the leased land for nearly three years. Jane, the defendant, argued that her possession had been put out and she was essentially frustrated with the performance of the contract. It is apparent that this court case established an absolute contractual liability. The judge in this case allegedly ruled in favor of the plaintiff, Jane was therefore obliged to pay her rent. In reference to most contract laws any party can be held liable even if they are not at fault. Comparing the court case of Parridine versus Jane with that of Taylor versus Caldwell further accentuates that there is an enormous confusion in understanding the nature of contractual liability. Similar to the case of Taylor versus Caldwell is the court case between Hadley versus Baxendale (9 Ex. 341 Ex.Ct. 1854) the ruling of this court case established that though the losses incurred were great the defendant was not to be held liable. The case between the Krell versus Henry further epitomizes key legal aspects in the nature of contractual liability. In this court case the defendant, Henry contracted with Krell the plaintiff to view King Edward’s procession. The terms of the contract stipulated that Henry could use Krell’s flat for two days to view the procession in return he was to give Krell 75 pounds .Nonetheless, the provisions in the contract did not express the aim of Henry’s use. Subsequently, the Kings procession was postponed due to his illness. Consequently, Henry dishonored the agreement in the contract. Krell responded by suing Henry on the grounds of breach of contract, he demanded for the balance as stipulated in the contract, the defendant also countersued the plaintiff for his alleged deposit. The court case of Taylor versus Caldwell was cited, judgment was given in favor of the defendant. In this case the rule of performance was excused due to the fact that an unforeseen and supervening event had occurred(Speidel, Ayres & Murphy 1984). Further controversy mounts on the nature of contractual liability as we examine the court case of Batsakis versus Demotsis (226 S.W.2d 673 Tex.Civ.App.-El Paso 1949). This case presents different dimensions of looking at contractual liability. In this case Batsakis, the plaintiff sued Demotsis, the two parties entered in to a contractual agreement that Demotsis was to pay Batsakis 2000 dollars at an interest rate of 8% per year this was in exchange for 500,000 drachmae that was give during the time that the contract was executed. The plaintiff had received the money in actuality however the amount was 500,000 Greek drachmae with the exchange value of $25. At the end of the war Demotsis refused to pay the loan citing that the contract was inherently unenforceable due to the lack of valid consideration. Generally, the element of exchange was needful to make the contract authentic according to the systems of the common law (Knapp & Prince2005). Demotsis claimed that Batsakis's delivery of 500,000 drachmae, with a putative value of $25, could not be adequate consideration for her promise of $2,000, making the contract unenforceable. He argued that the fact that the delivery of 500,000 drachmae that had a putative value of $25. This was adequate enough to render the contract unenforceable. The court ruled that the contract was enforceable Batsakis was in turn awarded $750 interest. Compared to the case of Taylor versus Caldwell the ruling of this court case further verifies the complexity of the nature of contractual liability. Question 4: Contractual remedies The USA contract law has enlisted provisions in regard to the breach of contracts, in most cases these provision provide remedy. Typically, remedy can come in the form of monetary compensation, certain privileges or performance (Knapp & Prince2005). The breach of contract occurs when a party fails to perform according to the stipulated agreements in the contract (Mulcahy& Tillotson 2004). Breach of contracts can result to certain penalties that act as remedy or compensation to the plaintiff. Damages are the basic remedy available in the breach of contracts. This is a common remedy in USA contract law that can be claimed by an authentic plaintiff. Over the years personnel in the law field have questioned the main goal of contractual remedies. It is viewed by many that main goal of contractual laws is to compensate the plaintiff. Nevertheless, the stand of this paper is that it is highly misleading to conclude that the key goal of contractual remedies lies in the compensation of the plaintiff. Basing our arguments on the court case of Hadley versus Baxendale 9 Exch. 341, 156 Eng. Rep. 145 (1854) we see that the ruling of this court case in regard to contractual remedies inherently yielded lost expectations. In this case the plaintiff, Mr. Hadley hired Baxendale to transport his broken mill shaft to an engineer. Baxendale was supposed to transport the broken mill shaft to Green with immediate effect however he was negligent and he did not transport the mill shaft as agreed in the contract. Consequently, Hadley’s mill had to close down for five days thereafter he sued Baxendale for 300 pounds due to lost wages and profits. The court rulings expressed that Baxendale had no knowledge of the mill closing down therefore losses of wages and profits are not liable to both parties since Hadley had not communicated the special circumstances to Baxendale. The court stated that the usual rule in regard to the amount that could have been received had the contract been kept measures the damages in case the contract is breached. A critical analysis of this court case reveals that consequential damages are in most cases linked to foresee ability and knowledge. However, expressed tacit agreement in the contract discussion was incorporated in the ruling of this court case (Atiyah 1989). Drawing on this court case it is evident that the compensation of the plaintiff, in this case Mr. Hadley was not the main aim of the emergent contractual remedies rather the ruling depicted a scrupulous appraisal of the agreement in the contract and the extent of the damages. The objective of the damage as a remedy in this case was to ensure that the both parties end up in a position that they would have been if the contract was fully implemented. Therefore it is highly misleading to conclude that the compensation of the plaintiff is the main objective of contractual remedies (Gillies 1988). The court case of Reliance Cooperage Corp versus Treat 195 F.2d 977 (8th Cir.1952) further epitomizes the main goal of contractual remedies. In this case, the plaintiff entered into a legally biding agreement with the defendant .The agreement of this contract required the defendant to buy staves however the defendant breached the contract. The plaintiff in turn sued the defendant on grounds that there was a considerable difference between the market price of the staves at the time of the contract agreement and the agreed date of delivery. The ruling of the court awarded the plaintiff for the damages mitigated as a result of the contract breach since the defendant could have procured the staves prior to the contract period. Subsequent to this ruling judgment was reversed this time the court concluded that damages as a result of breach of contract cannot be mitigated unless the actual damages have occurred. The second ruling of this case proves that contractual remedies do not only aim at compensating the plaintiff rather these remedies seek to offer legal restitution for defendants (Knapp & Prince2005). The Contractual remedies Act of 1979 comprise of particular provisions that allow bargaining between the plaintiff and the defendant. This Act allows the courts to scrutinize the likelihood of misinterpretation and misrepresentations of facts as agreed in the contract. In a case whereby the court considers the provisions in a contract as unfair and unreasonable the bargaining strengths of the plaintiff and the defendant are incorporated in the ruling of the case. These provisions largely enhance equity and fairness in the court processions that revolve around the breach of contracts. It is therefore highly misleading to state that contractual remedies essentially aim at compensating the plaintiff. The Act also provides conditions that allow the nullification of contracts. For instance, Section 7(2) has specifications that relegate the cancellation of contract exclusive of damage remedies. Studies in contract law point out there are two main remedies for contract breach, they include equitable remedies and money damages. Equitable remedies can come in the form of an injunction or specific performance. Given the fact that these remedies are in nature equitable the presiding judge denies or awards remedy at an equitable discretion. Therefore, a plaintiff who is negligent can be denied equitable remedy. This attests to the fact that contractual remedies are not geared towards the compensation of the plaintiff rather they offer neutral grounds for both the defendant and the plaintiff (Gillies1990). It is indeed misleading to conclude that the compensation of plaintiffs is the goal for contractual remedies. The cases involving Hydraform Products Corp versus the American Steel and Aluminum Corp (1985) 127 N.H. 187, 498 A.2d 339, 345 on one hand and the one between Spang Industries Inc Fort Pitt Bridge Division versus Aetna Casualty and Surety Co Torrington construction(1986) 787 F.2d 355 are a good pointer towards this argument. The two situations will significantly highlight the issue of compensation of a plaintiff and the practicality of the compensation (Gillies 1988). In the first case, the contract was such that American steels was to supply steel to Hydraform to enable manufacture of woodstoves. A notice was sent to American steels from hydraform informing them that delay in delivery of steel during the peak season when business for the manufacture and selling of stoves could ruin Hydraform’s business for a whole year. Consequently, American steel asked that Hydraform should make an advance order to purchase an amount of steel equivalent for making 400 woodstoves then American steel would stock this in advance. It was then agreed that the steel should be delivered in four installments and with each delivery Hydraform signed a receipt to specify that the American steel would not be answerable to any for any damages that could occur during delivery of the steel. The deliveries were late again and there were some defects which the American steel promised to rectify. However, Hydraform realized that the American steel would never keep their end of the bargain by performing as agreed and consequently tried to solicit for steel from other manufacturers but to no avail since it could not promptly raise the required amount for the commencing sales season(Corbin 2000). The delays resulted led to cancellation of orders that made them only to make 250 stoves. Eventually Hydraform sold the woodstove section of its businesses. After these events, Hydraform took legal action for breach of contract against American steel claiming that a hundred thousand dollar for lost profits plus two hundred and twenty thousand as to offset the sale of the business (Berryman & Watts 2005). American steel also brought a motion to dismiss the case basing their case on the clause addressing the issue of consequential damages. The fore goings herein helps to refute the assumption that compensation from the plaintiff was the sole purpose for companies working together. Neither American nor Hydraform anticipated troubles that would lead to the taking of actions against each other. Their sole purpose was obviously to make profits and advance with each of the two benefiting from each other. The argument is that plaintiffs make contracts just for the sake of compensation is unfounded since the plaintiff would not be in that position if other circumstances took center stage. The consequential loss experienced is indeed necessary in order for the two parties to build a consensus from the current stalemate (Baker 2002). In the second case a contract was sealed for fort Pitt deliver steel to Torrington by a delivery date that was to be agreed on later. Torrington needed the steel for the reconstruction of a highway and fort Pitt assured them that the steel would be shipped early. However, the shipping was done very late and was too little for Torrington to begin work until much later when the amount increased considerably. Torrington incurred a lot of losses from the additional costs prompting it to take action against Fort Pitt(Corbin 2000). The law court found Fort Pitt answerable to the claims and was fined a huge sum of money in damages for the cost incurred by Torrington. However, Fort appealed against this decision since they believed that increased expenses involve special damages which were not catered for in the agreement reached when the two were coming together to make the contract. Another contentious issue according to Fort Pitt was that the agreement between the two parties was that the work was scheduled to be completed much later in December and this implied that the work could not have been possibly expedited to be complete at an earlier period other than this set time. Moreover, fort Pitt claims that the notice for any eventualities of special damages should have been mentioned during contraction as expected in the rules (Gillies1990). This however had not been followed and Fort Pitt relies on this as a basis for its defense in the court of appeal. The argument here is that the events were not foreseeable and that the plaintiff-Torrington should realize that Fort Pitt did not participate in the contract with an aim of acquiring any compensation. When making the contract, the two parties notably agreed that the delivery date will be mentioned later after a mutual agreement. This implied that the knowledge of any default as at the time the contract was made was not possible since the time had not been agreed upon yet. Fort Pitt should admit their blunder since they knew from the beginning and from their experience what Torrington would be subjected to being a mini-contractor of the government that would lose greatly for any breach. Torrington’s action was done in good faith since they would have incurred an even bigger loss had they waited for another year (Berryman & Watts 2005). Fort Pitt should realize this and also act in a reciprocal manner since it is partly to blame for the huge loss experienced by Torrington. Whenever a dispute arises concerning the setting of the date for performing a certain task that all parties agree should be conducted later then all parties have knowledge of the consequences of this arrangement. Fort Pitt should agree to share the blame since they were the ones supposed to deliver the material and not to hide from the advantage that the date was not set earlier on during the contracting stage (Corbin 2000). Conclusion The focus of this paper was to give an incisive outlook on the USA Contract law in regard to the nature of contractual liability and contractual remedies. The discourse in this essay has established that the court case of Taylor versus Caldwell has introduced enormous confusion in understanding the nature of contractual liability. This case has introduced controversial elements pertaining to who should absorb the losses in the event that a situation arises, that causes the performance of the contract to be impossible. Moreover, the objective of impossibility in this case impresses that it would have been impossible for either of the two parties to perform the agreements of the contract. Particularly in a case whereby the involved parties did not express risks during the time that the contract was being set off therefore the court was bound to declare that the losses incurred should be let to lie where they fell (Meiners& Edwards 2006). On the other hand the issue of contractual remedies has raised concern on whether the main goals of these remedies are geared towards the compensation of the plaintiff. The stand of this paper was that it is highly misleading to say that the compensation of the plaintiff is the goal of contractual remedies. Basing our arguments on several contract court cases and the Contractual Remedies Act of 1979, it apparent that contractual remedies are generally pertinent to other matters besides the compensation of the plaintiff. For instance, contractual remedies allow bargaining between the plaintiff and the defendant. These remedies also ensure that both the plaintiff and the defendant end up in a position that they would have been if the contract was fully implemented (Berryman & Watts 2005). Bibliography Atiyah, P, 1989, .An introduction to the law of contracts, Clarendon Press, New York. Baker, R, 2002, Gilmore and the Strange Case of the Failure of Contract to Die After All, 18 Journal of Contract Law 1, Vol. 53, No. 4, p.775. Berryman, J & Watts, P, 2005, Contractual remedies, Continuing Legal Education Press, UK. Cappelletti, M & Garth, B, 1997, International encyclopedia of comparative law, Brill Publishers, New York. Corbin, L, 2000, Cases on the law of contracts: selected from decisions of English and American courts, Harvard University Press, UK. Gillies, P, 1990, Business law, Federation Press, California. Gillies, P, 1988, Concise contract law, Federation Press, New York. Knapp, N & Prince, H, 2005, Rules Of Contract Law: 2005-2006, Aspen Publishers, New York. Meiners, R& Edwards, F, 2006, Legal Environment of Business, Cengage Learning, UK. Mulcahy, L & Tillotson, J, 2004, Contract law in perspective, RoutledgePublishers, New York. Samuel, G, 2001, Law of obligations and legal remedies, Routledge publishers, New York. Speidel, R, Ayres, I & Murphy, E, 1984, Studies in contract law, Foundation Press, California. Court cases Taylor versus Caldwell (1863) 3 B. & S. 826, 122 Eng. Rep. 309 Reliance Cooperage Corp versus Treat (1952) F.2d 977 Hydraform Products Corp versus American Steel and Aluminum Corp (1985) 127 N.H. 187, 498 A.2d 339, 345 Spang Industries Inc versus Aetna Casualty and Surety Co (1986) 787 F.2d 355 Hadley versus Baxendale (1854) 9 Exch. 341, 156 Eng. Rep. 145 Parridine versus Jane (1647) 82 Eng. Rep. 897 Contractual Remedies Act of 1979, Section 7(2) . Read More