Internal Memorandum of Advice - Assignment Example

Internal Memorandum of Advice To: From: Date: File No: Client: SUMMARY OF ADVICE The main issue in the scenario is whether Bunnings Belconnen Pty should be compelled to accept and for the goods it had ordered for through Paul Watson, half of which were not designed according to the exact specifications agreed upon between the seller and the buyer and did not function as expected. The Paul Watson also contends that it was discovered the other products ordered for the second batch would also malfunction just as the first half. The seller wants the buyer to accept the goods as ordered because the goods were delivered as promised and only half of them were designed with slight variations from what was agreed upon; however they still function as the design of the goods agreed upon. There are apparent breaches of the seller, Birds on a Wire Pty Ltd’s breach of contract: (1) failure to produce a prototype of the Bird Catcher 5000 which was shown to the buyer at the time of signing the agreement; (2) failure of both bird catchers to function as expected. However, I must state that even if found to be breaches, they are not of the seriousness required for the doctrine of repudiation. Apparently Bird Catcher 5000 model is only 10 percent larger than the model that was shown to the buyer, but functions in much the same way as the model shown to the buyer. Further, the Bird Catcher 2000 has been rejected on grounds that it malfunctions just as the Bird Catcher 5000 model. In both all cases, the seller has explained that the birds caught in the traps have to be gassed. Bunnings’ refusal to pay may be a breach of the contract for which a claim for damages may exist. 2. REPUDIATION By invoking the repudiation doctrine, the buyer, in this case the promisee, is entitled to terminate the contract due to the seller’s breach of the agreement. The buyer must prove that there is the seller is reluctant or no willing to honour the agreement and that the matter actually possesses a significant level of seriousness. According to subs. 12(1) of the Sale of Gods Act, “Whether a stipulation in a contract of sale is a condition the breach of which may give rise to a right to treat the contract as repudiated or a warranty the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated depends in each case on the construction of the contract, and a stipulation may be a condition, though called a warranty in the contract”1. The seriousness of the breach of the contact can be proved with reference to the seller’s account regarding the contract or actual inability to perform as regards the perceived breach. To deal with this matter, it is worthwhile to analyse Birds on a Wire Pty Ltd’s potential contractual breaches. 3. BIRDS ON A WIRE PTY LTD’S POTENTIAL CONTRACTUAL BREACHES Change of model of goods supplied The contract stipulates that Birds on a Wire Pty Ltd was supposed to supply 3000 units of Bird Catcher 5000 and 3000 units of Bird Catcher 2000 to Bunnings Belconnen Pty as agreed on 3 March 2012. However, on 15 March 2012, Mr. Philip Aspen of Birds on a Wire Pty Ltd wrote to Paul Watson of Bunnings Belconnen Pty informing them that the Bird Catcher 5000 model that was shown to him was a was shown to him was actually a new prototype that had not been released yet, and it was mistakenly taken from the factory by Mr Rooney, a new member at, who showed it to Paul Watson. As a result, it was expected that the Bird Catcher 5000 model that would be supplied to Bunnings Belconnen Pty would be slightly different from the model shown to Paul Watson. Birds on a Wire Pty Ltd also claims that both models of bird traps designed by Birds on a Wire Pty Ltd and which were supplied do not function as crows can open them and leave only trapped. Birds on a Wire Pty Ltd however advised that the Bird Catcher 5000 supplied is bigger (and hence more effective) and was designed with very little variations from the model shown to Paul Watson. In addition, it was indicated to Paul Watson that once the birds are rapped in the bird catchers, they have to be gassed in order to be killed. Birds on a Wire Pty Ltd also contends that the Bird Catcher 2000 model has similar problems as the Bird Catcher 5000 model. 4. WAS THERE SIGNIFICANT BREACH TO GIVE RISE TO REPUDIATION Based on s18. of the Sale of Goods Act, on the Rules of guidance for the passing of property, Rule 1 states that “where there is an unconditional contract for the sale of goods in a deliverable state the property in the goods passes to the buyer when the contact is made and it is immaterial whether the time of payment or the time of delivery, or both, be postponed. Therefore, in the current case the buyer is under an obligation to pay for the goods as undersign in the contract. In short, the matter does not have a significant level of seriousness to warrant repudiation. Further, under the Contracts for the Sale of Goods of the Uniform Commercial Code, s 2(d) states that under the UCC, a contract may be modified without new consideration if done in good faith2. Part 1 of this clause however requires consideration from both sides if any modification is to be done on the foods before they are delivered: “common law requires new consideration on both sides for any modification.3 There is evidence that the modification that was done on the goods delivered to Bunnings Belconnen Pty was done in good faith. This is because on discovering that Paul Watson had been shown the exact model of Bird Catcher 5000 that was to be supplied, Mr. Philip Aspen wrote to him on 15 March 2012 to inform him of the slight modification. The fact that Philip Aspen wrote to Paul Watson is evidence enough that Birds on a Wire Pty Ltd tried to inform Bunnings Belconnen Pty of the modification before the goods were delivered. In addition, the modification of done in good faith as model shown to Paul was a new prototype that was ye to be released. Furthermore, the goods that were supplied to Bunnings Belconnen Pty had only slight differences from the model that was shown to Paul Watson. Another reason why a repudiation does not arise is that there is a remedy for the perceived malfunctioning of the traps supplied by Birds on a Wire Pty Ltd in that the birds have to be gassed as soon as soon as they are caught in the bird catchers. On top of that, there was no mention of the number of birds that could be caught in the traps in the contract. 5. BUNNINGS BELCONNEN PTY’S POTENTIAL BREACHES By refusing to accept the goods delivered by Birds on a Wire Pty Ltd as stated in the contract, it is likely that committed the following breaches. (1) Paul Watson checked the demonstration cages before making an order of 3000 Bird Catcher 5000 cages and another 3000 Bird Catcher 2000 cages. This is evidence that the buyer saw a sample of the goods before engaging in the contract. Therefore, refusal to take the goods on delivery is a breach of the sale contract. (2) there were no major alterations in the models of goods supplied to the buyer. Actually, the Bird Catcher 2000 that was ordered is the one that was supplied; and the Bird Catcher 5000 cages supplied were slightly bigger although their functionality was the same as that of the model shown to Paul Watson. By refusing to take the goods, Bunnings Belconnen Pty can be presumed to be in breach of section 8 of the Sale of Goods Act 1896 which related to the subject matter of a contract. Section 8(1) of the Sale of Goods Act 1896 states that “the goods which form the subject of a contract of sale may be either existing goods owned or possessed by the seller, or future goods”.4 Section 8(3) further states that “when a by contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods”.5 By refusing to accept the bird cage equipment, Bunnings Belconnen Pty also contravened clause 5 of the sales agreement, section 51 of the Sale of Goods Act 1896 (Qld) 6 and article 2-607 of the Uniform Commercial Code7. Looking at section 39 of the Sale of Goods Act 1896 (Qld) there is some liability on the part Bunnings Belconnen Pty through the refusal to take the supplied goods. Notably, this section deals with the buyer’s refusal to accept goods without giving substantive reasons: when the seller is ready and willing to convey the goods, and asks the buyer to take delivery, buyer does not within sensible time after such an appeal take delivery for the goods, the purchaser is accountable to the seller for any loss caused by the buyer’s disregard or refusal to posses the delivery, and also for a reasonable charge for the care and custody of the goods.8 Notably, Birds on a Wire Pty Ltd can argue that if Bunnings Belconnen Pty fails to accept the catcher equipment, the party is going to suffer a loss equal to the cost of manufacturing 3000 pieces of Bird Catcher 5000 and another 3000 pieces of Bird Catcher 2000 ordered by the Paul Watson for Bunnings Belconnen Pty. This is because the materials that were used to manufacture 6000 bird catchers would have been used for manufacturing other products for different buyers. Birds on a Wire Pty Ltd will also not realize the expected profits from this sale as a result of Bunnings Belconnen Pty’ action. 6. POSSIBLE REMEDIES Under section 40 (1) (a) of the Sale of Goods Act 1896 (Qld), an unpaid seller is one who is deemed to have not been paid or tendered. The remedy thus may involve looking at the unpaid seller’s right, in this case the right of Birds on a Wire Pty Ltd. Subject to section 41 (1) of the Sale of Goods Act 1896 (Qld), the seller can resale the goods or retain the goods for the unpaid price while still possessing the goods. The seller also a right to withhold the goods as long as their ownership has not been transferred to the buyer, in addition to the other remedies. For Bunnings Belconnen Pty, although Birds on a Wire Pty Ltd did not supply all the specific goods as stated in the contractual agreement, the remedy has been offered by the seller since the cages suppled still function as those mentioned in the contract. Bunnings Belconnen Pty only has to gas the birds as soon as they are trapped in the cages supplied by the seller. Read More