Analysis of Contract Law Cases - Assignment Example

Contract Law Name Course Lecture Date Question 1 The contract terms in this case are uncertain and the negotiations for the new systems are incomplete, thus the law may not recognize the contract as binding (Boardman 2006). SCT could seek to set aside the contract as they have failed to agree on key issues of performance and pricing of variations in the contract. SCT can seek to have a court give a reasonable construction to the terms of the contract that are uncertain. As seen in Whitlock v. Brew (1968) 118 CLR 445 courts may decide to look for external standards in that are common practices in the field to give the contract its true meaning. For example, where the price of contract variation is missing the court can imply a price for the same (McKendrick 2012). Finally, SCT can request the court to sever and void the clauses affected by the uncertainty. However, clauses can only be removed if the contract can be left intact upon their removal. On the other hand, DB can rely on the Contra proferentem doctrine which in Latin means “interpretation against the offeror” (Boardman 2006). Application of this doctrine means SCT as the party that provided the wordings for the contract would be at a disadvantage. According to Boardman (2006), courts use the doctrine to encourage people who draft contracts to be as clear as possible and try to take into account any foreseeable circumstances. As the bigger and more recognizable company SCT was in a better position to be in control of the contract for the production of the ASRS system. Failure by ASRS to involve its IT department in coming up with specifications for the software system were among the reasons DB had to spend extra on developing the system. The doctrine of Contra proferentem would thus place the cost of losses on SCT as it is the contracting party most responsible for the uncertainty. However, SCT may still be protected from DB’s exorbitant charges for contract violation through the implied covenant of good faith and fair dealing. Kirke La Shelle Company v. The Paul Armstrong Company et al. 263 N.Y. 79; 188 N.E. 163; 1933 N.Y argued that there is an implied consent by both parties not to engage in conduct that can injure the rights of the other party in the contract, to receive the fruits of the contract. Therefore, DB charges for contract variations should have been reasonable in observance of the good faith covenant. Breach of the good faith covenant is considered by the courts a variation of breach of contract terms. Question 2 A contractor just like an employee has legal and ethical responsibility not to divulge information that is detrimental to his employer. In Robb v Green [1895] 2 QB 315 the contract of employment gives rise to an employee’s duty of loyalty and fidelity. Common law recognizes the obligation of a contractor as being the same as those of an employee when it comes to divulging of information that could potentially harm the employer (Macken et al 2002) . Similarly, in Faccenda Chicken Ltd v Fowler [1986] 1 All ER 617, 625–628 it was ruled that an employee is under obligation to keep private information that could cause detriment to his employer. Faccenda Chicken Ltd v Fowler [1987] however does not provide protection for employers against divulging of information after termination of employment. Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 establishes that information that is obtained by contracting parties should be kept confidential. Therefore, the two Independent contractors acted in breach of their duty to DB not to use information obtained in the cause of their employment to DB to gain personal advantage as set out in section 183 of the Corporation Act 2001. Informax International Pty Ltd v Clarius Group Limited [2012] FCAFC 165 further allows a contracting party to restrain an independent contractor from working for another party for four weeks after termination of contract. However, the two DB independent contractors took up employment from DB clients as independent contractors while still engaged by DB as employees. The existence of a restraint clause can be deduced from the fact that the alleged one day consultation with SCT was done in a clandestine manner. In this case, the two DB independent contractors have acted in breach of their duty of confidentiality to DB. The conduct of the two employees is unethical as most professional bodies maintain that acting in breach of the duty of confidentiality is a contravention of their code of ethics McKendrick 2012. Furthermore, independent contractors are restrained in most cases are restrained from working directly for the firm where there are seconded by the contracting party. In this case DB can sue the two independent contractors for breach of their duty of loyalty and confidentiality. Secondly, they may ask the contractor’s professional organization to punish their unethical behavior. Question 3: Legal issue One of the legal issues explored in this case is the uncertainty, vagueness or ambiguity of contract terms. In this case, the ambiguity means that DB has no goal to work towards in fulfillment of its contractual obligations. May and Butcher v The King [1934] 2 KB 17 set out that an agreement to agree cannot be taken as a binding contractual terms. According to McKendrick (2012) uncertainty can lead to severance of ambiguous terms from the contract or voiding of the whole contract. However, as seen in Hillas v Arcos 1932 147 LT 503 the law prefers to make sense of uncertain terms in contracts instead of voiding the whole contract based on uncertainty. Performance is another contractual issue that is explored in this case. Performance in contracts is defined as the act of accomplishing a promise or other obligations according to the terms of the contract (McKendrick 2012). SCT performance of the contracts is entails offering part payment once certain milestones are reached in the development of the ASRS project. On the other hand, DB performance involves producing an ASRS system that reaches SCT performance specification. DB’s failure to fully perform the project is largely caused by the vagueness of the project on expected performance of the software and the whole ASRS system. An employee’s duty of confidentiality and loyalty to his/her employer is also explored in this case study. In this case, the employees are independent contractors who are seconded by DB to its ASRS clients. Under section 183 of the Corporations Act 2001 an employee is under obligation not to use any information obtained in the course of his employ to gain an advantage for themselves or cause a detriment to the organization. In contrast the two independent contractors clandestinely gave information on DB’s work on the ASRS system to DB’s clients. The two employees were compensated handsomely for their betrayal thus gaining an advantage for themselves. Secondly, the DB’s contract was cancelled and the company was later to collapse partly due to the action of the two contractors. This discussion partly shows why it is important for organizations to require confidential use of business information gained in the course of their employment (Macken et al 2002). Section 183 of the Corporations Act 2001 provides a civil obligation that a person who obtains information because they are or have been a director or other officer or employee of a corporation must not improperly use that information to gain an advantage for themselves or someone else or cause detriment to the corporation. Under section 184 (3) of the Corporation act the two committed a criminal offence by making dishonest use of the information. SCT could have avoided the Contract by Legally, SCT could have avoided failure of the ASRS contract by going to court for assistance on interpretation of the ambiguous clauses in the contract (Boarman 2006). According to McKendrick (2012), courts will first attempt to make sensible meaning of the uncertain clauses in the contract, this approach was used in Hillas v Arcos 1932 147 LT 50. In most cases concerning uncertainty courts will go a long way in ensuring contracts do not have to be voided (Mckendrick 2012). SCT could have been able to prevent DB from charging exorbitant prices for contractual variations. As ruled in (F & G Sykes (Wessex) Ltd v. Fine Fare Ltd [1967] 1 a contract for supply of chicken was reaffirmed and the supplier required to continue supplying the Chicken at a reasonable price. As seen in Sudbrook  Trading Estate Ltd v Eggleton [1983] AC 444 courts can use their own valuation with the assistance of experts and industry standards to establish the price SCT was supposed to pay for the contract variations. Furthermore, courts will be able to force DB to stick to its contractual good faith and fair dealings obligation as regard contractual variations. Therefore, SCT can be able to renegotiate the contract and provide the needed performance specifications to DB without being charged exorbitant prices. Conclusion Contracting parties must be careful lest they make contracts that are too vague to be enforceable and which do not have specific performance objectives. References (F & G Sykes (Wessex) Ltd v. Fine Fare Ltd [1967] Bernheim, BD, & Whinston, MD 1998, Incomplete contracts and strategic ambiguity, American Economic Review, 902-932. Boardman, M 2006, Contra Proferentem: The Allure of Ambiguous Boilerplate, Michigan Law Review, 104 (1105). Corporation Act 2001 (Cth) Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 Faccenda Chicken Ltd v Fowler [1986] 1 All ER 617, 625–628 Hillas v Arcos 1932 147 LT 50. Informax International Pty Ltd v Clarius Group Limited [2012] FCAFC 165 Kirke La Shelle Company v. The Paul Armstrong Company et al. 263 N.Y. 79; 188 N.E. 163; 1933 N.Y Macken, J, O’Grady, P & Sappideen, C and G Warburton, G 2002, Law of Employment, pp 139–141. McKendrick, E 2012, Contract law: text, cases, and materials, Oxford University Press. Robb v Green [1895] 2 QB 315 Sudbrook  Trading Estate Ltd v Eggleton [1983] AC 444 Whitlock v. Brew (1968) 118 CLR 445 Read More