Analysis of Contract Breach - Case Study Example

Running head: Breach of Contract Law Name Institute Date Breach of Contract a) What arguments could Chen use to support his refusal to pay John more than the original agreed price? John is solely responsible for the losses since he did not finish the job within the stipulated time frame, the end of June. He instead completed the renovation in mid July. Chen could argue from either misleading conduct or a breach of promise. In the first place, this case clearly constitute misleading and deceptive conduct defined as where a numerous legal penalty stream from stuffs, which are alleged by a single party that might not form part of the contract, however that are yet powerful in influencing the other party to join the contract. In this case, the remedies can either rescission and/or damages. It can be argued that it was too late for Chen to cancel the contract; therefore John has no choice but to pay for the damages (Sweeney, O’Reilly, Coleman, 2010). Case Studies/law Awad v Twin Creek Properties Pty Ltd (2011) NSWSC 923) is relevant. It may be argued that, if at all a promise was of great significance to Chen, then he would have stayed away from signing the contract initially unless he was certain of a stern and factual performance of the promise and may be set free in case of any violation of the so-called promise. This not withstanding, for Chen, finishing the work within stipulated time frame was very important as he indicated his parents were coming to stay with him. John is therefore responsible for the losses since if he knew he could not meet his promise, completely having the house renovated by the end of June, he would not have entered in the contract in the first place. Considering Riches vs Hogben (1986) Qd R 315: here, where a son decided to emigrate, having been guaranteed that the mother would purchase a home and place it in his name. The mother bought the home but instead put it in her own name. After a time the son moved out under pressure from his mother, but brought an action to have the house put in his name. Just like the said mother, John should be stopped from breaking his promise. Similarly, this warrants the remedy of damages. Therefore, Chen could demand for damages as a result of breach of promise. In this case, renovating the house by the end of June was a condition and as a result he could take legal action for damages after ending the contract. It may be argued that there was no written contract however, oral promises made by the parties before entering into the main contract that are not conditions, might include contractual impact as a security contract on the main contract as seen in De Lassalle v Guildford [1901]. Similarly, this is an example of a security contract has an autonomous existence to the main contract and is not subject to the parole proof rule. It may appear as if Chen also made a breach of contract since he had agreed to change the contract price but he could argue that he was only worried as he wanted the work be done on time owing to the coming of his family thus unwillingly agreed to the change in the contract price. To Chen, completing the work by the end of June was actually a condition. The term was sealed and to both parties the term was a condition at the beginning of the contract given Chen's circumstances and the way it was expressed and the importance of the term to the overall contract (Clarkson, Miller, Jentz and Cross 2001). Chen could also argue in support of his refusal to pay John from a similar case of Furan v Wight (1989) where Weights' failure to settle on the settlement date was itself a breach of condition. According to the court, the settlement date was 'of the essence of the contract'. Chen can support his action by indicating that immediately prior to the termination of the contract, as at the end of June he was willing and able to play his part in the contract. Chen can then also consider arguing for rescission of contract based on misrepresentation. Since there was a condition in the statement term, very vital in going to the root of the contract and allowing the injured party the option of rescission and/or damages. Chen thought John could complete the renovation by the end of June and was therefore convinced to enter into the contract. This was only reasonable given the prevailing circumstances at that time. Nevertheless, representation was not the main inducement but just one of the main factors that fascinated or attracted him to the contract. The relevant cases that apply here are JJ Savage and Sons Pty Ltd v Blakney (1970) and Holmes v Jones. Statute Law Section 42 of the Fair Trading Act 1987 “states that a person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. Also, Section 18 of the Australian Consumer Law “states that a person must not, in trade or commerce, engage in conduct that is misleading and deceptive or likely to mislead or deceive”. The effect of section 18 is the same as that of section 52 of the TPA and, as such, the existing jurisprudence relating to section 52 remains appropriate under the ACL. In consideration to the Australian Consumer Law (ACL) section 18, Chen may argue there was a also claim misleading conduct on the following threefold grounds: First, that the conduct was made in trade or commerce that is to say the statement was made in a business negotiation. Second, the conduct was misleading by virtue of the fact that Chen relied on John's promise to complete the renovation by the due date before he entered the contact and lastly, there is a Section 42 of the Fair Trading Act 1987 and of ACL's section18 consequently Chen has the right to claim for damages as one of the remedies. Again in the prevailing circumstance, Chen case could be decided in the same way in New South Wales. Particularly, section 42 of the Fair Trading Act 1987 (NSW) (applicable to people generally), “a company or person acting in trade or commerce must not engage in conduct that is misleading or deceptive, or that is likely to mislead or deceive”. b) What arguments could Chen use to support his claim for compensation? Need to explain the remedies and explain what the compensation is and include other cases. Before embarking on Chen argument for compensation, it is worth noting that there was a breach of contract. Normally a breach of contract takes place where a party (John) to a contract fails to perform, precisely and exactly, his obligations under the contract. Taking the form of a failure to perform a service as agreed (Barron, 2006). In the context of the current case, the breach is real in nature since John failed to form his side of the bargain on the due date, the end of June. This is similar to the Case of Poussard v Spiers and Bettini v Gye. In this case, the employer had a right to terminate the soprano’s employment when she failed to arrive for performances. However; if at all John announced in advance of in advance of the due date for performance, that he intends not to perform his side of the bargain. Then it would be a different case, taking the form of anticipatory breach of contract. Damages are the basic remedy available for a breach of contract. It is a common law remedy that can be claimed as of right by the innocent party. The object of damages is usually to put the injured party into the same financial position he would have been in had the contract been properly performed (Ciro and Goldwasser, 2006). Chen had to pay a three week hotel expense of $1500 since John had breached the contract having failed to finish the work with agreed time frame. This gives Chen a right to sue for damages. The purpose of damages is to compensate Chen 'the innocent party' for losses actually suffered as a due to the breach of contract triggered by John. It is worth noting that the amount damage is basically to compensate the claimant for his loss not to punish the defendant. The main aim or basis of compensatory damages is to put the innocent party into the same financial position he would have been if at all contract had been properly conducted. This is sometimes called the ‘expectation loss’ basis. Taking the case of Victoria Laundry v Newman Industries, for example, Victoria Laundry were claiming for the profits they would have made had the boiler been installed on the contractually agreed date. John's delay in the renovation cost Chen $1,500 as he needed to accommodate his parents in a hotel room. Therefore, Chen can sue for $1,500 to put him back in the same place. Just like the case of Hadley v Baxendale (1854) where the court followed the rule governing remoteness of loss of contract, where the court reinstated that where one party is in breach of contract, the other should receive damages which can fairly and reasonably be considered to arise naturally from the breach of contract itself particularly in the normal course of things. In order to be compensated. Chen will need to show that the damages for the losses were not too remote for instance by arguing he incurred unnecessary expenses in hotel accommodation for his parents since John failed to complete house renovation in time. The losses are related and not remote. He can also illustrate that the losses he incurred fall within the two limbs of the remoteness rule as explained in a foregoing case of Hadley v Baxendale (1854). If at all John had advised Chen in advance for his delay then Chen would have considered other options for his parents. Otherwise, by taking accommodating his parents in a hotel for three weeks and having incurred $1,500 was in itself only reasonable steps to reduce the losses. He must therefore be compensated. Based on Australian Consumer Law (ACL) under section 18 the aggrieved party, Chen will dispute that there are other causes of the loss apart from the breach of contract or confusing conduct as it is similar to the case of Gould v Vaggelas (1985). Thus, Damages under the ACL could be are arrived at by considering the position Chen is actually in and the position Chen would have been in but for the breach of section 18 (GIO v Marks 1998). Under this circumastance, the quantity of damages will be equal whether in contract law or breach of section 18. c) What arguments could John use to support his claim to the $10,000 he wants Chen to pay? John has argument for his case and in support of his claim of the $10,000 he wants Chen to pay including case law and statute (section 18 of ACL). John could argue along quantum meruit means which basically implies the amount he deserves" or "what the job is worth. Fundamentally, quantum meruit is an act for compensation of the rational value of services carried out. As in the Case of Maglica v. Maglica (1998) under quantum meruit the party seeking recovery must show the following that at least there was a benefit was conferred to the other party. Again, there should be a proof that the party conferring did so with the reasonable expectation of being paid and lastly there is also need to show that the benefit was not volunteered and therefore retaining benefit without paying for it would result in unjust enrichment of the party receiving the benefit. At least, John has done some work having completed the renovation though in Mid July. It is only fair under quantum meruit if he get payment for what he has done so far. John can initially claim that he has 'substantially performed' the work by the due date and consequently he can claim the $10,000 from Chen. Again, John can also vividly indicate the work was not a condition as alleged by Chen since both had not expressly provided that the term be a condition. What really matters is completion of the renovation (Barron, 2006). In the case study of Bettini v Gye (1874) the courts established that time can only be a condition if at all the by contract is considered in totality to determine if the parties had intended the time stipulation to be the root of the contract. However, according to John, this term was neither the essence of the contract root of the contract, nor was it the heart of the contract. In addition, John never intended the time stipulation to be the root of the contract. Again, Chen did not act promptly to rescind the contract, when the new price of $10,000 was quoted disqualifying the right to terminate the contract. Again, John can argue that Chen has benefited at his expense and therefore is entitled to $10,000 payment for renovations. The courts may award a quantum meruit even if the courts find that John has breached the contract as illustrated in the case of (Steele v Tardiani 1946). Chen should also not have waited but should have made inquires confirming the progress of the renovation. In a similar case, Ta Ho Ma Pty Ltd v Allen it was agreed that illogical for the plaintiff to rely on a valuation without making further inquiries. John will claim that he did not intend to induce Chen into acting on the representation that the renovation will be completed by the end of June. It was Chen's decision to accept the contract. In addition, John can argue that there was no breach of section 18 of the Australian Consumer Law (ACL) and that the misleading conduct since Chen did not rely on John's ability to complete the renovation by the end of June before he entered the contact but actually he relied on John’s building and renovation skills not his punctuality. References An article in (1996) 10 Journal of Contract Law 173 Barron, M. L. (2006). Fundamentals of business law. North Ryde, NSW: McGraw-Hill. Ciro, T. and Goldwasser, V. (2006). Law and business: text and tutorials. South Melbourne, Vic: Oxford University Press. Clarkson, Miller, Jentz and Cross (2001) West Business Law, Chapter 18-Contracts, Breach of Contracts and Remedies, 8th edition West Legal Studies in Business. Eddie Michael Awad & Anor v Twin Creek Properties Pty Ltd (2011) NSWSC 923 Gani Aldashev (2009) Legal institutions, political economy, and development Oxford Review of Economic PolicyVolume25, Issue2 Pp. 257-270. http://www.cch.com.au/ https://ubonline.ballarat.edu.au/ http://www.caselaw.nsw.gov.au/action/PJUDG?jgmtid=154136 Robert Fisher and Lawson Smith (2011) LAWS20028 Business Law Study Guide Edition 2011, T2 CQUniversity Australia, Queensland. Sweeney, B., O’Reilly, J., Coleman, A., (2010). Law in commerce. (4th ed.). Chatswood, NSW: Butterworths. Read More