Analysis of Contracts Law Issues - Assignment Example

Contract law 1 Name Institution Affiliation Contract law 1 ISSUE The case study deals with the doctrine of estoppel, which states that the court can prevent a litigant from taking the matter to court where in normal circumstances; it could have taken place in order to prevent an inequitable result on the other party. In that, estoppel occurs when one party depend on the promise of another party and with that reliance that the party get injured or damaged. Therefore, estoppel impedes a person from asserting anything to the contrary to what is stipulated or is in contemplation with the law, or has been established as the truth by judicial or legislative acts. In this case study, Mr. Roberts relied on the promise that was made to him by Mr. Martin, who was the managing director of the Composters Company Ltd. The promise stated that their contract would be extended for another four years if they would comply with the rules and regulations that have been set on producing wheat straws. Therefore, Mr. Robert would make a claim under promissory estoppel stating that composters should stay true to their word and the promise they made to Mr. Robert as he relied on the promise and bought machinery to produce what straws for the two seasons. ACTION Promissory estoppel states is a doctrine under estoppel that provides if a party to the contract changes his or her position either by acting or by forbearing from acting in reliance upon a complimentary promise, then that party can enforce the promise even though the essential elements of a contract are not present (Allison, 2011, pg. 252). Promissory estoppel is important because it helps in solving issues equitably; therefore, an equitable estoppel. The importance of promissory estoppel was stated in the case of1 where it was held that equity comes in to help in mitigating the rigours of strict law, as well as prevent a person from instigating on his or her strict legal rights. However, there are various factors that must be present in order to invoke promissory estoppel, and they include a promisor makes a gratuitous promise that he or she should expect to induce some action forbearance of a substantial and definite character on the person the promise is being made2. Secondly, the promise or the person the promise is being made justifiably relies on the promise. Thirdly, a substantial detriment that amounts to an economic loss is suffered by the promisee from the forbearance or the promise of the promisor. Lastly, the plaintiff must prove that justice requires enforcement of the promise made by the promisor3. Promissory estoppel is based on a promise not to enforce on a pre-existing right, but a future intention as was in the case of the promise that Dr. Martin made to Mr. Robert. CONSIDERATION The law of contract establishes that a promise without consideration is not enforceable because it bears a gratuitous promise. However, although not a sword but a shield sometimes the courts extend their purview of cases in instances where there is no consideration as was held in the case of Hughes v Metropolitan Railway Company4. However, the case was lost but, Denning J, promissory estoppel in the case of Central London Property Trust Ltd v High Tress House Ltd5. In this case, the plaintiff’s company restored payment of full rent from the early 1945 and full rent would have been restored after the initial promise if there was a suitable notice. Denning J, stated that promissory estoppel requires an unequivocal promise by conduct or words. Secondly, there should be evidence that there was a change in the situation of the promise as an effect of the promise reliance but not to the detriment of the plaintiff. Lastly, the plaintiff must show that there will be inequity in the case where the promisor goes back on his or her promise. The ruling was also upheld in the case of Total Metal Manufacturing Ltd v Tungesten Co Ltd6. In the case of Walton’s Stores (Interstate) Ltd v Maher7 it was held that in case estoppel is proven it gives rise to an equity right that is in favour of the plaintiff and for that reason, the court will do the minimum equity that is just in the given circumstances. ACTION AND CONSIDERATION Mr. Robert can bring a suit to court against composters because he relied on the promise that was made to him to get machinery from the bank in order, to produce wheat straws that were to the client’s specifications. According to Brennan J in Walton’s store case8, the plaintiff must prove that he or she assumed a legal relationship existed between him and the defendant and for that reason, the defendant would not be expected to withdraw from that obligation. This was the case with Mr. Robert and Composers after they wrote a letter showing an intention to create a legal relationship. Secondly, the defendant had induced the plaintiff to adopt that expectation or assumption, which was the case with Mr. Robert after receiving the letter. Thirdly, the plaintiff abstains from or acts in reliance on expectation or assumption. The defendant knew or had the intention to make a promise to the plaintiff9. Additionally, the plaintiff action in this case occasioned economic detriment as the expectation was not fulfilled, and he has already taken money from the bank to buy the machinery. Lastly, the defendant failed to act on the promise to avoid detriment by fulfilling the assumption or expectation. Therefore, the plaintiff in this case Mr. Robert has the right to sue Composters under the doctrine of promissory estoppel as he relied on the promise which will end up causing economic detriment on his part. In conclusion promissory estoppel, if relied upon by one party and if the other party had the intention of making the other party rely on the promise then the court can reward the promisee with specific performance from the promisor (Carter, 2009). In the case of Mr. Robert, the court can compel Dr. Martin to accept his goods because he relied on the promise that they would enter into a contract for a period of four years. Mr. Robert due to the promise made to him bought machinery to help in making the wheat straws to the client’s specifications. ISSUES 2. A contract is binding if parties who are willing to fulfil contractual obligations enter into it. In every contract, there are terms and conditions that are included in them as long as they are not inserted in the contract to lower the other parties bargaining power10. Contractual terms are provisions forming part of the contract in that each term gives rise to a contractual obligation. However, in case there is a breach of such terms and conditions there would be a rise of litigation. A contract does not expressly state all terms as some of them have less legal gravity than others as they are peripheral to the goals of the contract. Conditions that are imposed in a contract are the very root of the contract and when the terms are breach they give a person a right to repudiate the contract, as well as, allow the other party to discharge the contract (Groves, 2005, pg. 34). The issues that may arise or composters may rise in their suit would be the defendant did not fulfil the terms and conditions of their contract as the goods they provided for the client did not meet their specifications. For example, Dr. Martin, who is the director of the company, states that the straws contain high nitrogen levels meaning that they are not good for consumption. Secondly, the issue that can be raised by composters is on contract modification. Contract amending or modification is done when only the parties to the contract agree that in case of any changes in their business some terms and conditions of the contract may be modified, or amended (Peden & Carter, 2006, Pg.224). The amendment is made in writing even though the first contract was not in writing. There are various exception to the parol evidence rule that states that past agreements or terms stated by the party should not be considered when interpreting the writings in the contract as the parties have decided to leave them out. However, there is one exception to the rule that stands out in this case study that is the rectification exception. Rectification allows a document to be revised where there has been a transcription mistake in recoding. In the case of Dr. Martin, he needed to amend the contract due to the decrease of the price of the mushroom the parties needed to discuss the supply relations as they had agreed earlier in the letter sent to Mr. Martin. The company had stated that the prices would be adjusted annually after the first season using the CPI index that was suitable for both parties. This meant that the clause was agreed upon by both parties and for that reason; Mr. Robert was obligated to accept the clauses in the contract without any objection. ACTION The legal contractual issues that are raised in this contract would be resolved by looking at the terms of the contract or the provisions in a contract that both parties agreed. A term in the contract is any provision or clause that raises contractual obligation among the parties11. There are two main issues that arise in relation to contractual terms that include identification of the terms of the contract and construction of their legal effects. However, not all terms have to be written or said by parties even implied terms exist, and they impose legal obligations on either or both parties in order to qualify the terms of their bargain. Additionally, only terms that are made reasonably are available to the party before a contract is made, and that is when the terms can be incorporated into the contract. In some cases, some statements made before the contract is entered maybe intended by parties to act as terms; however, not all statements work as terms. In this case, the terms were implied in fact, where the terms would give full effect to the presumed intentions of the parties to the contract. Terms implied in fact, are tailored and are unique to a particular contract that makes the subject matter. In the case of BP Refinery V Hastings Shire Council12, in ascertaining a party’s presumed intentions the court laid down the following conditions that must be satisfied, and they include that the terms must be reasonable and equitable, must have business efficacy, the term must go without saying that is it must be obvious (Carter and Tolhurst, 2009). Additionally, it must be a clear and precise expression and consistent in that is does not contradict any express term of the contract. Therefore, to help in solving the claims raised by composters the terms implied by fact rule should be used. Contracts can be modified if the parties decided that in case some things changes the contract would be reviewed. Contract modification can be made in whole or in part depending on the agreements or needs of the parties (McLauchlan & Lees, 2011). In the case, of composters the price of mushroom feel drastically and before they entered into a contract they had agreed that they would change the prices depending on the CPI (Furmston, Cheshire & Fifoot, 2012, pg. 234). However, for a contract to be modified it must be considered to be valid and all parties to the contract must agree to the consequent changes in the contract13. Contract modification is necessary to change the terms such as delivery, payment or receipt of product, extending the contract, modifying the contracts duration and adding or subtracting any goods in the contract. ACTION AND CONSIDERATION Composters created a contractual legal obligation between them and Mr. Robert they can claim that he did not fulfil the terms of the contract (Bix, 2000 Pg. 67). In that, he produced goods that were of not good quality as they contained high nitrogen levels. Additionally, the terms implied in fact are enforceable because both parties relied on the terms to agree on the contract. Therefore, composters can bring a suit against Mr. Robert where the court can make him produce goods that are low in nitrogen and that are to the specifications of the client. Additionally, it is the party to act in good faith and ensure that the goods he produces are of good quality. In relation, to the modification of the contract if the parties had agreed to a rectification in the contract then it is enforceable by law (Pearson, 2009, pg. 109). The reason for modification of contracts in the case of composter, Dr. Martin, had informed Mr. Robert that in case there was a change in the prices they would use the CPI index to determine the price to use for the goods14. In this case, Mr. Robert is obligated to agree to the term of the contract as it was agreed upon by both parties in relation to modification of the contract. In conclusion, if one party does not fulfil the terms and conditions of the contract then the party that feels that those conditions have not be fulfilled can repudiate the contract. The party can also ask for damages in the case where he or she suffered economic loss. In relation, to the modification of the contract parties must be in agreement or inserted a clause in their contract in agreement that when anything changes in the terms of their contract they can amend the contract to satisfy their goals and objectives. Therefore, this means that Dr. Martin has a claim under law of contract as the conditions of the contract we not fulfilled. Secondly, on the issue of the modification of the contract to fit the CPI index price. QUESTION 2 Simple cannot rely on the statement made by Ms Shelley on 10 August 2011 because the comments in the first place were not made directly to Simple, but to his representative meaning that what he had was hearsay, as it did not come directly from Ms Shelley. According to the Evidence Act 2008 Section 59, there are various exceptions to hearsay evidence where the Act states” evidence of a previous representation made by a person is not admissible to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation.” Ms Shelley made a representation prior to the contract, which Simple relied upon meaning that she provided a statement that was inconsistent with the main contract. This is because what she told Simple representative was that it was not a must for them to bring 90 customers within six months after their contract was entered into by both parties. For that reason, Ms Marini as a representative of Simple decided to enter into a contract with WSA. This was a misrepresentation on the part of WSA, because if they knew that the statement was inconsistent with the main contract Ms Shelley would not have made that statement as it might have attracted Simple to enter into a contract with them (Paterson, Robertson & Duke, 2009, Pg.68). However, there is a criterion that has been used to determine a statement is a misrepresentation because misrepresentation is one of the vitiating factors that affects the validity of the contract. Where misrepresentation occurs when one party makes a false statement making or inducing the other party to enter into a contract with them15. A misrepresentation includes a false statement of past or existing fact being made, and the statement must be directed to the suing party and party who used the statement intended to induce the suing party into entering into a contract. Therefore, simple can rely on Ms Shelly statement she made it with the intention of inducing Simple to enter into a contract with them even though she knew that it was contrary to the actually contract, which stated under clause 5.4 stated that the minimum number of customers required by the company were 15 per month. However, simple had not satisfied that condition as he had only brought 90 new customers from 23 September to 23 march 2012. This meant that Simple was in not breach of the agreement that he had entered with the client16. The Simple can recover damages from WSA has it was fraudulent misrepresentation as he relied on the statement made by Ms Shelley. In the law of contract, when a party to the contract formally agrees to enter into a contractual obligation with the other party they become liable under the law to fulfil the contractual duties. However, failure to perform the terms and conditions set in the contract results to a breach of the contract and other legal liabilities (Paterson, 2011). There are some conditions that under the law of contract that allow the contract to be terminated legally before contractual obligations have been fulfilled. Termination of contract varies for different reasons first, because the parties to the contract have agreed to terminate their agreement. In the case of agreement by partners, the agreement should be mutual, and one party cannot be unduly influenced to terminate the contract. Secondly, a contract can be terminated or discharged by frustration when a supervening power that is beyond the control of either party the doctrine of frustration17. However, although the doctrine of frustration is applied in contract law it is limited to a range of circumstance. First, where the event that occurs renders the performance of the contract impossible and it is something that all parties to the contract had not anticipated, for example, a terrorist act and natural among others. However, if the courts establishes that the event was anticipated by the parties to the contract then it is not sympathetic. Additionally, where frustration is established the contract is terminated in futoro, and, therefore, leaving no option to perform or discharge the contract. The loss resulting from the termination of the contract lies where it falls. An agreement or a contract can also be terminated because of the breach in that one party to the contract fails to fulfil his contractual obligation as required under the law of contract (Aitken, 2012). The non-breaching party has the right to terminate the contract if there is a provision in the agreement that permits for the termination in the circumstances given by the contract18. Secondly, in case the other party repudiates the contract or renounces his, or her obligation under the contract. Lastly, in case the breach is sufficiently serious in that, technical or minor breaches cannot general led to the termination of the contract (O'Sullivan & Hilliard, 2012, p.89). The contract may contain a termination clause that stipulates how the contract should be terminated in case one party fails to fulfil his or her contractual obligation. In that, a termination clause is a part of the contract that gives the parties to the contract a right to cancel or terminate the contract. Termination clause are found in employment contracts where either party to the contract may be allowed to terminate the contract via notice. However, in some clauses the employer is given the liberty to terminate an employee at will or under certain circumstances that are mentioned in the contract19. Property leases also contain termination clauses or what is referred to as escape clause where a right is reserved to the tenant to terminate a lease prior completion. Considering the given factors on the discharge of a contract, it is clear that the termination was not unlawful (Tomasic, Bottomley & MCqueen, 2002, Pg. 125). This was because Ms Shelly did not do anything wrong as the termination clause of the contract provided that in case the distributor does not meet the minimum requirement for each six month period during the term of the agreement then, the supplier at his own discretion may decide to immediately terminate the agreement by way of writing to the distributor. The letter of termination was written to the distributor explain the reasons why the contract was being terminated. In that, Simple had not attained the number of customers that were required by the organization monthly, as they had only accomplished to get 90 customers after seven months meaning that he was in breach of his contractual obligation. However, although Simple was in breach of the contract they had relied on a statement made by Ms Shelley; hence, they knew that although they had not attained the right number of customers they were not at fault as Ms Shelley had promised to help them in case they found it hard to get customers within the six months. Therefore, looking at the various factors that led to the termination of the contract, it is evident that the Simple was not at fault as the company relied on the information or statement given by Ms Shelley. The information was a misrepresentation from what the contract stipulated and for that reason, the termination of the contract was unlawful due to fraudulent misrepresentation that was made by Ms Shelley to Simple’s representative. 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