Luiggis Shipping Company and Choes Contract with Marcus - Case Study Example

Name: Instructor: Course: Date: Issue Marcus Karkharoff had two ships which he decided to sell. On October 1st, he signed a contract with Luiggi’s shipping company for the sale of the Moskva for a price of $15 million, and the amount ws transferred to Marcus account the same day. However, all people involved did not know that Moskva had caught fire a few days earlier, suffered irreparable damage and then sunk. October 2nd, Marcus signed a contract with Imelda Chow and paid $20 million on Leningrad. Choe believed that it was a red hull while it was a blue hulled vessel though it was hulled beside the one that Chow had seen. A week, he was advised by the insurance assessor that Leningrad was in a poor condition and was worth $10 million The Law For any contract to be valid, the law demands that three essential aspects must be satisfactorily addressed. First there has to be an agreement or an offer and acceptance. Secondly, is the intention which bides a party to the agreement and finally there is the consideration which is the promise to pay for goods or services offered1. In this case, both parties had all these aspects were satisfied. Marcus had an offer to sell his two ships. Choe and Luiggi’s Ship Company accepted the offer and paid for the same and therefore were bound into the contract. For the case of Luiggi’s shipping company, Moskva was the main reason why this business contract was enacted. Now that the ship sunk, the offeree has nothing to offer at all. This in contract law terms means that there was failure of a condition. The condition of the contract is the exchange of cash amount and the ship. According to the law, an offer lapses where the conditions are not satisfied. This case can be referred to as a conditional contract. As it is in Gilbert J McCaul (Australia) Pty Ltd v Pitt Club 1959 (NSW2), Pitt entered into contract with McCaul for a period of five years. He has a right to renew the contract but had to meet some conditions. First is three months notice for his intention to renew and he had to pay rent punctually. However, in court when McCaul refused the renewal of the contract, it was found out that Pitt was not punctual in paying the rent and thus that condition was not satisfied and thus the right had lapsed. In this case, a refund may be demanded. According to Australian Consumer law which is elaborated in Competition and Consumer Act 2010, there is a guarantee for consumers who acquire goods or services. This ensures that the goods are received as paid for and conditions indicated. The remedy may require repair, replacement, refund or have the service performed again. Mandatory quality standards in any transaction are justified on grounds of the inevitable information asymmetry between customer and trader. In this case, Luiggi’s shipping company and Marcus had agreed on the condition of the ship they are transacting. This however is not met and thus, the buyer as the consumer has to be protected by the law. The law states that, the consumer may not be aware of the defects of the goods to make substantial bargain for the risks3. This being the case, mandatory standards of quality addresses this issue by giving consumers a right to redress if the goods they just purchased are faulty or defective4. The contract was entered when the condition of the ship was not certain. Marcus did not know the condition of the ship; he did not know it does not even exist. There are two aspects that Marcus will approach this case. First he can issue a refund. The amount paid for the item must be returned to the buyer. The amount has to be returned as it was. First this is because the item was not delivered therefore they cannot be termed as return goods. Secondly, he can choose to give a replacement of the same type of ship and with similar value. If the replacement is not available, the refund will remain to be the main option. Choe’s case is a complicated one. First, he signed a contract to buy a red hulled vehicle for 20 Million. He confused with the one hulled beside it. Later on he learnt that he was charged more than the condition of this ship dictated. First of all, Trade Practices Act 19735 protects consumers when they buys good. The goods bought must be free from defects and must perform as per their requirements. This are well elaborate in statutory rights. This ship did not meet the any of the obligations stipulated by Choe. This therefore means that there was a breach of contract also. Statutory rights which do not have a time limit address the value and the quality of the good6. At the same time, he can return the ship to the seller, notify him of the problem and let him (Marcus) inspect the ship before he can use it. As it was the case with Luiggi’s shipping Company, Choe can demand a full refund of the payment he made. First, this was not the actual ship he intended to buy. He wanted a red hulled ship but this was a blue hulled ship. Secondly, the price given by the seller is not the actual value of the ship in correlation with the condition and performance of the ship. When it is the seller’s mistake to provide good that meet the statutory warranty or condition, then it is also their responsibility to provide a remedy7. However, even when the law is aimed at protecting the welfare of a customer, the same law does not apply in case it is customer’s carelessness or unreasonable demand8. This means that Choe should have examined the goods before buying and ought to have seen the obvious fault9. Rememdies for breach incase the condition of the ship is of merchantable quality are found in the common law and s75A of the Act10. From the common law it is clear that when the condition of the contract is breached, them the plaintiff who in this case is Choe is entitled to a claim seeking to make sure that the defendant (Marcus) performs as per the contract, or even terminate the contract. In section 75A, it is clear that when the condition of the contract is not met regarding the quality of the goods, then the customer has a right to recession11. The law dictates that a party must fulfill their obligation under a contract even if they made a mistake. In this case, there was a mutual mistake. This is the mistake where Choe thought he is buying a particular ship and Marcus thought he was selling another ship. When an unforeseen even occurs that result to a different expectation of the parties, then the agreement between both parties has been frustrated12. In NSW, this is found under the Frustrated Contracts Act 1978 (NSW)13. What Choe expected and even paid for was totally different from what he received. When one party has fulfilled their part but has not received the benefits from the other, then the other party may require a refund of all the payment14. Conclusion It is clear that Luiggi’s shipping Company and Choe entered into a contract with Marcus. When they both paid the amount quoted for the two ships, then they were all legally bound by the contract. However, there was a breach of contract in both parties. First of all, luiggi’s Shipping Company paid for an item that all parties did not ascertain it condition. According to the law Luiggi’s Shipping Company ought to have inspected the god before paying for it. The same case applies to Choe. He should have inspected Leningrad to ascertain that it is the ship he wanted to buy and with is in the right condition. Both Luiggi’s Shipping Company and Choe failed to inspect their products. On the other hand, they were shortchanged by Marcus. Whatever good they paid for, they did not receive or was not in the right condition or even worth the amount paid for. This being the case, they are protected by the Trade law and consumer law. Moskva did not exist. Therefore Luiggi’s shipping company had a right to demand another ship with the same specifications or even get a full refund of the amount they paid. According to Frustrated Contracts Act 1978 (NSW), he had paid for destroyed ship and thus he had a right to demand a refund. The same case applies to Choe who paid for an ship which could not perform. According to the law, Bothe Choe and Luiggi’s shipping company are protected by consumer law and are entitled to a refund or substitution of the ship they had bough. Work Cited Emerson C, ‘Trade Practices Amendment (Australia Consumer Law) Bill (No 2) 2010 Second Reading Speech’, March 2010 Commonwelath of Australia, Hansard, House ofrepresentatives, p. 2710 Frustrated Contracts Act 1978 (NSW). Furmston, M.P. Cheshire, Fifoot & Furmston's Law of Contract, 15th edn (OUP: Oxford, 2007) p.779 n.130. Gordley, James and Von Mehren, Arthur Taylor An Introduction to the Comparative Study of Private Law: Readings, Cases, Materials (Cambridge University Press, Cambridge,2006). Trade practices Amendment (Australia Consumer Law) Bill (No.2) 2010 Trade Practices Act 1973 Wilmot , Contract Law, Third Edition, (Oxford University Press, page 34 2009) Cases Gilbert J McCaul (Australia) Pty Ltd v Pitt Club 1959 (NSW), Read More