Breach of Contract and Remedies - Case Study Example

Contract Law Name: Institution of Affiliation Contract Law Analysis of the Case The above-highlighted case centres mainly on contractual law. Therefore in consideration of the contracts signed, namely the two contracts signed by Marcus and the other two parties, contract law will play a major role in their determination. In Australian contract law, not many remedies are offered in situations where parties are found to having breached contracts that remain a wanting situation1. According to the Attorney General's department in Australia, the judicial system in the country remains mainly limited to awarding loss based damages in instances where defendants are proven to have breached contracts2. Breach of Contract Breach of a contract according to Australian law is established as having occurred in a number of ways. For a claimant to be in a position where they can claim damages owing to a breach of contract an enforceable agreement is required. According to the agreement reached by both parties, the obligations of each of the parties require to be documented and ought to be the consideration of the deal being agreed upon by both parties. However, it is also the requirement that the contract ought to explicitly or implicitly require that performance be achieved within or a pre-determined period3. Contractual breach usually occurs in a number of one of various ways: i) The failure to perform the stipulations of the contract on time or at all; ii) The failure to perform according to the requirements or specifications or standard expected of the terms of the contract; iii) The refusal or inability of terms of the contract being met before the agreed upon period. With respect to the initial types of the actual breach, the provision offered by them addresses performance in relation to the agreed upon terms of the contract. The two types of breach identified seek to address those instances where the expectations of the contract are not met thereby qualifying them as having been breached. However, the third type of breach has an anticipatory element and is thus referred to as anticipatory breach. Often in a situation where the terms of the contract are not met due to the refusal or the inability of one of the parties to meet the terms of the contract, the innocent party qualifies to terminate the contract4. Analysing each of the above two cases, different types of breach can be tied to each of the cases individually because each has their unique circumstances. The first case, that of Marcus and the shipping company, the shipping company when agreeing to the purchase of the Moskva expected the delivery of the ship once they had purchased the ship for a fee of $15 million. However, the ship at the time of purchase had caught fire and sunk without the awareness of the buyer, Luiggi Shipping Company. Therefore, in the absence of the ship failing to be delivered to the buyer, Luiggi Shipping Company can adopt to claim breach of contract. It would be based on the first form of breach, which is that of the failure to perform at all concerning the requirements of the contract between the two parties. The company it is worthy to note are eligible to claim based on this form of breach, as the ship was not delivered irrespective of whether Marcus knew that the ship had sunk or not by the time, the ship sunk. Therefore, to seek reprieve because of the ship not being delivered to the buyer, Marcus can adopt to refund all the money owed to the buyer and thereby terminate the conditions of the contract5. In addition, to refunding the money to the shipping company, Marcus should also endeavour to prove that he too was not aware of the burning and sinking of the ship. In the second case involving Imelda Chow, she claims that she had purchased the ship thinking of it as a red-hulled vessel that she had seen at Perth. However, reality would be that the Leningrad vessel she desired was a blue-hulled vessel. Based on this fact she had then decided to purchase the vessel. However having realized the breach that would have occurred the most likely recourse that Chow would use to claim breach of contract would be that of the failure to meet the terms and conditions of the contract. However, the decision to purchase the vessel based on the assumptions that Chow had made would not be admissible in court because the stipulations agreed to the contract were not made clear to both parties. This is because, Marcus was aware that the vessel that he was selling was a blue-hulled vessel while for Chow the vessel that according to her at the time of purchase was a red-hulled vessel. With respect to this information, the ideal remedy would thereby be to return both parties to the original position that they held prior to engaging in the contract of selling the vessel6. Remedies According to Australian contract law, four main remedies are offered by the judicial courts as remedies where contracts are established to have been breached. The four remedies mainly include; rescission, damages, specific performance and prohibition of penalties for a breach of contract. Specific performance as a remedy requires that the offended party may require that the terms of the contract be completed by the other party. This would be in those situations where the defendant would have refused to go on with the terms stated in the contract. As a remedy, the offended applies to the court to ensure that the defendant carries on with the terms of the contract. On the other hand, prohibition of penalties as a remedy applies to those situations where the parties to the contract pre-determine on compensation in the event of a breach of contract. The remedies mentioned above, however, would not apply in the cases outlined. Rescission according to Australian law refers to the revocation or cancellation of a contract. The remedy offered by the courts aims at ensuring that all the parties to the contract are restored back to those positions that they were in prior to the signing of the contract. For instance, as indicated in the circumstances facing Marcus, the courts may opt to cancel the contract. The result would then translate to Marcus refunding all the funds that he received from the parties thereby restoring each of them to their original position. For rescission to be achieved by the courts, a number of requirements need to be met because the remedy is a very restrictive remedy. The first requirement would be that action should immediately take place in the event that it is discovered that a breach of contract had occurred. In the event therefore that either of the parties does not react immediately upon realizing that the terms that they had agreed on the contract were not as agreed this option would be nullified. The second requirement for rescission to be achieved requires that the items in question within the contract not be used by the second parties and thus remain valid to be returned to their owners in the state they were in by the time. However, in the event that for instance Chow makes use of the ship, rescission, in this case, will not be a valid recourse. The second form of remedy offered by the courts is that of damages. According to contract law, damages remains as the most popular form of restitution where the defendant in many of the cases pays monetary compensation to the plaintiffs. Damages are calculated by the courts as the sum of money that can be equated to the worth of the damage suffered by the defendant. The purpose of awarding damages to the party identified as having been wronged is to ensure that they are reinstated back to the same position that they would have been essentially, where the contract had worked. From another perspective, damages are representative of the loss suffered by the party wronged owing to the reasonable effects of the breach. Further damages are owed to the wronged party in the event that it can be proven that the party was aware that the other party would suffer in the event that the contract was breached. Therefore, with respect to the situation that Marcus faces with both parties, damages are not likely to be faced in the situation with the first party, Luiggis Shipping Company. The reason for this is attributed to the fact that Marcus, as well as the company by the time that they were signing the contract were not aware that the ship at the time had sunk. Further, according to the terms of the second contract, Chow thought at the time that the vessel that she was purchasing was a red-hulled vessel while Marcus knew the Leningrad vessel to be a blue-hulled vessel. In the second case damages, as a remedy does not qualify as the terms and stipulations of the contract were not clear for both parties. As recourse, therefore it would be the proposal based on the facts of the case for Marcus to refund the monies received to Chow thereby also returning her to her original position prior to engaging in the terms of the contract7 References Australian Government. (2014). Remedies for breach of contract. Infolet 10, 1-2. Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80 per Mason CJ and Dawson J. Fitzroy Legal Service. (2015, January 28). Court Remedies. Retrieved April 15, 2015, from The Law Handbook: http://www.lawhandbook.org.au/handbook/ch12s04s05.php Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272. Travis Mitchell, B., Owen, D., & Chambers, W. (n.d.). Contractual Breach: Consequences and Monetary Remedies. Greens List Barristers, 1-12. Read More