The Contract between Hercules and Sally - Article Example

Breach of contract Student’s name Course Professor’s name University name City, state Date of submission BREACH OF CONTRACT (a) Advise Hercules what damages for breach of contract, if any, he can recover from HM in relation to the fact that he was unable to exchange contracts with Xena. Issue Is Hercules entitled to damages for loss resulting from delay in performance of contract by HM? Rule In a contract, time will be of the essence where the contract expressly provides so and the parties have agreed. According to the case of Hadley v Baxendale [1854] 9 Exch. 341 damages are recoverable where at the time of making the contract both parties knew that loss would occur as a result of delay in performance. Where the affected party had indicated to the other party that performance is necessary at a specified time, failure to perform by the other party entitles the affected party to damages. (Fitzpatrick, Jeffrey F 2014). The requirement is that the parties to the contract must have specified that time is to be of the essence at the time the contract is made. In Hadley’s case the court held that the party in breach of the contract ought to have known of the potential loss to the other party at the time the contract is made. In cases where the parties had not indicated that time is to be of the essence, one party may inform the other ow when he expects performance of the contract. Once such information is communicated then time becomes of the essence from that moment until the stipulated period is over. (Hadley v Baxendale [1854]) Application In this case, Hercules had informed HM that he needed the car repaired by midday so that he could travel to a town 200 kilometers away. Hercules explained the nature of the business he needed to attend to in that town and stressed on the importance of the completion of the repairs by midday. HM was well aware that Hercules could only purchase the house from Xena at a price below the market price only if contracts were exchanged by 2.00 pm. The fact that HM also made a guarantee that the car repairs would be done by midday on the following day shows that both parties included time as a term in the contract. This means that by HM failing to have finished repairs by midday they were in breach contract which resulted in Hercules loss of the opportunity to buy the house. The parties had from the time of making of the contract made time a condition in the contract. The failure by HM to have performed his part of the contract by the time stipulated amounted to a breach. Conclusion Hercules is entitled to ordinary and special damages resulting from the loss incurred as a result of the lost opportunity to acquire the house from Xena. The special damages arise in the fact that HM knew of the extra-ordinary circumstances between Hercules and Xena yet still delayed in performance. The failure by HM to perform by the time stipulated at the time of the contract amounts to a breach. Time, in this case was a condition in the contract and not a warranty, hence damages accrue to Hercules. (b) Would your advice in (a) be any different if there was a large sign at the entrance to HM’s premises which said:  "HM excludes all liability for any losses suffered by its customers in the event of any breach of a contract between HM and any of its customers for repair of vehicles owned by such customers’?" Issue Would an exclusion clause limit the liability of HM for breach of the contract? Rule In L'Estrange v Graucob [1934] 2 KB 394 it was held that a party to a contract who signs a contractual document containing an exclusion clause is bound by its terms. This implies that when a person enters in to a contract, which contains an exclusion clause, such a person is bound by those terms. An exclusion clause has the effect of limiting the liability of the party who inserted it into the contract. The party relying on the exclusion clause is exempted from any liability covered by the clause in the contract. The party must have taken reasonable steps to notify the affected party of the existence of the exclusion clause. (Parker v South Eastern Railway [1877] 2 CPD 416) The requirement therefore is that the party was well aware of the existence exclusion clause while entering the contract. Exclusion from liability arising from negligence requires the use of clear words. In cases of negligence, the exclusion clause is interpreted as against the party relying on it unless the clause excludes liability arising from negligence. (White v John Warwick & Co Ltd [1953] 3 KB 327) In the absence of clear wording of the exclusion clause such that it ends up being ambiguous, the Contra proferentum rule will apply. The contra-proferentum rule is applied strictly against the party relying on the exclusion clause. This is to say that the contract is interpreted in a way that does least favors the party relying on the clause. (Andrews Bros Ltd v Singer & Co Ltd [1934]) Application In the event that HM had put a sign at the entrance excluding all liability arising from breach of contract, the outcome would be different. First, Hercules must have seen and read the sign and went ahead to enter in to a contract with HM. In such a case Hercules would be bound by the terms of the contract as held in L'Estrange’s case. The exclusion clause clearly excludes HM from any liability arising from any breach of the contract hence the contra-proferentum rule does not apply in this case. Hercules would have been aware of the terms of the exclusion clause hence HM would be protected from any liability as stated in the exclusion clause. The wording of the exclusion is such that HM is exempted from all liabilities, including those arising out of negligence. Conclusion Hercules would not be entitled to recover damages from HM as a result of the breach in the event that there was an exclusion clause. This is especially where HM took reasonable steps to notify Hercules of the clause. (c) Advise Hercules whether his belief that his contract with Sally for Moorcroft tea set is void or voidable is correct. Issue Was there misrepresentation at the time of making the contract? Rule In Derry v Peek [1889] 14 App Cas 337 a misrepresentation was defined as a statement that is false made knowingly or made carelessly or recklessly as to whether it is true or false. The statement made must have induced the party to enter into the contract. The purpose of the misrepresentation, therefore, is to induce the other party into entering the contract with the other party. The party must have relied on the statement made by the other party to enter in to the contract. (Attwood v Small [1838] 6 CI & Fin232). The misrepresentation made by one of the parties to the other must have been relied upon by the other party in making the decision to enter into the contract. In instances where the misrepresentation was made but the other party did not rely on it in entering in to the contract, this will not be considered a misrepresentation. In cases where a false statement has been made to induce the other party to enter in to a contract, the contract becomes voidable. This means that the contract is valid until the affected party decides to set it apart. (Fitzpatrick, Jeffrey F 2014) Application Sally made a statement describing the Moorcroft tea set as one belonging to Nicholas II. This was the statement that induced Hercules, being fond of antiquities, to buy the tea set. Hercules relied on the sign at the store and the description as provided by Sally to enter in to the contract to buy the tea set. The statement made by Sally was made to induce Hercules to buy the tea set in her store. This statement, as Hercules later found out, was false as nobody could accurately state which tea set was presented to Nicholas II. The definition of a misrepresentation in Derry’s case is applicable to this case in that the statement made by Sally including the one appearing at the store amounted to a misrepresentation. The fact that Sally was relying on a statement made to her by a Russian artifact expert does not negate the existence of a misrepresentation. Sally had the duty of care to ensure that the statements made to buyers were true since it was probable that they would rely on them to enter in to a contract. Sally therefore had a duty to ensure that any description of the goods at the store was correct and could be relied on by the customers. Conclusion The statement by Sally describing the nature of the tea set and the sign that had been put at the entrance of the store amounts to a misrepresentation. The existence of a misrepresentation at the time of making the contract therefore makes it voidable. This makes the contract between Hercules and Sally voidable at the time it was made. The belief by Hercules that the contract was either void or voidable is therefore correct. REFERENCES Fitzpatrick, Jeffrey F 2014. Business and Corporations Law, 2nd Edition, Chatswood: NSW LexisNexis Butterworth’s. Balotti, R. Franklin, and Jesse A. Finkelstein, 2009. Delaware Law of Corporations and Business Organizations Deskbook, Aspen Publishers Online, 2008. Solomon, Lewis D., Donald E. Schwartz, and Jeffrey D. Bauman 1988. Corporations Law, and Policy, materials and problems, West Publishing Company Williston, S., 1888. History of the Law of Business Corporations before 1800, I. Harvard Law Review, 105-124. Corbin Arthur Linton 1952. Corbin on Contracts, West Pub.Co. Bauman, Jefrey D., Elliott J. Weiss, and Alan R. Palmiter 2003. Corporations Law and Policy: Materials and Problems, West Academic. Read More