Commercial Law Issues - Assignment Example

COMMERCIAL LAW Name Course Instructor’s name Institution Date Introduction The Australian federal laws provide for the conditions of a contract that the parties entering into a contract must have the capacity to contract. For instance, the legal age for individuals to enter into contracts must be observed before parties enter into a contract. In addition, companies are treated as artificial persons before the legal eyes. Such companies must be registered under the law and the services they provide indicated. This gives such companies legitimacy to operate and transact businesses with individuals and other companies. Moreover, the events that lead to the termination of contract are provided for in the law with the remedies applicable for circumstances that lead to termination of a contract. Using the scenario of Lyn and ‘cool freeze Air-conditioning’ and the scenario between Marti and ‘chemical wonder’, this paper seeks to examine the circumstances under which the contract terminates as well as the required remedies. The provisions of general rules and principles for termination of contracts also form part of this paper. This is achieved through quoting different cases and the general principles quoted therein. Scenario 1 It is noteworthy that Martin has met the legal age to enter into a contract with other parties. Similarly, martin’s dry cleaner, ‘chemical wonder’ is assumed to be a registered company, capable of entering into a contract with actual and artificial persons. The ability of the two entities to enter into the contract is a clear indication that the contract is valid. However, the termination of the contract between Martin and cool breeze appears to violate various provisions of the law. To start with, the law provides that the breach of the contract entitles the injured party to seek damages for compensation. The contract between Martin and chemical wonder is that the entity cleans his clothes up to the expected levels of cleanliness. Therefore, the stains on Martin wife’s dress is a clear indication that the dress was not cleaned hence Martin has grounds to make claims for compensation. However, this claim should be made in the event that chemical wonder refuses to clean the dress. The compensation in this case stands as a token amount until Martin proves beyond reasonable doubt that he actually suffered a loss due to the failure of Chemical Wonder to clean his wife’s dress up to his expectations. Martin’s claim is supported by the case between Robinson and Harman, the case of 1848 1 Ex 850, 855.in this case, a general principle was applied.this general principle holds that ‘where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation as if the contract has been performed. Thus Martin may seek to be compensated back to his situation such that the dress he acquires for his wife after compensation satisfies him as the actual cleaning of the dress would actually do. However, Martin must show a causal connection between the stains on his wife’s dress and the loss suffered due to the failure by chemical wonders to perform the contract as agreed. In addition, Martin must provide the necessary steps which chemical wonders should have taken to reduce the loss that the dry cleaner causes. The steps should be reasonable to an extend that chemical wonders can reasonably recover for the loss suffered. Additionally, chemical wonder failed to fulfill their obligation of cleaning the dress in accordance with the contract. Thus the contract should terminate through performance. The law requires that performance must be exactly in accordance with the agreement unless the parties to the contract indicate clearly that something less will suffice. The case of Luna Park (NSW) ltd, Moore & Co. ltd and Landauer versus Tramways Advertising Pty Ltd ; case number 61 of 1938 CLR 286. It was ruled that Tramways failed to carry out advertising services for the two companies as agreed in the contract and as such there was breach of the contract. Similarly, chemical wonders failed to clean Martin wife’s dress as per the expectations and as such Martin has a right to make claims for compensation for breach of the contract. In regard to the loss of martin’s jacket, the dry cleaner has a case to answer should Martin consider seeking compensation. To start with, it is the obligation of chemical wonder to ensure safety of all the clothes that their clients bring in for cleaning. The safety of the clothes is the responsibility of chemical wonder for the period in which the clothes are in custody of the dry cleaner. The case of Koompahtoo Local Aboriginal Land council versus Sanpine pty limited (2007), case number 233 CLR 115 upholds the principle that, if a party to the contract is substantially deprived of the benefits for which they contracted, this gives the innocent party the right to terminate the contract. This principle gives martin grounds to make his claims based on the fact that he did not derive the benefits for which he entered into the contract. The breach of trust to ensure the safety of Martin’s jacket clearly indicates that the contract between chemical wonder and martin is undergoing frustration. The frustrated contracts act of 1988 provides for the necessary remedies and steps to be taken in the event that a breach of the contract takes place. The provision by this act is that when a contract is frustrated, the parties should make adjustments such that not party is advantaged or disadvantaged unfairly. For this reason, martin should make claims asserting his unfair monetary disadvantage in the event that chemical wonder is not compelled to compensate him for his lost jacket. This is because the frustrated contracts act 1988 provides that the necessary adjustments to prevent unfair disadvantage or advantage to either party can be in form of money, realization of the property or anything else that the court deems appropriate. The south Australian tort law provides that non-pecuniary damages caused by breach of the contract should not be compensated. However, the case of Martin draws pecuniary damages in the sense that he suffers loss of money if his jacket goes unrecovered. It is on economic grounds that Martin is capable of convincing the court to compel chemical wonder to compensate him for his lost jacket. Thus Martin has all the reasonable grounds and apprehension to seek compensation for the damages he suffers by losing his jacket. It is noteworthy that the misplacement of Martin’s jacket by the dry cleaner is unpredicted event by both martin and staff of chemical wonder. This brings in a new dimension of the agreement in the sense that chemical; wonder fail to perform their tasks in the way originally envisaged. Furthermore, Martin did not anticipate such occurrence or the cause of the occurrence. This gives Martin a chance to terminate his engagement with chemical wonder and demand for compensation of his lost jacket. This is because the general principles provide that in the event that neither party contemplated failure of contractual performance, it would be unjust to compel either party to proceed with the contract. Thus martin is protected by the law to terminate the contract and seek compensation for tainted dress and the lost jacket. Scenario 2 Lyn entered into contract with cool freeze air-conditioning with expectations of having a cool house after installation of the cooling system. The decision by Lyn not to pay for the installation of the system seems abrupt and amounts to a breach of the contract. In addition, the principle of termination of contract by performance requires that the contract is deemed terminated when each party fulfils their obligation. The obligation of cool freeze in this case was to install a cooling system which they did as per the contract. It is the obligation of Lyn to honor the contract and pay for the installation of the cooling system as agreed. Moreover, general rule in respect of terminating the contract by performance provides that performance must be exactly in accordance with the contract unless parties to the contract identify some short comings below the expectations of the contract. This general rule was met by cool breeze when they performed the act of installing the cooling system. Thus the two parties did a mistake of failing to identify anything that would suffice after the installation of the cooling system. Notably, it can be argued that the performance by cool freeze air-conditioning is substantial in the sense that the company did not disown its errors and the defects of the system are minor. In addition, $ 1100, which is the remedying cost, is insignificant compared to $ 10,000, the installation cost for the contract. These considerations should convince Lyn to pay for the installation coat as per the contract. This is because failure to perform as per the expectation is exempted from general rules in case one party exhibits substantial performance similar to which cool freeze air-conditioning displayed when installing Lyn’s cooling system. This relates to the case of Hoeing versus Isaacs (1952)2 All ER 176. The ruling rejected the termination of the contract by quoting the applications of substantial performance as follows. The wrongdoing party is yet to abandon the work The defects are minor The cost of remedying is insignificant when compared to overall cost of the contract These provisions renders Lyn’s assertions of refusing to pay for the contract void as it is clear that the defects to the installed cooling system are minor and the remedying cost is less than the cost for installation. Thus terminating the contract will be unprotected by the law. In this respect, the better option for Lyn is to pay for the installation service as agreed then claims for remedying of the cooling system so as to match her expectations. The denial by Lyn to pay for the contract amounts to being unfair disadvantage to the company installing the cooling system. This amounts to the breach of contract which is punishable by law. Thus, it is fair for Lyn to pay the installation fee however upset she might be. Conclusion To sum up, it is noteworthy to identify the legal provisions for entering into a contract and the repercussions for terminating the contract. Whenever an innocent party to a contract feels short changed like in the case of Martin and chemical wonder, he has a legal backing to make claims demanding for compensation of reasonable monetary value. However, the push to terminate the contract should be based on sound legal framework such that each party to the contract is not unfairly advantaged or disadvantaged by the termination of the contract. This applies in the case between Lyn and cool freeze air-conditioning. References Peterson, J.M. & Arlen, D. 2012. Principles of Contract Law. Thompson Reuters. Read More