Commercial Law to Resolve the Issues of Homebuilt Ltd - Case Study Example

Running head: COMMERCIAL LAW BUSINESS Name Grade Course Tutor’s Name 10/ 12/ 2010 A contract is a legally binding or enforceable agreement that is voluntarily entered by two or more parties. The contract obliges each party to do or fail to do something for the other party and still give each party the right to demand for the performance of what is promised by the defaulting party. In case of breach of the agreement made between the parties, the remedy is payment for damages or a monetary compensation. To create a valid contract, there must be an offer and acceptance. That is, one party referred to as the offeror, makes an offer which upon its acceptance by the other party referred to as the offeree, the agreement becomes binding. The offer must be clear and need to be communicated properly to the other party. Similarly, there must be a clear communication of the acceptance to the offerer. For a legal contract to be formed there must also be consideration where a party receives a benefit in return for the fulfillment of the agreement. Incase of a breach of contract by one of the parties, the party not on breaching is free to work of the contract and enter into a new contract with a new party. If there was no consideration exchange between the parties contract become null and void once a party to contract is in breach. Consideration is recoverable to non breach party and not breaching party. Non breaching party can also claim for damages from breach party on top of recovery of the consideration. In this case of ACTION and the leading bus manufacturers, it was merely an invitation to treat or the invitation for offers. Therefore the request for tenders from the bus manufacturers represents an invitation to treat and each tender submitted from Volvo, Renault and Homebuilt Ltd amounts to an offer. However, Homebuilt Ltd was given the tender since it offered the lowest price and this automatically became an offer that was accepted and a legal relationship was created. An offer may be terminated incase of the death of the two parties that is, either the offeror or the offeree. It may also be terminated by the lapse of time which happens if the offeror had put a time limit on the offer and therefore it will lapse at the end of the stipulated time. However, the requirement is that the offer will come to an end after a reasonable time and what amounts to reasonable time or period will depend on the circumstances. The basic rule is that the parties to the contract need to perform as stipulated or specified in the contract unless the two parties agree to change the terms of the contract. Breach of the contract refers to the failure of the one party to perform his or her contractual obligations. The non breaching party therefore has the right to take remedial action to address the breach. Breach of the contract by the non performing party allows the other party to seek for damages. The breach of contract relieves the aggrieved party of his obligations. Advice 1 In this case of ACTION and Homebuilt Ltd, the agreement between them was binding and the conditions of the contract were expressed in form of writing. The wordings of the contract stipulated the time limit for the execution of the offer. Homebuilt Ltd was obliged to make the delivery of the buses latest one week before the commencement of the Canberra Show. This is what is referred to as the conditional offer and the offeree must obey the conditions. By failing to deliver the buses to ACTION within the stipulated time, Homebuilt Ltd was in breach of contract signed. There are exemptions to the breach of the contract and the offeree is therefore not held to be in breach of the contract. Factors that are beyond the control of either party are examples of these exemptions. These factors include the major catastrophes that are considered as the act of God and the offeree or the offeror have no control over them. Examples are fire, earthquakes, floods, famine among others. The fire that broke at the factory in Taiwan who was the only suppliers of Homebuilt Ltd is a factor that is beyond their control. The delay of the delivery was caused by the fire and this means that if the fire did not broke, they could have supplied the buses within the time limit given. An event can only be considered as unforeseeable where it could not reasonably be predicted by the parties during the time of making the contract. However, it shall not be deemed to be unforeseeable if it happens due to the action of the person who avails himself during the period of the contract. The Homebuilt Ltd can therefore defend themselves in court on the ground that the factors that lead to their failure were unforeseen and could not be controlled. However they cannot seek for damages incurred during the preparation of the tender. This means that ACTION will not pay them for the damages. They are relieved of their obligation through the breach of contract by the Homebuilt Ltd. They were not in breach of the contract by contracting with Volvo and giving them the tender. They were just trying to meet the time limit given for the supply of the buses before the commencement of the show. Once Homebuilt Ltd indicate that they won’t perform their obligations within the stipulated time due to the circumstances that arises, then ACTION may affirm the contract wait for the Homebuilt Ltd to supply and then sue for damages. They may also treat the contract as already repudiated and thus declare themselves as being discharged from their obligations. On the issue of the delay caused by the third party, the Homebuilt cannot defend themself in court on this ground. This is because the suppliers from the factory in Taiwan were not part of the contract. The doctrine of privity provides that no one else have the right to the contract except those that are parties to it. The Homebuilt were supposed to make sure that they look for a supplier that will not delay the supply. On the other hand, the Taiwan factory did not sign any where with ACTION that they were to supply the buses. This means that any delay caused by the supplier is not an excuse by the offeree of his failure to honour the contract. Advice 2 The contract between ACTION and Homebuilt limited is valid. The incapacity of homebuilt to supply buses in one week time before the start of the show can be taken as breach of contract. The contract is frustrated by their failure to supply the buses in one week earlier to the show. ACTION is release from the contract and he can make a new invitation to new offeree. So their move to invite Volvo to supply buses cannot be taken to mean a breach. They were at their own mercies to seek for alternative supply. Homebuilt cannot succeed in court of law if they institute a suit against ACTION. Reason number one is that were the one who were in the breach in first place. Reason number two is that there was no consideration exchange between them and ACTION. So they stand to lose nothing when the contract comes to an end. ACTION is release from the contract and it is their choice to institute a suit against homebuilt. They can succeed to recover any damage they incur in the process from homebuilt. What homebuilt only have is defense incase ACTION file a suit against them. They can argue that it was unforeseen circumstances that their supply from Taiwan was involved in fire accident. The expenses that might have incurred in the process are not recoverable from ACTION. References: Robert Bradgate, Fidelma White (2007), Commercial Law, Oxford University Press. Read More