Business Law - Joseph and Clara v Marshall and Edward - Case Study Example

Business Law - Case Study Name: University: Date: Business Law - Joseph and Clara v Marshall and Edward Introduction Using relevant case law, this essay offers advice to Joseph and Clara regarding their legal rights and/or obligations and examines the probability of either Edward or Marshall succeeding in taking legal action against Joseph. On 5th February 2017, Joseph placed advertised in the local newspaper seeking contractors with the best quote on relevant case law. He mentions that the deadline for submissions was 25th February 2017, three days after placing the ad, he gets a quote from Marshall, which categorically, states that the provider would not take any responsibility for workmanship defects. Joseph agrees to Marshall’s offer on 13th February 2017, whereby the agreed that he would commence the work the following day. Marshall started the work as agreed to cover 55% of the total work, but due to unforeseen events the floor collapsed because of flooding attributed to heavy rain. As a result of frustration, Joseph terminated the contract with Marshall and allowed Edward to complete the flooring. According to Joseph, Edward offered the cheapest quote, but had not received the email at the time he offered Marshall the contract. In this case, anticipatory breach comes about since there exists a contract but, before its completion date, it became clear to Joseph that Marshall cannot fulfil his side of the agreement. Argument The Australian contract law considers every contract as valid and applicable unless proven otherwise. In the contract between Joseph and Marshall is binding and valid because the offer made by the latter was definite and accepted. Furthermore, Joseph acceptance was clear, and he communicated in a timely manner to Marshall (offeror). Both Joseph and Marshall showed some intention of creating binding legal relations.1 The Australia contract law offers some remedies when contract breach happens. In this case, Marshall is the innocent party and could be entitled to damages. In the common law, the remedy for contract breach is considered as a performance‘substitute’, which can be made available for losses suffered after the termination of the contract. In White and Carter (Councils) Ltd v McGregor case, some members of the House of Lords mentioned that a party could continue carrying out their contractual obligations even during situations where the other part has evidently repudiated the contract.2 When repudiation is accepted by the innocent party, the termination of contract happens on account of anticipatory breach. However, when the innocent part (Marshall) rejects the overtures of repudiation, then as held by House of Lords, the contract will remain binding on the involved parties. For this reason, the parties must continue to perform their part of the agreement legally.3 In White and Carter case, Lord Reid established that there are some qualifications that could limit continued performance following repudiation. The ‘legitimate interest’ test is the first qualification, which inquires whether the party that is not repudiating has a ‘legitimate interest’ in continuing to perform their end of bargain despite the unequivocal repudiation of the other party. Commentators together with jurists have almost collectively criticised the White and Carter approach as well as legitimate interest test for the possible grounding of unjust and anomalous outcomes as well as creating a legal test where considerations are more concealed as compared to revelations.4 The second qualification is good faith, which is widely acknowledged and used by courts in Australia in both contractual performances of terms and pre-contractual. In the Australian contract law, good faith is considered as a sophisticated as well as a mature concept representing a well-adapted and viable legal tool for handling criticisms and shortcomings related to the legitimate interest test. Even though Joseph and Edward appear not to be having a binding contract, the Hochster v De La Tour case expands the contract breach notion to situations where the actual performance date is yet to arrive.5 The anticipatory breach was heralded from this case, and it requires one party (by deed or word) to terminate the contract. Regardless of whether the termination was by deed or word, the party repudiating must demonstrate a clear intent that the other party is unable or unwilling to fulfil their contractual obligations. Another requirement for anticipatory breach is that repudiation should be accepted by the innocent party; as a result, the contract is terminated before the completion data. Joseph as the repudiating party compelled Marshall, who is the innocent party to end the contract by insisting that he should never come back. In the case, Macmahon Mining Services v Cobar Management, the defendant (Cobar Management) contracted the plaintiff (Macmahon Mining Services) for designing as well as construction works at Cobar’s copper mine in New South Wales.6 After two years into the contract, Cobar Management terminated the contract. In this case, Macmahon Mining Services hold that the contract termination was not valid and emphasised that Cobar Management’s termination letter comprised contract repudiation. Subsequently, Macmahon Mining Services notified the Cobar Management the repudiation was accepted as the way of discharging the contract. Macmahon took legal action against Cobar for damages.7 Cobar (the defendant) decided to depend on the exclusion clause of consequential loss, which states that irrespective of everything in this contract, both parties will not be liable to each other for any Consequential Loss. Consequential Loss can be defined as any profits or loss, losing a contract. Amusingly, the contract between the two parties also had a clause of termination for convenience that allowed Cobar to terminate the contract for any reason, whereby Cobar had to compensate Macmahon for 'loss of profits'. In view of this case, it is clear that contract between Joseph and Marshall did not have an all-embracing and clear clause that could be utilised after termination of the contract. The defendants, Joseph and Clara could argue that Marshall and Edwards (plaintiffs) are depending on asserted but non-existent breach of contract. Akin to Cobar Management and Macmahon Mining Services who had created a careful bargain, where they offered means of allocating liabilities, Marshall only relies on the workmanship defects clause that prevents Joseph from recovering losses brought about by defects in workmanship. This can be described in details by Iggleden & Anr v Fairview New Homes (Shooters Hill) Ltd case, which was attributed to construction-related defects. In this case, Fairview sold a new house to Iggledens, and clause 5 of their contract indicated that the house was supposed to be built in a workmanlike and proper manner.8 Numerous defects surfaced after Iggleden purchased the house, and although some defects were corrected, some remained. For instance, the driveway had some defects. (Andrews). The judge had to take into account whether the claimants were reasonable to prevent the defendant from coming back to the property in order to carry out some repairs. It was established that the defendant had originally failed to construct the property properly as agreed in the contract and but was willing to carry out complete remedial works that were deemed necessary. Therefore, it was not reasonable for the plaintiffs to state that after more than five years, the defendant was not welcomed to their property to carry out further remedial works. Certainly, the contract must allow the contractor to remedy the defects. The case of Joseph and Marshall is akin to that of Pearce & High Limited v John P Baxter and Mrs A S Baxter, whereby the judges in the Court of Appeal concluded that if the contractor (Marshall) is denied an prospect to remedial works then the employers (Joseph and Clara) will hardly recover the total costs they incur to employ another party (Edward) to perform the repairs and complete the work.9 That is to say, the failure by Joseph to allow Marshall to perform the repairs it would be more costly to hire Edward to complete the job. Still, Joseph can utilise the doctrine of frustration as a counterclaim since the performance of the contract was affected by heavy rain, which was unanticipated by both parties. Clearly, the courts would likely be sympathetic because of severe storm, made it impossible for them to receive Edward email and heavy rain destroyed the work that Marshall had done. Basically, both events were not anticipated and were not included in the contract.10 When defendants and plaintiffs were creating the contractual relationship, they were certain that all the parties would fulfil the contract’s terms and conditions.11 Joseph frustrations were justified and can be used as a counterclaim. Conclusion In conclusion, it is the obligation of the contractor to perform and complete the works in a workmanlike as well as proper manner. Whenever defects surface, the employer must allow the contractor to make repairs. The workmanship and materials were within the standards highlighted in the contract. A counterclaim against Marshall can be based on the doctrine of frustration whereby the contract nature changed due to an unforeseen event, and which could not be controlled by both contracting parties. Clearly, the agreement had to be terminated because of frustration since the obligations were radically changed by heavy rains to the extent that the main intent of the contract did no longer exist. Lack of contractual provision that handles unforeseen event such as severe storm and heavy rains resulted in Josephs’ frustration. Bibliography Articles and Books Andrews, Neil. Contract Law, Cambridge (University Press, 2011). Clarke., Julie 'Discharge by Frustration' Australian Contract Law (Online), 2010 . Dahdal, Andrew, 'Good faith and Post-Repudiation Conduct' 2015 40(1) University of Western Australia Law Review 73. Glover, Jeremy, Liability for Defects in Construction Contracts - who pays and how much? (Fenwick Elliott, 2008). Loel, James, 'Termination Of Contracts Due To Frustration' Lillas & Loel Lawyers (Online), 2 September 2015 . James Morgan-Payler, 'Exclusion of liability for consequential loss in infrastructure contracts' Mondaq (Online), 2 September 2014 . Toombs, Dan, 'Contracts In Australia' LawBuddy (Online), 8 August 2013 . Cases White and Carter (Councils) Ltd v McGregor [1961] UKHL 5 Hochster v De la Tour (1853) 2 E & B 678 Macmahon Mining Services v Cobar Management [2014] NSWSC 502 Iggleden v Fairview New Homes (Shooters Hill) Ltd [2007] EWHC 1573 Pearce & High Ltd v. John P Baxter and Mrs A Baxter [1999] BLR 10 Read More