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Legal Environment - Essay Example

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For this case, the contract between Maldrive and Planright was discharged by frustration. This was due to the change in law. The government secured the enactment of emergency regulations, which prohibited with immediate effect the manufacture and export of the relevant weapon system.
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Legal Environment
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Download file to see previous pages In this case, an agreement was made to exhibit advertisement on the defendants' hotel for a period of seven years. During this time, Manchester Corporation, exercising statutory powers, acquired the hotel and demolished it. It was held that the defendant should have been aware of the risk of compulsory purchase, and must be taken to have implicitly accepted the risk.
The contract could also have been discharged by frustration due to government interference. The government interfered causing a fundamental change of circumstance from the contemplated by the parties when the contract was made. This is because the government prohibited with immediate effect the manufacture and export of relevant weapons systems hence there was need for Maldrive to purchase the machine. This caused the termination of the contract.
In this case, the defendant had agreed to construct a reservoir for the plaintiff. Before the defendants had done so, the government acting in pursuance of war-time powers, stopped it. It was held that the contract was discharged through government interference.
A contract is discharged by breach; that is failure of one of the parties to perform his obligation under the contract. Every breach of contract provides remedies to the innocent party, and this does not necessary discharge the contract. Thus if a party breaks a term of contract going to its root, known as condition the other party will be released from his obligations under the contract. But if the term broken is one collateral to the main term of the contract, known as a warranty, the innocent party will not be released from performance and can only claim damages.
Maldrive, the manufacturers of weapons systems for exports had agreed to buy a machine from Planright but failed to perform his obligation under the contract. Failure of Maldrive to buy the machine from Planright discharged the contract.
Rights and Remedies available to Maldrive and to Planright if contract is terminated by frustration.
Maldrive could recover his deposit of |1000 pounds and was not liable to pay the balance.
The law reform (Frustration Contracts) Acts 1943 England, amended the common law rule and provides what shall happen if the contract is discharged by frustration:
All money paid before discharge is recoverable
Money which become payable before frustration ceases to be payable.
The court allow the parties to recover sums of money paid out in expenses incurred in connection with the contract, or to retain such sums from money already received under the contract.
Where one party has received benefits, other than the money payment, the court may permit the other party to recover a reasonable sum as compensation for such benefit on quantum Meruit.
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