British Legal Systems and Contract Law - Essay Example

British Legal systems and Contract law Detailed proposed response to each of the issues: (a) There has been no breach of contract so no damages are due at all: There has been a breach of contract since there was an implied term in the contract that the materials would be delivered at Aberdeen plant. The personnel at Metalinque Ltd were aware of the fact that the materials were to be sent to the plant situated at Aberdeen, and by delivering the materials at London, they have committed a fault, although it may be said in their defense, that the contract was signed with the Company's buyers based at the London Office. By not sending the materials to the Aberdeen office, knowing fully well that the materials need to be send there, the personnel at Metalinqwue had failed to observe what a person with ordinary prudence and intelligence would have done under similar circumstances. In the leading case of Olley v.Marlborourgh Court Hotel (1949) 1 KB 552, a lady deposited her fur cloak in the hotel locker which was subsequently stolen. She sued the hotel for loss of the cloak, but the hotel management pleaded that in the contract of service there was a specific disclaimer for liability arising out of theft. It transpired that the disclaimer notice was in the hotel room, and not at the reception where the contract was enforced between the lady and the hotel management. 1 Moreover she did not have constructive notice of this diclaimer when she booked her room. The Court held that the hotel was liable for the loss since, the claimant was not aware of the facts at the time of booking the contract. However, in this case, it is seen that Metalinque was aware of the material fact that the goods need to be shipped to Aberdeen, and not delivered at London office. The writer's opinion is that the seller, Metalinque cannot be absolved of liability in this case merely on the fact that their agreement was with the London office, and not with the Aberdeen plant since the purpose of the agreement was not fulfilled due to (1) delay in performance and (2) Subsequent losses to the buyer, arising out of breach of contractual obligation by the seller due to material variation in delivery terms Further if the law were to consider, the application of Section 4 and Section 4 (5) of the Supply of Goods and Services Act 1982, it is seen that there is an implied condition that the goods supplied should be fit and should serve the purpose for which it is sought. It is also seen that in the event that a party relies on the skill or judgment of another, whether the terms are expressly, or by implication, the implied condition shall be deemed to be present. In this case there is an implied condition that goods be delivered to Aberdeen. "Where, under a contract for the transfer of goods, the transferor transfers the property in goods in the course of a business and the transferee, expressly or by implication, makes know to the transferor, any particular purpose for which the goods are being acquired., there exists an implied condition that the goods shall meet such conditions." 2 (b) Even if there was a breach of contract, the sum sought is excessive. Under Section 20 (2) of the Sale of Goods Act 1979, the goods remain at the seller's risk until the title in them is vested on the buyer. When the buyer has accepted the goods at London, it is deemed that delivery has been affected. However, "where delivery has been delayed through the fault of either the buyer or seller, the goods are at risk of the party at fault, as regards any loss, which may not have occurred but for such fault." 3 In this case it is seen that, prima facie, there is a fault on the part of Metalinque for having caused losses due to belated delivery. However, this fault has been alleviated to a certain extent, due to the fact that Amethyst Ltd, had not explicitly and specifically stated under Clause 20 of the Purchase Contract that the goods need to be delivered at Aberdeen. In the absence of certainty of delivery of contractual obligation, they were at liberty to rescind the contract and return the goods received at London, but this they did not do. By having accepted the goods at London, they have affirmed the contract. The Courts in England would need the applicants, Amethyst to prove that they have suffered the losses of 132,500 in terms of transportation costs of 10,000 from London to Aberdeen and loss of profits for 2 days amounting to 132,500. In my opinion, the amount of 10,000 is a sum which the defendants would fairly reasonable had known if there was a breach of contract. But the defendants, at the time of executing of the contract were not aware of the fact that their breach of contractual obligation would result in loss of profits. "Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it." 4 (c) In any case Aberdeen Sheriff Court has no jurisdiction: the dispute should be resolved by arbitration by International Chamber of Commerce at Paris. Clause 100 is binding on both the parties since it has stemmed out of contract, and moreover, both have accepted it. However, it may be argued that the phrase " in the event of any dispute arising out of the terms of this contract " is inapplicable in this case, since the only contentious area is with regard to settlement of damages. If Metalinque is willing to settle the claim amount arising out of their fault, there is no room for dispute. There has not been any dispute regarding acceptance of the delayed materials and also, the actual transportation costs borne by the buyer to ship the goods from London to Aberdeen. The loss of profits have been computed in terms of estimated losses of two working days lost due to delayed supply. However, this needs to be substantiated with evidential claims that the loss of production and profits could be directly attributable to the delay in the arrival of materials from London and is a direct result of the seller's delay in sending the materials. (2) Your brief view on whether a settlement offer should be made, what that offer might be and why you suggest that it is made. It is seen in this case that material losses have occurred to Amethyst due to delay in supply caused primarily to ambiguity in the terms of the contract relating to delivery of goods. Although Clause 20 has been mentioned that the goods need to be delivered to Amethyst Ltd, it is unclear where the specific location of delivery need to be, whether at London or at Aberdeen. Hence, the absence of clarity in the terms of the contract has created delivery problems. However, it would not be judicious to take up this matter with the International Chamber of Commerce in Paris because of two reasons: 1. The Cost involved and (2) the bad publicity that such a step would entail, considering the market reputation that Amethyst currently enjoys. Competitors would use this pretext to degrade the Company in order to become more competitive. Therefore the best option would be to take an out-of -court settlement which would serve both parties' interests. Since both the parties are reasonably at fault, Amethyst, for one, not having informed the specifics of destination and, for another, Metalique for not having made delivery at the right destination, it would be prudent and in best legal interests to settle for a 50:50 arrangement. Under this Out [of-Court Settlement, Metalique would have to pay up 50% of 132,000 i.e., 66,000 in full and final settlement of their dues. This is because it is believed that a long drawn legal battle in the International Chamber of Commerce in Paris would cost more than 66,000 to the applicant and the final verdict in favor of Amethyst is only a matter of conjecture and not reality. The reality would be if both parties are ready to accept a settlement .This offer has been made keeping the best interest of both companies in mind and ensuring that future business relationships are not hampered due to this apparent misunderstanding on both sides. The legal aspects notwithstanding, it is felt that it would be difficult to convince the Court that the material losses arising out of this dispute would be to the tune of 132,000 attributable directly, to the delay on the part of Metalique. The Court would use standard practices in allowing damages that would return Amethyst to a position which it would have enjoyed had this misoccurence not taken place. 5 In other words, the Courts would try to return Amethyst's financial position as though Metalique had delivered the materials to the plant at Aberdeen, instead of their London office. (3) Your brief advice on how to tighten the terms of a contract like this in the future, to avoid a similar dispute. In a bilateral contract it is paramount that all terms and conditions are written down in clear, specific and unambiguous manner, in order to disappoint even the worst skeptic. Therefore, in future the Clause regarding delivery should read like: Clause 20: Metalique Limited agrees to deliver the contracted 1000 tubular metal sections to the plant site of Amethyst Limited situated at Aberdeen, latest by 1st April, 2006. Amethyst Limited reserves the right to rescind this contract if Metalique Limited varies the delivery stipulations as mentioned above. Any unavoidable variations would need the prior approval of Amethyst without which the contract is rescindable at the option of the buying Company. It is also seen that Clause 100 is unfavorable to the Purchaser, since all disputes would be referred to the International Chamber of Commerce based at Paris, France. All subsequent arbitration clauses may read as follows: Clause 100 : The Purchasing Company, Amethyst Limited, with its plant site at Aberdeen, reserves the right to refer disputes, arising out the operation of this Contract to the Aberdeen Sheriff Court at Aberdeen. All verdicts passed by Aberdeen Sheriff Court shall be deemed as final and binding on both the contracting parties, Amethyst Limited as the Purchasing party and Metalique Limited, as the selling party. In the event the dispute remains unresolved, the dispute shall be addressed to by two arbitrators, one of each party, within the legal and territorial jurisdiction of Aberdeen. In the event of non-decision, the matter may to be taken up by English Courts, the jurisdiction of which is to be decided upon mutual consent of both the parties to this contract. Bibliography Olley v. Marlborourgh Court (1949). The K-Zone. 23 Feb.2006. 20 Jan. 2008. . Sale of Goods Act 1979: Reservation of right of disposal. Passing of risk. 2000-2006 Net Lawman Ltd. Crown Copyright Acknowledged. 2006. 20 Jan. 2008. . Baxendale, Hadley V. In the Court of Exchequer 1854, 9 Exch.341. 20 Jan. 2008. . Supply of Goods and Services Act 1982. Supply of Goods Contracts for the Transfer of Property in Goods. Net Lawman. 20 Jan. 2008. . Read More