StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Advice for a Contract Law Case - Essay Example

Cite this document
Summary
The author of the paper titled "Advice for a Contract Law Case" advises Red that he can terminate the time-charter party contract (the “contract”) with Blue and at the same time claim damages against Blue as compensation for any past and future losses…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97.1% of users find it useful
Advice for a Contract Law Case
Read Text Preview

Extract of sample "Advice for a Contract Law Case"

I will advise Red that he can terminate the time-charter party contract (the “contract with Blue and at the same time claim for damages against Blue as compensation for any past and future losses. The issues in the problem are - (1) whether Blue has breached the contract vesting upon Red the right to terminate the performance of such contract and claim compensation for past and future losses; and (2) whether such terms violated is a condition or a warranty entitling Red the dual right to terminate the performance of the contract and to claim compensation for past and future losses. In regard to the first issue, a party is considered in breach of a contract when a party fails to perform its obligations under the said contract. In the problem, the contract provides that the barge will be delivered in safe working order for the purpose of sea-faring voyages (Clause 4) and that a condition of the agreement is that the barge will be available from 1st January 2006 until 31st December 2008 (Clause 8). Blue is guilty of breach of contract because the barge was only actually ready-to-load on the 3rd of January 2006 in violation of the owner’s promise (Clause 8) that the barge will be ready-to-load from the start of the charter, i.e. the 1st of January. Moreover, Blue is guilty of breach of contract because the barge had to be towed sometime January 2008 (when the contract is still effective) from Oslo to Liverpool due to serious engine failure in violation of Clause 4. Having failed to perform its obligations under the contract, Blue is therefore in breach of contract. In regard to the issue of whether Red may exercise the right both to terminate the contract and to claim compensation for past and future losses, the answer depends on whether the terms of the contract violated by Blue is a condition or a warranty. This is because not all contract terms are of equal significance. Some are more important than others. A condition is an essential term of the contract which goes to the root or the heart of the contract while a warranty, on the other hand, is a lesser, subsidiary term of the contract. The distinction between a condition and a warranty is vital in the event of a breach of contract. A breach of a condition enables the party who is not in breach of contract (“the innocent party”) either to terminate the performance of the contract and obtain damages for any loss suffered as a result the breach or to affirm the contract and recover damages for the breach. A breach of a warranty, on the other hand, only enables the innocent party to claim damages, such that the innocent party cannot terminate the performance of the contract and must therefore continue to perform his obligations under the contract. Simply stated, if a party violated a warranty, the innocent party is confined to a remedy in damages. Thus, it is necessary to know how to determine whether a term is a condition or warranty. A term is declared a condition in one of three ways: by statutory classification, by judicial classification or by the classification of the parties. Firstly, a term may be classified as a condition by statute such as for example sections 12-15 of the Sale of Goods Act 1979 implying certain terms into contracts for the sale of goods. These sections classify these implied terms: satisfactory quality, fitness for purpose and compliance with description and sample are declared as conditions. By analogy, it can be argued that Clause 4 is akin to the implied terms of satisfactory quality and fitness for purpose. Secondly, a term may be classified as a condition by the courts. There are two grounds, apart from the stipulation of the parties, on which courts may decide that a term is a condition. The first is where performance of the term goes into the root of the contract so that, by necessary implication, the parties must intended that the term should be treated as a condition, breach of which would entitle the other party to treat himself as discharged. (Couchman v. Hill [1947] KB 544) To ascertain the significance of the violated term, courts considers the views and practices of the commercial community because, as Kerr LJ has stated, the court is, in the absence of any other “more specific guide” making “what is in effect a value judgment about the commercial significance of the term in question.” Thus, where a decision has been made by an experienced trade arbitrator or tribunal as to the status of a particular term and that decision is based upon the commercial significance of the term, the courts will be extremely reluctant to interfere with such finding. (State Trading Corporation of India Ltd v. M Golodetz Ltd [1989J 2 Lloyds Rep 277,284 and The Naxos [1990] 1 WLR 1337,1348). Applying the foregoing to the problem, it is to be noted that when the barge had to be towed from Oslo to Liverpool due to a serious engine failure, Blue’s chief engineer and Green, a consultant engineer, significantly found that the engines will take 5 months to repair and that the engine fault was at least 3 years old and had reduced the barge’s engine capacity by 20%. It can hence be argued that findings of the Blue’s chief engineer and Green may be deemed to be well considered views and practices of the seafaring community that maintaining a vessel on a sea worthy condition during a charter party is a condition. The second ground on which a court may decide that term is a condition is that binding authority requires the court to hold that the term is a condition. In some industries, parties trade on standard terms and decision that a particular standard term is a condition will affect not only that contract, but also all subsequent contracts of that type. Thus, in the case of The Mihalis Angelos [1971 ] 1 QB 164, it was ruled that a stipulation in a voyage charter party relating to the time at which the vessel is expected ready to load is generally treated as a condition. Thus, applying the ruling in the Mihalos case, Clause 8 should be considered a condition. The third method of classification is the parties own classification of the contract as a condition. Thus, if a contract states that a particular term is a condition, the term will generally be regarded as a condition. Thus, in the case of Lombard North Central pic v. Eutterworth [1987] 1 QB 527, a contract for the hire of computers stated in clause 2 of the agreement that it was of the essence of the contract that the hirer should pay each instalment promptly. The Court of Appeal held hat making punctual payment of the essence of the contract was sufficient to turn the failure to pay a single instalment into a repudiation of the contract entitling the claimant owners to terminate the contract and recover, not only in respect of arrears as at the date of termination, but also the loss of future instalments. The court held that there was no restriction upon the right of the parties to classify the relative importance of the terms of their contract. In the problem, when the parties have expressly classified Clause 4 and 8 as condition, then Red as the innocent party is entitled not only to terminate the contract but to recover damages as compensation for past and future losses as well. The parties’ classification, notwithstanding, the court must be satisfied that the parties intended to use the word “condition” in its technical sense. Thus, in Schiller AG v. Wickman Machine Tool Sales Ltd (1974) AC 235, clause 7(b) of a four-year distributorship agreement stated that “it shall be a condition” was rejected by the House of Lords because it was by no means “conclusive” evidence. However, in the problem, Clause 4 and 8 as to the seaworthiness of the vessel and as to the time at which the vessel is expected ready to load, is conclusively a condition because it goes into the roots of the obligation of the contract. Thus, Lord Wilberforce in Schiller validly dissented challenging the majority approach on the ground that it assumed “contrary to the evidence, that both parties ... adopted a standard of easy-going tolerance rather than one of aggressive, insistent punctuality and efficiency.” In view of the foregoing premises, and viewed from all angles, Clause 4 and Clause 8 in the problem are both conditions, the breach of which by Blue entitles Red not only to terminate the performance of the contract but to claim compensation for past and future losses as well. Hence, Red will be so advised. Read More
Tags
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Assigment 2 Essay Example | Topics and Well Written Essays - 1000 words - 2”, n.d.)
Assigment 2 Essay Example | Topics and Well Written Essays - 1000 words - 2. Retrieved from https://studentshare.org/miscellaneous/1544756-assigment-2
(Assigment 2 Essay Example | Topics and Well Written Essays - 1000 Words - 2)
Assigment 2 Essay Example | Topics and Well Written Essays - 1000 Words - 2. https://studentshare.org/miscellaneous/1544756-assigment-2.
“Assigment 2 Essay Example | Topics and Well Written Essays - 1000 Words - 2”, n.d. https://studentshare.org/miscellaneous/1544756-assigment-2.
  • Cited: 0 times

CHECK THESE SAMPLES OF Advice for a Contract Law Case

Scot's Law of Contracts

In legal terms, consensus in idem must be achieved for a contract to be deemed as binding.... The parties involved must additionally have the mental capacity to perform what is laid out in the contract and such a contract is enforceable under the law as long as the terms are not illegal, indeterminate, trifling or impossible to perform.... The Requirements of Writing Act 1995 clearly states that a contract must not always be written contrary to belief by people who are not essentially lawyers....
10 Pages (2500 words) Essay

Analysis of Freds Situation in Law

In Rowley & Ors v Secretary of State for Department of Work and Pensions (2007) the Court held that 'a solicitor owes a duty of care in tort because, like any professional person, he or she voluntarily assumes responsibility towards an individual client', which applies to the case of Fred v.... For example, as in Fred's case, Paul – recommending himself as returning a small accountancy firm, which specializes in tax and other investment matters– was expected to act like an average accountant....
6 Pages (1500 words) Essay

Legal Systems and Contract Law

According to the Scots law of contracts, for a contract to be binding it must be a bilateral agreement between two parties.... Another provision of the Scots Law of contract is that for a contract to be legal and binding there must be free and genuine consent of the parties.... When it comes to issues related to contracts, the Scots contract law is applied.... This case involves a number of parties and therefore, the Scots contract law will be applied in this case....
5 Pages (1250 words) Assignment

The Applicability of Common Law and Equity to Contract and Tort of Negligence

This case "The Applicability of Common Law and Equity to Contract and Tort of Negligence" involved a standard 'Broiler Chicken Growing Contract' executed between the said parties.... The Court of the first instance heard the case in two separate hearings.... ther standard clauses of the contract touching the case at hand included but not limited to the general clause 2, giving an overview that the growers were to provide 'sealable birds' from any farm location ready to be picked and processed by the appellants....
15 Pages (3750 words) Case Study

Contract Law: Advice to Furniture World Ltd

for a contract, there must be a bargain between the parties.... From the paper "contract law: Advice to Furniture World Ltd" it is clear that Glue Guys Ltd claimed erroneously that their glue can sustain any temperature as when FW heated the glue at an extraordinarily high temperature, it exploded resulting in heavy loss of furniture and equipment.... According to contract law, the parties involved in a contract can make mistakes that can be defined as flawed convictions regarding the information given at the time of getting involved in a contract....
6 Pages (1500 words) Assignment

The Legal Issue Arising in Regards to Contracts at Common Law

for a contract to be legally binding it has to have the following elements; an agreement (where one party offers and the other accepts), consideration where each party has to benefit from the contract, intention to create legal relations, it must adhere to legal formalities and parties involved in the contract should possess the legal capacity to enter into a contract.... The paper "The Legal Issue Arising in Regards to Contracts at Common Law" states that the case would be a straightforward victory for Alice's family as it satisfies conditions for setting aside a contract on grounds of lack of capacity to enter a contract and undue influence in contract formation....
6 Pages (1500 words) Assignment

Business Law in Australia: Type of Contract

A key legal issue would be whether Mike has breached a contract.... A breach of contract is an unjustifiable failure to perform a contractual duty or failure of a party to do what he agreed to in a contract.... However, to confirm this, four elements have to be considered: whether he entered into a contract with Mike, whether the two parties agreed to a contract, and since it is a written contract, whether Frank has written evidence showing that he entered into a contract with Mike....
15 Pages (3750 words) Case Study

Advise Adam and Belinda in the Separate Situations in Business Law

Adam and Belinda had formed a contract in January 2011, whereby Adam was to construct an extension to Belinda's house, by the end of July 2011.... Relevant law and discussions crucial nature or otherwise of a time obligation in a contract, are determined by the construction of the contract.... Nevertheless, time obligations have been deemed to be central to a contract, by the courts.... a contract, in general, incorporates a variety of terms....
6 Pages (1500 words) Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us