Essential Australian Business Law - Essay Example

Business Law: Contracts Question No BSP could claim damages from Bajool for breach of contract. The kind of damages that BSP could claim under thecircumstances could be any of the following: damages arising from expectation; damages arising from reliance; damages for restitution, and; damages for indemnity loss. The current trend in Australian is for the courts to avoid double indemnification which thus means that the aforesaid damages can be claimed only in the alternative.1 In this case however, the best option for BSP is to claim an award of damages for expectation. An obligation under a contract arises when two or more parties enter into an agreement with each or among each other and that agreement is entered into with a consideration or by Deed and no mistake, misrepresentation or frustration is attendant before, during or after the agreement. Under such kind of agreement the promisee is obliged to deliver and the promissor is entitled to receive in accordance with the terms of the contract and in the event of failure of the promisee to deliver what is expected of him, then the promissor is entitled to recover damages for breach of contract. 2 In the present case, Bajool freely entered into a contract with BSP with the terms of the contract clearly set forth in the agreement. The time of deliveries is specific as well as the manner and amount of payments in installment. Although there is always a probability that prices of any commodity may from time to time fluctuate, as in this case, Bajool did not negotiate for a provision at the time of the agreement that would stipulate that in the event of a fluctuation, particularly a rise in the price of industrial salt, the agreed contract price shall forthwith also increase under a ‘rise and fall’ clause. Absent such a clause and considering that the contract is not long-term, Bajool is not justified in forcing BSP to agree to a different contract price and ultimately terminated the contract when the same failed. Therefore, Bajool’s termination of the contract is unwarranted and unjustified. This is especially true if the agreement of the parties had been put into writing considering that the Australian legal jurisdiction strictly adhere to the ‘parol evidence’ rule. This rule states to the effect that when the terms of an agreement are put into writing, then no other evidence of the intention and the terms that the parties agreed in the contract can be admitted to prove the terms agreed upon by them. This is the same doctrine held in the case of Mercantile Bank of Sydney v Taylor. 3 That BSP is entitled to the recovery of damages under the instant clear is clear. In the first place, BSP had already communicated to Bajool that the sixth and final installment of the delivery of the industrial salt is very vital because it would be used to comply with the latter’s obligations to the Industrial Gases Ltd. BSP stands to gain $350 per tonne of processed industrial salt delivered to Industrial Gases but since the deliberate failure of Bajool had caused it to reneged on its obligation, not only did BSP lost a potential profit of $3.5 million, more or less, but is now obliged to pay Industrial the amount of under the penalty clause of $250 per tonne, or $2.5 million, more or less. In short, BSP lost the opportunity to earn $3.5 million and actually incurred the loss of $2.5 million as a result of BSP’s termination of the last installment. Recoverable compensatory damages are ascertained in accordance with a test laid down in The Wagon Mound (No1) 4 which set the doctrine that damages which could be awarded for compensation purposes are only those which could be reasonably foreseen. In the case of a contract, if a party has informed the other party of the specific purpose of the goods or services subject of the contract, or the practice and custom of the place dictates that the party obliged to deliver goods or services should know their purpose, he is bound to deliver and if he failed to make good his promise to deliver, then such party shall be liable for breach of contract and damages for the loss incurred by the other party. 5 The best option in this case is to claim for damages on the ground of unfulfilled expectation. This is because among the three options, the expectation angle is the most fitting and viable to the case. The primary distinction among reliance, restitution and expectation, as ground for damages, is that reliance places the Injured Party (IP) in the position as if he has not entered into a contract with the Contract Breaker (CB) and can be used in any breach of contract or where the CB is also guilty of negligence. On the other hand, damages for restitution restores to IP what he has given to CB or the gains CB made from the breach and is available if CB incurred total failure under the contract. Finally, damages from loss of expectation, places IP in the position as if the contract has been satisfied and not broken by CB. In an action based on a contract, the common standard of claim for damages is based on expectation.6 In the case of Robinson v Harman, 7 the Court laid down the general principle in the measure of damages in breach of contract cases which is placing the injured party in the position, as far as monetary aspects allow, as if the contract has been actually executed. In Mertens v Home Freeholds Co, 8 the Court held that in the case, for example, of a contractor whose contract is left unfinished, the measure of damages is computed by determining the cost of the completion of the project within a reasonable time minus the contract price. In the case of Surrey CC v Bredero Homes,9 on the other hand, the Court held that a vital requirement for the award of damages is actual loss because damages are based on the loss incurred by the injured party and not on the gain acquired by the contract breaker. Question No 2 In the case of the accounting and management firm Shaw, Sen and Tsang Partners (SST hereafter), it is obvious that the firm committed tortious negligence in the exercise of its profession towards the management of the Brisbane Private properties, both from the point of view of common law and the Civil Liability Act 2003. Normally, contracts have three elements: offer and acceptance, consideration and intention to be bound legally.10 Since pro-bono work does not involve any consideration, then strictly speaking, the SST Partnership and the Brisbane Private relationship does not come within the ambit of a contract. Any negligence involve in the instant case is therefore non-contractual in nature and can be categorized under the law of tort. Tort, according to Sir L. Salmond is a “civil wrong for which the remedy is a common law action for unliquidated damages and which is not exclusively the breach of a contract or the breach of trust or other merely equitable obligation.” 11 A tortious act that is applicable to the case at hand is that of negligence. Negligence is simply the absence of reasonable conduct with the following present: a person owes a legal duty of care to another; there was a breach of that duty, and; the plaintiff, as a result of that breach of duty, suffered injury.12 The modern concept of negligence was first born with the case of Donoghue v Stevenson13 where a person who was drinking ginger beer suddenly saw, as she was about to finish her drink, a snail at the bottom of the bottle, rendering her shocked and ill. The precedent-setting case laid down the doctrine of negligence where liability for it if occurs in the absence of the duty of care to prevent acts and omissions that will reasonably result in the injury of another. Since the relationship between the SST firm and the Brisbane Properties are not contractual as earlier discussed, the negligence of the firm in the management of the properties of Brisbane therefore falls under the tortious negligence. As professionals assisting Brisbane Properties, albeit for free, SST owe the latter a duty of care to exercise the practice of their profession as managers of the properties with due diligence so as not to injure or harm Brisbane. However, there was obviously negligence on their part as can be gleaned from the fact that the renewal of the insurance of one of the buildings was neglected and the funds of Brisbane was invested in a company that had already gained an unsavory reputation in the investment circle in the past. From the point of view of statutory law, the SST firm is likewise culpable under the specific provisions of the Civil Liability Act 2003. The same statute states that a person is liable for breach of duty of care if the harm was foreseeable, the risk was considerable and when a reasonable person would have, under the circumstances, acted with precaution. 14 Applying this provision to the case at hand, it would seem that SST is really culpable for breach of duty of care because the building was obviously insured to protect it from harm which although uncertain is possible and when it occurs, would certainly cost Brisbane an amount it would find difficult to shoulder on its own. Besides, the building was insured previously which implies that Brisbane had the intention to keep itself protected from any untoward event that might happen to the building. Furthermore, the building is a source of income for Brisbane and therefore must be protected. The risk that SST took therefore in failing to renew the insurance of the building was considerable and as a professional accounting firm, its conduct was unreasonable and unprofessional. The same holds true and even worse for the investment it made in a company with an unsavory reputation in the business circle. It was a totally reckless action that the firm took and so surprising coming from a professional accounting firm. An accounting firm, or any professional group, doing pro bono work for another group especially a non-profit organization should not be completely divested of liability in the exercise of its profession with respect to the affairs of the organization or group it is doing pro bono work for. The fact that such pro bono work will not earn the professional group any financial gains, in addition to the fact that it cannot be made liable contractually, can make it tend to be laxed and negligent in the exercise of its profession where the interests of the group that it is working pro bono for is concerned. A case in point is the problem case at hand, albeit that it is only hypothetical. References: Barker, David Essential Australian Law: Australian Law, Routledge. Chen-Wishart, Mindy 2007, Contract Law Oxford University Press. Civil Liability Act 2003. Donoghue v Stevenson [1932] AC 562. Erbacher, Sharon 2002, Restitution Law Routledge Cavendish, p 139. Gillies, Peter 1988, Concise Contract Law, Federation Press. Goldring, John & Maher, Laurence & McKeough, Jill 1998, Consumer Protection Law Federation Press. Kurer, Martin & Codoni, Stefano & Gunther, Klaus & Neves, Jorge Santiago & Teh, Lawrence. 2002. Warranties and Disclaimers: Limitation of Liability in Consumer-related Transactions. Kluwer Law International. Mercantile Bank of Sydney v Taylor [1893] AC 317. [1891] 12 LR {NSW} 252. Mertens v Home Freeholds Co [1921] CA. Overseas Tankship (UK) Ltd v Morts Dock & Engineering Cp. Ltd. [1961] AC 388. Robinson v Harman [1848] 1Ex850. Surrey CC v Bredero Homes [1992] 3AIIER 302. Read More