Business Law: Best Builders Limited, Ravishing Rooms Limited, and Perfect Print Limited - Assignment Example

CONTRACT II WORK Best Builders Ltd (BBL) Issues The issues to be considered, in respect of the losses caused to Simon are; whether the BBL Company is liable for breach of contract, under the provisions of the contract law, whether BBL can invoke the doctrine of Frustration as a defence for non –performance of his part of the contract, and whether any remedies are available to Simon against the BBL Company for the loses caused due to termination of the contract. Rule The Supply of Goods and Services Act 1982 addresses implied terms, with respect to services provided. Section 14 of this act, stipulates that there exists an implied term that requires the supplier to complete the service within a reasonable period of time.1 A contract is frustrated, if its performance changes drastically, due to some external event or change of circumstances that transpired without the fault of either party.2 In order to circumvent a contract on the grounds of frustration, it has to be established that the events had not only made it much more difficult to comply with the contractual obligations, but that they had also destroyed its very foundation. Analysis The BBL Company should have made alternate arrangements to contend with the problems arising from the failure of machinery. As per the case law discussed in the sequel, contractual terms that become more burdensome, cannot provide a defence of frustration of the contract. The BBL Company had breached the implied terms stipulated by the Supply of Goods and Services Act 1982, as it had failed to complete the work within the specified time. In Bush v Trustees of Port and Town of Whitehaven, it was held by the court that the contractual terms had changed sufficiently, for the contractor to claim an additional amount for the inordinate delay.3 This decision was censured in the Davis Contractors case, and it was opined that a party to a contract could not claim relief from a contractual obligation, merely on the grounds that the contract had become more onerous to perform.4 Consequently, a quantum meruit arises only when the circumstances change to such an extent that the contract is frustrated. The mere fact that the contract has become more expensive or has changed appreciably does not constitute frustration of the contract.5 In Tsakiroglou & Co. Ltd. v. Noblee and Thorl GmbH, a consignment was to be shipped to Hamburg from Port Sudan. Subsequently, the Egyptian government prevented any shipping through the Suez Canal. 6 As a result, the goods had to be sent through a much longer route. This doubled the cost, and the appellants contended that the contract had been frustrated. The House of Lords ruled that there was no frustration, as the shipping route had not been specified.7 As such, it was held that a mere increase in cost did not constitute grounds for the frustration of a contract. In Davis Contractors Ltd v Fareham UDC, a contract had been formed for the construction of a number of houses. The project was to be completed in 8 months, by Davis Contractors, at a cost of £ 94,425. However, the work was delayed on account of labour shortage and was completed after 22 months and the cost escalated to £115,233. 8 Fareham UDC paid Davis Contractors the initially agreed upon amount, and the latter contended that the contract had been frustrated. Accordingly, Davis Contractors claimed an increased amount, for the work done by them. The House of Lords discounted this contention and ruled that the contract had not been frustrated. The labour shortage was deemed to have made the contract more difficult to execute; however, this in no way could be construed to be sufficient to rescind the contract, on grounds of frustration.9. Conclusion In our problem, the company had not taken any steps to fulfill its part of contractual obligations. As such, it had breached the contract. The losses that were suffered by Simon due to non performance of the contract have to be compensated by the BBL Company. Since the BBL Company breached the contract, Simon can make a claim against the company for the losses suffered by him under the provisions of contract law. The Company cannot rely on the defence of frustration to circumvent liability. Simon can rescind the contract and claim full refund of the money that he had paid to the company, in lieu of the contract. 2 Ravishing Rooms Ltd (RRL) Issues The issues to be addressed in respect of Simon’s accident are; whether RRL can exclude liability, on the basis of exclusion clauses. It is also to be determined; whether damages can be claimed for the personal injury caused to Simon, on account of the computer cable placed on the floor by RRL’s employee. Rule Exclusion clauses in contracts endeavour to avoid liability. Their validity is strictly controlled by the Unfair Contract Terms Act 1977 and the Unfair Terms of the Consumer Contract Regulations 1999. The provisions of the Unfair Contract Terms Act 1977 make businesses liable for violations or circumvention of statutory obligations and duties, in the normal course of business.10 The Supply of Goods and Services Act 1982 addresses implied terms, with respect to services provided.11 This act, stipulates that there exists an implied term that requires the supplier to exercise sufficient skill and care, whilst providing a service.12 Analysis The carpenter of RRL failed to fix the wardrobe, correctly. Consequently, it crashed to the floor, and Simon who rushed in tripped over a computer cable that had been negligently left there by one of the electricians. This resulted in grievous injury to Simon, who can claim damages for the ruined Persian rug and personal injury. RRL cannot evade liability, by relying on exclusion clauses. The Unfair Contract Terms Act 1977 recognises that reasonableness is essential in contractual terms, and scrutinises exclusion clauses in order to determine whether they are reasonable. In this process, the circumstances that should have been known to the parties to the contract, in the usual course of business, are taken into consideration.13 In Thornton v. Shoe Lane Parking, (1971) 1 All ER 686, the court ruled that the contract was formed at the time that the plaintiff had entered the car park.14 In Godley v Perry, it was ruled that a defect that makes a product unsafe, also makes it unsatisfactory.15 In Lambert v Lewis, the court ruled that the coupling was to be deemed to be defective at the time of its purchase, because it had failed to function, prior to the elapsing of a reasonable period of time.16 In Spice Gils Ltd v Aprilia World Service BV, a definition was provided for the term misrepresentation by conduct.17 Implied terms are statutory conditions, whose infringement by the seller entitles the buyer to reject the goods and claim a full refund of the price. Since, the carpet had been damaged, due to the poor workmanship of the carpenter; the service provider RRL is liable for breach of contract, under the provisions of the Supply of Goods and Services Act. Moreover, as per the provisions of the Unfair Contract Terms Act 1977, liability cannot be excluded if personal injury results from negligence.18 In the context, of other loss or damage resulting from negligence, this act states that an exclusion clause that is not reasonable is invalid.19 The Unfair Contract Terms Act 1977, states that a contractual term cannot exclude liability for negligence, if there is personal injury, death or loss of property.20 Conclusion Simon can claim the cost of the carpet, and damages for the personal injuries undergone by him, from RRL. RRL cannot exclude liability; since, Simon had experienced losses due to personal injury on account of faulty services. Moreover, Simon can repeal the contract and claim damages for the broken wardrobe, Persian rug and personal injury. He can also insist upon RRL to replace the wardrobe under the provisions the Sale and Supply of Goods to Consumers Regulations 2002. 3 Perfect Print Ltd (PPL) Issue The issues to be addressed are; whether Peter’s information regarding the experience and technical expertise of the PPL Company, which induced Simon to enter into the contract can be deemed to be misrepresentation. It is also to be determined, whether the termination of the contract by Simon, renders him liable for any violation of the provisions of the contract law. Moreover, it is to be ascertained, whether Simon has any remedies for the losses caused to him, due to the termination of the contract. Rule The Sale of Goods Act 1979 stipulates that the goods sold in the normal course of business are to be of satisfactory quality.21 This act also requires goods sold by description, to conform to their description. In the absence of such conformity, goods can be rejected.22In accordance with the provisions of the Misrepresentation Act 1967, the courts are required to explore the possibility of awarding damages, instead of annulling a contract, in instances where a party to the contract claims dissolution of the contract.23 Under the provisions of this act, an innocent party can recover damages from the party that had made a false statement. Analysis Peter of the PPL, successfully induced Simon to place an order for the printing and supply of 10,000 leaflets. Peter had informed Simon that the rates charged by PPL were the lowest and that their product was the best. These statements were false. Even if there is no fraudulent intention, a person making a misrepresentation shall be liable for damages. In Watts V. Spence, one of the joint owners of a piece of land was deemed to be guilty of misrepresentation, as he had agreed to sell it without the knowledge of the other owners.24 In Hedley Byrne v Heller, the court held that compensation for negligent misstatements could be claimed for damages in tort.25 In Leaf v International Galleries Ltd, a painting was sold. After five years, the buyer attempted to rescind the contract, as he realised that there was a misrepresentation, at the time of the purchase. The Court of Appeal held that the buyer could not rescind the contract.26 Lord Denning opined that the statement was a contractual condition that had been infringed by the misrepresentation.27 However, the contract could not be rescinded due to lapse of time. In Esso Petroleum v Mardon, a senior employee of Esso Petroleum provided an estimate to Mardon, in respect of the petrol pump’s projected annual sales. Lord Denning held that the higher sales estimate should have been arrived at only after a reasonably careful estimation of the expected sales.28 Consequently, the company was liable for misrepresentation. An individual who undergoes a loss, due to fraudulent misrepresentation by another person, can claim damages, with regard to such loss, under the provisions of the Misrepresentation Act.29 Hence, PPL Company is liable for Fraudulent Misrepresentation. In our present problem, Simon was induced by Peter’s statement, in respect of the PPL Company, regarding its expertise in printing. Simon placed an order for printing 10,000 leaflets. After their delivery, 3,000 of these were of unsatisfactory quality. Moreover, it was discovered that the machinery used in their printing was not new. This clearly shows that Peter had made a false statement in order to induce Simon to enter into the contract. Since the PPL had infringed the implied terms of the contract, specifically the provisions of section 14(2) of the Sale of Goods Act 1979, it is liable to make good the loss caused to Simon. Conclusion As per the case law discussed above, Peter is liable for fraudulent misrepresentation under the provisions of Misrepresentation Act 1967. The remedies for fraudulent misrepresentation are termination of the contract and damages for the losses sustained. Hence, Simon can claim damages from PPL Company, for the losses undergone by him. Moreover, PPL is liable under the provisions of the Sale of Goods Act for violating the implied terms in respect of quality of goods, due to supplying leaflets of inferior quality. Bibliography Bush v Trustees of Port and Town of Whitehaven (1888) 52 JP 392 David Kelly, Ann Holmes and Ruth Hayward, Business Law (5th edn Cavendish Publishing, 2005) Davis Contractors Ltd v Fareham UDC (1956) AC 696 (HL) Esso Petroleum v Mardon (1976) QB 801 Godley v Perry (1960) 1 All ER 36 (QB) Graham Virgo, The principles of the law of restitution (Oxford University Press, 1999) Hedley Byrne v Heller (1964) AC 465 JH Williams and MF Levine, ‘Restitutionary quantum meruit - the crossroads’ (1992) 8(3) Const LJ 244 John Keith Macleod, Consumer Sales Law, (Routledge – Cavendish, 2006) Lambert v Lewis (1982) AC 225 Leaf v International Galleries Ltd (1950) 2 KB 86 Misrepresentation Act 1967 Richard Stone and Ralph Cunnington, Text, Cases and Materials on Contract Law (Routledge – Cavendish, 2007) Sale of Goods Act 1979 Spice Gils Ltd v Aprilia World Service BV (2000) EMLR 478 Supply of Goods and Services Act 1982 Thornton v Shoe Lane Parking (1971) 1 All ER 686 Tsakiroglou & Co Ltd v Noblee and Thorl GmbH (1962) AC 93 (HL) Unfair Contract Terms Act 1977 Unfair Terms of the Consumer Contract Regulations 1999 Watts v Spence (1975) 2 All ER 528 Read More