Contract Law: Introduction to Business Law.

Introduction

A contract is an agreement to create a legal obligation binding the parties involved. Parties to the contact primarily negotiate terms and it is presumed that they made their intensions clear to each other regarding every material term which govern the contract that is their rights and obligations. The contract is entered into can be discharged through performance of contract, agreement to end the contract, breach of the contract, impossibility or frustration, lapse of time and operation of law (Graw S., 2005).

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In a contract of sale of goods under tender the goods sold must meet some conditions and warranties in the tender document. The seller and the buyer have specific rights in case of one party refuses to honor part of the contractual terms as stated. This case is a normal contractual sales contract and there are a number of remedies available to both parties in case one fails to honor part of the contract. This section of the paper seeks to highlight this to the parties to the contact (Khoury D. et al, 2003).

Advice to peerless

In this case Peerless had entered a contract with university of Canberra to supply goods to the university with a condition of delivery them within a week to avoid chaos in the university. Therefore peerless was obliged to supply the goods as they had agreed. In the contract peerless did not indicate the source of the goods as part of the terms of contact. Failure by the peerless to supply the goods as agreed discharged the contract by breach. In breach of contract the party involved can be held liable for damages privy to the contract especially where time is of essence. In the similar cases contact was discharged by breach and contains materials facts similar to the case at hand (Sweeney B and O’Reilly J., 2004).

  • Bettini V Gye:- B, was engaged for the whole of the season to sing at G’s theater and agreed to appear six days in advance for the purpose of the rehearsals. But due to his illness B arrived three days in advance instead of six days as agreed. G, terminated his contract on his ground. Held that rehearsal clause was collateral to the main purpose of the contract, and its breach could give rise to damages and not to rescission of the contract (Sealy L.C. 2003).
  • Pussard V Spiers:- P was engaged by S to play a leading party in a new opera for a short duration. Due to her illness, p was unable to take up her role in the first week. S was forced to engage someone else and refused P’s services. It was held that the promise to take part from the first night was vital to the existence of the contract, and its breach entitled S to repudiate the contract (Sealy L.C. 2003).
  • Behn V Burness:- The defendant charted a ship to carry coal from Newport to Hong Kong. The plaintiff described the ship as “now in the Port of Amsterdam” whereas in fact the ship was 62 miles away from Amsterdam. The ship was late in arriving at Newport, and the defendant refused to load it. It was Held that the defendant was entitled to do so because the situation of the ship, when the contract was made, was a term of great importance and must be treated as a condition (Sealy L.C. 2003).

Going by decisions made in these three cases, I can state that the condition of supplying the equipments in the first week of the contract was of essence and it constituted a term of great importance to the contract. Peerless will have breached the terms of contract therefore he does have any right against the university. This means that the university has not breached any contract. They could have breached the contract if they sourced for the goods from somewhere else before the time of the contract had expired.

The argument that the contract had been delayed because of factors beyond Peerless control can not be used as a defense. This is because the equipments to be supplied are not special in nature since they can be available somewhere else and factors that can be cited as beyond control include destruction of the subject matter, non-occurrence of a stated event, change of law, death or personal incapacity and government interferences (Sweeney B and O’Reilly J., 2004).

It will be impossible for Peerless to imply a condition in the contract stating that a delay of a third party as a defense will not succeed in case of a contract such as this where time is of great essence since a breach the University will lose a lot due to the impending chaos. As defined earlier breach of contract arises when one fails to perform part of his contract when performance is due. Performance was due during the period agreed and he was required to deliver the equipment to the institution which he failed to do.

In the case of Paradine v Jane 1648 it was held that contracts always impose absolute obligations. Therefore failure by the third party need not be whole; it is sufficient as long as it prevents the contract from being carried out.

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I will therefore advice Peerless that they will held responsible for breach of contract because stating that they will not succeed to supply in time as agreed was refusal of further performance of the contract. The university treated the statement as refusal to perform the contract. I will advice them that they don not have any right in the original contract as they breach the contract by refusing part performance. The thirty issues will be invoked as defense in this case as it was not part of the terms of the contact (Slorach, J.S. and Ellis, J. 2006).

Damages for the university

There are many remedies available for breach of contract by one part to it. The following remedies are available to aggrieved party: – refusal of further performance, action for specific performance, action for injunction and action for damages. Action for specific performance is especially in cases of services and can not be adequate remedy in this case since time is of essence here. Action for injunction remedy is normally applicable where there is a negative contractual terms to the party such as not to work for someone while under contact. In this case what is available to the university is action for damages (Lowry, J., Dignam, A. and Padfield, 2004).

Action for damages is a normal remedy for almost all breach of contract. This remedy is available specifically when the buyer or seller has fulfilled all conditions to the contract and in our case the implied conditions that must be fulfilled in order for the universality to succeed must include the essence of time as indicated unless there was an express agreement to exclude the conditions verbally or in writing.

The aim of the law is to return universality as far as possible in the position it could have been in if the contract had been performed as agreed. The law considers that the loss sustained from breach of contract is too remote to merit any compensation then it will not be awarded (Lowry, J., Dignam, A. and Padfield, 2004).

In the following case of Hadley v Baxendale where H, a mill owner, delivered a broken crankshaft to the defendants, who were common carriers, and they promised delivery on the following day to the maker for using it as sample. The defendants took several days to make delivery with the result that the mill remained idle longer it would have been had delivery been made as promised. The plaintiff claimed damages for loss of profits arising from extra delay. The plaintiff did not make known to the defendant that the delay would result in a loss of profits. It was held that the defendants were not liable to pay h damages for loss of profits.

The loss did not arise naturally and defendants were not aware that H did not have a spare crankshaft. Judge B. Alderman said damages for breach of contract should be such as may fairly and reasonable be considered either arising naturally i.e. according to usual course of things, from such breach of contact itself or such as it may reasonably be supposed to have been in contemplation of both parties at the time they made the contract as the probable result of the breach of it( CarterJ.W. et al, 2004).

However, when there is breach of contract, the requires the party to the contract to take necessary steps to mitigate the loss that could incur and they are only entitled to those damages that could not be avoided. Such damages may include the difference between the market price and the contract price. In this case the university took reasonable steps to minimize the loss that could have a rose from the breach of contract. However this will be assessed by the court and the university must prove that actually they incurred a loss due to the breach of the contract. The court will follow the principle laid down in the case of Hadley v Baxendale mentioned above.

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In will advice Peerless that the university has a right to sue for breach of conditions of the contract and will be able to recover the damages. This is possible because the agreement provided for a condition of time (conditions and warrants of the contract were breached) to be fulfilled was breached, by ordering from the second best in the tender the university was mitigating a loss from the breach. The university will recover 20% which is the difference between the contract price and market price that is the price of buying the equipment (Slorach, J.S. and Ellis, J., 2006).

References

CarterJ.W. et al, (2004); Cases and Materials on Contract Law in Australia, 4th ed., Sydney, Butterworths.

Graw S., (2005); An Introduction to the Law of Contract, 5th ed, Thompson Law book Company.

Sealy L.C. (2003); Jordans Cases and materials in Company law, , Butterworths Heinemann.

Khoury D. et al, (2003); Understanding Contract Law, 6th ed., Butterworths.

Lowry, J., Dignam, A. and Padfield, (2004) Company Law, Butterworths.

Pentony B., Graw S., Lennard J. & Parker D. (2003); Understanding Business Law Workbook, Butterworth’s.

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Slorach, J.S. and Ellis, J. (2006) Business Law LPC Guide Oxford OUP.

Sweeney B and O’Reilly J., (2004) Law in Commerce, Second Edition, Lexis Nexis Butterworths.

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