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Business and Corporate Law: Defenition of Contract

The Facts of the Case

Mrs. Lastic’s daughter was having a wedding in May. In preparation for the wedding, Mrs. Lastic agreed to hire Mr. Johnson’s vintage, white R. Royce as a bridal car. She engaged Mrs. Kay to take the photos. Further, she hired Mr. Leslie to do the catering for the reception. Mr. Johnson sold the R. Royce to Mildred a week before the wedding on the condition that she will make sure that it’s available for hire to Mrs. Lastic for the wedding. The day before the wedding when Mrs. Mildred was contacted denied Mrs. Lastic the knowledge of availing the car for hire. This forced Mrs. Lastic to hire another one for the wedding at a higher cost. On the day of the wedding, the photos did not come out properly because Mrs. Kay’s camera kept jamming. Lucy, Mrs. Lastic, and many other guests became violently sick and ill after consuming a contaminated chicken by salmonella which Mr. Johnson did not know. Lucy vowed to sue all who ruined her wedding.

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Definition

A contract is a legally binding agreement between two persons with clearly spelled obligations. Some contracts or agreements can be valid but cannot be enforced such as domestic arrangements, asocial invitations, and a promise to marry someone. According to Lawnix (2008, p. 209) and Flaherty, Phillips, Baker, Girard, and Wilton (1999, p. 89), the laws that give rise to various types of contracts include the constitution, the statutes, and international treaties, regulations from administrative agencies or court rulings on disputes. For any agreement to be described as a valid contract, it must have the following an offer and acceptance, consideration, legal, the parties must have an intention of creating a legal relationship and there must be consent from both parties wrote Slorach and Ellis (2006, p.89-98).

According to Berryman et al (2006, p.144) contracts are always written, however, any oral contract that does not have any documentation will be binding if the parties to the contract intended to create a binding contract. In the landmark case of Severson v. Elberon Elevator, Inc., [Iowa Supreme Court, (1977) 250 N.W. 2d 417], where there was an oral contract between the plaintiff and the defendant but it was not performed. The defendant argued that the agreement of the transaction only had the elements of preliminary negotiations and was not a contract. The principles of contract law suggest that “An oral contract may come into existence even though the parties intend to reduce it to writing at a later date” quoted from Kelly, Holmes, and Hayward (2005, p. 781). This was held in Severson v. Elberon Elevator, Inc.

Identify Legal Issues

Can an undisclosed principal successfully sue for breach of contract? Can Mrs. Lastic successfully sue for the breach of contract against Mildred? Can Johnson sue Mildred for damages for the loss incurred? Can she successfully sue Mr. Johnson for breach of contract? Can she successfully recover any damages for breach of contract? What kind of damage should she be compensated for? What monetary compensation should she receive in respect of damage which is not too remote? Can she successfully sue for damages for poor performance by Mrs. Kay? Can she sue Mr. Leslie for damages for the supply of contaminated food?

Analysis

Mrs. Lastic is an agent to Lucy. But in this case, she did not disclose her principle in any agreement. Therefore this means that Lucy is only the third party to the contract. In this case, she has no right to sue since the agent had contracted in terms that implied that she was the principal herself. The rule in the privity of contract is that one can not sue or be sued to a contract in which he is not a party. Although Lucy can claim to enforce legal rights based on the reforms which resulted in the CONTRACTS (RIGHTS OF PARTIES) ACT 1999 (Contracts Act, 1999).

Mrs. Lastic cannot sue Mildred for a breach of contract because Mildred is the third part and she has no obligation to Mrs. Lastic.

However, Johnson can claim damages from Mildred for the loss incurred. Before the sale of the car, there was an implied condition that he will only sell at the price agreed if she ensured that it will be available for hire to Mrs. Lastic for Lucy’s wedding. This condition was violated by Mildred breaching the contract of sale. John can sue her for exemplary damages for the loss he has incurred from the breach of contract. This type of damages is awarded to punish the promise-breaker and prevent others from committing the same breaches. But at the same time, Johnson may not succeed in a claim for damages because he did not mitigate his loss. From the facts of the case, Johnson did not hire another vehicle for Lucy’s wedding but kept quiet. The law requires that where a breach of contract occurs, the plaintiff should make all reasonable efforts to minimize his loss and he can not be entitled to recover those damages he could have easily eliminated if he tried.

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In BRACE v CALDER, (1863) B was wrongfully dismissed from his service but was immediately offered employment on his previous terms. B declined re-employment and sued for wrongful dismissal. It was held that although the dismissal was irregular and was technically a breach of contract, B was entitled to the nominal challenges only (Berryman, Gillen, Berryman, Farquhar, McPherson, Gillen, and Woodman, 2006, p.145).

Therefore the court will only award him damages that it will feel arose naturally from the breach.

There was a genuine contract between Mr. Johnson and Mrs. Lastic. This is because there was an offer and acceptance which was supported by a consideration agreed upon. The agreement was that he was to avail the car for hire at Lucy’s wedding but he sold the car before the wedding. The car was the subject matter to the contract and therefore selling it amounted to a breach of contract. Mrs. Lastic can sue for damages or treat the contract as subsisting or discharged. From the facts of the case above, she affirmed the breach by treating the contract as subsisting and completing her part without Mr. Johnson’s cooperation. She incurred a cost that was higher than that of the contract. Mrs. Lastic is entitled to claim the whole sum due under this contract. This arose under the decided case is quoted from Lum and Yeo (2005, p. 201);

White and Carter (Councils) V Mcgregor (1961)

“P agreed to advertise D’s business for three years on plates attached to litter bins. D repudiated the contract on the same day that it was made. P nevertheless manufactured and displayed the plates as originally agreed, and claimed the full amount due under the contract. A majority of the House of Lords upheld the claim, their reason being that the repudiation does not, of itself, bring the contract to an end. Its effect is to give the innocent part a choice of whether or not to determine the contract. If he chooses to affirm the contract it remains in full effect”( Gower and Davies, 2006, p. 58 and Redfern, 2004).

However if Mrs. Lastic treats this as an anticipatory breach, she can elect to treat the contract as discharged and sue for damages at once.

In HOCHSTER v DE LA TOUR (1853) “D agreed to employ P as a courier for three months commencing on 1st June. Before this date D told P that his service will not be required. This was an anticipatory breach of contract, and it entitled P to sue for damages immediately” quoted from Booth (1996, p.78)

Mrs. Lastic can sue Mr. John for the damages because of a breach of contract. Damage is not too remote if it is “such as may be fairly and reasonably be considered either as arising naturally, i.e. according to the usual course of things from the breach of 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” (Macdonald and Koffman, 2007). In determining damages the courts follow a rule which was laid down in HADLY v BAXENDALE, (1854)

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“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 a sample. The defendants took several days to make delivery with the result that the mill remained idle longer than 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 will 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 the defendants were not aware that H did not have a spare crankshaft” quoted from Sealy, (2000, p. 136)

From the above rule, a loss suffered by the plaintiff who arose naturally from his breach renders the defendant liable. In PINNOCK v LEWIS (1923) the seller of poisonous cattle food was held liable for the loss of the cattle to which it was fed. This loss arose naturally from his breach ( Slawson, 1996, p. 312).

Mrs. Lastic in recovering damages, the general rule is that she recovers the actual loss. But from the facts of the case at hand, she incurred an extra cost in hiring a different car. As such the court in assessing the number of damages to be recovered may consider the inconvenience suffered. This was seen in

JARVIS v SWAN TOURS (1973) “P paid $63 for a two-week winter sports holiday. It differed vastly from what was advertised. There was very little atmosphere, the hotel staff did not speak English, and in the second week, he was the guest in the hotel. P recovered $125 damages for his upset and annoyance due to having his holiday spoilt” quoted from Chandran (2000, p. 245).

Mrs. Kay was engaged to produce photos. She had an obligation to Mrs. Lastic to do anything possible and produce photos. There were no expressed terms to the contract that specifically described how she was to perform her duties or on what type of camera to use to produce the photos. Therefore she was expected to use the best machines and knowledge to produce photos properly. She will not defend herself that the poor performance was due to a faulty machine because she could have taken the necessary steps to have an alternative if it breaks and prevent the frustration. Mrs. Lastic can sue her for the breach of contract since she had failed to perform. The parties to the contract did not provide that it was to terminate on its becoming impossible or on the happening of a specified event. This means that Mrs. Kay may defend herself by bringing the doctrine of frustration that a supervening event occurred which destroyed the very foundation of the contract and it was beyond contemplation. According to Chen-Wishart (2007, p. 1999), supervening impossibility will discharge the contract if it’s proved that there was a destruction of the subject matter. This arose in the decided case of

TAYLOR v CALDWELL, (1863) “in this case a, music hall was agreed to be let out for a series of concerts on certain days. The hall was destroyed by fire before the date of the first concert. The contract was held to have become void and the owner of the hall was absolved from liability to let the hall as promised” quoted from Brillinger (2006, p. 186)

In this case, Mrs. Kay may be released from liability if she succeeds to prove the doctrine of frustration.

Mr. Leslie was engaged to do the catering at the reception by Mrs. Lastic. The food which he provided to the people who attended the wedding was contaminated because they fall sick after consuming it. Mr. Leslie had an obligation to supply food that was in good condition and fit for consumption. For him to claim that he did not know is not enough to relieve him from liability. In the contract of sale, there is an implied condition as to quality and fitness for the goods supplied. In this, the seller is not under a duty to disclose the defects attaching to the goods which he sells since the buyer is expected to look after his interest. But there is an exception to this rule of caveat emptor which states that where the buyer makes known to the seller the particular purpose for which he is buying the goods, and the seller specializes in the sale of those goods, then there is an implied condition that the goods should be reasonably fit for that purpose. In PRIEST v LAST, (1903) “P asked for a hot water bottle and enquired whether it could stand boiling water. The defendant told him that it would stand hot water, but not boiling water. The bottle burst and caused injury to the wife of the plaintiff. It was held that the bottle was not fit for the purpose it was acquired for, and the seller was liable” (Sealy, 1971, p. 340). Mrs. Lastic can therefore repudiate the contract and claim damages from Mr. Leslie.

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Advice

From the analysis of the legal issues above I can advise each of them as follows:

Lucy

She is a third party to the contract and therefore she cannot sue anybody who failed her wedding. My advice is for her to seek legal redress based on any reforms to the privity of contracts to third parties. The CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 specifically will help in this case. The Act, even if it maintains privity it gives the third parties in certain circumstances the right to sue the contractor. The two circumstances that are stated in section 1 of the act are: where the contract expressly so provides; and where the term of the contract purports to give a benefit to the third party and, upon a proper construction of the contract, the parties did not intend that it is not enforceable by the third party. I believe she will succeed because she was the only one to benefit from each contract. If she succeeds, she will sue all those who failed her wedding.

Mrs.lastic

Mrs. Lastic has the right to sue Mr. Johnson for the breach of contract and claim damages. She can also sue Mrs. Kay for poor performance and at the same repudiate the contract with Mr. Leslie and claim damages. If the defendants so wish to have an outside court settlement, she should accept because this will reduce the time between when the breach occurred and recovering damages by a court hearing.

Mr. John

He breached the contract between himself and Mrs. Lastic and as such is liable to pay damages. My advice to him is to seek an outside court settlement with Mrs. Lastic. This will enable him to avoid extra expenses and save time.

Mildred

She should pay the damages because she intentionally denied the condition and she should not benefit from the price of the car without adhering to the agreement.

Mrs.kay

She was responsible to take the necessary steps to take wedding photos which she failed. She should avoid being sued for a breach of contract and seek a settlement with the aggrieved party.

Mr. Leslie

He supplied food that was not fit for consumption because everybody who consumed became sick. I will advise him to seek out of court settlement because he loses a lot of customers if they get to learn that he has court cases. He should also promise to improve in the future.

List of References

Berryman, J, Gillen, W, Berryman, Farquhar, G, McPherson, M, Gillen, M, Woodman, F, 2006. The Law of Trusts: A Contextual Approach, Emond Montgomery Publication.

Booth, C.D., 1996. Hong Kong commercial law: current issues and developments. Hong Kong: Hong Kong University Press.

Brillinger, R, 2006. Canadian Business Law. Emond Montgomery Publication.

Chandran R, 2000. Introduction to Business Law in Singapore. New York: McGraw Hill.

Chen-Wishart, M., 2007. Contract Law, Oxford: Oxford University Press.

Contracts (Rights of Third Parties) Act 1999.

Flaherty, D, Phillips, J, Baker, G, Girard, P, & Wilton, C, 1999. Essays in the History of Canadian Law: In Honour of R.C.B. Risk. Toronto: University of Toronto Press.

Gower, L, & Davies, P, 2006. Principles of Modern Company Law. New York: Sweet and Maxwell.

Kelly, D, Holmes, A, & Hayward, R, 2005. Business law. Cavendish: Routledge.

Lawnix, 2008. Lefkowitz vs. Great Minneapolis Surplus Store Case Brief: Lefkowitz v. Great Minneapolis Surplus Store, 251 Minn. 188, 86 N.W.2d 689 (1957). Web.

Lum, K, & Yeo, V 2005. Contract law. New Jersey: Butterworth’s Macdonald, E, & Koffman, L, 2007. The Law of Contract, Oxford: Oxford University Press.

Redfern, A, 2004. Law and practice of international commercial arbitration. New York: Sweet & Maxwell.

Sealy, L, 1971. Cases and materials in company law. CUP Archive (Cambridge).

Sealy, L, C, 2000. Jordans Cases and materials in Company law, London: Butterworth’s Heinemann.

Slawson, W, D 1996. Binding promises: the late 20th century reformation of contract law, New Jersey: Princeton University Press.

Slorach, J, S, & Ellis, J 2006, Business Law LPC Guide; Oxford: Oxford OUP.

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