Business Law - Reasons for Termination of Contract - Assignment Example

1. a. Variation in contract:   While it is correct that a simple contract can be discharged by word of mouth even if the original contract was required by law to be inwriting, one would need to understand the fact that for the contract to be correctly varied and it is essential that the contract be in writing. This means in essence that the variation be in writing (Yorston, Turner, and Fortescue, 1990). For a variation in contract requirement that a variation of the contract be evidenced by writing has given rise to further refinement between, for example, a variation to the contract or a change in the method of its performance requires that there be a evidentiary support that is written for the formalization of the changes [Hartley v Hymans [1920] 3 KB 475].   b. Consideration   Consideration could be understood as being the third essential element of every valid contract. It is the bargain that supports the entire contractual relationship. The idea innate to the concept of consideration is that there contract would be formed for the fulfillment of a transaction that results in a mutual exchange of some type (Helewitz, 2007). Often, consideration comes in the form of a mutual promise. One party will promise to do something if the other party does something. This can mean that a party promises to buy, and the other party promises to sell. Consideration, or a mutual exchange, can be any sort of mutual exchange as courts do not generally consider the adequacy of consideration. A contract, however where one agrees to a the performance or the fulfillment of a certain aim while the other party has to promise absolutely nothing will not be enforceable because there is no mutual consideration. This case involved a subsidy scheme to assist local manufacturers to remain competitive in their use of wool. Plaintiff claimed to have made purchases of wool "in pursuance of the said agreement", during a period for which the government was unwilling to pay. Here, the announcements were not from commercial motivation but from a government trying to deal with the aftermath of war - public money is involved. To what extent is this important in explaining the decision? The court took the view that the subsidy was not a request, invitation or an inducement to purchase wool - would you agree with this? There was nothing, they said, to suggest that the subsidy and purchase of wool were related, no quid pro quo. Governments can of course make contracts in the normal way - purchase of equipment, employment etc. But in this type of case, it may have been thought that this was an attempt to bind the government in a policy type of situation where flexibility was more important. c. Duress in contract Duress means committing or threatening to commit any act against a person’s will. Duress is some element of force either physical or economic, which is used to override one party’s freedom to choose whether to enter into a particular contract or not. Such contracts are voidable at the insistence of the innocent party. In order to benefit from the doctrine of duress, the claimant would have to necessarily prove two essential points:   1.     That the pressure, which has resulted in an absence of choice on their part was brought on them against their will; and 2.     That the pressure was of a nature considered to be illegal by the courts. Duress is a vitiating factor of a contract that prevents agreement being reach between the parties to the contract, due to some unlawful threat or illegitimate business or economic being brought to bear on party to the contract. This means, essentially, that if it is alleged that an agreement was concluded as a result of some improper and excessive pressure exerted by one of the parties on the other, the contract may be treated as being voidable. Contracts tainted by duress are said to be voidable by the innocent person and thus able to set aside the contract in its entirety. The duress is must be such a character, and the circumstances must place the person in a position where they had no other choice other than to accede to the demand or threat and enter the agreement. If it is alleged that an agreement was concluded as a result of some improper and excessive pressure exerted by one of the parties on the pother, the contract may be treated as voidable under the common law doctrine of duress or under the equitable doctrine of undue influence. The basis of both duress and undue influence is that one of the parties gave no real consent to the contract. As duress and undue influence can only make a contract voidable, and not void, the right to rescind the contract can be lost by affirmation, an inability to restore the parties to their pre contract positions or the acquisition of rights by third parties. Duress originally meant actual violence or threats of violence but it has been extended to cover economic duress, that is, threats to property or to business. In the context of this case therefore, there is no case of duress given the fact there is no case of duress. d. Reasons for termination of contract The general rule is that a party will only be discharged from the obligations under a contract if complete performance has taken place. This means in turn that the performance needs to be exactly in line with the terms of the contract. Partial performance is insufficient and may result in a party being treated as having done nothing at all. in Cutter v Powell (1795) (KB), the plaintiff’s husband signed on as second mate on the defendant’s ship on a voyage from the West Indies to England (Manohan, 2001). Minor flaws in the contract execution scheme are not usually held punishable by law u7nder the principle of de minimis (Shipton Anderson and Co v Weil Brothers and Co (1912) (KB)) the court held that a purchaser could not reject a consignment of wheat which was 55 pounds over the required 4950 tonnes.   In theory, a contract may stipulate that performance is to be completed in stages or segments. If so, performance of less than the entire contract whole may be insufficient to confer partial rights on the performing party. In Government v Newfoundland Railway Co (887) PC the defendant agreed to grant 25,000 acres of land to the plaintiff for each of the five mile section of railway constructed. The plaintiff only completed 25% of the required sections (Carter, 2004). The court held that the defendant was bound to grant the plaintiff 25,000 acres of land for each of the for mile stretch completed notwithstanding that the whole contract not perfumed. In other words, each five mile section was divisible or severable from the entire contract.   Finally there is also the consideration of the acceptance of partial performance. This means in essence that if a party chooses to accept part performance by the other party to a contract than this acceptance may constitute a discharge except where the accepting party had no option but to accept the partial performance. In Sumpter V Hedges (1898) CA Sumpter, a builder with a contract to build two houses and stables for Hedges for £565. Bruce J found that Sumpter had abandoned the contract, and said he could get money for the value of the materials but nothing for the work. e. Contract rescission: When a contract is rescinded when liability is terminated and the parties are restored to their position prior to the signing of the contract. The requirement is for each party to return to whatever benefit they had received during the progress of the contract [CC §1692.] mostly, the impact of the rescission is the extinguishing of the contract. [CC §1688.] The party that has been rescinded against is entitled to restitution. When faced with a party who has rescinded a contract, first determine whether the rescinding party’s election to rescind was justified, i.e., did the rescinding party have proper legal justification for rescinding, and second, adjust the equities between the parties by granting to each party the relief to which that party is entitled. [CC §1692.] Section 1692 of the Corporations act states that in cases where the contract has been found to have rescinded, completely or in part, the idea based on the spirit of aggrieved party protection will be to ensure that there is a method by which an action could be brought so that damages could be recovered in money or substance terms, so that rlif could be provided keeping the consideration of circumstances in mind and ensuring that and assertion is made by way of which rescission is not subject to defense or cross-complaint. A claim for damages is not inconsistent with a claim for relief based upon rescission. The aggrieved party shall be awarded complete relief, including restitution of benefits, if any, conferred by him as a result of the transaction and any consequential damages to which he is entitled; but such relief shall not include duplicate or inconsistent items of recovery. If in an action or proceeding a party seeks relief based upon rescission, the court may require the party to whom such relief is granted to make any compensation to the other which justice may require and may otherwise in its judgment adjust the equities between the parties. In the context of this case, the first thing is that when the contract was signed in the first place, the market was already in a state of turmoil. The first consideration in this respect would arise in the context of whether or not Townsend Smelters were justified in their demands of bringing in variations in contract. Also needed to consider is the fact that there has already been one variation that has been included in the contract which has been accepted by CMIL despite the added burden of cost. Given the fact that the contract has been rescinded by Townsend because of a disagreement on requirement for variation, the idea here would be that CMIL could sue Townsend on the issue of an absence of consideration. According to the law, this is warranted in instances where “the consideration for the obligation of the rescinding party becomes entirely void from any cause”, there is also the issue of failure of Townsend demanding unjust equations, that would place CMIL in an impossible situation. Question 2: In most cases a company irrespective of its size and number will seek to enter into an agent will an outside entity through the offices of an agent. A review of Sections 128 and 129 of the Corporations law, 2001 need to be used and reviewed in order to understand the statement in better light. Section 128: The law states in this regards that a person may assume that anyone who is held out by the company to be an officer or agent of the company has been duly appointed; and has an authority to exercise the powers and perform the duties that are usually exercised and by the same kind of officer in a similar company. This basically means that an agent who is dealing with an outside party and negotiating on say a contract or a deal has an authority to do so because he has been nominated to take care of such negotiations by the company in question and the outside authority therefore has to consider and give weight to negotiations carried out by the agent same as it would have been in case they were carried out by the company itself.               Section 128 goes on to state that the third party may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1). Section 128 also states that it may be assumed that an officer or agent of the company who has authority to issue a document or a certified copy of a document on its behalf also has authority to warrant that the document is genuine or is a true copy. Section 129: The second section in the Corporations Act, 2001 that deals with the topic in question is Section 129. It basically states the conditions on the basis of which the third party is to assume he conditions on the basis of which it is to assume that the agent is acting on behalf of the company. The first variable under consideration is that a contract can only be binding on a company if it is entered into by an agent of the company with the company’s authority. This means in essence that the contract can be declared void in case it can be proven that that the agent's authority is "denied" by a company (Freeman and Lockyer v Buckhurst Park properties (Mangal) Ltd [1964] 2QB 480 at 502 per Diplock Lj). The idea here is simple. Actual authority is the authority granted to an agent by a company in question by virtue of a consensual settlement or contract to which they alone were party. The act has further specified that in relation to companies, an agent's actual power to act for the company in question may arise from: an internal management rule in the Constitution of the company; an in-house management rule that has been stated in the in the CA; or Any such power has its source in the consent that has been given by someone who has an authority to give such consent on the company's behalf, such as by the board of directors. There can also be a condition where the agents are vested with express or implied actual authority to contract on a company's behalf. The concept can be understood in terms of Lord Denning’s judgment inHutchinson v Brayhead Ltd: [An agent’s actual authority is express when it is given by express words, such as board of directors pass a resolution which authorizes two of their number to sign cheques. It is implied when it is inferred from the conduct of parties and the circumstances of the case, such as when the board of directors appoint one of their own to be managing director. They thereby impliedly authorize him to do all such things that falls into the scope of that office], (retrieved Tomasic, 2002, p216). Authority by which a contract is executed is of two kinds primarily- formal authority and substantive authority. The absence of either will mean that the company is not bound by a contract which on its face appears to be properly executed a ‘direct contract’. It is here that one has to understand the exact implications of the term ‘agent’. An officer of the company, as an agent of the principle, can bind his/her company only if the officer has the authority to act for the company. An indirect contract in this context is formed when it has been executed ‘for and on behalf of the company. The only point of contention that arises in this regard is whether or not the agent posses the requisite authority to bind the principle in question. The authority by virtue of which the agent makes a negotiation or decision in question is called Express Authority. This kind of authority finds its sources in Empowering provision of the corporations act, 2001, the company’s constitution (198A (2)) or a delegation of authority to the agent by the company’s directors. The act further permits the board to delegate all or any of its powers to the Managing Director (198C (1)). Implied authority on the other hand will has its source in powers implied in the post that is occupied by the agent in question or the company’s board has given legitimacy to the conduct of the agent. If observed closely however the tenet turns to be a more of a technicality which has been provided in the Corporations Act, 2001 to minimize the risk of unenforceability for the outsider. It is in fact in this regard that one has to review not just the Corporations Act, 2001 but some of the landmark judgments that have been passed in this regard along with some other case laws. In the context of this case one would correct in assuming that while Redford has express authority to negotiate with respect to Janapada Beef. Therefore, given the fact that Janapada had not bestowed Redford with the express authority to negotiate contract in the specific context, Indi beef, would automatically render the contract unenforceable. Question 3 Part a In the year 2001, on November 18th a tree fell on the car of a driver who was driving on the Edmondson Road in New South Wales, and it killed him. The driver was Mr. Napoleone Turano, while his wife and two kids who were in the car sustained injuries. It was alleged that the tree had collapsed due to the fact that the roots of the roots of the tree were diseased. The cause of the disease was the water clogging at the base of the roots, which had occurred due to the fact that one of the water culverts beneath the roads was blocked. The blockage of the water culvert had occurred in the year of 1981, when Sydney Water had laid a water main under the road, which had caused the blockage to occur leading to the collection of the water under the tree. In the 20 years since the water main had been installed under the road there had been no notices put to Sydney Water against the tree. Mrs. Turano bought up a case of liability against the corporation as well as against the Liverpool Council, on the charges of negligence and liability of statutory authority (Dinkha O 2001). The court decided against the council but in favor of Sydney Water. Part b The case that was put to the Trial Court by Mrs. Turano was found by the DCJ Delaney in favor of Sydney Waters as it was not possible by the corporation to foresee that the water would travel along the sand filled trench and end up at the base of the tree but against the Liverpool Council (Turano v Liverpool City Council unreported). The council appealed in the Court of Appeals against this decision, and Mrs. Turano also cross appealed against the dismissal of the claim by the District Court. Beazley JA found the casein favor of the Council and found Sydney Water guilty and then proceeded to remit the proceedings against Sydney Water to the District Court for the “assessment of the damages.” The corporation appealed in the High Court against the decision of the Court of Appeal based on the error that had been described in the Dederer3 vs. Roads and Traffic (NSW) which had taken place in the year of 2007, on the grounds that the class which owed duty was not confined within reasonable limits, and the duty of care in this case was ambiguous in the stated case. Part c The Civil Liability Act 2002, Sec 43A deals with the proceedings against any public or other authority which has failed to exercise their special statutory powers. There has been clearly stated in the section of the act that a special statutory power is one which is clearly mentioned or conferred under a statue, or any act which a person cannot perform on their own general will without specified authority. The section also clearly states that a public authority would not be given to civil liability if the authority does not undertake an action or consider any exercise if the conditions were so unreasonable that no authority could have considered the completion of the ct or the omission of the undertaking as reasonable and required. In the occurrence of such a case the exercising of the failure to act cannot be bought up in as a failure of duty of care in the court of law (Aronson 2008). Mrs. Turano bought the case against Sydney Water as well as against the Liverpool council claiming physical damage and psychological injury on the basis of Negligence, Duty of Care and liability of the statutory authority. Following the two proceedings, when the Court of Appeal found the Sydney Water Corporation as guilty of the breach of Duty of Care, it appealed in the high court against the verdict of the Court of Appeal. The corporation appealed in the High Court against the decision of the Court of Appeal based on the error that had been described in the Dederer3 vs. Roads and Traffic (NSW) which had taken place in the year of 2007, on the grounds that the class which owed duty was not confined within reasonable limits, and the duty of care in this case was ambiguous in the stated case. The High Court declared its decision in Favor of the corporation where it stated that the Section 43 A of the Civil Liability Act clearly states that the statutory authority was not responsible for acts of the omission of an act if the act at the time was ‘unreasonable’. When the court declared its verdict it clearly stated that Sydney Water could not be held responsible for the disease of the roots and its collapse in the year of 2001, when the water main had been laid down in the year of 1981. The Court added that the duty that had been identified by the Court of Appeal was to ensure that the ‘integrity of the water culvert had not been compromised.’, and it did not include any injury that may have befallen the plaintiff. The High Court added further that the consideration of general principles of the Civil Liability Act of 2002 as illustrated under 5B and 5C did not arise. Part d The common law of negligence as stated under the Civil Liability Act 2002 states that any statutory power is be held responsible if there is failure to perform or breach of the statutory duties. In the case of Sydney Water Corporation vs. Turano and Anor the High Court verdict was found to be in the favor of the corporation on the basis of the fact that the damages that were caused were not foreseeable at the time of laying down of the water main in the year of 2001. The High Court further added that it was the owner of the land that is the council who was the authority that was responsible of looking at the effect of the water clogging at the root of the tree, and that Sydney Water Corporation had no authority to check the water clogging problem after the year of 1981, and could not be blamed for any risk that was posed by the tree in the year of 2001. The High Court pointed out that a consideration of these principles would have directed attention to the question of whether in 1981 a reasonable water authority ought to have obtained the advice of an arborist in relation to the impact of its proposed works on vegetation growing in an unpopulated, semi-rural area (Hooper G 2009). The court ruled that the Sydney Council could not be blamed by Mrs. Turano under the same ‘neighbor principle’ that had been articulated by Lord Aitkin in the case of Donohue vs. Stevenson. The basis that the court made the declaration on was that the Duty of Care is applicable to the cases where the problems and their occurrence was foreseeable at the time when the duty was being performed through the procedure of enquiry, and there should be ensured that reasonable care is taken. The implication of the hearing of the High Court in the case was clear that the Duty of Care applied on in cases where the injury could have been foreseen in the past, and was not applicable to cases where the risk is perceived in the retrospect after the injury has already occurred.   References: Elliott, (1989): "Necessity, Duress and Self Defence" Criminal Law Review . p611. LeRoy, M. R., and Jentz, G., (2009). Fundamentals of Business Law: Excerpted Cases. Cengage Learning, 2009. p142 Carter J and Peden E, (2005), The natural Meaning of Contract, Journal of Contract Law, Vol.21 No.06/58, p277  Poole J, (2005), Contract Law, Ed.9, Published by Oxford University Press p33-49  John Farrar, ‘Frankenstein Incorporated or Fools’ Parliament? Revisiting the Concept of the Corporation in Corporate Governance’ (1998) 10 Bond Law Review 142, 144  Helewitz, J. A., (2007). Basic Contract law for paralegals. Aspen Publishers. p87   Yorston, K., Turner, C., and Fortescue, E. E., (1990). Australian Commercial law. Law Book Publishing Company. p32-37  Dinkha O 2001: Determining duty of care: High Court finds that Sydney Water did not owe a duty in respect of an accident arising from works it performed 20 years earlier, Mondag Business Briefing Review, pp 125-128. Hooper G 2009: Australia: The High Court on Negligence: Absolute Liability is Out- Reasonableness is King, PSF Journal, October 19, 2001  Aronson 2008: Government Liability in Negligence, Melbourne University Law Review Vol 42, pp 78. Turano v Liverpool City Council unreported, District Court of New South Wales, at [150] per Delaney DCJ. Read More