hnd-helps

Aspects of Contract Law Hnd
Introduction:
In this assignment I am providing the legal advice and guidance to enable the members of a group to decide on whether to seek the professional advice. I’m also going to discuss the pros and cons of the situation and identifying the relevant legal issues and going to discuss the relevant law to support the possible judgement on the following case. A member of a group had booked a holiday to the Sharmal Sheikh. The holiday company is still taking bookings, but due to the current troubles, one of the group member wishes to cancel their holidays. In order to take advantage of a discount the full amount is already been paid to the holiday booking company.

1 – Does their contract allow them to cancel?
2 – What conditions apply to the contract?
3 – What exclusion clause is present?
4 – What compensation is likely to be paid?

In the contract law the essential elements are:

(a) – Offer
(b) – Acceptance
(c) – Consideration

All these elements are been discussed previously in the task

In this scenario the conditions that are applied to the contract between the two parties clearly have the offer and acceptance principles. When both the parties have exchanged the money and a legal transaction been conveyed in between two parties then it seems that the consideration exists in its full swing in this contract in between the two parties. As an advisor I have to make sure that both these parties are well aware of the benefits of this contract that took place in a good faith and at that time both the parties were willingly and knowingly interested to make an agreement about the holiday booking.

I am also going to make clear for both the parties about the disadvantages of this contract, whether both these parties were aware of the troubles in Sharmel Sheikh? Since the company is still been taking the bookings. They could argue that they were not clearly and timely informed about the problems at the holiday resort. At the time of the contract the holiday company represented the resort as a nice and peaceful place and in a good faith and at that time it never appeared that there is any misrepresent from the company towards their customers. The company was made aware of the uncertain and unsatisfactory condition of the resort due to the trouble by the customers who wanted their money back. The holiday company could have innocently misrepresented the holiday resort being a peaceful and safe place for the tourists.

A general condition is that both the parties have performed what they were agree to do and created a legal relationship in between them. In this case another condition is to look at the holiday companies implied terms and those terms can be expressed given a specific direction and where things might be vague like they might be in this case. Implied terms in English law refers to the practice of setting down default rules for contracts, when terms that contracting parties expressly choose run out, or setting down mandatory rules which operate to override terms that the parties may have themselves chosen. The purpose of implied terms is often to supplement a contractual agreement in the interest of making the deal effective for the purpose of business, to achieve fairness between the parties or to relieve hardship. Innominate term: In this case the innominate term might be the strongest weapon to deal with the circumstances.

This is a very reasonable term where the contents of the contracts are not clear and the customer asking for his money back due to the troubles in the area. A warranty is a term concerning a minor part of the agreement only, if it is broken, the injured party has a right to claim damages but not, In general, to treat the contract as repudiated. A condition, on the other hand is a term that relates to an important aspect of the agreement: it ‘ goes to the root ‘. If such a term is broken the victim has a right, not only to claim damages, but also to avoid the contract.

If the court felt that there was an official notice from the foreign office in the news about the trouble in the Sharmel Sheikh, then court would advise the holiday company to imply a warranty condition where the holiday company may have to pay back some or all of the money they received. However there are some cases where assurance or guaranty couldn’t be met due to unforeseen circumstances for example Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962]

A ship was chartered to the defendants for a 2 year period. The agreement included a term that the ship would be seaworthy throughout the period of hire. The problems developed with the engine of the ship and the engine crew were incompetent. Consequently the ship was out of service for a 5 week period and then a further 15 week period. The defendants treated this as a breach of condition and ended the contract. The claimants brought an action for wrongful repudiation arguing the term relating to seaworthiness was not a condition of the contract. Held:

The defendants were liable for wrongful repudiation. The court introduced the innominate term approach. Rather than seeking to classify the term itself as a condition or warranty, the court should look to the effect of the breach and ask if the breach has substantially deprived the innocent party of the whole benefit of the contract. Only where this is answered affirmatively is it to be a breach of condition. 20 weeks out of a 2 year contract period did not substantially deprive the defendants of whole benefit and therefore they were not entitled to repudiate the contract. Ref: e-lawresources.co.uk In this case the terms implied by the customers where the contracts are done through an informal/friendly basis, however the court will imply recommendations to resolve the dispute.

Let us see another case

Golden Strait Corporation v Nippon Yusen Kubishka Kaisha(2007) Golden Strait Corp chartered a ship to Nippon Yusen Kubishka Kaisha from 10 July 1998. The earliest contractual date for termination was 6 December 2005. The only exception (in clause 33 of the charter party) for cancellation was if war broke out between Iraq, the United States, the United Kingdom and a number of others. Nippon, nevertheless repudiated the charter on 14 December 2001, redelivering the ship to Golden. Golden accepted this three days after. They took the case to an arbitrator to consider how much Nippon should pay in damages. By that time, America had started the Iraq War, in March 2003. This was just the event that would have allowed Nippon to cancel the charter, if stayed with it.

The arbitrator, Mr Robert Gaisford, reluctantly decided that the outbreak of war had created a limit on the payable damages. Nippon was liable for no damages after 21 March 2003. Golden appealed, the question being, in what circumstances could a party in breach rely on subsequent events to show that the contractual rights lost were not valuable? Golden argued that where there was an available market, the loss should be measured at the date of acceptance. It said that this created finality in contractual negotiations, and certainty because events subsequent to the date of acceptance of a contract would become irrelevant. Judgment:

The majority held that because the outbreak of war occurred before the damages fell to assessed, they could be taken into account. The most important thing was an accurate assessment of damages based on the loss actually incurred, which goes to the root of the compensatory principles that a victim of breach of contract will be compensated for the loss of his bargain. The victim should be placed in the position as if the contract were performed. The court should not ignore facts that were available. Golden was trying to argue for compensation exceeding the value of what it had lost. “Certainty, finality and ease of settlement are all of course important general considerations. But the element of uncertainty, resulting from the war clause, meant that the owners were never entitled to absolute confidence that the charter would run for its full seven-year period.

They never had an asset which they could bank or sell on that basis. There is no reason why the transmutation of their claims to performance of the charter into claims for damages for non-performance of the charter should improve their position in this respect.” Ref:http://en.wikipedia.org Like this case the court can give a judgement for compensation. There is another example

The Moorcock (1889)
The claimant moored his ship at the defendant’s wharf on the river Thames. The river Thames is a tidal river and at times when the tide went out the ship would come into contact with the river bed. The ship became damaged due to uneven surfaces and rocks on the river bed. The claimant sought to claim damages from the defendant and the defendant argued that there was no provision in the contract warranting the condition of the river bed. Held:

The court implied a term in fact, that the river bed would be safe for mooring. The court introduced the business efficacy test i.e. the term must be necessary to give the contract business effect. If the contract makes business sense without the term, the courts will not imply a term. Ref:http://www.e-lawresources.co.uk/The-Moorcock-(1889) Like this case the terms court can imply (but not directly) can also change the shape of the contract. In some cases where the contracts can’t be fulfilled due to turbulent weather or break out of the war then those contracts are capable of becoming frustrated (according to the unfair contracts legislations and frustrated contract act 1943).

Clauses:

A clause may be inserted into a contract which aims to exclude or limit one party’s liability for breach of contract or negligence. However, the party may only rely on such a clause if: (a) It has been incorporated into the contract, and if:

(b) As a matter of interpretation, it extends to the loss in question. Its validity will then be tested under (c) the Unfair Contract hnd-helpsTerms Act 1977 and (d) the Unfair Terms in Consumer Contracts Regulations 1999 Ref:http://www.lawteacher.net/contract-law/lecture-notes/exclusion-clauses- There are 3 types of exclusion clauses. The first kind is a true exclusion clause wherein it pre-empts a possible breach of contract and excuses the party that commits the breach of contract from any liability. The second kind is a limitation clause, which limits the amount of damages a party can pay for in the event of a breach of contract. This amount is fixed and cannot change no matter how much the actual damage or losses are. The third kind of exclusion clause is time limitation wherein a time period is fixed for the offended party to make a claim against the other. If the offended party does not make a claim against the other in the time period allotted, then he or she can no longer make a claim against the other regarding that particular agreement or contract Baldry v Marshall [1925] 1 KB 260

The plaintiff asked the defendants, who were motor dealers, to supply a car that would be suitable for touring purposes. The defendants recommended a Bugatti, which the plaintiff bought. The written contract excluded the defendant’s liability for any “guarantee or warranty, statutory or otherwise”. The car turned out to be unsuitable for the plaintiff’s purposes, so he rejected it and sued to recover what he had paid. The Court of Appeal held that the requirement that the car be suitable for touring was a condition. Since the clause did not exclude liability for breach of a condition, the plaintiff was not bound by it.

Ref:

http://www.lawteacher.net/contract-law/cases/exclusion-clauses-cases. As one of the group members has cancelled the holidays and there were a strong reason behind this cancellation. They booked the holidays to enjoy their time in Sharmal Sheikh. But with the time the situation became worse in Egypt and there was a huge risk involved in this holiday trip. Even the flights schedules been effected to and from Egypt. So there were no alternatives other than to cancel the holidays booking and to claim the money back.

In this case limitation exclusion clause and the time limitation exclusion clause are more likely to be present. In the presence of both these clauses there are possible chances that the court can give a judgement in the favour of the potential tourist group and the holiday booking company have to pay back the maximum possible amount which can be the full amount or can be the amount between 75% to 100% of the total amount depending on the different terms and conditions.

References
1 – http://www.lawteacher.net/contract-law/cases/exclusion-clauses-cases. 2 – http://www.e-lawresources.co.uk/The-Moorcock-(1889)
3 -http://en.wikipedia.org

David Marks

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