assignment 1 law

Question 1

Answer:

Issue:-The legal issue here is contract law formation - the element of consideration. Can Bob

start any court proceedings against Ben?

Rule:-The performance of the duty already mentioned in the contract is not regarded as good

consideration (Latimer, 2012, p.348).This comes from Stilk v Myrick (1809) 170 ER 1168

(Pentony, Graw, Lennard & Parker, 2011, p.97). In this case, the ship on the voyage was

abandoned by two sailors. So the captain of the ship promised to divide the wages of those two

sailors among other sailors if they helped him to sail the ship back home. However, on returning

from the voyage, he denied to pay any extra money to sailors arguing that they were just carrying

out the duties mentioned in the contract. Lord Ellenborough in his verdict held that Myrick was

bound by original contract and his want for consideration was void.

An exception to this rule was the case of 723 Musumeci V Winadell Pty Ltd (1994) 34 NSWLR.

Mrs. Musumeci was granted rent reduction by Winadell Pty Ltd because a new competitor was

setting up the business in the same shopping mall. Later, the owner sued Musumeci for rent

“arrears”. But the court decided that there was practical benefit to owner on reducing the rent as

the shopping mall remained occupied and the defendant suffered a detriment by competing with

the competitor. The benefit obtained by Winadell in this case was the consideration to his

promise of rent reduction (Latimer, 2012, p.349).

Application: - As it is given in the contract that “Bob enters into the contract with Ben…….for

$40,000”, we can say that there was intention, agreement and acceptance in the terms of

consideration between the contracting parties. Moreover we can also assume that the contract

was in writing because it is said that Ben will not be make extra payment to Bob if the price of

the materials rises.

When the construction work started, the price of materials rose significantly due to global

shortages. Fearing loss, Bob asked additional $50,000 to which Ben agreed. Later, when Bob

completed the house, Ben is refused to pay the extra $ 50,000.

1Kundan Khatiwada Student id: 11511177

The case of Musumeci V Winadell Pty Ltd (1994) 34 NSWLR does not apply to this question. It

is so because the promisor (Ben) is not getting anything more for additional $50,000. The court

would acknowledge $ 50,000 as consideration only if there were some additional benefits to Ben

other than those stipulated in the contract.

Rather, Stilk v Myrick (1809) 170 ER 1168 applies strictly to this case. Ben was just carrying out

the obligations mentioned in the contract. Moreover, there was no provision for extra payment

with the rise in material prices. Therefore, continuing with the obligations imposed by the

contract is not good consideration. (Latimer, 2012, p.348)

Conclusion: - My opinion in the given case is that Bob cannot take any legal actions against Ben

based on Stilk v Myrick (1809) 170 ER 1168.


Question 2

Answer:

Issue: - The legal issue here is what damages can be claimed or what remedies can be sought for

the breach of the contract. Does Ocean Tours Pty Ltd has any remedies against Marine Designs

Pty Ltd?

Rule: - Actual breach occurs when there is late performance, non performance, defective

performance, and if the terms of the contract are false. (Pentony et al., 2011, p.209).

If it is a breach of condition, then the contract comes to an end. Conditions are important to the

purpose of the e contract. The innocent party can repudiate the contract and sue for the loss

caused by the breach of the contract: Poussard v Spiers (1876) 1 QBD 410 (Latimer, 2012,

p.428). In this case, the lead singer was unable to perform at the theater on the opening night due

to her illness. As a result, the court held it as a breach of a condition and allowed the organizer to

find the replacement of Poussard.

If it is breach of warranty, the contract does not terminate. However, the innocent party is

entitled to the damages caused by the breach .But he must continue to perform the obligations

specified in the contract (Latimer, 2012, p.428).

When the damages are caused by the breach, the innocent party can seek to recover for the loss

caused by the damages. The claimant can claim for the losses naturally arising from the contract,

or for the unusual losses that were in contemplation of both the parties while entering into the

contracts (Rose, Libowitz & Magnus, 2001, p. 111). In the famous case of Hadley V Baxendale

(1854) 156 ER 145 , the plaintiff was the miller who had contracted the carrier (defendant) to

take the broken crankshaft to the manufacturer to replace with the new one. The defendant could

not complete the obligation on time which resulted in loss of profit for the plaintiff. As a result,

he was sued on the court by the miller for the damages caused by late delivery of the crankshaft.

However, the court held that the loss of profit of miller was neither arising naturally from the

contract nor in the contemplation of carrier during the time of contract. As the carrier was not

informed by the miller about the large losses he would incur if the crankshaft was not delivered

on time, the plaintiff should not have to recover for the damages.


Application: - From the question, it is clear that Marine design Pty Ltd has breached the contract

with Ocean Tours Pty Ltd. The stipulated delivery date on the contract was 15 June 2012 but the

yachts were not actually delivered until the end of July.

When the yachts were finally delivered, Ocean tours found that the boats could accommodate

only 15 people instead of 20 people. As the size of boats is an essential element in the contract,

Marine Design has breached the condition of the contract.

Moreover, the lost profits of $20,000 were foreseeable to both the parties while entering in to the

contract. The first limb of Hadley V Baxendale (1854) applies in this case. Applying the second

limb of the same case, we can say that the private deal between the millionaire and Ocean Tours

was not foreseeable at the time of contract creation. Moreover, nothing in the question shows

that Ocean Tours communicated about this private deal to Marine Design.

Conclusion: - Ocean tours can claim to recover the lost profits of $ 20,000 in any Magistrate

Courts of NSW: Local Court Act 2007 (NSW) s 29 (Latimer, 2012, p.17) on the basis of first

limb of Hadley V Baxendale (1854). However, it cannot claim for loss of $32,000 arising due to

millionaire’s booking because it is not arising naturally from the contract. Moreover, as there is

breach of condition, Ocean Tours can repudiate the contract and sue for the damages. It can

appeal to district court to make claim below $100,000 and to intermediate courts if the claim is

between $100,000 and $750,000 (Latimer, 2012, p.17-18). To make a claim greater than this,

Ocean tours should go the Supreme Court. (Pentony et al., 2011, p.32)


References:

Latimer, P. (2012). Australian Business Law. Sydney: CCH Australia Limited

Pentony, B., Graw, S., Lennard, J., & Parker, D. (2011).Understanding Business Law. Australia:

LexisNexis Butterworths

Rose, A., Leibonitz, D., & Magnus, A. (2001).GETTING OUT OF A CONTRACT: A Practical

Guide For business. Hampshire: Gower Publishing Limited

British and Irish Legal Information Institute. (n.d). England and Wales High Court (King's

Bench Division) Decisions. Retrieved from

http://www.bailii.org/ew/cases/EWHC/KB/1809/J58.html)


http://www.bailii.org/ew/cases/EWHC/KB/1809/J58.html

assignment 1 law

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