Remedies of contract breach free essay sample

Howcan Pte Ltd then gets SureCan Pte Ltd to transport perishable goods from China to Singapore. The ship is supposed to transit via Vietnam. The goods are shipped out of China, but due to improper planning on the part of SureCan Pte Ltd, they are wrongly dispatched in Vietnam and further, SureCan Pte Ltd has not bothered to remedy the situation. Howcan Pte Ltd managed to trace the goods, but by that time, the goods have already gone bad. Howcan Pte Ltd is thinking of writing off its losses instead of suing SureCan Pte Ltd as the latter is in liquidation. However meanwhile, the liquidator of SureCan Pte Ltd wants payment for shipping the goods from China to Vietnam. (a) Is SureCan Ltd entitled to any payment? According to the general rule, one cannot seek payment from the other party if he has not completely performed his obligations, so the contract was not discharged by performance. In the case of Ocean Projects Inc v Ultatech Pte Ltd (1994), the defendants were engaged to transport the goods from Houston to Dumai by ship. They loaded the goods from Houston but, due to some reason, unloaded them in Singapore without going to Dumai. Since they did not complete the voyage, the court held that the defendants were not entitled to any payment for shipping the goods from Houston to Singapore. The same rationale applies in this case as well. Payment is conditional only upon complete performance. SureCan did not complete the contract and wrongly dispatched in Vietnam instead of Singapor. Therefore, in this case, SureCan is not entitled to any payment because it did not completely perform its obligation of shipping the goods from China to Singapore. However, there are four exceptions to this general rule. If SureCan has fulfilled any one of the exceptions, it may nevertheless be entitled to some payment. The first exception is substantial performance. If there is no complete performance, but there is substantial performance, the party performing may nonetheless be able to claim the contract price, less the cost of making good any omissions or defects in execution. As stated in the contract, SureCan needed to ship the perishable goods in proper condition from China to Singapore, by transit via Vietnam. Since the goods were shipped from China to Vietnam but were wrongly dispatched in Vietnam, there was no substantial performance as the goods did not reach its supposed final destination which is Singapore. Hence, Sure Can is not entitled to any payments under substantial performance. The second exception is divisible contracts. Certain contracts may be divisible into stages, and after each stage is completed, the party performing will be entitled to payment. However, from a legal standpoint, there is no mention of any divisions within the contract in the question. Furthermore, delivery job is normally regarded as an entire obligation. It is very hard to divide it into different stages since the goods have to reach the buyer’s hand eventually for the credit of full performance. The customary practice for payment of shipping goods by sea is to make the full payment only after the contract is fully performed. Therefore, SureCan cannot seek payment by divisible contract. The third exception is prevented performance. If SureCan has begun performing his obligations, but has been prevented by the HowCan from continuing, SureCan who has performed part of the contract may nonetheless be entitled to payment on a quantum meruit basis, that is, payment based on the value of services rendered. In this case, there is no prevented performance, since HowCan did not prevent SureCan from completing its contractual duties in any way. The failure to transport the goods to its destinated location was solely due to SureCan’s lack of proper planning and irresponsibility as it did not bothered to remedy the solution. As such, SureCan is not able to receive payments on the basis of prevented performance. The fourth exception is acceptance of partial performance. If SureCan has not completely performed his obligations and HowCan, by words or actions, shows that he accepts the incomplete performance, SureCan who has not completely performed the contract may nonetheless be able to claim on a quantum meruit basis. In this case, if HowCan who traced the dispatch in Vietnam and foresees the inability to deliver the goods in time didn’t take any measure against SureCan, HowCan may show acceptance of partial performance. However, HowCan will not accept the goods at all as the goods have already gone bad and cannot be used anymore. As such, SureCan cannot receive payments by acceptance of partial performance. Furthermore, the delivery of goods from China to Singapore can be considered to be a condition, with which it should be delivered to HowCan in the same condition as when SureCan had received it from Panda. In this sense, SureCan has breached a condition which leads to a fundamental breach of contract. Also, the failure of SureCan in delivering the perishable goods to Singapore on time has caused the goods to go bad, rendering the goods to lose their commercial values. Therefore, the consequence of breach is very serious as Howcan is deprived of the substantial benefits of the contract. In light of these, HowCan the innocent party, is thus able to terminate the contract, rendering SureCan no payment at all. (b) From a business / practical point of view, how could HowCan Pte Ltd have protected itself? Firstly, the contract should explicitly state the terms of each party’s obligations and penalties if either one fails their responsibilities. In this case, HowCan Pte Ltd should expressly state a term that SureCan Pte Ltd will be entitled to payment only if there is complete delivery from China to Singapore, and the goods are delivered on time and in proper condition. If the delivery is not complete or the goods have perished due to improper planning or negligence, penalties will be incurred and no payment will be entitled to SureCan. Secondly, HowCan can purchase a Trade or Cargo Insurance Policy which will provide coverage against loss or damage of goods caused in shipping transit. For example, the Marine Cargo Insurance offered by Tokio Marine Cargo Insurance provides indemnity and financial protection for loss of or damage to cargo during transit. It covers the mode of transport by Sea, Air, Rail and Land, and is designed to indemnify the insured party against any physical damage or loss that occurs during transportation. Under this insurance, HowCan will thus be capable of reducing or removing its financial burden that accompanies such potential damages and losses. Thirdly, HowCan should make the habit of consistently tracing and monitoring the goods in delivery. This will ensure proper delivery process, and also allows it to initiate timely remedies should anything goes wrong. Forthly, HowCan Pte Ltd should always do a check on SureCan’s reputation, delivery ability and financial status before getting into a contract with SureCan to ship their goods. Since SureCan was already in liquidation, it is a sign that perhaps indicates SureCan’s incapability to fully complete the contract. Hence, by checking SureCan’s track records beforehand, HowCan can minimise the risk of its goods being damaged in the voyage, and also avoid the situation where SureCan may not be able to recover the losses due to the fact that it is in liquidation.(c)What if the contract required shipment to HowCan Pte Ltd’s warehouse in Singapore, but the goods were left in the port upon arrival in Singapore and HowCan Pte Ltd then manages to get the goods to the warehouse within time at its own cost? In this case, even though the contract requires the shipping from China to HowCan’s warehouse in Singapore, it can be argued that SureCan has carried out substan tial performance of the contract as the goods have already been successfully delivered to Singapore. The only thing left undone was to transit the goods to the warehouse, which could be reasonably and easily done on HowCan’s part. Furthermore, HowCan’s action of delivering the goods itself from port to its warehouse also indicates that it accepted SureCan’s partial performance. Therefore, SureCan will receive the payment on a quantum meruit basis, which is the full payment of the contract minus the costs incurred by transiting the goods from port to the warehouse. In addition, if it was a divisible contract which expressly stated that SureCan is able to get part of the payment after completion of one stage which is to ship the goods to the Singapore port, SureCan will be entitled to that portion of the stipulated payment. However,Surecan might not able to entitle any payment under the following two situations. Firstly, if the contract expressly contained a term which stated that â€Å"only complete delivery from China to HowCan’s Singapore warehouse will entitle SureCan the full payment†, SureCan will thus not receive any payment since it has not fulfilled this term. Secondly, if Howcan has no choice but to accept the incomplete performance ,the acceptance of partial performance will not be valid. since the goods are perishable ,if Howcan did not get the goods from the port by themselves within time , the goods will be expired. late delivery will influence its quality and thus losses may occur if Howcan was going to re-sell the goods to other suppliers. Howcan could not reasonably be expected to leave them in the port and let it spoiled. Hence, there would be no acceptance of partial performance since Howcan accepted it under no choice situation. Therefore, Surecan is not entitled to any payment. Question 2 Bambang an Indonesian company entered into a contract on the 1 September to sell and ship goods to Mirlyon, a Singaporean company. The contract provides that the goods are to be shipped from Indonesia by 10 September. Bambang is intending to use Port Jarpadee which is near its warehouse. However, there are strikes in Port Japardee throughout September making it impossible to send the goods from there. Assuming Singapore law governs the contract, (a) Will Bambang be in breach of contract if it does not ship the goods as a result of this? In this case, the questions lies in whether the contract is terminated by frustration or by breach of contract. The issue here is whether termination by frustration applies in this case. Frustration is the happening of an unexpected event beyond the control of the parties, after the making of the contract but before the completion of the contract, which makes further performance of the contract either illegal, impossible or radically different from what was originally envisaged by the parties. In this case, the unexpected event which was the strike in Port Japardee occurred after the making of the contract, since the contract was signed on the first day of September while the strikes were said to happen throughout the month of September. The strikes were also beyond the control of the parties since both parties are unable to take any action to stop the strike. There is no illegality in this case regarding the contract between Bambang and Mirlyon. Thus, the focus of this case will be more centered around the other two factors. Firstly, impossibility can relate to the subject matter of the contract being destroyed before the completion of the contract. Bambang entered into a contract on the 1st September and there were strikes in Post Japardee after Bambang has entered the contract. Since the strikes would be throughout September, making Bambang impossible to send the goods from Port Jarpadee, the contract could be discharged by frustration and Bambang has not breached the contract. However, the contract did not state that Bambang has to ship the goods from Port Japardee. The only conditions provided were for the goods to reach Mirlyon’s warehouse by September 10. The reason that Bambang wants to ship the goods from Port Japardee is that it is near its warehouse and hence it will help them to minimize the costs. Shipping from Port Jarpadee is not mandatory. As such, even if there were strikes taking place in Doom airport, Bambang could still have used another airport to send the goods to Singapore before the deadline. As seen from the case of Tsakiroglou v Noblee (1962), the court held that the contract was not discharged by frustration as there were still alternative routes the plaintiff could have used. Thus in this case, the contract cannot be terminated by being radically different from What was originally envisaged by the parties. Even though it might be more expensive for Bambang to use another method of transportation to ship the goods to Singapore, if Bambang had chosen not to do so, it will amount to a breach of contract. Unless otherwise, the cost increase are so extreme as to be astronomical, which makes the contract radically different from what was originally envisaged by the parties, the contract could then be terminated by frustration and Bambang will not have breached the contract. On the other hand, if the frustration is self-induced, the party at fault cannot plead frustration to get out of the contract. For example, if the parties could have reasonably foreseen that a particular event would occur and nonetheless decided to go ahead with the contract, it is unlikely that the doctrine of frustration would apply. In the case, the strikes in Port Japardee throughout September made Bambang impossible to send the goods from there. However, Bambang may have foreseen the strikes since there would have some rumors and signs of strikes before they happen. Bambang may have fully aware of those rumors that there could be a possibility that it could not send the goods from Port Japardee, but it has still decided to go ahead with the contract. Therefore, if this is the case, the contract is not frustrated and Bambang will be breaching the contract if it does not ship the goods. In conclusion, if the Courts eventually rules that Bambang is in breach of the contract, Mirlyon would be able to sue Bambang for the breach and claim for the damages. What if there was a force majeure clause in the contract which stated: (i) The contract would be suspended if there were strikes, riots or civil disturbances which make it impossible to ship the goods out of Port Japardee and (ii) Such a suspension would be for a period of 8 weeks. If the strikes, riots or civil disturbances cleared up before the end of the 8 weeks, the time for the performance of the contract would be extended. Otherwise the contract would be discharged. A force majeure clause relieves people of liability of unexpected events in the contact. They can provide a period of suspension (instead of immediate termination under the doctrine of frustration). It allows the parties to wait and see before making a decision. If there was a force majeure clause which narrowed down what amounts to frustration discussed in part (a), the question lies in whether the clause is applicable in the situation. The clause states that strikes, riots and civil disturbance will suspend the contract, and strikes can be deemed as supervening events which arise without the fault of both parties. So the clause can apply in this situation. The clause sets a time frame of 8 weeks for the suspension. If the strike ends within 8 weeks, then Bambang is responsible to ship the goods before the new deadline they agreed upon, otherwise Bambang will be liable of failure to fulfil its obligation. If the strike ends beyond 8 weeks, then the contract can be discharged, and both parties will be dismissed from their obligations. Since Port Jarpadee now becomes the exclusive port to ship the goods, the contract will be suspended if there were strikes in the port. From the information given in the case, the strikes did happen in the Port Jarpadee which makes Bambang impossible to send the goods from there, so the contract will be suspended due to the force majeure clause. If the strikes end by September, the time for the performance of the contract will be extended after the strikes are cleared. Thus if Bambang does not ship the goods at the beginning of October, he is considered to have breached the contract. Question 3 Able Pte Ltd, a company involved in renovation agrees to renovate Mr Oh Noh’s house. But after the hacking had started, the company realizes there is no way it can finish on time, as it has over committed itself by doing many other renovations in many other places at the same time. It is also short of workers. So Able Pte Ltd completely stops renovating Mr Oh Noh’s house as it is the least profitable project of the lot. (a) Is the company excused by reason of frustration if it does not perform the contract? In this case, whether or not there is frustration depends on both the foreseeability of overcommitment the shortage of workers and whether or not the frustration was self-induced by Able. If Able could have reasonably foreseen that a particular event would occur and nonetheless decided to go ahead with the contract, the doctrine of frustration would not apply, since it is not considered as a happening of an unexpected event even though it is subsequent to the making of contract. In the case of Housing and Development Board v Microform Precision Industries Pte Ltd (2003), the court held that the inability of the defendant to secure an adequate supply of workers to meet its renovation commitments â€Å"cannot by any count be regarded as an unforeseen contingency†. Assuming Able is a company with much industry experience, it should have knew beforehand that it would not be capable of committing to so many renovation projects at the same time, and that there would be shortage of labours. As such, despite knowing this fact and Able still decided to sign the contract with Mr Oh Noh, Able will most likely not be excused by frustration based on the above reasoning. Secondly, if the frustrated event has been brought about due to the conduct of one of the parties, frustration would be self-induced and hence frustration cannot be successfully raised. In the case of J Lauritzen AS v Wijsmuller Bv ,The Super Servant Two (1990), the court held that the defendant’s inability to fulfill his contractual obligations was self-induced by his own decision since they could have assigned super servant one to this contract but decided not to do so. Able should not push its limitations by taking too many projects at the same time. It also had a choice to do Mr oh Noh’s renocation first instead of doing others. Hence, the contract is not discharged by frustration. In addition, according to Davis Contractors Ltd v Fareham UDC (1956), labour shortages do not make the contract radically different from what was originally envisaged and thus the contract will not be considered as frustrated. In the case above, the contractors argued that the contract was frustrated by labour shortages but the court held that the contract was not frustrated. Hence, the company cannot be excused by the reason of frustration if it does not perform the contract. As such, it is unlikely for Able Pte Ltd to be excused by reason of frustration due to the foreseeability in the lack of manpower and time. If 2 months have passed and no further work has been done, despite Mr Oh Noh’s repeated calls – what are Mr Oh Noh’s rights? Mr Oh Noh has the rights to act according to the actions exhibited by Able. Repudiation occurs when one party by words or conduct shows to the other that he no longer intends to continue performing his obligations or be bound by the contract. Repudiation may be actual or anticipatory. It is actual when the date for performance is due, and anticipatory when the date for performance is yet to be due. If 2 months have passed and no further work has been done, despite Mr oh Noh’s repeated calls, it would indicate that Able showed an intention not to perform his obligations. In this case, Able conduct of ignoring Mr Oh Noh’s repeated calls and refusing to start the project for two months can be considered as repudiation as it would seem that Able Pte Ltd no longer intends to go ahead or be bound by the renovation contract. Assuming that the deadline for completion is not yet due by the end of the two months, Able Pte Ltd would be in breach of anticipatory repudiation. However, it can be argued that if the renovation work is due after 2 months, the fact that Able Pte Ltd completely stopped renovating Mr Oh Noh’s house and did not reply to Mr Oh Noh’s repeated calls did not clearly convey to Mr Oh No that Able did not want fulfil the contract. Thus, there is no anticipatory breach by Able. There needs to be a clear notice from Able Pte Ltd to Mr Oh Noh that explicitly states that it no longer want to carry on with the contract before Mr Oh Noh can sue Able for anticipatory breach. Thus, he needs to wait for the date of performance to be due before he can sue Able for actual repudiatory breach and claim for any losses and damages. It should be noted that Mr Oh Noh can also choose to not to terminate the contract. It is not compulsory for the innocent party to terminate the contract. Mr Oh Noh has a choice. He can either terminate the contract or decide to keep the contract alive and affirms it. After the affirmation, Mr oh Noh is still able to sue Able company later for damages or losses incurred in the two month unless he waived his right to do so. However, Mr Oh Noh has to aware that if he decided to keep the contract alive , then it is kept alive with all the enduring consequences. For example, if the contract is terminated by frustration like his house being burnt down accidentally in the later of time , Able company would not be liable for breaching the contract or any damages incurred anymore. (c) Is the company entitled to any payment for the hacking? Since Able Pte Ltd has not completely performed its obligations under the contract, the general rule applies that the company cannot seek any payment from Mr Oh Norh or the hacking. However, there are a few exceptions. The first exception is substantial performance. To be able to claim substantial performance, there has to be a fulfilment of the obligations agreed to in a contract, with only slight variances from the exact terms and/or unimportant omissions or minor defects. In this case, the contract states that Able Pte Ltd is obliged to renovate Mr Oh Noe’s house. While only hacking was performed by Able. The obligation to renovate Mr Oh Noh’s house is not fulfilled and thus there is no substantial performance. The second exception is divisible contract. A divisible contract is one where the promises are independent of each other. Each promise can therefore be performed separately and payment can be claimed for the completed parts. If the contract between Mr Oh Noh and Able is divided into stages, and hacking is deemed as one stage, then the payment of hacking accordingly will be entitle to the company. However, more often the contract is not divisible since renovation is a whole process. If it is divisible, then the company may abuse to just perform certain stages of the contract and receive payment accordingly. It will be hard for Mr Oh Noh to find another company to Continue with the renovation work. Hence, with an indivisible contract, Able cannot be entitled with the payment. The third exception is prevented performance. If one party prevents the other from completing the performance of the contract, then the other party can claim on quantum meruit for the value of the work completed. This exception is not applicable here as Mr Oh Noh does nothing to prevent Able but to ask for renovation work. It is Able itself stops working. Hence payment cannot be entitled in this case. The fourth exception is acceptance of partial performance. If one party has not completely performed his obligations, and the other party intimates that he accepts the incomplete performance, the performing party may be able to claim on a quantum meruit basis. In this case, Mr Oh Noh has no choice but to accept the incomplete performance as he cannot ‘undo’ the hacking done already or leave his house in its partially renovated state. Hence, there is no intimated acceptance by Mr Oh Noh. Hence, Able Pte Ltd will not be entitled to payment for the hacking done. Group A8 Group memebers: 1. Article for Discussion http://china15min. com/2013/07/10/camachos-china-story/ (Focus is on the section under â€Å"Camacho’s defeat† and â€Å"Secrets around the Contract†) 2. Legal focus of Discussion Termination of contract 3. Summary of Case Jose Antonio Camacho is a spaniard football coach hired by the Chinese Football Association (CFA) back in August 2011, with the intention of improving the performance of the National China Football Team for a contract period of 3 years. However, while Camacho fulfilled his role as a coach for 22 months, he oversaw an embarrassing 5-1 defeat at the hands of Thailand in June 2013, in addition to the fact that China had failed to qualify for 2014s World Cup. As a result, the CFA had decided to terminate their contract with Camacho at the 1. 5years, on the basis that Camacho had not made significant improvements to the performance of the National China Football Team. Chinese reports claimed that Camacho expected CFA to pay the express compensation amount as stated in the original contract, which was equivalent to 18 months of his salary, along with his hefty Chinese income tax bill (which was an ambiguous term since it was not stated clearly in the contract whether the compensation would be the after- or before-tax payment). The Beijing Times newspaper quoted that the association has only offered to pay the compensation amount, and refused to pick up his tax bill that amounts to almost $4 million. Eventually, the case was brought to FIFA and the Court of Arbitration for Sport for settlement, and the Court held that CFA was liable to pay Camacho the compensation amount along with his income tax bill. 4. Analysis of the Case Discharge by Performance To discharge a contract by performance, both parties to the contract have to undertake to do something and once that thing is done completely, the contract comes to an end by performance. In this case, the parties to the contract are CFA and Camacho. Camacho has been hired by the CFA in 2011 under a three-year contract, and CFA has agreed to pay after-tax annual salary of 2. 8 million Euros to Camacho in exchange for seeing improvements in the performance of the China National Football Team. However, the contract did not come to an end by performance since it has only been partially performed for 1. 5 years, until CFA gave Camacho notice to dismiss him of his position, instead of being fully performed for 3 years. Discharge by frustration To discharge by frustration, there has to be the happening of an unexpected event beyond the control of the parties, after the making of the contract but before the completion of the contract, which makes further performance of the contract illegal, impossible or radically different from what was originally envisaged by the parties. Termination by frustration will not be applicable in this case since there had been no unexpected events beyond the control of the parties from the facts given. Camacho has some control over the performance of the team as he played a significant role in leading and coaching the team. Failing to obtain improvements would not be an unexpected event since he could have reasonably foreseen the failure while he was leading the team for the past 1. 5 years. Discharge by Fundamental Breach Fundamental breach occurs when one party without expressly or implicitly repudiating the contract, commits a fundamental breach of the contract, such as a breach of condition. Through two years efforts, remarkable and positive change should be achieved on the style and tactics of China’s national team† Term of contract CFA tried to terminate the contract since it believed that there was a fundamental breach of term by Camacho due to a lack of considerable improvement of the Chinese National Football Team. The improvement of the football team is a fundamental term deemed as a condition to the China National Football Team since the main intention of CFA to go into the contract with Camacho was to improve the performance of China National Football Team. However, Camacho did not bring positive changes to the team and lead the team towards a better performance. From the facts given, the national team dropped from 73th to a record low of 109th in the FIFA rankings March 2013 under Camacho, and also failed to qualify China for next years World Cup. From the perspective of CFA, Camacho has breached the condition of the contract, thus CFA intended to discharge the contract due to a fundamental breach of condition by Camacho. However, from the perspective of Camacho, the argument held by CFA would not be sufficient to terminate a contract. Firstly, CFA cannot prove that Camacho has breached the term as there were no specific indicators of performance provided. The contract did not have an express quantifiable term that stated what exactly amounts to â€Å"remarkable and positive change†. The fact that there was a drop in ranking does not imply that there is no positive change brought by Camacho to the team, since this may have been resulted from the fast improvement of football teams from other countries relative to China National Football Team. Secondly, the contract clearly stated that Camacho had to bring positive changes to the team within the time frame of two years. When CFA made a unilateral decision to terminate the contract after 1.5 years, they failed to recognize the fact that there was still 6 months available for Camacho to produce satisfactory results. Since there is ambiguity in the term and CFA was unable to prove Camacho’s breach of condition, the contract cannot be terminated by a fundamental breach. Discharge by agreement â€Å"If CFA terminates the contract with Camacho, CFA needs to pay Camacho and his t eam a high breach penalty equal to the amount of one and a half years’ salary, which is 6. 45 million Euros in total (equivalent to 51. 5 million RMB), and generates the corresponding taxes of about 25 million RMB. Term of contract Since CFA was unable to discharge the contract by claiming Camacho’s breach of condition, it seek agreement with Camacho by agreeing to pay the compensation amount as stated in the term above. For this agreement to be enforceable, the four elements of a valid contract, namely offer, acceptance, consideration and intention to create legal relations, must be present. CFA’s offer to Camacho to terminate the contract by providing the compensation amount of 1. 5 years’ salary was destroyed by Camacho’s counter-offer that the income tax of the compensation should also be included. The new offer raised by Camacho is that the contract can be terminated by CFA, provided that the compensation amount stated in the term and the income tax is paid to Camacho. CFA accepted the offer and paid Camacho with this amount of money. There is consideration because Camacho received the money he claimed and gets the opportunity to seek his next job, and CFA is able to find another coach to the China National Football Team. Thus both parties get fresh benefits. Since this is a commercial agreement, there is presumption that both parties have the intention to create legal relations and the new contract will be made under seal or deed. Hence, with the four elements present, the new agreement to discharge the contract is valid and enforceable. Therefore, it can be concluded that the contract was discharge by agreement. 5. Implications In this case, the contract signed between CFA and Camacho seemed unfair to CFA. The contract expressly stated the obligations of the CFA, such as the unexpectedly high remuneration as well as the hefty compensation amount, and only vaguely stated Camacho’s responsibility on the contrary. However, it should be noted that the law does not guarantee fairness of the contract. From the business perspective, several improvements could be made to enhance the contract terms. Regarding CFA’s benefits: CFA should explicitly state its expectation to the coach, such as providing a quantifiable range in the world ranking where the Chinese National Football Team has to achieve e. g. to improve to a ranking between 60 and 70. In this way, t