Discuss about the Tramways Advertising Pty Limited.
Whether Huang has right to sue the Bill for breach of his building contract or not, and whether he has right to claim sum of $150,000 from the Bill?
Rights and obligations of the parties related to the contract are determined from the contractual terms. These terms are defined in two parts that are express term and implied term. Express terms are those terms which are defined by the parties to the contract either in written or in oral manner and implied terms are those terms which are stated by common law or by statute.
While assessing the terms of the contract, it is necessary for the parties to keep in mind that both pre-contractual negotiations of the parties and their post-contractual conduct can result in non-contractual rights and responsibilities, and they can also be concluded as the term of the contract[1].
For the purpose of constituting the term of the contract it is necessary that parties related to the contract must be promissory in nature. In other words, parties must intend to create legal relations with each other. It must be noted that in this context intention of the parties is determined objectively, which means what a reasonable person was intended in the similar situation.
As a general rule, those parties who signed the written document agreed that they are bound by all the terms stated in that written document, no matter whether parties read and understood the document or not.
This can be understood through case law, L’Estrange v F Graucob, [1934] 2 KB 294, Court of Appeal (UK). [2]In this case Court stated that if parties related to the contract signed the agreement executed between them, then they were by the terms written in the contract even though they fail to understand the contract. This happen because person who was signing the document reflect to the world that they were agreed to the terms written in the contract. Court further stated, parties to the contract only bound with such terms about which they were aware that have been present in the contract[3].
It must be noted that terms is considered as important term of the contract if it is determined as condition of the contract. In other words, condition is the promise which is of such importance that promisee would not enter into the contract without the insurance of strict or substantial performance of the promise. This can be understood through case law Tramways Advertising Pty Limited v Luna Park (NSW) Pty Limited (1938) 38 SR (NSW) 632)[4].
If party to the contract who is bound by the terms of the contract fails to fulfill the contract terms then it is considered as breach of the contract. Common law provides different remedies in case of breach of contract in the form of damages and Liquidated claims. Damages for breach of contract are considered as the substitute for performance, and this remedy is mainly designed for the purpose of putting the plaintiff in the similar position as he would have been if contract is performed by the party. Loss claimed by non-breaching party must not be too remote in nature and breaching party must do what is reasonable for the purpose of reducing the damages they suffer[5].
Common law damages mainly involve the acceptance of breach of contract by the innocent party and for this purpose they are being compensated for loss suffered by the innocent party as as result of the breach. The main motive of these damages is to put the plaintiff in the similar position as they would be if contract is performed. This can be understood through case law, Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64[6]. In this case court held, plaintiff bears the burden to prove the extent of loss or the injury on the balance of probabilities. For the purpose of satisfying the requirements under this rule plaintiff must established the assessable damages. In other words, plaintiff must establish the loss which can be measured in monetary terms.
It must be noted that expectation interest is also accessed while calculating the common law damages. Expectation interest is considered as that interest which generally reflected in order of damages and which mostly clearly fits within the principle of compensation.
In the present case, tender is submitted by the Huang to the manufacturing company for the purpose of assembling and making the components for the company, and for this he wants to use the factory and workshop. His tender has been accepted by the company and in this regards he need to have the garage and workshop completed by 1st November.
For building the garage and workshop, Huang enter into the contract with the Bill and discuss his requirements for the same. He clearly stated to the Bill that he required completing the construction by 1st November but does not mention the importance of the date. Bill agreed to construct the garage and workshop by 1st November. Subsequently, Bill fails to construct the required premises on 1st November and because of these Huang losses the contract he entered with the company. Delay in the completion of the contract by Bill has therefore resulted in a loss to Huang of $150,000.
In this case, term to complete the construction on time is the important term and not mere the representation made by the Huang, and parties to the contract are bound by the terms of the contract. This can be understood through case law Ellul and Ellul v Oakes (1972) 3 SASR 377, Supreme Court of South Australia[7]. In this case court follow the ruling stated under case Oscar Chess Ltd v Williams and Dick Bentley Products Ltd v Harold Smith (Motors) Ltd[8] under which Court stated:
If the presentation was made by the party while entering into the contract and this presentation was made for influencing the other party to act upon it by entering into the contract than such term was intended as a warranty term. It is not necessary for the parties to expressly state that term was warranty under the contract. It is sufficient that party was intended to acting upon it.
In case of Ellul, Court further stated the position of law and consider number of factors to decide whether representation is contractual term or not. Court takes into account the four factors and all these factors are stated below:
It must be noted that above stated factors were used as secondary guides and they are subsidiary to the main test that was contractual intention. Under this test Court consider the evidence whether parties to the contract either one or both intended that there must be any contractual liability in context of the accuracy of the statement then such statement was considered as the term of the contract[9].
As a general rule, those parties who signed the written document agreed that they are bound by all the terms stated in that written document. Therefore, Bill is bound by the term stated in the contract and failure to fulfill that term is considered as breach of the contract. This can be understood through case law Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165; 79 ALJR 129; 211 ALR 342[10]. In this case, Court stated that by signing any document, parties to the contract made representation to the world that they have read and understand the terms of the contract and they were willing to bind by the terms stated in the contract. Court further state, that representation made by parties becomes stronger when the signature of the parties appears below the legible written request to read the document before signing it. Principle stated by court were also complied with the decision made in L’Estrange v F Graucob Ltd (when any agreement which include the contract terms was signed by the parties and this sign was made in the absence of fraud or misrepresentation, then sign of the parties were bound and it does not matter whether party read and understand the terms or not[11].
As stated above, Bill fails to fulfill his obligation under the contract and this is considered as the breach of contract. In context of contractual breach, common law provides different remedies in the form of damages and Liquidated claims. Damages for breach of contract are considered as the substitute for performance, and this remedy is mainly designed for the purpose of putting the plaintiff in the similar position as he would have been if contract is performed by the party.
In this case Huang can assess his damage on the basis of the principle of expectation interest. Expectation interest is considered as that interest which generally reflected in order of damages and which mostly clearly fits within the principle of compensation. This can be understood through case law Howe v Teefy (1927) 27 SR (NSW) 301[12]. In this case, Court stated that expectation interest is the interest which is referred as loss for profit damages and also reflect compensation for the loss of profit damages, and compensation which is given to the party for loss of the expectation or profit, for which plaintiff was entitled under the contract and which was denied because defendant breach the contract. Therefore, court assess the damages of the Huang on the basis of expectation interest because Bill fails to construct the required premises on 1st November and because of this Huang losses the contract he entered with the company. Delay in the completion of the contract by Bill resulted in a loss to Huang of $150,000. Therefore, Huang has right to claim for damages of $150,000 from Bill.
Conclusion:
After considering the above facts of the case, it is clear that Bill fails to full his obligation under the contract, and this is considered as breach of contract. Therefore, Huang has right to sue the Bill for breach of his building contract.
On the other hand, on the basis of common law damages, Huang also has right to claim sum of $150,000 from the Bill.
ACL. Terms of Contract, < https://www.australiancontractlaw.com/law/scope-terms.html>.
L’Estrange v F Graucob, [1934] 2 KB 294, Court of Appeal (UK).
ACL, L’Estrange v F Graucob, [1934] 2 KB 294, Court of Appeal (UK), < https://www.australiancontractlaw.com/cases/lestrange.html>.
ACl, Remedies, <https://www.australiancontractlaw.com/law/remedies.html>.
ACL. Ellul and Ellul v Oakes, (1972) 3 SASR 377, Supreme Court of South Australia, < https://www.australiancontractlaw.com/cases/ellul.html>.
ACL, Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd, [2004] HCA 52; 219 CLR 165; 79 ALJR 129; 211 ALR 342, < https://www.australiancontractlaw.com/cases/toll.html>.
Howe v Teefy (1927) 27 SR (NSW) 301.
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165; 79 ALJR 129; 211 ALR 342.
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64.
Ellul and Ellul v Oakes (1972) 3 SASR 377, Supreme Court of South Australia.
Oscar Chess Ltd v Williams and Dick Bentley Products Ltd v Harold Smith (Motors) Ltd.
Tramways Advertising Pty Limited v Luna Park (NSW) Pty Limited (1938) 38 SR (NSW) 632).
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