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In law, a contract gives rise to duties to the parties, and then the law imposes these obligations on them. Common law recognizes three fundamentals to the nature of a valid contract. These essentials are the contractual willingness, agreement, and consideration. A violation of the contract occurs when one party, with no lawful justification, neglects or declines to deliver what is due as stipulated in the contract. Besides, a breach can also occur when one party provides something defective or incapacitates itself. This paper is going to examine three instances where the breach happened, and the remedy to on focus for each breach.
A “breach of contract” describes a party’s failure to perform as per the terms of their contract (Bennet, 2012). Overall, the law defines different remedies. Some of the remedies that this paper will discuss are the damages resulting from the repudiation of a contract. In depth, this paper will discuss this breach in the case concerning Rajeev and Paul. Another principle that this paper would discuss is the recession. This one touches more on allowing one party to withdraw from fulfilling its part of the contractual duties. For more on this bleach, we shall take a case between Rajeev and Bhanu. Next, this paper would touch on forfeiture of deposit. This one typically occurs in the transaction of land or real estates, and this paper will look at the case between Bhanu and Shane.
A short brief about this case is that Rajeev entered into a contract with Paul to buy a car, signed the papers, and then later backed off from the deal. There is a need to understand that where someone signs the papers, they can no longer back off the deal. Another key important point within this case is that Rajeev had not paid the deposit. As stipulated in contract law, a bilateral contract occurs where each party relies on the fact that the other one would fulfill its obligation. Where one party folds, then the other one may suffer some economic loss. In such a case, reliance damages are the best at compensating the harmed party. These damages cover the loss that the innocent party suffered due to reliance on their contractual duties.
At the same time, it’s worth noting that reliance loss awards come where the innocent party’s loss cannot amount to accurate estimation. By the same token, the plaintiff can acquire this remedy where an order for Specific Performance cannot apply. In this case, a court cannot order Rajeev to purchase the car. Reliance damages work best for cases of promissory estoppel suits. In (Anglia Television v Reed, 1971), the court awarded Anglia £2,750 as a reliance loss that she suffered when Reed pulled out.
Again, whereas some damages under this remedy are mostly money based, even time born also counts as a loss. In addition to this, Paul is entitled to recover the damages for deceit as held in (Mcrae V Commonwealth Disposals Commission, 1951). A contract is said to have repudiated if one of the parties withdraws before the date is due. In this case, Rajeev repudiates their contract before the delivery date. With this, Paul can sue Rajeev for the reliance loss.
For a summary of this case. Rajeev leased some rare paintings from Bhanu for one year. The contract required Rajeev to purchase insurance for the paintings, but sadly he didn’t. This act resulted to harming Bhanu by losing the rare paintings after they fell. This loss happened when Rajeev’s children were playing with the paintings.
In this case, this paper shall be guided application of equitable remedies. These are simply discretionary reliefs at equity. More importantly, these equitable remedies are applicable where compensations are not a satisfactory remedy for the breach. One of these reliefs is the rescission. This one is right for the injured party to set aside the entire contract. However, this right applies where there is a breach of any or all the terms of the contract. Furthermore, a substantial restoration to the injured party should be possible. With this, the injured party would come back to the pre-contractual situation.
Apart from rescission, Bhanu would also need to sue for the damages he has incurred after the breach of vital factual terms. That is, the terms to purchase insurance. For this case to succeed, Bhanu needs to demonstrate three things. First, he would need to prove that both Rajeev and Bhanu willingly entered into a contract (Ocean Ridge Develop. Corp. V. Quality Plastering Inc, 1971)
Secondly, the law would need to see that Bhanu did all his substantial part of the contract. That is, transferring the ownership of the rare paintings for one year to Rajeev. Thirdly, Rajeev failed to do his part as required by the terms of the contract. That is the act of failing to purchase the insurance. And lastly, Bhanu would have to prove that the failure for Rajeev doing his obligations led to harming Bhanu rights. Simply, the failure of Rajeev to insure the rare printing led to their breakage, and Bhanu now no longer has the rare paintings. Therefore, Bhanu has the right to terminate the contract, and then sue for the damages.
A point to note, any rescinded contract becomes non-existent as though it didn’t exist from the beginning. Following this, both Rajeev and Bhanu would return all the benefits they had secured being part of their contract. These benefits are money (received by Bhanu from Rajeev) and the rare painting in good condition as they were (Paintings in good condition from Rajeev to Bhanu).
For a short background of the case, Bhanu was selling a house under a contract to Shane. Shane paid a 10% deposit, and Shane was required by the contract to clear the balance In 6 weeks’ time. However, a week before, Shade backed out of the purchase and was ready to lose the 10% deposit.
At law, the purpose of the deposit is to act as the earnest money that shows the intention of the buyer to stick to the end. Significantly, this would have given both parties a smooth completion of their transaction. Secondly, the deposit also plays as the fractional payment of the actual cost of the land. Where the Shane defaults, Bhanu has the right to seek an order asking to terminate their sale agreement. Upon termination, Bhanu will have to retain the 10% deposit which for now he is entitled. This fact is evident in (Agosti v. Winter, 2009). Under their circumstance, the court concluded that the seller has full entitlement to get the deposit to cover his damages. However, every case needs the demonstration of the loss. Therefore, Bhanu would need to prove that there were actual damages. Although this may be true, there is no reason to prove since Shane is already prepared to forfeit the deposit.
On the side of restitution, it would not work here for Bhanu. That is because those are just damages that the court awards the plaintiff in the cases where the defendant proves to enrich him or herself at the claimant’s expense unjustly. Therefore, restitution works perfectly to give a remedy where the defendant need to give back what belongs to the claimant (Pearce & Halson, 2007).
Similarly to the injunction, this would not apply as a relief for Bhanu. An injunction order can only apply to restrain one party from doing something that would affect the rights of the other party in an implied contract as held in (Luxor Eastborne Limited v Cooper, 1941). Another purpose of an injunction would be to obstruct or else prevent the other party to the contact from continuing with the contract. This order would apply where one party is doing something that it had promised not to do (Marshall v Colonial Bank of Australasia, 1904). Considering such facts of the injunction, none would apply in their contract.
Conclusion
The adoption of the different principles of a contract helps the parties to reach their actual purpose of their relationship. Nevertheless, if one of the parties decides to do contrary to their terms, the other party doesn’t have to suffer the unfair conduct of the other. The aggrieved party has the right to terminate the contract and claim for the damages. Also, there is a need to understand that the failure to perform the obligation is a direct act that can amount to the cancellation of the whole agreement. With this, there is always a need for both parties to honor their promises, and to avoid the unnecessary expenses of paying for the damages.
References
Bennett, M. 2012. Breaching and Terminating a Contract.
Anglia Television v Reed, 3 All ER 690 (1971)
Mcrae V Commonwealth Disposals Commission, 84 CLR 377 (1951)
Pearce, D.,& Halson, R. (2007). Damages for breach of contract: compensation, Restitution, and vindication. Oxford Journal of Legal Studies (2007)
Agosti v. Winter, BCCA 490 (2009)
Howe v Smith, 27 Ch.D. 89 (1884)
Luxor (Eastborne) Limited v Cooper, AC 108; 1 All ER 33 (1941)
Marshall v Colonial Bank of Australasia, 1 CLR 632; 10 ALR 210 (1904)
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