logo

Assignment On Valid Contract

   

Added on  2020-04-01

3 Pages1162 Words144 Views
1Asin1Answer 2“Where contracting parties have pre-determined the amount payable as damages in theevent of a breach of contract, this amount of damages should be payable as a contractualright.” A contract is the combination of offer, acceptance, consideration, legal intention andconsideration. Once a valid contract is made then the parties must comply with the terms of thecontract. One of the terms that are normally made part of the contract is the term of possibleremedies or damages. These are also called liquidated damages or the pre determined amountthat must be paid by the defaulting party to the aggrieved party in case of breach of contract.The pre contractual remedies are the amount that is freely decided by the parties prior theestablishment of the contract. thus, these are the damages which can be claimed by the parties tothe contract in the event of the breach of contract as they are freely decided by the parties andthus the courts must honor such clauses as they are made part of a private document and wherethe clause is made part of the contract by mutual determination. The courts were willing to paythe liquidated damage even when such damages are harsh on one party as they were decidedmutually by the contractual parties.1So, can we conclude that “Where contracting parties have pre-determined the amount payable asdamages in the event of a breach of contract, this amount of damages should be payable as acontractual right.”The answer is NO. In 2012, the High court of Australia in Andrews v Australia and New Zealand Banking GroupPty Ltd [2012]2has determined the situation wherein the liquidated damages which are usuallyclaimed by the contractual parties as rights cannot be held enforceable mainly when they aretreated as penalties. So, the question arises as to when the liquidated damages are considered as penalties to makethem non enforceable in law. It is submitted that when the liquidated damages which are mutually decided by the parties at thetime of the formation of the contract are found to be 'extravagant and unconscionable' whencompared from what was expected by the parties then such liquidated damages must beconsidered as penalties, thereby, making them non-enforceable in law. it is held in DunlopPneumatic Tyre Co Ltd v New Garage and Motor Co Ltd[1915]3 and Ringrow Pty Ltd v BPAustralia Pty Ltd(2005)4 that when the damages of serious nature as opposed to trivial damagesthen such are not liquidated, rather, the same must fall in the category of penalties which cannotbe asked by the contractual parties as a matter of right. Two important factors must beconsidered in making any liquidated damages into penalties. The same are:5i.That degree of difference that exist amid the damages that are pre determined by theparties and the damages that are actually suffered by the aggrieved party;ii.To consider the relationship that is shared amid the parties, that is, the presence ofbarraging powers of the parties when the pre determined damages were anticipated bythe parties etc. In the leading case of Ringrow Pty Ltd and BP Australia Pty Ltdestablished a contractualrelationship for the purchase of a service station. Ringrow Pty Ltd needs to buy fuel from BPAustralia Pty Ltdexclusively and this will allow BP Australia Pty Ltdto buy back the servicestation if the contract is violated ( as per a collateral agreement). There was a contractual breach1 Construction (2017)(online). Available at: http://www.constructionlawmadeeasy.com/Chapter12. Accessed on 7th October2017. 2Andrews v Australia and New Zealand Banking Group Pty Ltd [2012] HCA 30.3Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd[1915] AC 79.4Ringrow Pty Ltd v BP Australia Pty Ltd(2005) 222 ALR 306.5 ibid1

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Valid Contract Law : Assignment
|9
|2133
|47

Law Assignment Australian Contracts & English Common Law
|12
|2556
|144

Corporation and Contract Law
|11
|2844
|276

Whether Qantas Airlines Ltd (Qantas) is entitled to claim compensation from Airbus Corporation Ltd (Airbus) Rule 1 2 Question 1 Issue
|10
|2337
|499

Company and Commercial Law: Financial Compensation, Negligent Misrepresentation, and Legal Risks
|7
|1443
|201

Legal Institutions Assignment Solution
|10
|1823
|39