Business Law Assignment: Contract Breach and Frustration

This presentation discusses the rules and application of contract breach and frustration in business law. It covers the legal elements of a valid contract, consideration, contractual capacity, and frustration of contract. The presentation also includes case studies and references to relevant laws and cases.

Business law assignment

1. Issue:
The issue involved in the case study is
whether Ted can sue Ann for the contract
breach.

Rules:
Contract can be regarded as an agreement which can be enforced and
executed in a legal manner among at least two or more than two
persons who can be considered as the parties to it. For resulting into
valid contract, some essential elements are required to be present which
are as follows; intention of the parties to be legally bound, presence of
consideration, legal capacity of the parties and an agreement.
The concept of consideration has been explained in the case of Currie v
Misa (1876) 1 AC 554 by Lush J where he said that consideration can
consist of rights, benefits, profits or interest which is accruing to one
party given, undertaken by other. it was held in Thomas v Thomas
(1842) 114 ER 330, it was held that consideration may not be of equal
valuation but it would be held sufficient if it is of some value even if such
value is very small . Hence it can be said that the consideration given in
an agreement by one party to other need not to be adequate but it can
be just a token amount. But it was not be an illusory it is to be real.

Rules (Contd.):
It is not necessary that consideration must be always of some pecuniary
amount. It can consist of providing any particular thing for performing
something which is of some importance some value and importance to the other
party. anything which has been already given cannot be provided later on again
as a consideration. as held in the Stilk v Myrick (1809) 170 ER 1168.
However instead of providing anything, if any act is performed in exchange of
any service or anything such performance of the act can be considered as a
valid consideration. This principle is followed when an individual asks another
to cause the performance of any act and mention that binding agreement will be
made in exchange for such performance of the act at a later date as observed in
Pao On v Lau Yiu Long [1980] AC 614 where it was held that performing any act
can amount to a valid consideration. In the same manner in Musumeci v
Winadell Pty Ltd (1994) 34 NSWLR 723, it was discussed that any practical
benefit that has been incurred by one party due to the act of the other party can
be considered as a valid consideration.
However it has to be noted that an agreement will result into void agreement if
the consideration is absent or found illusory as observed in Placer Development
Ltd v Commonwealth (1969) 121 CLR 353.

Rules (Contd.):
Another important factor required to form a contract
legally valid is the contractual capacity of the parties. If
the party to a contract is less than 18 years, he will be
considered minor then generally the contract is not
binding on the minor as per section 17 of the Minors
(Property and Contracts) Act 1970 No 60 – NSW.
However if it is for minor’s benefit then that contract is
binding as per section 19. Similar observation was found
under the provisions of common law where a contract
entered by an individual of below 18 year (minor) for
purpose of employment, then it is binding if it is
beneficial to him. But on attaining majority the minor
can repudiate the contract.

Application
In the present case it is seen that 14 year old girl Ann entered into a
contract for a period of 3 years with Ted for learning ballet dancing.
From this it is seen that the girl is a minor when she enters into the
contract. Here although she lacks the capacity to enter the contract but
as the contract is a civil act and is beneficial to her interest and can be a
source of employment then it is binding. Hence the contract is not void
because of the minor age of the world.
As per the terms present in the contract, Ted will be teaching her belly
dancing without any charge. Moreover during this period of 3 years she
was not permitted to accept any engagement except under Ted. In
addition to these, Ted can even employ her to perform dancing on stage.
From the fact that ted was providing dance lessons to Ann at free of
charge shows that there is no consideration at all. But it was also
mentioned in the agreement that she is not bound to accept any
engagement from outsiders and she can be even employed to perform on
stage by him. This forms a valid consideration of service against the
teaching of dance by Ted.

Application (Contd.):
From the facts it is seen that a stage
engagement is accepted by her from an
outsider bill because whatever she was
earning from trade was not sufficient. This
shows the breach of a condition mentioned in
the agreement. Since she has breached the
term of an agreement Ted can sue her for
this.

Conclusion
Hence it can be concluded that Ann can be
sued by Ted for contract breach.

2. Issue
The issue involved here is whether the belief
possessed by the fishing company is right.

Rules:
A contract is known as frustrated when after it is formed and
without the fault for involvement any party becomes
impossible such that it cannot be performed. It can happen
because of some unforeseen act or event that result it into to
the applications of the parties under the contract to be
radically and completely different from that which the parties
have decided or planned during contract creation. Similar
type of situation appears in Taylor v Caldwell [1863] EWHC
QB J1.
The legal effect of such contract which has been frustrated is
that the contract gets terminated when the frustration
occurs. Such type of contract is not void ab initio that is it is
not void from the beginning but because of the change of
situation the performance of the contract becomes frustrated.

Rules (Contd.):
For the purpose of determining whether frustration
has resulted in any contract the classic case of Davis
Contractors Ltd v Fareham Urban District Council
[1956] AC 696; [1956] 3 WLR 37 is referred. It is an
English case regarding frustration of the agreement
in the contract. This english case is referred for
determining any type of frustration cases. Similarly
it was also applied during the analysis of the leading
Codelfa Construction Pty Ltd v State Rail Authority
of NSW [1982] HCA 24, (1982) 149 CLR 337 where
it was held that the contract involved was frustrated
due to an injunction.

Rules (Contd.):
Various situations can result into frustration of the contract and they are
discussed below;
When the original subject matter gets destructed as observed in Taylor v
Caldwell (1863) 3 B & S 826.
When the personal incapacity of either of the parties results into to the
frustration of the contract. This was observed in Condor v Baron Knights
[1966] 1 WLR 87.
When the contract cannot be performed because such performance will
render it illegal then the contract is frustrated. This was construed in
Fibrosa Spolka v Fairbairn [1943] AC 32.
In case the contract cannot be e done or performed in a particular
manner specified in the agreement as laid in Nicholl and Knight v
Ashton, Eldridge & Co [1901] 2 KB 126.
Similarly a contract can again be frustrated if the commercial objective
behind the contract is not present anymore as in Krell v Henry [1903] 2
KB 740.

Rules (Contd.):
However there are some exceptions where the contract will not
be considered to be frustrated even if satisfies any of the above
mentioned conditions.
When the contract becomes more expensive or difficult to perform in such
case the contract cannot be considered to be frustrated because it can be
performed its performance just become difficult or more expensive. it was
laid in Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93.
Again the contract will not attract the provision of frustration where
performing it turns impossible because of the fault made by any party to it
as in Maritime National Fish v Ocean Trawlers [1935] AC 524.
If it is seen that a force majeure clause is present then it will apply
instead of the frustration law. This was laid down in Jackson v The Union
Marine Insurance Co Ltd (1874) LR 10 CP 125.
The frustration of the contract cannot be considered if the frustration can
be foreseen easilyas laid down in Peter Cassidy Seed Co Ltd v
Osuustukkuk-Auppa Ltd [1957] 1 WLR 273.

Rules (Contd.):
In case if a contract is frustrated then both the
contracting parties are not obliged by the contract
anymore and they are released from their liabilities
present in the contract and they will not have the
right of suing one another if the contract is
violated.
However the parties are entitled to claim some sort
of relief in the form of restitution in case the
contract in which they are parties is being
frustrated. Search claim of restitution does not
arise from any contract but it just protects the
parties from the enrichment at their expenditure.

Application:
In the present case scenario it is seen that four trawlers where
owned by a fishing company. Such trawlers can be used only when
they are fitted to an otter trawl. Then a similar trawler was
chartered by the company that increased the size of the fleet to five.
In order to fit this type of trawl permission must be sought from the
Minister of Fisheries. Application for 5 licenses was played by the
company but it was granted with only 4 instead of 5. As a result four
trawls were fitted to the four boats owned by the company. Then it
was claimed by the company that the charter of the 5th boat is not
possible. Moreover it claimed that the contract has ended.
This showed that the functioning of the fifth trawler becomes
impossible due to the non-granting of the license to it by the
Minister of Fisheries. This amounts to the frustration of contract
due to act of the Minister of Fisheries which was not in the hands of
the party, the fishing company.

Conclusion:
Hence it can be concluded that the belief of
the fishing company is right because the
contract cannot be performed due to
frustration.

References:
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24, (1982) 149 CLR 337
Condor v Baron Knights [1966] 1 WLR 87
Currie v Misa (1876) 1 AC 554
Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696; [1956] 3 WLR 37
Fibrosa Spolka v Fairbairn [1943] AC 32
Jackson v The Union Marine Insurance Co Ltd (1874) LR 10 CP 125.
Krell v Henry [1903] 2 KB 740.
Maritime National Fish v Ocean Trawlers [1935] AC 524.
Minors (Property and Contracts) Act 1970 No 60 – NSW
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723
Nicholl and Knight v Ashton, Eldridge & Co [1901] 2 KB 126.
Pao On v Lau Yiu Long [1980] AC 614
Peter Cassidy Seed Co Ltd v Osuustukkuk-Auppa Ltd [1957] 1 WLR 273.
 Placer Development Ltd v Commonwealth (1969) 121 CLR 353
Stilk v Myrick (1809) 170 ER 1168
Taylor v Caldwell (1863) 3 B & S 826
Taylor v Caldwell [1863] EWHC QB J1.
Thomas v Thomas (1842) 114 ER 330
Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93.

Thank you..