University Business Law 2 Assignment: Contract Law Analysis

This document provides a comprehensive solution to a business law assignment, addressing two key questions. The first question analyzes a scenario involving Mansfield Ltd., James Crowe, and Stephen Smith, focusing on the Sale of Goods Act 1979, breach of contract, and the concept of good faith. It examines the rights of an unpaid seller, the implications of fraudulent activities, and the application of relevant case law such as Hadley v Baxendale and Carter v Boehm. The second question delves into the concept of economic duress, exploring its definition, elements, and application in contractual situations. It references landmark cases like Lloyds Bank Ltd v Bundy, Universe Tankships Inc. of Monrovia v International Transport Workers Federation, and Barton v Armstrong to illustrate the principles of economic duress and its impact on contract enforceability. The assignment emphasizes the importance of free will, fairness, and the legal consequences of economic pressure in contractual agreements.

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Business Law

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Answer to Question 1
As implied form the facts of the scenario provided, Mansfield Ltd. has rights against the
person perceived to be known as James Crowe who subsequently sold the goods to Stephen
Smith after purchasing from Mansfield Ltd. Mansfield Ltd. no rights against Stephen Smith
as he acted in good with regard to the purchase from the person supposed to be known as
James Crowe. Vijay, the order clerk at Mansfield Ltd. had also telephoned by dialing the
number printed in the paper pertaining to the order for the laptops. A thorough investigation
is to be conducted with regard to the verification of such a telephone number since it is
already observed from the facts of the case that the letter from bank confirming the credibility
of Matrix is a forged one thereby implying deception. The person behind the letter is to be
held liable accordingly as far as forgery is concerned. The verification would involve the
location of the telephone number and the person on whose name the telephone number is
registered. Proceedings related to breach of trust must be initiated against the person claiming
to be James Crowe. It would play vital role in the claiming of damages by Mansfield Ltd. in a
proper and appropriate manner.
Sub-section 1 (a) of Section 38 of the Sale of Goods Act of 1979 implies that a vendor of any
kind of goods is considered to be an unpaid seller if the price of the goods has not been made
or disbursed accordingly. Sub-section 1 (a) of Section 39 of Sale of Goods Act of 1979
implies that a vendor is entitled to possess the goods until the payment is made towards the
seller in the desired manner by the person who is under debt. Sub-section 1 of Section 47 of
the Sale of Goods Act of 1979 implies that the rights of an unpaid seller as per Section 39 of
Sale of Goods Act of 1979 are not affected if there is a subsequent sale of the goods by the
purchaser to another person1. However, Sub-section 2 (a) of Section 47 of the Sale of Goods
Act of 1979 implies that the rights of an unpaid seller Section 39 of Sale of Goods Act of
1979 cannot be exercised if the transfer relating to the goods has been made in terms of sale
as implied by the concerned document. It is to be seen as per the facts of the case whether the
sale by the person presumed to be James Crowe is carried out in an appropriate manner
thereby the goods being purchased by Stephen Smith. If there is a valid documentation with
regard to such kind of a sale, then Sub-section 2 (a) of Section 47 of the Sale of Goods Act of
1979 would be applicable. Documentation can also mean bank statement. It is also to be
taken into account whether there is any receipt confirming the purchase of goods by Stephen
1 Sale of Goods Act 1979

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Smith. As per Section 27 of the Sale of Goods Act of 1979, the buyer purporting to be James
Crowe has acted in breach of his duty as a purchaser as far as the non-payment for the goods
bought is concerned. If it is observed that the transfer of the goods from James Crowe to
Stephen Smith has been carried out in an unlawful manner, then Sub-section 1 of Section 47
of the Sale of Goods Act of 1979 would be applicable. However, the concept of good faith
comes into play here. Such a concept implies that in terms of sale, the buyer and seller must
act in such a manner so that there is a mutual trust amongst them as far as fairness is
concerned.
In the case of Hadley v Baxendale, it was held by the Court of Exchequer that there cannot be
claim for the damages as a result of the events which are not generally foreseeable2. Such a
case established the legal principle with regard to the special damages as far as the imposition
of liability is concerned. As a result, the aspect of good faith was exercised.
In the case of Bhasin v Hrynew, it was held by the Supreme Court of Canada that the concept
of good faith is one of the most essential parts of the relations formed as a result of
executions of contract3. In this case, the aspect related to the performing of duty by parties to
the contract was taken into account.
In the case of Yam Seng Pte Ltd v International Trade Corp Ltd4, a suit was filed by Yam
Seng Pte Ltd against International Trade Corp Ltd on grounds of breaching the aspect of
good faith with regard to contractual duty thereby providing information which is not true
and stating that another distributor would be inducted instead of Yam Seng Pte Ltd for the
distribution of fragrance products branded by Manchester United Football Club. In this case,
it was held by the High Court of England and Wales that International Trade Corp Ltd has
acted in breach of its duty as far as honesty is concerned thereby not acting in good faith as
far as contractual obligation is concerned.
The concept of good faith in terms of contract was established in the case of Carter v
Boehm5. In this case, Carter, the Governor of Fort Marlborough carried out an insurance
policy with Boehm in terms of Fort Marlborough being captured by the enemy. It was held
by Lord Mansfield, the then Lord Chief Justice of the King’s Bench that Carter had owed a
duty of utmost good faith towards Boehm as far as disclosure of material facts is concerned.
2 Hadley v Baxendale [1854] EWHC J70
3 Bhasin v Hrynew 2014 SCC 71
4 Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111
5 Carter v Boehm 3 Burr 1905

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In the case of Kirke La Shelle Company v The Paul Armstrong Company, it was held by the
New York Court of Appeals that for every kind of contractual relationship, there is a
covenant of good faith as far as fairness in terms of dealing is concerned6.
As a result, it is implied form the facts of the given scenario that the person purported to be
James Crowe must be held liable for breach of duty as far as good faith is concerned.
Answer to Question 2
The concept of economic duress implies the imposition of economic pressure in an illegal
manner by forcing a party to the contract to satisfy the demands which are normally not
possible. It is one of the important aspects related to unfair terms in a contract. Additionally,
the aspect related to economic duress implies the threatening of the party to the contract in a
wrongful manner which involves tort or crime in addition to moral wrong. It also involves the
distress caused to such a party in terms of finances. It also implies the influencing of a person
into doing of something against the free will of such a person. The doctrine pertaining to
economic duress was formulated in the case of Lloyds Bank Ltd v Bundy by Lord Denning7.
In this case, it was held that there was undue influence as a result of which Herbert James
Bundy entered into the contract without any consultation with regard to the legal
enforceability of such a contract. The theory with regard to inequality involved in the aspect
of bargaining power was also developed and formulated accordingly. The aspect of inequality
of bargaining power implies that in contract, one party has better alternative than the other.
As a result, it implies unfair contract terms.
Additionally, in the case of Universe Tankships Inc. of Monrovia v International Transport
Workers Federation (The Universe Sentinel), there was a blackening of the ship The Universe
Sentinel by the International Transport Workers Federation thereby restraining it from
leaving the port8. The International Transport Workers Federation also compelled Universe
Tankships Inc. of Monrovia to pay a massive amount of money Seafarers International
Welfare Fund. In this case, it was held by the House of Lords that the money in this matter
has been extracted by the International Transport Workers Federation by the virtue of
economic duress in terms of unfairness. The elements pertaining to economic duress in such a
case implies the inducement to agree without any free will and the illegality involved in the
6 Kirke La Shelle Company v The Paul Armstrong Company, 263 N.Y. 79
7 Lloyds Bank Ltd v Bundy [1974] EWCA 8
8 Universe Tankships Inc of Monrovia v International Transport Workers’ Federation [1982] 2 All ER 67

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pressurizing of payment. The House of Lords set aside the decision made by the Court of
Appeal which implied that such a payment is valid in terms of industrial dispute as far as the
Trade Union and Labor Relations Act of 1974 is concerned. As a result, the aspect relating to
economic duress was highlighted in this case.
In the case of Barton v Armstrong, a deed was executed between the company Paradise
Waters (Sales) Pty Ltd of which Alexander Barton was the managing director and Alexander
Ewan Armstrong, a politician based in the Australian state of New South Wales. The terms of
the deed implied that the company Paradise Waters (Sales) Pty Ltd would make payments
amounting to a hundred and forty thousand Australian dollars and his shares would be
purchased for an amount of hundred and eighty thousand Australian dollars. In this case, it
was held by the Court of Appeal of New South Wales that the onus of proof with regard to
duress lies on the appellant or plaintiff as the case may be. It was further concluded by the
Court of Appeal of New South Wales that the appellant Alexander Barton failed to furnish
conclusive proof or credible evidence as far as duress is concerned with regard to the threat
involved in the making of such a contract9. Subsequently, the Judicial Committee of the Privy
Council of the Commonwealth a person may refrain from the contract on instance of entering
into contract.
In the case of Courage Ltd. v Crehan, there was in agreement made between Crehan and the
company Entrepreneur for the purpose of purchasing beer from the brewery Courage Ltd. A
suit was filed against Crehan by Courage Ltd. on grounds of non-payment of the dues
amounting to fifteen thousand two hundred and twenty six pounds10. Crehan in his counter
argument emphasized that such an agreement cannot be enforced as it is in blatant
contravention of Article 81 of the Nice Treaty. In this case, it was held by the Court of Justice
of the European Union that profit by the virtue of any illegal or malicious act is not
acceptable. The Court of Justice of the European Union also held that such kind of beer tie
agreement is void. As a result, the damages cannot be claimed by Crehan in cases of contract
which is not enforceable by law as far as the aspect of economic duress is concerned. Such a
case holds a great significance pertaining to the common law principles implying that when
an agreement is in contravention of the law, claim for damages cannot be instituted as far as
the remedial aspect with reference to compensation for loss is concerned.
9 Barton v Armstrong [1973] UKPC 27
10 C-453/99 Courage Ltd. v Crehan [2001] ECR I-6297

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In the case of Macaulay v Schroeder Music Publishing Company Limited11, Macaulay a
songwriter made an agreement in a standardized form with Schroeder Music Publishing
Company Limited in which it was implied that Schroeder Music Publishing Company
Limited would benefit from the composition of the songs by Macaulay. The copyright at the
national level was granted to another party in exchange of royalties for a certain percentage.
The termination clause of the contract stated that the contract could be terminated only by
Schroeder Music Publishing Company Limited and not by Macaulay. It was claimed by
Macaulay that such a contract is in contravention of the public policy. In this case, it was held
by the House of Lords that Macaulay was being exploited by Schroeder Music Publishing
Company Limited thereby implying inequality in bargaining power as far as unfairness
involved in the terms of contract is concerned. The contract made between Macaulay and
Schroeder Music Publishing Company Limited was also held to be invalid as the terms and
conditions could not be justified as Macaulay was in a disadvantageous position with
reference to the clauses of the contract, most notably the termination clause.
11 Macaulay v Schroeder Music Publishing Company Limited [1974] 1 WLR 1308

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Bibliography
Barton v Armstrong [1973] UKPC 27
Bhasin v Hrynew 2014 SCC 71
C-453/99 Courage Ltd. v Crehan [2001] ECR I-6297
Carter v Boehm 3 Burr 1905
Hadley v Baxendale [1854] EWHC J70
Kirke La Shelle Company v The Paul Armstrong Company, 263 N.Y. 79
Lloyds Bank Ltd v Bundy [1974] EWCA 8
Macaulay v Schroeder Music Publishing Company Limited [1974] 1 WLR 1308
Sale of Goods Act 1979
Universe Tankships Inc of Monrovia v International Transport Workers’ Federation [1982] 2
All ER 67
Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111