Assistance and Financial Compensation for Violation of Contract Terms

FOUNDATION OF COMPANY AND
COMMERCIAL LAW

P a g e | 1
QUESTION 1
I: ISSUE
The issue focuses on determining the assistance/financial compensation which can be
offered to James for violating the terms given in the contract?
R: RULE
The terms of a contract are categorised into two divisions which include express and
implied. The terms which are included by the parties to a contract are referred as express
terms. The implied terms are not expressed by the contracting parties; instead, they are
included by the statute and the court. Moreover, these terms are categories into conditions
and warranties. The essential terms of a contract are referred to conditions, and violation of
these terms give the party right to rescind the contract and demand compensation.
Warranties are non-essential terms and violation of those terms gives the right to the party
to demand damages. In common law, the parol evidence rule (PER) prevents the parties
from introducing evidence regarding prior negotiations or agreements which contradict,
vary or modify the written terms of the contract. However, the court provided an exception
to this rule in Curtis v Chemical Cleaning case in which the court provided that a party
cannot rely on this rule if the terms of the contract are misrepresented by the party.
Moreover, in Costa Vraca Ltd v Berrigan Weed & Pest Control Pty Ltd case it was held that
parties have rights, and obligations under a service contract and the party who is providing
the service must ensure that a standard is maintained by him to avoid causing harm to
another party or failing in giving the exact services as promised. In case contractual terms
are violated, the remedies available for parties include specific performance, injunction,
repudiation, damages, and rescission.
A: APPLICATION
A service contract is formed between Lloyd Right Pty Ltd (Lloyd) and James to design the
exterior and interior of the restaurant. An expressed term of the contract provides that
Lloyd has to take the permission of the local council regarding putting chairs outside

P a g e | 2
footpath. Moreover, the conversation which parties had regarding minimum seating
capacity can be set aside based on PER, however, Lloyd made misrepresentation while
providing the information regarding the minimum seating capacity in the restaurant and
while purchasing Italian design tables and chairs, thus, James has the right to enforce the
contractual terms as per exception of PER given in Curtis v Chemical Cleaning case. A
standard of care was not maintained by Lloyd while discharging duties under the service
contract, and an express term of the contract was violated as well based on which James
has the right to receive damages (Costa Vraca Ltd v Berrigan Weed & Pest Control Pty Ltd).
The financial compensation should be offered to James that includes payment for the loss of
40 customers as per $30. James can also avoid paying $15,000 to Lloyd for the services.
C: CONCLUSION
Conclusively, financial compensation should be given to James for the loss suffered by him
due to loss of 40 customers each day, and James has the right to deny the payment of
$15,000.