Legal Relationships and Breach of Contract

This document discusses the legal relationships created in a contract and the assessment of damages in case of breach. It also explores the meaning of a clause in the contract and its impact on liability.

Course Contract and Sale of Goods
Code Name
Question 1: The Legal Relationships
Blackboard Pty Ltd and PosetrPLUS Pty Ltd
The type of legal relationship created between this two parties, according to the fact pattern is a
contractual relationship. This is the kind of relationship that is created between parties in a
contract and is evidenced by an offer, acceptance thereof and valid consideration.1 The fact
pattern reveals that the parties entered into a contract for the supply of cast vinyl.
PosterPLUS Pty Ltd and SEASTORM Containers
According to the fact pattern, it is not mentioned that there was a contract between these two
parties. Rather, it is mentioned that PosterPLUS sold the cast vinyl to SEASTORM. Therefore,
the legal relationship created between these parties is the buyer and seller relationship.
Blackboard and SEASTORM Containers
From the fact pattern, it is not said that there was a contract or contractual relationship between
these two parties. The only factor that connects the two is PosterPLUS Pty Ltd – Blackboard
entered into a contract with it for supply of cast vinyl while SEASTORM bought the cast vinyl
from it. SEASTORM is therefore referred to as a third party. The relationship between these two
parties is not contractual but rather, a third party relationship.
Question 2:Party that Breached the Contract and Assessment of Damages
The issue in this fact patter is whether Blackboard Pty Ltd breached its contract with
PosterPLUS Pty Ltd when it supplied the cast vinyl which was degrading. The other issue is
1 MacMillan, Catharine, and Richard Stone, Elements of the law of contract (London: University
of London, The External Programme, 2004) 14, 18, 30.
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Course Contract and Sale of Goods
Code Name
whether PosterPLUS breached its duty to SEASTORM Containers in selling cast vinyl that
proved to be degradable.
The general rule in determining whether there is a breach of contract is asking whether a
promisor failed to perform a contractual obligation of where such a promisor committed
anticipatory breach of the contract. Entitlement to claim for damages by a promisee against a
promisor is the inevitable consequence in case there is a breach of contract.2 Specifically, a
promisee becomes entitled to liquidated damages. This right to claim for damages begins to
accrue at the time of the breach of contract by the promisor. Although the right to damages is not
dependent on proving loss and damage, where a party fails to furnish such proof, entitlement is
limited to nominal damages.3 The law provides that professionals providing professional services
breach their duty arising from the provision of those services if it is found that they conducted
themselves in a way that was not acceptable by the body of professional peers who practice the
craft or trade.4 In the same breadth, professionals under common law are required to conduct
themselves with a degree of due care, diligence and skill that members of the profession would
normally carry.5 With respect to design and build contracts, it is an express term in these
contracts that products supplied will be fit for their intended usage. The consequence is that this
imposes a warranty (an absolute obligation) that the items supplied will perform the task for
which they are required. Therefore, the fitness for purpose requirement is an absolute warranty.
Applying the law to the fact, the question to ask is whether it was a term in the contract to
provide cast vinyl that had sufficient ultraviolet stabilizer. According to the facts of the case, the
parties entered into a contract to supply cast vinyl. The contract did not expressly provide the
2 O'Connor v S P Bray Limited [1937] HCA 18.
3 Tramways Advertising Pty Ltd v Luna Park (N.S.W.) Ltd (1938) 61 CLR 286, 300-12.
4 Civil Liability Act 2002 (NSW), s 50(1).
5 Voli v Inglewood Shire Council (1963) HCA 15.
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Course Contract and Sale of Goods
Code Name
standard of cast vinyl that was required in terms of the chemical makeup. Therefore, to the extent
that Blackboard supplied cast vinyl to PosterPLUS, it did not breach its contractual obligation.
However, the contract between Blackboard and PosterPLUS falls under the design and build
category. Therefore, there is an absolute warranty that the cast vinyl will be fit for purpose. The
fact that Blackboard knew what PosterPLUS intended to use the vinyl for makes them liable for
breach of contract. PosterPLUS Pty is therefore entitled to claim for damages.
In conclusion, Blackboard was in breach of contract and damages will be assessed as liquidated
damages against them. PosterPLUS is not in breach of contract since there was no contract
between it and SEASTORM Containers.
Question 3: Meaning of the Clause
According to the fact pattern, the contract between Blackboard and PosterPLUS included a
clause that stated that there was no warranty that the goods would be fit for any particular
purpose. The issue is whether this statement is capable of limiting the liability of Blackboard in
case the cast vinyl does not fit the purpose for which it was procured – as is the case in the
scenario.
Classical contract theorists propound that the principle of freedom of contract necessitates that
contracting parties assume risks in their own contracts.6 The condition necessary for this freedom
to take effect is that there was no pressure on either party to the contract at the time of entering
the contract.7 However, in Australia, the law demands that contract terms be fair. The general
rule in this regard is that a contract will be rendered void if the terms are unfair.8 A term is
6 Andrew Robertson, ‘The Limits of Voluntariness in Contract’ (2005) 29 Melbourne University
Law Review 179, 180–1.
7 Ibid.
8 See Australian Consumer Law 2010 (Cth), s 23(1).
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Course Contract and Sale of Goods
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considered as being unfair if it causes a significant imbalance in the rights and duties of the
parties in a contract. Also, a term would be deemed as unfair if it occasions detriment on a party
were it to be relied on or applied.9 By virtue of section 24(2) of the Australian Consumer Law, a
court must take into account the contract as a whole, the extent of transparency of the term and
other facts as it deems fit, in the determination of whether a term is unfair. The test of unfairness
focusses on both substantive and procedural fairness.10
Applying the law to the fact pattern, it is clear that although the law of contract fosters the idea of
freedom of contract, the law of sale of goods holds the position that contract terms must be fair.
Therefore, the term in the contract that provides that there is no warranty that the goods will be
fit for any purpose is considered as an unfair contract term. The result will be rendering the
contract void.
Bibliography
Books
9 Ibid, s 24 (1).
10 See West v AGC (Advances) Ltd (1986) 5 NSWLR 610, 620.
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Course Contract and Sale of Goods
Code Name
MacMillan, Catharine, and Richard Stone, Elements of the law of contract (London: University
of London, The External Programme, 2004) 14, 18, 30.
Journal Articles
Andrew Robertson, ‘The Limits of Voluntariness in Contract’ (2005) 29 Melbourne University
Law Review 179, 180–1.
Statutes
Australian Consumer Law 2010 (Cth).
Civil Liability Act 2002 (NSW).
Case
O'Connor v S P Bray Limited [1937] HCA 18.
See West v AGC (Advances) Ltd (1986) 5 NSWLR 610, 620.
Tramways Advertising Pty Ltd v Luna Park (N.S.W.) Ltd (1938) 61 CLR 286, 300-12.
Voli v Inglewood Shire Council (1963) HCA 15.
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