Commercial Law Assignment: Contract Remedies and Issues Analysis

This commercial law assignment addresses two key areas of contract law: formation and breach. Part A of Question 1 examines the formation of a unilateral contract, focusing on the requirements of offer, acceptance, and consideration, using the case of Carlill v Carbolic Smoke Ball Co as a precedent. It analyzes a scenario involving an advertisement for a lost item and determines whether a binding contract exists between the offeror and the person who returns the item. Part B of Question 1 explores the impact of the offeree's awareness of the offer on contract formation. Question 2, Part A focuses on remedies for breach of contract, specifically damages, specific performance, and injunctions, in a scenario involving the sale of a Rolls Royce. It advises on the most suitable remedy for the buyer. Part B of Question 2 discusses the application of the rule in Hadley v Baxendale regarding the recovery of damages, emphasizing the importance of reasonably foreseeable circumstances at the time of contract formation. The assignment concludes by considering how the advice would change if the vehicle was a late model Mercedes Benz, indicating that the unforeseeable damages would be recovered.

COMMERCIAL LAW
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COMMERCIAL LAW
Question 1
Part A
Introduction
For the formation of an enforceable contract, there are various requirements that ought to be
fulfilled. There needs to be valid offer and valid acceptance. However, communication of
acceptance and its role may vary across bilateral and unilateral contracts. Further, mutual
consideration ought to be present besides an intention to create legal relationships (Taylor &
Taylor, 2015).
Issue
The issue is to determine whether there is an enforceable legal contract between Leila and
Julie.
Relevant Law
The offeror needs to extend offer to the offeree and the respective offeree needs to
communicate an unconditional acceptance to it to the offeror in order to form the contract.
Further, it is essential to note that there are some instances where the offeror extends the offer
to multiple offerees (Edlin, 2016). In such scenarios, there is waiver of acceptance in the
sense that it does not need to be communicated as is the case in bilateral contracts. Any
person who would complete/perform the action stated in the offer would extend acceptance
leading to the formation of a binding contract (Andrews, 2014). Advertisement which offers
reward for performing certain act would also be treated as unilateral offer and anyone who is
aware about the advertisement and performs the act would be bounded by the contract. This
is because performing the action stated in the advertisement is the indication of the valid
acceptance of the offer (Carter, 2013).
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According to Carlill v Carbolic Smoke Ball Co(1893)1 QB 256 case, Carbolic Smoke Ball
Co made an advertisement in the newspaper about one of its products i.e. smoke balls. The
company claimed that it wouldpay £100 to anyone who got sick with influenza cold after
consuming their product. They also mentioned that £1000 had been deposited in the Alliance
Bank with respect to the fact that anyone who got influenza cold can take £100 from the
bank(Peel, 2017). Louisa Carlill (plaintiff) used the smoke balls are per the prescribed
manner but still got sick with influenza.Hence, plaintiff claimed £100 from the company. The
company denied paying £100 to Carlill saying that it was mere advertisement. The
honourable court delivered the verdict that advertisement was a unilateral offer and Carlill
had accepted the offer by consuming the smoke balls along with good consideration. Further,
depositing £1000 into bank account also indicated the seriousness of the intention of the
company to make legal relations. Hence, an enforceable contract had been made between
them and company was held liable to pay £100 to Carlill (McKendrick, 2014).
Application
In present case, Leila has put an advertisement for her lost gold chain &locket and also stated
that she will provide a reward of $50 to anyone who would return the same. This indicates
that advertisement is a unilateral offer extended to the world and hence, communication of
the acceptance to Leila is not necessary. Further, as per the verdict given in Carlill v Carbolic
Smoke Ball Co(1893)the given advertisement constitutes a unilateral offer which is extended
to public for acceptance and anyone who returns the lost item to her would be said to have
legally bounded contract with Leila. Julie has read the advertisement and also found the
locket & chain and hence, returned the same to Leila. It implies that Julie has performed the
action stated in the unilateral offer and therefore, Julie and Leila are bounded with the
obligations of the unilateral contract. Leila cannot refuse to provide $50 to Julie or else Julie
has the legal rights to sue Leila for not discharging the contractual duty.
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Conclusion
An enforceable contract has been made between Leila and Julie. Thus, Leila is liable to
provide the reward amount $50 to Julie.
Part B
A key aspect of agreement which forms the basis of contract is that there ought to be offer for
acceptance to occur. In the absence of any offer, acceptance cannot arise and hence no
enforceable contract can be formed. As a result, in cases where the concerned person is not
aware of the unilateral offer, indulgence in the underlying activity stated by the contract
would not lead to contract formation (Carter, 2013). The above understanding related to the
enacted contract between Julie and Leila would be different when Julie did not read the
advertisement and returned the locket and chain. This is because Julie was not aware about
the unilateral offer extended by offeror Leila and hence, her act of returning the locket and
chain would not be termed as acceptance towards the offer. Therefore, no contract would be
enacted between Julie and Leila and thus, Julie cannot claim the reward amount of $50.
Question 2
Part A
Introduction
The key focus of the given problem is on the remedies available when there is breach of
contract. Breach of contract happens when one of the contracting parties fail to fulfil
contractual obligations. In such cases, the innocent party may demand damages for the losses
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COMMERCIAL LAW
incurred. Also, specific performance and injunction are other remedies which may be
awarded by the court (Davenport & Parker,2014).
Issue
The issue is to offer a legal advice to Adam with respect to the available remedies on account
of breach of contract by Edwin.
Relevant Law
When one of the contractual parties fails to fulfil their contractual duties then this situation is
termed as breach of contract. The law has provided three main remedies to protect the rights
of the plaintiff and to cover the potential losses, which are highlighted below.
 Damages
When one of contractual party has suffered losses or injuries because of the breach of
contract then damages would be provided to the plaintiff as compensation. In other words, the
losses incurred on the account of breach of contract would be compensated in the monetary
terms (Gibson & Fraser, 2014).
 Specific Performance
In this type of remedy, the compensation of the breach of contract would not be provided in
the monetary term. It means when the monetary compensation is inadequate to the plaintiff
for losses then specific performance would be used (Davenport & Parker, 2014). The plaintiff
would rather request the honourable court to force the respective defendant party to perform
the contractual duties as per the terms of the contract. This remedy is considered to be a
discretionary and forced action which means when the damage seems inadequate or
undefined then specific performance would be enforceable on the other party to perform the
actions of contract (Taylor& Taylor, 2015).
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 Injunction
Injunction is the equitable remedy in which the court forces the defendant party to stop
performing action which is related to the breach of contract. There are three types of
injunction which are used under injunction remedy (Carter, 2013).
 Interlocutory injunction (Stop the work from being performed)
 Mandatory injunction (Court would force party to perform some action)
 Prohibitory injunction (Prohibit the party to sign contract with other party)
Application
Adam agreed to purchase a Rolls Royce from Edwin for a consideration of $500,000. Both
the parties enacted a contract for the sale of car at this mutually agreed price. However,
Edwin found a new deal to sell the vehicle for $700,000 to an Arabian Sheik and hence,
breached the contract with Adam. It is apparent that Edwin has breached contract by not
selling the Rolls Royce to Adam. In this case, the most appropriate remedy would be specific
performance because the damages incurred by purchaser Adam are undefined and also,
monetary compensation is inadequate. The plaintiff Adam would request the court to force
Edwin to complete the contractual liability and sell Rolls Royce for $500,000. Further,
injunction will also be available to Adam so as to resist Edwin to form other contract with
Sheik for Rolls Royce. However, based on the current circumstances, specific performance
remedy would be most suitable.
Conclusion
Edwin has breached the contract of sale of car and hence, the best remedy would be specific
performance. Hence, Edwin would be bounded to perform the contractual duties which is sell
the car for the consideration of $500,000 to Adam only.
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Part B
Any special circumstances which are rationally foreseeable at the time of enactment of the
contract only would be taken into consideration. Also, both the parties must discuss these
special circumstances at the time of contract formation. If the contract is breached which does
not incorporate the special circumstances then the plaintiff would not be able to get any
award for the lost profit (Andrews, 2014). According to Hadley v Baxendale (1854) case,
Hadley owned and run a mill. He enacted a contract with Baxendale to deliver shaft on a
specified date. However, at the time of contract enactment, Hadley did not inform Baxendale
the special circumstance that the mill would be in-operational until the shaft replacement. The
delivery was delayed and hence, Hadley’s mill was in-operational and caused loss of profit
which indicates that damages would not be recoverable by Handley because the special
circumstance was not reasonably foreseeable (Edlin, 2016). Further, there is unliquidated
damages which has not been estimated by the parties at the time of contract formation and
would be payable if the contractual term is breached (Peel, 2017).
If the motor vehicle was a late model Mercedes Benz, the advice to Adam would not be the
same as stated in the above case. It is because unliquidated damages would be used as the
contract made between Adam and Edwin is for the Rolls Royce which is the term for the
contract. Also, Edwin does not inform Adam about the possibility of change of the vehicle.
Hence, the unforeseeable damages borne by Adam would be recovered from Edwin.
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References
Andrews, N. (2014). Contract Law (3rded.). Cambridge: Cambridge University Press.
Carter, J. (2013). Contract Act in Australia (3rded.). Sydney: LexisNexis Publications.
Davenport, S. & Parker, D. (2014). Business and Law in Australia (2nded.).
Sydney:LexisNexis Publications.
Edlin, D. (2016). Common law theory (4thed.). Cambridge: University Press Cambridge.
Gibson, A. & Fraser, D. (2014).Business Law (8thed.). Sydney: Pearson Publications.
McKendrick, E. (2014). Contract Law(5thed.). Basingstoke:Palgrave.
Peel, E. (2017). The Law of Contract (7thed.). London: Thompson.
Taylor, R. & Taylor, D. (2015).Contract Law (5thed.). London: Oxford University Press.
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