Commercial Law Case Study: Breach of Contract and Negligence Tort

This case study provides an analysis of commercial law principles through two distinct scenarios. The first scenario explores contract law, specifically focusing on a builder's entitlement to payment for work completed and the implications of breaching a construction contract. It references relevant legislation like the Home Building Contracts Act and the Building and Construction Industry (Security of Payment) Act, along with the precedent set in Hadley v Baxendale. The second scenario delves into tort law, particularly the principle of 'duty of care,' examining a restaurant owner's liability for a customer's injury due to negligence. The analysis considers the foreseeability of harm, referencing landmark cases such as Donoghue v. Stevenson and Sutherland Shire Council v. Heyman, to determine the extent of the owner's responsibility and potential damages owed to the injured party. The study concludes by determining liability and potential compensation based on legal precedents and duty of care principles. Desklib offers more solved assignments and resources for students.

Running head: COMMERCIAL LAW
Commercial Law
Name of the Student
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Author Note

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Question 1: Contract
a. In this scenario, the builder has completed work worth $45,000 out of the total
amount of $95,000 and therefore he shall be liable to receive a payment of the portion of
the work he has completed. The Home Building Contracts Act and the Building and
Construction Industry (Security of Payment) Act of different Provinces lay down the fact
that a there is a provision of part payment that a builder is liable to receive for the portion
of work that he has completed1. This is called ‘progress payment’, which is for the
benefits of all the parties to the contract, which should be pre-determined before the work
is undertaken, or the contract is made. However, as the builder has abandoned the work,
he seems to have breached the contract. This amounts to discharge of the breaching party,
however cannot terminate the contract while the non-breaching party can. In addition, the
builder cannot claim the entire consideration amount, which was pre-decided for the
completion of the overall construction. The other party, which is the non-breaching party,
can sue the builder for breaching the contract. In Hadley v Baxendale, it was held that the
aggrieved party is liable to claim for damages in case of breach of contract effected by a
builder2.
b. In this case, as the builder has essentially finished the construction except for
some minor details that needs to be fixed, he is liable to receive the consideration amount
except for the parts that are remaining to be done. The Building and Construction
1 Building Contracts And Progress Payments (2018) www.commerce.wa.gov.au
<https://www.commerce.wa.gov.au/sites/default/files/atoms/files/building_contracts_and_progress_payments_fact_
sheet_0.pdf>.
2 Hadley v Baxendale [1854] 9 Exch 341

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Industry (Security of Payment) Act 2009 makes sure that the builder can judiciously claim
his share of remuneration on completion of the construction, wholly or partly. Section 10
of the Act states that a builder may ask for ‘progress payment’, which may include the
final payment, a single payment or a milestone payment for carrying out the construction
work3. The amount of progress payment needs to be pre-decided by an agreement or a
contract as well which may vary on the value of the construction work carried out or the
goods and services supplied. The builder would be liable to make a payment claim under
Section 15 of the Act, which enable a builder to claim his payment, which is due with the
respondent4. However, the builder must evaluate the amount that he is liable to claim,
which should not exceed the value of work that he has completed. He would not be able
to claim payment for the further fixtures that needs to be done later. In case, the
respondent refuses, the builder may reimburse the amount as a way of debt that was due
on the client, in a court having a competent jurisdiction, laid down under the Building
and Construction Industry (Security of Payment) Act 20095.
c. In this scenario, the client would be responsible to pay certain amount to the
builder as damages as the client is the one who breached the contract between them. This
amounts to a substantial breach of contract, which gives the builder a right to terminate
the contract and make claim for damages for the time and effort that he had invested upon
the project. The case of Hadley v Baxendale showed that the client could claim damages
from the builder in case the builder does not perform his duty, while there are several
precedents that lays down that the builder can claim damages from the client in case the
3 Building and Construction Industry (Security of Payment) Act 2009, s 10
4 Building and Construction Industry (Security of Payment) Act 2009, s 15
5 Building and Construction Industry (Security of Payment) Act 2009, s 17(2)

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client repudiates the contract wrongfully6. The client may have called off the contract
within a reasonable amount of time by issuing a prior notice. However, in this case, the
builder was sent away on the day the work needed to be started. This results in the loss
of time of the builder as he could have invested the time in other project and made
money. Therefore, the builder would be liable to claim damages from the client for not
giving prior notice to him for cancelling the construction work.
Question 2: Tort
This case attracts the principle of ‘duty of care’ under the law of torts where it refers to
the responsibility of a person to do or not to do certain things to protect them from foreseeable
danger. It involves a person who owes a duty of care to another by way of an agreement or legal
responsibility. The essential factor of this principle is to understand that to whom the duty is
owed and as to what standard of duty is owed7.
In the given scenario, Lily sprained her ankle by falling down on the wet ramp of the
restaurant run by Fan. This accident affected Lily severely who is a dance instructor as she
would not be able to work for two weeks. This makes Fan liable for the condition of Lily as Fan
has breached his duty of care towards his customer. Taking the fact of rainy season into
consideration, the owner or the manager of the restaurant is under an obligation to take due care
of the safety of the customers who come to the restaurant. This principle requires the owner to
take care of the infrastructure that is associated to the restaurant, which may create an adverse
situation for the customers. The landmark case of Donoghue v. Stevenson is an example of
6 Hadley v Baxendale [1854] 9 Exch 341
7 Negligence (2018) Lawhandbook.sa.gov.au <https://lawhandbook.sa.gov.au/ch01s05.php>.

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breach of duty of care by way of negligence of the maker of the ginger ale8. In this case, the
plaintiff suffered from gastroenteritis by consuming a bottle of ginger ale, which mistakenly
contained a decomposed snail at the bottom. The manufacturer of the drink was held liable for
showing such negligence to check the quality of the drink. However, In Sutherland Shire
Council v. Heyman the plaintiff held the council liable for damages who was in charge of
constructing the building, which had faulty footing9. The council was responsible for approving
the building with faulty footing, which caused harm to the plaintiff. It was held by the judges’
bench that the council would not be liable to pay damages, as there was no reasonable
foreseeability. Therefore, the factor of ‘foreseeability’ is essential in deciding a case of
negligence to provide duty of care.
In the given case, Fan, the owner or the manager of the restaurant was liable to take every
necessary care possible to provide a safe environment for the customers. Fan should have
foreseen the dangers that might occur on a wet ramp. Fan should have adopted necessary
measures to keep the ramp dry or should have provided for another option for the customers to
enter or exit the restaurant. Therefore, these factors prove that Fan has been negligent to provide
the duty of utmost care and concern towards his customer. This makes Fan liable to pay damages
to Lily for she is unable to pursue her job as a dance instructor. The court would decide the
damages amount by evaluating the medical cost spent by Lily and the remuneration that she
would be losing during the period she is unable to work.
8 Donoghue v Stevenson [1932] UKHL 100
9 Sutherland Shire Council v Heyman HCA 4 Jul 1985

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Bibliography
Cases
Donoghue v Stevenson [1932] UKHL 100
Hadley v Baxendale [1854] 9 Exch 341
Sutherland Shire Council v Heyman HCA 4 Jul 1985
Legislation
Building and Construction Industry (Security of Payment) Act 2009
Home Building Contracts Act 1989
Government website
Building Contracts And Progress Payments (2018) www.commerce.wa.gov.au
https://www.commerce.wa.gov.au/sites/default/files/atoms/files/building_contracts_and_progres
s_payments_fact_sheet_0.pdf
Negligence (2018) Lawhandbook.sa.gov.au <https://lawhandbook.sa.gov.au/ch01s05.php>