Contract Law: Fiduciary Duty and Breach of Contract Analysis

This assignment analyzes two contract law scenarios. The first case involves Qantas Airlines and Airbus Corporation, focusing on a breach of contract due to the provision of an entertainment system with fewer channels than specified in the contract. The analysis examines the elements of a valid contract, the importance of adhering to the terms, and the implications of a new document (Limitation of Liability) introduced after the contract was signed. The second scenario explores a fiduciary relationship between an employer (Frank) and an employee (Gemma), where Gemma sells a dishwasher to her niece for a lower price, acting outside her authority. This section discusses the concept of fiduciary duty, the employee's responsibilities, and the employer's rights in such situations. The assignment also briefly touches upon the actions of another employee, Bob, and his potential impact on a transaction with a customer, Angela.

Running head: CONTRACT LAW
CONTRACT LAW
Name of the Student:
Name of the University:
Author Note

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Answer 1:
Issue:
In the case law that is provided the issue is whether Airbus Corporation Ltd is in
breach of the terms of the contract by providing the wrong software in the entertainment
system by providing only 34 channels while the contract specifically specifies for 36
channels?
Law:
The basic elements of a contract consist of offer, acceptance (DeMott, 2014). The
offer should have been made for a consideration and then the obligations of both the parties
are decided. The parties should also be competent to contract and they should also have the
capacity. These are few of the basic elements which need to be kept in mind while forming a
valid contract. Another important thing that should be kept in mind while forming a contract
is that any goods which a seller is willing to sell should match the description which is made
in the contract. A buyer has every right to get only that product and also to pay for that
product.
Another important principle which needs to be kept in mind while forming a contract
is that once the terms of the contract have been decided if any change needs to be
incorporated or any new document needs to be included whether it be from the buyers side or
from the sellers side then the new document needs to be accepted by both the parties (Fisk &
Barry, 2012). If one of the parties is against this incorporation of the new document then in

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that case the contract is voidable on the choice of that party. If both the parties agree to the
incorporation of the new document or term to the contract then the contract remains valid.
Some of the basic things to be remembered while entering into a contract are the
terms of the contract. The terms of the contract which the parties agree to form the vital part
and if any of the parties fail to honor the terms then the contract becomes voidable at the
choice of the other party. Compensation can also be claimed by the party who faced the loss
whether it be the buyer or the seller in the form of damages or other forms as decided by the
parties themselves or by the court.
Goods description as mentioned above also is an important part while forming a
contract. This basic rule was put down in the case of Manbre Saccharine Co. Ltd v. Corn
Products Co. Ltd. The case dealt with selling of starch in 280lb bags. The contract had
specified that the goods will be delivered to the buyer in the proper packaging but the goods
were unfortunately shipped partly in 280lb bags and the rest in 140lb bags which was against
the terms agreed between the buyer and seller. The seller was of the view that packaging does
not form an essential element when it comes to description of goods and also that this
condition was not vital for the agreement. The court on the other hand was of the view that
the seller could not escape this liability by saying that packaging was not an essential part of
the agreement and that it did not form an important part when it came to description of goods.
The court was also of the view that the seller was in breach of their duties by providing goods
in packages which were contrary to the description of goods mentioned in the contract.
Thus from the case mentioned above it can be inferred that description of the goods
whether it be in the form of packaging or any other form should be maintained by the seller
(Smith & Lee, 2014). Any provision regarding how the contract needs to be performed
should be followed. Another case which can be referred to in this matter is that of Benabu &

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Co. v. Produce Brokers Co. Ltd. This case deals with the sale of beans in bags arriving by a
steamship. The dispute arose when the steamship arrived much earlier which was before the
contractual date and dropped off the goods which was not known either to the buyer or seller.
The buyer after getting the knowledge accepted the necessary document but refused to take
the goods as they had not arrived on the appropriate date as mentioned in the contract. The
court was also of the view that the buyer had acted within their rights by rejecting the goods
and that they could claim the price which had been paid.
Application:
In the present case Qantas Airlines Ltd had formed a contract with Airbus
Corporation Ltd for building up of a new airplane. The contract had a total of 545 terms out
of which number 455 stated that the airplane should have an in-flight video system which
should be able to show 36 channels of entertainment to the passengers. These were the
specific terms of the contract. During the delivery of the aircraft it was seen that the software
which had been provided for the entertainment only consisted of 34 channels and not 36 as
the terms of the contract mentioned. This would be treated as a breach of contract on the part
of Airbus Corporation Ltd. The terms of the contract specifically asked for 36 channels of
entertainment and by providing only 34 channels not only has the description of the goods
not been met but the terms have also not been honored by Airbus Corporation. Thus the
buyers Qantas Airlines Ltd can sue for damages.
Another important factor which needs to be mentioned in the present case is that after
the terms of the contract had been decided by the parties and also signed, Airbus Corporation
while sending a large package of documents which also included the contract sent a new
document named Limitation of Liability which stated that the liability of the company
towards Qantas for any breach of contract would amount to $ 300000. The thing which needs

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to be mentioned here is that this is a new document which the buyers Qantas Ltd were not
aware of while forming the contract. Inclusion of new documents is allowed but in the
present case since the buyers were unaware of this document, the contract is voidable. If
Qantas Ltd accept this new document which means that they agree to the terms then in that
case the contract is still valid. In case they do not accept this new document then the contract
is voidable from their behalf.
Conclusion:
Thus it can be concluded from the analysis made above that Airbus Corporation was
responsible for breach of contract as they had failed to provide 36 channels of entertainment
and had provided with only 34 channels.

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Answer 2:
Issue:
In the case law that is provided the issue is whether Gemma acted outside her
authority when she sold the dishwasher to her niece Frances for a lesser amount and also
what are Frank’s rights as a seller when he was sued by Angela?
Law:
The relevant rule that applies in this case is that of Fiduciary Relationship (Selmi,
2012). Fiduciary Relationship is a relationship whereby a person places faith and trust on
another person. The other party has a fiduciary duty to maintain that trust and faith. The party
who has been bestowed with this trust has a fiduciary duty to act in the interest of the other
party. There are various examples of fiduciary relationship namely that which exists between
an employer and an employee (Weidner, 2016). An employer puts their faith on their
employee that they will act in the best interest for the said employer. The employee thus has a
fiduciary duty to act in the best interest. In case the employee does not act in the interest of
the employer then they would have been known to act in contravention to the relationship
that is shared between the said employer and the employee.
When an employee acts in contravention to their duties and are in the breach of
fiduciary relationship then the employer can sue for damages or refuse to pay any outstanding
amount which the employee might be entitled to. The employer also has the right to terminate
the said employee (Leib et al., 2013).
One relevant case law where the court passed a landmark judgment was in the case of
Mattheus. The employee had acted in contravention to their fiduciary duty which is why the

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employer was of the view that the said employee should not receive the salary. The Court
however was of the view that the said employee could not be disentitled from getting their
salary because the said employee had acted in contravention to their duties only for this
particular period (Bruner, 2013). Other than this particular instance the term that was served
by the said employee showed no sign of acting in contravention to the trust of the company.
Thus the said employee was entitled to their salary. This did not however imply that the court
let the said employee go unscathed. The Court was of the view that the employer could claim
for damages (Velasco, 2012).
Application:
In the present case Gemma had been working for Frank and had also acted outside the
scope of her power of authority. Gemma not only took undue advantage of the trust placed in
her but also acted beyond her authority. As an employee of Frank she was duty bound to see
that Frank and his business flourish. On the contrary Gemma sold the dishwasher for cheaper
just to her niece because of the fact that it was her wedding. Thus as an employee she had
acted outside the interest of Frank. Frank and Gemma were employer and employee and
therefore a fiduciary relationship existed between them. Gemma if would have acted under
the orders of Frank during the course of her employment then such would have become the
responsibility of the employer as the said employer would have been aware of the whole
transaction (Rave, 2013). In the present case however Gemma though acted in the course of
her employment but not under the orders of Frank. Gemma took undue advantage of the
fiduciary relationship that existed between employer and employee. Gemma acted for her
own benefit and not for the employer. Gemma’s act did not have bona fide intentions.
Gemma must compensate Frank for the loss occurred and is also liable for not maintaining
fiduciary relationship between the said employer and employee.

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On the other hand Bob was a salesperson under the employment of Frank therefore an
implied trust is in existence between them. An employer gives certain responsibilities to the
employee. An employer also gives power to the employee to carry out those responsibilities.
Such powers are however restricted and should not be misused (Aviram, 2013). In the given
case however the employee did not act within his jurisdiction. The acts committed by Bob
show that he did not have any bona fide intentions. An employee is expected to follow certain
etiquette while they are at their workplace. Attending work late and drunk is not appreciated
by any employer. An employer thus reserves the power to maintain the work place
atmosphere. Bob acted dishonestly to show his displeasure and to get his revenge. Angela
mostly transacted with Bob for buying washing machines. Therefore she cannot be expected
to know that Bob got fired on that day. Angela on getting an email from Bob agreed to buy
the ten washing machines and immediately transferred the amount. Angela should not have
acted so readily without making proper investigations, firstly such as she did not go to the
shop to check whether there are ten machines as said in the mail. Secondly she should have
looked into the fact whether the machines were in working condition or whether they had
been already reserved by some other customer. Frank on the other hand should have taken
due care to find out that Bob left the office after being fired. Frank should have given proper
notice of Bob’s termination to people who transacted with Frank and his employees. In the
given case Frank was bound to deliver the machines to Angela. Angela is a third party over
here who acted with good intention. Frank being the employer is responsible for Bob’s
activity in the present scenario. However he can file a case against Bob for recovering the
amount and compensation for all the expenses and hardships he had to go through.

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Conclusion:
Thus from the above discussion it can be seen that even though Frank was unaware of
Bob’s actions still Angela would get the machines as she had acted in good faith but Frank
could sue Bob for damages.

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Reference List:
Aviram, A. (2013). Officers' Fiduciary Duties and the Nature of Corporate Organs.
Bruner, C. M. (2013). Is the Corporate Director's Duty of Care a Fiduciary Duty-Does It
Matter. Wake Forest L. Rev., 48, 1027.
DeMott, D. A. (2014). Relationships of Trust and Confidence in the Workplace. Cornell L.
Rev., 100, 1255.
Fisk, C., & Barry, A. P. (2012). Contingent Loyalty and Restricted Exit: Commentary on the
Restatement of Employment Law.
Leib, E. J., Ponet, D. L., & Serota, M. (2013). Translating Fiduciary Principles into Public
Law.
Rave, D. T. (2013). Politicians as Fiduciaries.
Selmi, M. (2012). The Restatement's Supersized Duty of Loyalty Provision.
Smith, D. G., & Lee, J. C. (2014). Fiduciary discretion.
Velasco, J. (2012). The Role of Aspiration in Corporate Fiduciary Duties. Wm. & Mary L.
Rev., 54, 519.
Weidner, D. J. (2016). Cadwalader, RUPA and Fiduciary Duty.

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