LAW60003 Corporations & Contract Law: Analyzing Contract Breach

This assignment delves into a contract law scenario involving a travel agent and clients, Andrew and Margaret, examining potential breach of contract claims. It explores the concept of contract discharge through performance, referencing key cases like Cutter v Powell and Sumpter v Hedges, and discusses the vitiating factor of misrepresentation, citing Bisset v Wilkinson and Smith v Land & House Property Corp. The report further analyzes remedies for breach of contract, including damages, rescission, and specific performance, referencing cases like Hadley v Baxendale and Jarvis v Swan Tours to illustrate different heads of damages. Applying these legal principles to the case study, the assignment assesses the likelihood of success for claims made by both the travel agent and Andrew and Margaret, considering arguments related to partial performance, misrepresentation, and the potential for recovering damages for disappointment and distress. Desklib provides access to a wealth of resources, including past papers and solved assignments, to aid students in their studies.

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Corporations and Contract Law
Assignment 2: Research assignment
02-May-18
(Student Details: )

Corporations and Contract Law
Issue
The main issue of this case resolves around the possibility of a breach of contract being claimed
by Andrew and Margaret against the travel agent. There is also the issue of remedies which
Andrew and Margaret would be able to claim successfully against this travel agent owing to the
ensuing breach of contract. The issue is also to analyse the possibility of the contract being
discharged through performance, in place of having been breached.
Law
A contract, once it is formed, becomes binding on the parties to the contract. This means that the
terms mentioned in the contract, have to be followed properly; where this is not done, the
aggrieved party has the right of applying to the court for getting remedies awarded to them,
owing to a breach of contract1. Before going into the discussion of breach of contract, there is a
need to note that a contract can not only be discharged as a result of a breach of contract, but can
also be discharged as a result of performance of stated terms of the contract2.
Where the contracting parties fulfil the obligations covered under the contract, the contract is
deemed to be discharged through performance. In Cutter v Powell3, the court held that payment
for work done by the husband of widow could be payable only if he had performed his part of
the contract4. Even though this rule is harsh, it has been since mitigated by various exceptions
being created5. One of such is partial performance of contract. If a party decides to accept the
1 Jane Swanston, ‘Discharge of Contracts for Breach’ (1981) 13(1) Melbourne University Law Review 69.
2 John W. Carter, Contract Law in Australia (LexisNexis Butterworths, 2013)
3 [1795] EWHC KB J13
4 M Dockray, ‘Cutter v Powell: A Trip Outside the Text’ (2001) 117 Law Quarterly Review 664.
5 C Kidd, ‘Partial Performance of Lump Sum Contracts: Proposals for Reform’ (1985) 59 Australian Law Journal
96.
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partial performance, then they have to pay the sum for the work which has been completed6. In
Sumpter v Hedges7, the court denied the acceptance of partial performance by the defendant as
they were forced to accept this partial performance since the defendant had left the half
completed house on the land of the defendant. Another important element regarding discharge of
contract through performance is related to performance being prevented by the promise. In
Planche v Colburn8, the claimant was allowed to recover money for partial performance due to
the fact that he had been prevented by the defendant from completing the performance of entire
contract.
Misrepresentation is a vitiating factor under contract law, which has the capacity of rendering a
contract as voidable/void. One of such factors is misrepresentation. Misrepresentation basically
denotes a false statement of fact or law being made by one party, to another party, so that the
other party gets into the contract9. Bisset v Wilkinson10 is a leading matter in this context which
provides that the false statement needs to be one covering law or fact. If it is one of opinion or
advice, a claim of misrepresentation would not be successful. However, where the opinion giving
party, was in a position to know the truth being the false statement being made, owing to the
position or knowledge held by them, then the person making such false statement, even when it
is related to an advice or opinion, would be liable, based on Smith v Land & House Property
Corp11. The remedies of misrepresentation include rescission and/or damages. Through
rescission, the parties are put back in their pre contractual position. Through damages, monetary
6 G L Williams, ‘Partial Performance of Entire Contracts’ (1941) 57 Law Quarterly Review 373.
7 (1898) 1 QB 673
8 [1831] EWHC KB J56
9 James Marson and Katy Ferris, Business Law Concentrate: Law Revision and Study Guide (Oxford University
Press, 3rd ed, 2016)
10 [1927] AC 177
11 (1884) 28 Ch D 7
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compensation is awarded to the aggrieved party, for dealing with the loss which they had to bear
as a result of misrepresentation being present.
The key mode which results in the discharge of contract, apart from its performance is its breach.
When the parties to the contract, fail in fulfilling their obligations, as have been covered under
the contract, a breach of contract takes place12. So, where a promise made under the contract,
even if it is a part of such contract, is not performed, a claim of breach of contract can be raised
by the aggrieved party. Under the common law, there are different types of remedies which can
be cited for the breach of contract. These remedies include damages, rescission, repudiation,
injunctions and specific performance13.
Damages under the common law of contract are the monetary compensation which is awarded to
the aggrieved party, for compensating them for the loss. Addis v Gramophone14 clarified the
purpose of awarding damages. Damages are awarded as remedy for breach of contract in order to
put the injured party in such place which they would have been at upon the contract being
properly performed. The damages are awarded subject to rules of causation, remoteness and duty
of mitigating loss being applied. In Monarch Steamship Co Ltd v Karlshamns Oljefabriker
(A/B)15, outbreak of war was not seen as chain of causation being broken as this was deemed as
foreseeable by the court.
A key part of damages being awarded relates to rules of remoteness. A claimant is allowed to
recover the losses only which are reasonably a result of breach of contract in a natural manner, or
are such which are supposed to be in contemplation of parties at the time of formation of
12 Neil Andrews, Contract Law (Cambridge University Press, 2nd ed, 2015)
13 Jill Poole, Casebook on Contract Law (Oxford University Press, 2016)
14 [1909] AC 488
15 [1949] AC 196
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contract. In Hadley v Baxendale16, the claimant was unable to use the mill due to delay in work
of the defendant and claimed loss of profit. The court denied this claim on the basis that the
defendant had never been told that a delay would result in claimant bearing losses. Further, this
loss did not naturally occur or arise from the breach of contract. As these damages were not
reasonably contemplated by the parties at the time of contract formation, the claim of claimant
was denied.
In Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd17, the defendant was aware of the
fact that claimant would have to bear a loss in absence of boiler. As a result of the delay in
delivery of boiler, a breach of contract was claimed, and a particularly lucrative sum was applied
as damages by the claimant. The court denied the lucrative sum and stated that only such losses
could be recovered which were reasonably contemplated by the parties in context of loss of
profit resulting from absence of boiler.
There are different heads of damages under the contract law, on the basis of which monetary
compensation can be claimed, and these cover the different types of loss. Where the plaintiff
claims breach of contract based on disappointment and discomfort, it is crucial to show that
enjoyment had been a part of contract18. This is mostly awarded in cases of holidays where they
fail in meeting the standard which any holiday maker had been lead to believe that they would
have enjoyed. In Baltic Shipping v Dillon19, damages for distress were allowed to be recovered.
In Jarvis v Swan Tours20, Jarvis had booked a holiday which made certain promises based on the
brochure. Majority of these were not provided and the ones which were provided were not as
16 [1854] EWHC Exch J70
17 [1949] 2 K.B 528
18 Paul Latimer, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)
19 (1993) 176 CLR 344
20 [1972] 3 WLR 954
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they had been described initially. As a result of this, a claim for contract being breached based on
disappointment was claimed. This resulted in the trial judge awarding £30 as damages. An
appeal was made by Jarvis on this order. The appeal was upheld and the court held that as the
specific purpose of getting in this contract was entertainment or enjoyment, the damages had to
be awarded for frustration, distress, disappointment and upset resulting from contract breach.
In Jackson v Horizon Holidays21, Jackson had booked a holiday for him and his family. As the
hotel turned out to be unsatisfactory owing to cleanliness issues, a breach of contract was
claimed. The trial judge awarded damages only for Jackson but not for the family, stating that
disappointment of children and wife could not be considered as they were not a contract party.
However, the higher court held otherwise on appeal being made by Jackson on order of the trial
judge and Jackson was able to recover damages for the disappointment which his wife and
children suffered.
Application
In the present case study, a contract had been entered between the travel agent and Andrew and
Margaret, where the travel agent promised that Andrew and Margaret would be provided with
restful holiday, where they would access to a nice beach and facilities for golf and water skiing.
For these services, Andrew and Margaret paid certain sum to the travel agent. Due to the certain
things that happened, where the services given to Andrew and Margaret were not as they had
been promised by travel agent, they are looking for raising a claim of breach of contract against
the travel agent. On this claim, the travel agent can raise the contention that the contract had been
discharged through performance. Based on Cutter v Powell, he can show that Andrew and
21 [1975] 1 WLR 1468
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Margaret had made payment for the holiday package which was same for the alternative resorts.
Nothing was specially or overly paid for the claimed upon services by the two. Hence, the
contract had been properly performed by him and as Andrew and Margaret held their end of
bargain in terms of making payment for the contract, the contract was discharged through
performance.
Another contention which can be made by the travel agent is the fact that Andrew and Margaret
decided to use the services which were offered to them and also paid for the services they got.
They paid nothing extra and hence got nothing extra. So, a partial performance of the contract
can be claimed. Reliance can be placed on Planche v Colburn to show that by leaving early, the
travel agent was stopped from proper completion of the contract. However, chances of this
claiming being a success are very less. This is due to the fact that if travel agent relies on
Planche v Colburn, Andrew and Margaret can prove him wrong based on Sumpter v Hedges and
show that they were forced to accept the partial performance as they had no other place to stay.
Moving to the claims which can be raised by Andrew and Margaret, the first claim they can
make is for the misrepresentation undertaken by the travel agent. The travel agent can claim
based on Bisset v Wilkinson, that the services offered were based on advice. However, Smith v
Land & House Property Corp would prove him wrong. This is because as a travel agent, he
knew that the accommodation provided to Andrew and Margaret was a deserted cabin with no
water, no toilet facilities, and no vehicle access, that it had been deserted for some time, that the
only beach within walking distance is covered with rocks and coral, and is very unsuitable for
swimming, and that there were no facilities for water skiing and the only golf course on the
island is a mini golf course in the village, four kilometres away, which has been vandalised by
youths. He had made false promises to Andrew and Margaret so that they can get in the contract
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with him. This would allow Andrew and Margaret to claim damages for the misrepresentation
undertaken by the travel agent.
Andrew and Margaret also have the option of claiming breach of contract from the travel agent.
The damages paid to Andrew and Margaret, based on Addis v Gramophone, would put the two in
a pre contractual position, as they would have been properly compensated. On the basis of Jarvis
v Swan Tours and Jackson v Horizon Holidays, Andrew and Margaret would be able to claim
damages for breach of contract. This is because entertainment was a key part of the holiday
which Andrew and Margaret had booked for themselves. Applying Victoria Laundry (Windsor)
Ltd. v. Newman Industries Ltd, the travel agent knew that the purpose of the holiday booked by
Andrew and Margaret was to get a restful holiday. So, a breach of contract, on the basis of not
being able to enjoy the holiday, can be claimed upon by Andrew and Margaret.
The question is now on the remedies which can be claimed by Andrew and Margaret and for
which basis. As monetary compensation is best suitable in this case, since rescission,
repudiation, injunctions and specific performance would not put Andrew and Margaret in pre
contractual position, damages have to be awarded to Andrew and Margaret. Andrew and
Margaret have claimed the following damages: cost of the holiday, cost of medical treatment for
Margaret, anticipated loss of wages, and cost of additional airfares incurred.
Based on Jarvis v Swan Tours and Jackson v Horizon Holidays, Andrew and Margaret would be
able to claim damages incurred for cost of the holiday and for cost of additional airfares incurred.
Based on Baltic Shipping v Dillon, Andrew and Margaret would be able to claim damages
incurred for cost of medical treatment. However, this claim is likely to be contested based on
Monarch Steamship Co Ltd v Karlshamns Oljefabriker (A/B) as nervous breakdown was a direct
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result of breach of contract cannot be established based on the given facts. Also, based on Hadley
v Baxendale, Andrew and Margaret would not be able to claim damages incurred for anticipated
loss of wages, owing to lack of causation and remoteness in breach of contract resulting in such
losses.
Conclusion
Thus, based on the detailed analysis of this, Andrew and Margaret would be able to claim
damages from the travel agent for cost of the holiday and for cost of additional airfares incurred;
but this would not be successful for the other claims including cost of medical treatment and
anticipated loss of wages.
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Bibliography
Articles/ Books/ Journals
Carter JW, Contract Law in Australia (LexisNexis Butterworths, 2013)
Dockray M, ‘Cutter v Powell: A Trip Outside the Text’ (2001) 117 Law Quarterly Review 664.
Kidd C, ‘Partial Performance of Lump Sum Contracts: Proposals for Reform’ (1985) 59
Australian Law Journal 96.
Latimer P, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)
Marson and Katy Ferris, Business Law Concentrate: Law Revision and Study Guide (Oxford
University Press, 3rd ed, 2016)
Swanston J, ‘Discharge of Contracts for Breach’ (1981) 13(1) Melbourne University Law Review
69.
Williams GL, ‘Partial Performance of Entire Contracts’ (1941) 57 Law Quarterly Review 373.
Cases
Addis v Gramophone [1909] AC 488
Baltic Shipping v Dillon (1993) 176 CLR 344
Bisset v Wilkinson [1927] AC 177
Cutter v Powell [1795] EWHC KB J13
Hadley v Baxendale [1854] EWHC Exch J70
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Jackson v Horizon Holidays [1975] 1 WLR 1468
Jarvis v Swan Tours [1972] 3 WLR 954
Monarch Steamship Co Ltd v Karlshamns Oljefabriker (A/B) [1949] AC 196
Planche v Colburn [1831] EWHC KB J56
Smith v Land & House Property Corp (1884) 28 Ch D 7
Sumpter v Hedges (1898) 1 QB 673
Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 K.B 528
Legislations
Contract Law
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