Business Law Case Revision 2
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Pearce V Brook
Brooke = pute
- Facts : The Clm rented out his horse and carriage to a known prostitute, who used it to carry out her trade. When she failed to pay the agreed rent, the Clm sued her for BOC
- Decision : This contract encouraged immoral behaviour so although prostitution was not in itself illegal, it was morally wrong. The contract was thus void an unenforceable. Not liable.
Attwood V Lamont
10 years. 10 miles.
: Clm employed Lamont as a tailor and one condition of his contract was that if he left the employment he owuld not work as a "tailor, dress maker, general draper, hatter, gentlemans, ladies or children's outfitters" for 10 years within a 10 mile radius of the city they were in. When Lamont left his job he set up a competing business in that same city and Clm sued for BOC.
- Decision : Clause was much too wide for it to be binding. Although area covered was reasonable, scope of restraint was excessive : Clm was a tailor, and so to restrict all of the other relative actions was unfair. It was simply designed to prevent future competition and was therefore void.
Fitch V Dewes
Ever. 7 miles.
Solicitor employed the Clm as his trainee and when he had completes his training, he was promoted to managing clerk. At that time, the Clm signed a new contract of employment which included an agreement that if he left the firm he would never practice as a solicitor within 7 miles of the city's town hall. 12 years after leaving the practice, the Clm was offered the opportunity to join another firm of solicitors in the city, so he applied to court asking to be released from the restriction, claiming it was unreasonable restraint of trade.
- Decision : Clm had delt confidentially with many of his employer's clients, who might follow him if he were allowed to practice locally. The length of time was not unreasonable given the very limited geographical area. Clause valid and enforceable.
Fitch. People are loyal to the brand. People will be loyal to the solicitor.
Forster & Sons V Suggett
5 years. Anywhere in UK.
: Def was a works manager at Clm company and was instructed in certain confidential areas concerning to correct mix of gas and air in the furnaces manufacturing glass. His contract of employment stated that if he left the Clm co, then he would not work in the glass-making industry anywhere in the UK for 5 years. Two years after leaving, he went to work for a rival glass-making co and the Clm sued for BOC.
- Decision : Restraint was not designed to prevent competition but to protect Clm's trade secrets, a valuable bus asset. Lenght of restraint was also reasonable (in 5 years, trade secret would be common knowledge). Clause valid and enforceable.
Forster. Il faut forger le verre.
British Reinforced Concrete V Schelff
: Clm co carried on a large bus selling road reinforcements. Def ran a much smaller bus of same type. He sold his bus to the Clm co and agreed not to compete with them in either the manufacture or sale of road reinforcements ever. Four years later the Def set up a new bus selling road reinforcements so Clm co sued for BOC.
- Decision : Def's bus was only involved in selling road reinforcements, so it was quite unreasonable to restrict Def's activity in respect of manufacture. Agreement unreasonable and void.
Nordenfelt V Maxim Nordenfelt Guns & Ammunition
25 years. Anywhere.
: Nordenfelt was a gun-maker with a world wide reputation. When he sold his gun making bus for a huge profit, he agreed not to set up a competing business anywhere in the world for 25 years. After 3 years, Nordenfelt wanted to start work again and as gun-making was all that he knew, he went to court to remove the restraint clause, claiming it was too wide and therefore unreasonable.
- Decision : Because of the Clm's world wide reputation, the restriciton was not unreasonable. The Def co was likely to suffer huge losses if the Clm set up a competing, and they would never have paid such a huge sum of money if they thought this could happen. Restraint reasonable and valid.
Esso Petroleum V Harpers Garage
4 and 21 years.
: Harper owned two garages and entered into two agreements with Esso whereby Harper agreed to sell only Esso petrol in return for a loan from Esso to refurbish his garages. The first agreement was to last 4 years and the second one 21. Three years later, Harper decided he wanted to cancel both agreements as he wanted to use another supplier. Esso refused to release him from the agreement so he took the case to court to cancel both contracts.
- Decision : The 21 year long agreement was unreasonable, and this restriciton was void. However the 4 year agreement was reasonable and thus enforceable.
Goldsoll V Goldman
2 years. UK, US, France.
: Def sold immitation jewellry bus to Clm. Most of the business was conducted through mail order in the UK. The contract of sale stated the Def would not "Be involved in the sale of real or imitation jewellry for 2 years, anywhere in the UK, France or USA". Def breached agreement and Clm sued for BOC.
- Decision : Restraint too wide in geo area and in scope (Clm only sold imitation jewellry). Clm was trying to protect his bus from present and future competition. However the clause remained valid, with the help of severance: Be involved in the sale of real or imitation jewellry for 2 years, anywhere in the UK, France or USA.
The Law of Contract
- There will be no contract unless the parties who are making the agreement have the legal capacity to enter into the contract.Indeed the law considers that certain people need protection to ensure that they are not persuaded to make unsuitable contracts and therefore certain rules apply when the following people enter into a contract- minors
- - someone who is drunk
- - anyone suffering from a mental disorder
In all other cases there must be genuine consent
so that the agreement is entered to freely.
Atlas Express Ltd V Kafko Ltd
Atlas Express Ltd V Kafko Ltd
: Kafko ltd secured a contract with a company, agreeing to provide them with a specified quantity of food, weekly. Kafko then entered into a contract with Atlas Express, a trasnport company, whereby the goods would be collected at an agreed time each week and delivered. After a while, Atlas Express realised it had underpriced the job and when their driver showed up one week to collect the goods, he presented a new contract to Kafko Ltd which included a price increase. The driver would not load the goods until the contract was signed. Kafko Ltd's manager signed the new contract and the goods were delivered but when Kafko received the invoice from Atlas Express, they only paid the original agreed upon price. Atlas Express sued for BOC.
- Decision : Def's signature had only been obtained by duress/pressure. He would not have signed had he not been afraid to lose the deal with the other company. Def did not have freedom of choice and the new contract was thus unenforceable and invalid.
Discharge of a Contract
A contract is said to be discharged when neither party has any further legal responsibilities to perform. Discharge of a contract can happen in a number of ways:
- By performance
- As soon as each party ahs fulfilled his obligations under the contract, it is discharged.A party must do everything he has promised and part performance is no performance at all. This means no payments can be recovered unless the other party has accepted that work.Difference between part and substantial performance!Bolton V Mahadeva
- Hoenig V Isaacs
- By Agreement
- Contracts are entered into by agreement and thus, parties can also release each other by agreement. Parties can also agree in advance that occurence of a certain event will discharge the contract.
- By Breach
- If one party will not perform the contract as promised, the other party can sue for BOC and in addition, he is discharged from having to perform his part of the contract. If one party knows in advance that the other one will not perform his part of the contract, he can sue immediately.
- By Lapse of Time
- One cannot claim BOC for lapse of time, if no specific time clause is specified in the contract. If the time limit is not respected, the contract is discharged and the other party is entitled to sue for BOC.
- By Death
- If the contract involves the performance of personal services (painting a portrait, designing a house) then contract will be discharged if the person performing the personal service dies. In all other cases, the personal representatives of the deceased will be required to perfrom the contract.
- By Frustration
- Unexpected events may occur, which will make it impossible for one or both parties to perform the contract.
- Impossible to performTaylor V Caldwell
- Illegal to performRe Shipton Anderson & Co
- Radically different from what was agreed
- Contract may be based upon happening of specific event. If that event does not take place then the whole purpose of the contract is lost -> contract frustrated.Krell V HenryHerne Bay Steam Boat Co V Hutton
- Davis Contractors Ltd V Fareham
- Force Majeure Clauses
- A well drafted contract should include a Force Majeure clause which specifies what will happen if an event occurs which is beyong the control of the contracting parties.
Difference Between Part and Substantial Performance
- if a party has received the bulk of what was agreed, payment is due, even if final performance varies slightly from what was originally agreed.
- if only part of the work has been completed, there is no legal obligation to pay
What if one party has already carried out their part of the contract?
Money or property paid in advance may be recovered
A party who has incurred expenses on the contract is entitled to payment
Money due to be paid is no longer payable and work to be carried out does not have to be completed
- Where one party has gained a benefit from work done before the frustration, the other party may be awarded an amount which the court considers fair and just
- eg: half built house
Bolton V Mahadeva
Bolt le chien électrique. Chauffage=électricité.
- Facts: Clm contracted a central heating system into the Def's home, promising that it would make the home considerably warmer. When the job was completed, the house was less warm than before and fumes came from the system, which had not properly been installed. Def refused to pay. Clm sued for BOC.
- Decision: Contract had not been substantially completed, only part of it was. The part performance was not accepted by the other party so the Clm was not entitled to payment.
Hoenig V Isaacs
Isaac est dans la Bible. Bible=livre=bookshelf
- Facts : Clm was contracted to decorate and furnish a flat for the Def but in doing so, he caused damage to a bookcase and a wardrobe door which had to be fixed and replaced. Def refused to pay contract and Clm sued for BOC.
- Decision : Contract had been susbtantially performed - defects were superficial and easily remedied. Def was in BOC for failing to pay : liable. Def had to pay (contract cost - repair and damage costs.
Taylor V Caldwell
: In return for payment, Def agreed to let Clm use the Music Hall and Gardens to hold a few concerts. Shortly before the first concert, the Hall was accidentally burnt down. The Clm, who had to refund all the tickets, sued for BOC.
- Decision : Contract was frustrated, as it became impossible to perfrom. Def not liable.
Taylor. Taylow swift -> singer
Re Shipton Anderson & Co
: During the war time, Clm contracted to purchase a large consignment of wheat from Def, to be delivered on an agreed date. Shortly before delivery, the Gov passed an emergency law requisitioning all wheat. Clm asked the court to determine whether this affected their existing contract.
- Decision : Agreement was not impossible to perform, but was illegal. No BOC, but contract frustration.
Anderson. Der ander son. Can't eat wheat.
Krell V Henry
: Clm owned a room overlooking the proposed route of the Coronation procession of Edward II. Def entered into an agreement to rent out the room for the purpose of viewing the procession as it pased. The procession however did not take place due to the King's illness and Def refused to pay the rental. Clm sued for BOC.
- Decision : Both parties knew WHY Def had hired room so although it wasn't impossible to perf, King's illness made it radically different from what was intended. Contract frustrated.
Henry -> Prince
Herne Bay Steam Boat Co V Hutton
: Clm agreed to hire a steamboat to the Def so that the Def could take paying passengers to see the naval review which was assembled for the purpose of the King's coronation. The steamboat was to follow the Royal boat around the harbour as Kind Edward II reviewed his fleet. King got sick, couldn't make it, Def no longer wanted steamboat and refused to pay. Clm sued for BOC.
- Decision : Naval fleet was still assembled and could be viewed (all that was missing was the King) so contract was not frustrated. It was not radically different from what was intended.
Davis Contractors Ltd V Fareham
: Fareham employed Davis Contractors to build a fair amount of houses for them at a fixed cost. During the course of the contract the builders experiences serious difficulties with shortage of skilled labour and building materials. The work thus took much longer to perform and cost more. Davis Contractors argued the contract was frustrated and that they were entitled to be paid on a quantum meruit basis.
- Decision : Mere hardship or inconvenience is not enough for a contract to be frustrated. It is not impossible to perform, or radically different from what was intended. Not frustrated.
Fareham. Ham is far, resources are far, lack of material.
Monetary compensation awarded in order to place the injured party in the same position as he would have been had the contract been properly performed. If no losses have been suffered by Clm, then he will be awarded nominal damages of £1 - this recognises there has been a BOC and the Def will usually be required to pay the legal costs.
- To assess amount awarded, courts apply rules established in the following
Hadley V Baxendale
- As a BOC may have unforeseeable consequences it is important that the law imposes some limits on the amount of damages that can be recovered.
- Victoria Laundry V Newman Industries
- A party who suffers loss as a result of a BOC must take all reasonable steps to mitigate his loss -> mitigation. If not he will only be entitled to nominal damages.
- Brace V Calder
- Court order imposed on the other party in order to stop him from acting in BOC. Injuction will not be awarded if the court feels an award of damages would be satisfactory.
Araci V Fallon
- Court order requiring the party who is in BOC to perform the contract as agreed. Particularly useful in cases where someone is purchasing a unique product, and would rather have it than receive compensation.
Any party who refuses to comply with a court order would be considered in contempt of court and could face a fine or even imprisonment.
- SP will not be awarded if damages is considered satisfactory.
- It will not be awarded if:- the Clm himself has behaved badly
- - where personal services are involved: it would be wrong to force someone to work for another against their will
- - it would cause excessive hardship to the Def
Hadley V Baxendale
: Clm was a miller who engaged the Def, a transporter, to take a broken mill part to the manufacturers so that they could repair it. Def delayed delivery and as a result, miller was unable to operate his mill so he lost profits during the period of the delay. Clm sued Def claiming damages caused by the BOC.
- Decision : Court stated Def would only be liable if :
- - it would be obvious to a reasonable man that the mill would remain unusable while the mill part was being repaired OR
- - the Clm had fully explained the circumstanes to the Def so that he was aware that the mill was unusable without the part
- None of these circumstances existed:
- - miller may have had a spare part
- - miller had not explained situation to Def
Damage claimed was too remote and couldn't be recovered.
Had lee way to say he NEEDED the piece ASAP
Damages can be recovered if...
1 ...they were from a loss which arose naturally from the BOC, in the usual course of things
2 ...they were for a loss which was reasonably within the contemplation of the parties when they made the contract. Damages which were not anticipated by the parties are said to be too remote and cannot be recovered.
Victoria Laundry V Newman Industries
: Defs agreed to deliver new boiler to Clm by agreed date but were 22 weeks late in doing so. Clm sued for BOC and claimed
- 1 - loss of normal business profits during the delay period
- 2 - loss of profits on a specialist dying contract which had been due to complete during the period of the delay, and was unable to happen because of the missing boiler
- Decision: Clms could recover normal business profits because they arose naturally from the BOC. Having not informed the Def about the dying contract, they could not recover those losses. Def did not know that his breach would cause such a substantial loss. This dmg was too remote.
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