Company Law Australia
Q1. In this circumstances outline in the case which area of law provides Jamco with its most likely cause of action?
If a contract is a written agreement, any statement that appears in the writing is regarded as a term. In the same vein, any oral statement made prior to the signing of the contract and is not repeated in the written agreement will usually be regarded as a representation (Brown 2013, p. 180)
Jamco cause of action will be based on the exemptions to the rule of parole evidence. Jamco representative made the request (requirement) that the jars are made up of up to 10% recycled glass before the contract was signed. Such a statement will constitute representation. Should the statement made by the one party to the contract prove false, then the other party to whom the statement was directed may have a remedy, under the statute and common law, to rescind the contract (Thampapillai et al. 2015, p 23). In addition, the statement that the jar will meet the 10% recycled glass requirement was made by an individual with special skills and knowledge. In this light, the statement is deemed as a term. For example, in the Dick Bentley Productions v Harold Smith Motors (1965), the court ruled that the statement of the defendant constituted terms because he was an expert as a car dealer in the field. Dick Bentley knew a car dealer specializing in the prestige market for a number of years.
The defendant obtained a Bentley and recommended it to the claimant. He told him that the car had been owned by a German Baron and had been fitted with a replacement engine and gearbox and had only done 20,000 miles since the replacement. Mr. Bentley Purchased the car, but it developed faults. The defendant had done some work under the warranty, but then more faults developed. It transpired that the car had done nearer 100,000 miles since the refit. The question for the court was whether the statement amounted to a term in which case damages would be payable for breach of contract, or whether the statement was a representation, in which case no damages would be payable since it was an innocent misrepresentation and the claimant has also lost his right to rescind due to lapse of time.
Held: The statement was a term. Mr. Smith as a car dealer had greater expertise, and the claimant relied upon that expertise (Weitzenböck 2012, p 12)
In addition, Jamco can contend that there was an intention from both parties that the agreement be only partially written. In this case, the written agreement is not meant to set out all the terms agreed by Arnold and Jamco. Under the Australian commercial law, such extrinsic evidence of other terms is admissible before a court of law.
Q2. Assume that Arnold wants to prove what Grace said about Glassco jars containing upto10% recycled glass became an express term of the contract for the purchase and sale of the glass jars. Does it matter that no such promise was included in the written contract?
The provision of the sale of goods section 14 states that goods delivered to the buyer must be of satisfactory quality. In addition, and most importantly, if the buyer states that the goods are meant for a particular purpose, then there is an implied term that the merchandise are fit for that purpose (Brown 2013, p. 186). The buyers requirement was that the goods contained up to10% recycled glass so that they could withstand high temperatures. This crucial information was brought to the attention of the Grace, the representative of the company supplying Glassco jars prior to signing the contract. In this respect, it does not matter whether such a promise was included in the written contract. Although the only statement included putting down in writing in a written agreement are considered as a term, (parole evidence rule) statements made before the parties sign the contract are regarded as representation, and some types of representations constitute the terms under certain conditions. The assumption here is that if the parties, as important, do not perceive the statement when it is not included in the written agreement. Nevertheless, this is not always the case. Other terms (statements) may be admissible if there was the intention that the contract be only partially written.
Q3. Assuming what Grace said about the percentage content of recycled glass did become an express term of the contract, is this term likely to be treated by a court as a condition or warranty? Do the facts show that there has been a breach of this term?
If Grace states, that she would provide jars that with up to 10% recycled glass as an express term of the contract, then the term would be treated as a condition. A condition is a term of a contractual agreement that goes to the root of the agreement (McGoldrick 2012, p. 5). The express term that the jars will meet the percentage required is a condition of the contract that the jars (goods delivered) must meet the specification specified at the time of making the contract.
The supply of jars that have not met the specified requirement (10% content of recycled glass) is a breach of the condition. In this case, Arnold would have the right to treat the breach as repudiatory, which means that Arnold could opt to either terminate the contract or claim for damages.
Q4. Assuming that Jamco can establish a breach of warranty by Glassco, what remedies are available to them?
If Jamco can establish a breach of warranty by Glassco, Jamco may be entitled to claim damages for the breach of the agreement. In this case, the failure to meet the 10% content of recycled glass goes to the heart of the contract, meaning that Jamco cannot proceed with the contract since the breach leads to an immense barrier to operational activities. Jamco could, therefore, be entitled to terminate the contract altogether (McGoldrick 2012, p. 6)
Q5. Assume Glassco is in breach of a contractually binding promise that the jars were heatproof and that, as a result of this breach, Jamco is unable to bottle a batch of jam that has cost $5000 to make. Jamco offers to sell the whole batch to a biscuit maker at cost price, but the biscuit maker only offers $2000. If the jam had been bottled, the bottled jam would have been sold to retailers for $10,000.
In this case, Jamco would be entitled to claim damages, amounting to $8000 from Grassco. Evidently, Jamco would also have the remedy of terminating the contract since the binding promise to provide jars that were heatproof would be a condition that has to be met by Glassco. The remedies available to Jamco may oblige Glassco to first issue a default notice requiring Glassco to fulfill the breached condition within a specified period of time. But is Jamco opts to terminate the contract due to a breach of the 10% content of recycled glass by Glassco, Jamco will be entitled to recover the money paid to Glassco under the contract.
Q6. If Jamco were able to establish only substantial performance of a condition of the contract, rather than complete performance, what remedies are available to Jamco?
If Jamco was able to establish a failure to comply with the terms of the condition, it may not avoid recovery if there has been a substantial performance of the contractual responsibility. Where recovery is allowed for substantial performance, it is counterbalanced by damages for loss caused by failure to render complete performance. In this case, even though there is substantial performance, the causes of the Glassco Company deviate from the provisions of the contract.
In this case, deviation from the agreed terms was not accidental and it led to an immense difference between what Jamco expected from Glassco and what was delivered. In this vein, Jamco will receive the damages equal to a total loss incurred due to the use of jars that had not met the 10% content of the recycled glass.
Case Study Two: With reference to common law and relevant cases discuss the rights and remedies for Leo and Diana and HDFC Bank
A loan contract contains some elements of risks, especially whose repayment is pegged on gross income of the borrower. The loan contract specifies the entire important element relating to loan disbursement, interest rate repayment terms, and duration. In this case, Leo and Diana have been able to prove to the bank that their deposit and monthly income is adequate security for the loan. This means that should Leo and Diana run out of luck and lose their source of income, which serves as security for the loan, they are stuck with the consequences. They must either seek for new ways to pay for the loan or risk losing all the bank balances and security to the loan Thampapillai et al. 2015, p 46). A credit contract also sets out certain rights and obligations for the banks (lender) and for Leo and Daina (borrower), including what will happen if the bank and the borrower do not meet the end of their bargain (Turner 2014, p. 14). Leo and Daina seek for the discharge of the loan due to the perceived unfair terms of the credit contract. In this light, Leo and Daina can only result to the court process for determination of the whether the credit contract has unfair terms or not. The general rule is that the unfair term must be brought to the attention of the lender (HDFC Bank) before the contract was made. In this case, Leo and Diana did not bring the issue of the unfair terms to the attention of the bank before the contract was made.
HDFC Bank has numerous remedies, even though its actions will largely be guided by the terms of the credit contract. Under the law, The HDFC Bank has the right to recover the monthly loan repayment amount plus the interest on the loan from the Leo and Daina deposit (Thampapillai et al. 2015, p 46). In this case, the bank does not need to notify or ask Leo and Daina for permission before recovering the interest from the deposit.
In addition, if Leo and Daina refuse to continue making repayment of the loan, HDFC Bank can pursue two other courses. The Bank can claim repayment of the loan before a court of law, just like what any other lender would do in case the borrower defaulted on repayment (Shelly 2008, p. 181).
In this light, the bank will be seeking to enforce the preferred position for the bank in the ensuing event. This may encompass seeking to acquire the security interest, used to secure the loan. In this case, the Leo and Daina would not be called upon to make repayment of the loan, since the collateral would be used to cover the interest and loan. In the event that the collateral value is above what Leo and Daina had borrowed, the excess amount would be paid to them. In the same vein, Leo and Daina would remain liable for the deficit after the sale of the collateral used to secure the loan.
Brown, Fiona. 2013. ‘Outsourcing Law Firm Libraries to Commercial Law Library And Legal Research Services. The UK Experience’. Australian Academic & Research Libraries 45.3 (2014): 176-192.
McGoldrick, B. 2012. Condition Vs Warranty in a Contract. Jackson Macdonald. Retrieved from: http://www.jacmac.com.au/uploaded/News/publications/201204_Condition_vs_Warranty_in_a_Contract.pdf
Shelly, Marita.2008. ‘Commercial Activities and Copyright in Australian Universities.’ Education and the Law 20.3: 175-191.
Thampapillai, D., Tan, V., Bozzi, C., Matthew, A. 2015. Australian Commercial Law
Turner, C., Trone, J., & Gamble, R. (2014). Concise Australian commercial law.
Weitzenböck, E.M.2012. Law of Contract. Norwegian Research Center for Computers & Law