Fulfilment of Obligations for a Contract

Fulfilment of Obligations for a ContractJacks purchase of the machine from Jim of Agricultural Supplies Ltd is one for a specific purpose. The contract with ASDA volition no doubt reap substantial reward. The machine is a fundamental part of that agreement, as Jack gougenot fulfill his obligations without it. The importance of the machine being able to mother vegetables that comply with the harm of the contract with ASDA was brought to the attention of Jim at the time the contract was entered into.The question of whether Jack can recover anything beyond the price of the machine subsequently it fails to deliver will initially depend upon the interpretation of the exclusion clause. The contract specifically excludes liability for any consequential loss whatsoever. This would include the loss of make to be suffered by Jack as a result of ASDA summarily terminating their agreement. Such terms are however subject to the Unfair Contract damage Act 1977, and more specifically s. 31, and the test of reasonableness contained within s. 11. There is a standard requirement that the term is fair and reasonable2 barely what amounts to this will be a question of fact in each case. Not only will it realise at the extent of what the clause is attempting to exclude, but also the talk terms position of the parties. As both are essentially acting in the course of a business there is a suggestion that there is an correspond footing and the greater the equality, the more likely that an exclusion clause will be considered reasonable3.What is fair to infer from the facts of this case, is that Jack is not an experienced businessman with an reason as to the operation of a clause that would exclude liability. He may well have noticed its presence, but requires firm clarification as to what he can actually recover in the issue of a fall apart. It is Jims response that leads to the exclusion clause probably becoming unenforceable. The clause is attempting to limit the liabili ty of Agricultural Supplies Ltd but Jim, a company Director contradicts this position and assures Jack that any consequential losses will be covered in the event of a breach. S 11(1) UCTA 1977 states that the term may be considered reasonable having regard to the circumstances go to bedn to, or in the contemplation of the parties when the contract was made. It would be acrimonious in this case to deny Jack the ability to rely upon Jims assurances. Certainly there is a strong argument that Jims rumor will become a term of the contract, overriding the earlier exclusion clause. It was the parties true intention and to allow the exclusion clause to stand would not only be unreasonable, but an inaccurate reflection of that intention4. Assuming indeed that the exclusion clause itself does not prevent a claim in principle for losses beyond the defective machine, we can consider the issue of broken gain ground arising from the agreement with ASDA.It has traditionally been the accepted practice of discernment of damages in the area of contract, that lost(p) profit following a breach are subject to tests of causation and mitigation. turn the general rule in contract law is to put the claimant in the same position as if those terms had been fulfilled5, it is still necessary for the Court to assess such damages in monetary terms. In Jacks situation he has an expectation interest which is defined as the benefit the claimant expected to receive from the completion of the promised performance of the other partys obligation, but which were in the event prevented by the breach of contract committed by the defendant6. The difficulty here is that while there is a definable loss i.e. the profit from the contract with ASDA, there is no knowing how long that contract would continue for or how much Jack would receive per annum. Where significant loss has been sustained, the Courts will look to the available evidence to assess quantum7. But whether this alone would suffice i s debatable. The difficulty is causation to what extent was this breach of contract the effective or dominant seduce of the loss8?The case of Headley v. Baxendale (1854)9 laid down the rule regarding recovery of losses that were allegedly too remote. In modern terms it is stated to be A shell or kind of loss is not too remote a consequence of a breach of contract is, at the time of contracting (and on the assumption that the parties actually foresaw the breach in question) it was within their reasonable contemplation as a not unlikely result of that breach10. It would for certain appear therefore that such contemplation was well within the mind of both Jack and Jim at the time of entering into the contract. Indeed, Jack showed Jim a copy of the agreement with ASDA and his statement that Agricultural Supplies Ltd would see to it that Jack is compensated for any loss he incurs certainly seems to suggest an acceptance of the types of loss i.e. future profit, which Jack would now tr y on to recover.The recent judgment of the House of Lords in Transfield Shipping Inc v. Mercator Shipping Inc (The Achilleas) (2008)11 has however thrown such assumptions wide open. This case concerned the hire of a transfer for a certain period. The defendant failed to return the ship on time and as a result, the claimant lost a contract with a third party. magic spell the defendant accepted that in the trade compensation would have to be paid, the disputed that they were liable for the loss of profit under the second contract. The arbitrators at firstborn instance and the Court of Appeal12 found for the claimant. The House of Lords however reversed that decision finding for the defendant.The issue of assumption of duty was at the forefront of the Lords considerations in this matter. While the defendants accepted that some losses would be sustained for which they may be liable, the Court felt that the particular kind of loss was not reasonably contemplated. As Lord Hope of Craig head stated13a party cannot be expected to dare responsibility for something that he cannot control and, because he does not know anything about it, cannot quantify. It is not enough for him to know in general and on open-ended terms that there is likely to be a follow-on contractWhat has been established by the case is a second limb to the test in Headley v. Baxendale. A claimant will not necessarily recover losses that were not unlikely to slip away in the usual course of things, if the defendant cannot reasonably be regarded as having assumed responsibility for losses of the particular kind suffered14. No longer can it be said that such losses were likely, probable or foreseeable alone, the particular type of loss must have been contemplated by the defendant and he nevertheless accepted the risk in the event of a breach. While this issue of a certain type of loss is not a impudent phenomenon15, the combination with the test in Headley v. Baxendale has redressed the scope of re covery in contract cases and particularly the issue of remoteness of damage. Baroness Hale16 has referred to this extension as adding a novel dimension to the way in which the question of remoteness of damage in contract is to be answered. What this case has done is establish a negligence type assessment for causation in contract. While the issue of remoteness, and whether the kind of loss was not unlikely to occur remains a question of fact, the issue of whether it was reasonable to assume the defendant accepted responsibility for that particular type of risk is a question in law17. Whether this will assist Jack is not clear.It has been suggested that the effect of The Achilleas upon exchange of Goods Act 1979 claims (as is Jacks) may have relevance. S. 52(2) of the SGA 1979 states thatThe measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the sellers breach of contract.If such loss of profit from the agreement with A SDA is to be not unlikely to occur, then Jack may have to establish that Jim assumed responsibility for that particular type of loss. In Chitty on Contracts18 it is submitted that the House of Lords see their decision as a se parate rule when applicable to sale of goods contracts. It should be illustrious that the facts of The Achilleas related to shipping contracts and the House noted that lack of case law considering this specific issue. While not limited to this area of law, the decision as foreign to other areas i.e. sale of goods, needs to be watched with trepidation.Ultimately there are reasonable prospects for Jack to secure damages beyond the cost of the machine. It can certainly be argued that Jim accepted the risk of the particular type when he was referred to the contract with ASDA. The loss of profit resulting from the termination of that agreement is not the only possible monetary disadvantage Jack could suffer i.e. damages claimed by ASDA, returned goods through poo r quality etc. This coupled with the uncertainty as to the duration and net mensurate of the contract makes quantum an almost impossible task. It should be noted that such losses have been recovered in Victoria Laundry (Windsor) v. Newman Industries (1949)19, and more specifically for lost profit arising out of defective equipment under a contract of sale in H Parsons (Livestock) Ltd v. Uttley Ingham Co Ltd (1978)20. However the particular circumstances of Jacks contract are quite unique, and the possible extension of the remoteness rule will not appear to be a help.BIBLIOGRAPHYChitty on Contracts Thirteenth random variable 2008, Sweet Maxwell PublishingPeel, E. Remoteness Revisited, L.Q.R. 2009, 125(Jan), 6-12Poole, J. Casebook on Contract Law, Ninth Edition 2008, Oxford University PressMcKendrick, E. Contract Law Text Cases and Materials 3rd Edition 2008, Oxford University PressTamblyn, N Damages Under String Contracts for Sale of Goods, J.B.L. 2009, 1, 1-14Rose, F. Blackston es Statutes on Contract, Tort Restitution 2008-2009, Nineteenth Edition 2008, Blackstone Presswww.westlaw.co.uk as accessed on 22nd December 20081Footnotes1 UCTA 1977 s. 3(1) This section applies as between contracting parties where one of them dealson the others written standard terms of business Chester Grosvenor Hotel Co Ltd v. Alfred McApline Management Ltd 1991 56 Build LR 1152 UCTA 1977 s. 11(1)3 Watford Electronics Ltd v. Sanderson CFL Ltd 2001 All ER (D) 290 CA4 This section can be expanded upon to include extra cases on exclusion clauses in any text book. There is also an argument for rectification by mistake i.e. Joscelyne v. Nissen 1970 2 QB 86 (CA)5 Golden straits Corp v. Nippon Yusen Kubishika Kaisha 2007 UKHL 126 Chitty on Contracts Thirteenth Edition, Volume I, at para 26-0027 Tai Hing Cotton Mill Ltd v. Kamsing Knitting Factory 1979 A.C. 91, 106.8 Ibid fn 6 at para 26-0329 1854 9 Ex. 34110 Ibid fn 6 at para 26-054 see also Koufos v. C. Czarnikow Ltd (The Heron II ) 1969 1 A.C. 35011 2008 UKHL 4812 2007 Lloyds Rep 55513 Ibid fn 11 at para 3614 Ibid fn 6 at para 26-100A15 Victoria Laundry (Windsor) v. Newman Industries 1949 2 K.B. 52816 Ibid fn 11 at para 9317 Ibid at para 22 per Lord Hoffman18 Ibid fn 6 at para 26-100G19 Ibid fn 1520 1978 Q.B. 791