Final Contract Analysis
Note: This is a two-part assignment that consists of two different contract analysis scenarios. Please answer both scenarios on one document, and upload it to Blackboard.
Contract analysis scenario one-damages determination: Alfred and Barbara own adjoining farms inDry County, an area where all agriculture requires irrigation. Alfred bought a well-drilling rig and drilled a 400-foot well from which he drew drinking water. Barbara needed no additional irrigation water, but in January 1985, she asked Alfred on what terms he would drill a well near her house to supply better-tasting drinking water than the county water she has been using for years. Alfred said that because he had never before drilled a well for hire, he would charge Barbara only $10 per foot, about one dollar more than his expected cost. Alfred said that he would drill to a maximum depth of 600 feet, which is the deepest his rig could reach. Barbara said, “OK—as long as you can guarantee completion by June 1, we have a deal.” Alfred agreed, and be asked for $3,500 in advance, with any further payment or refund to be made on completion.
Barbara said, “OK,” and she paid Alfred $3,500.
Alfred started to drill on May 1. He had reached a depth of 200 feet on May 10 when his drill struck rock and broke,
plugging the hole. The accident was unavoidable. It had cost Alfred $12 per foot to drill this 200 feet. Alfred said he would not charge Barbara for drilling the useless hole in the ground, but he would have to start a new well close by and could not promise its completion before July 1.
Barbara, annoyed by Alfred’s failure, refused to let him start another well. On June 1, she contracted with Carl to drill a well. Carl agreed to drill to a maximum depth of 350 feet for $4,500, which Barbara also paid in advance, but Carl could not start drilling until October 1. He completed drilling and struck water at 300 feet on October 30.
In July, Barbara sued Alfred, seeking to recover her $3,500 paid to Alfred, plus the $4,500 paid to Carl.
On August 1, Dry County’s dam failed, thus reducing the amount of water available for irrigation. Barbara lost her apple crop worth $15,000. The loss could have been avoided by pumping from Barbara’s well if it had been operational by August 1. Barbara amended her complaint to add the $15,000 loss.
In a minimum of a 1,000-word contract analysis, discuss Barbara’s suit against Alfred. What are Barbara’s rights, and what damages, if any, will she recover?
Cite any direct quotes or paraphrased material from outside sources. Use APA format.
Contract analysis scenario two-remedies determination: Mundo manufactures printing presses. Extra, a publisher of a
local newspaper, had decided to purchase new presses. Rep, a representative of Mundo, met with Boss, the president of Extra, to describe the advantages of Mundo’s new press. Rep also drew rough plans of the alterations that would be
required in Extra’s pressroom to accommodate the new presses, including additional floor space and new electrical
installations, and Rep left the plans with Boss.
On December 1, Boss received a letter signed by Seller, a member of Mundo’s sales staff, offering to sell the required number of presses at a cost of $2.4 million. The offer contained provisions relating to the delivery schedule, warranties, and payment terms but did not specify a particular mode of acceptance of the offer. Boss immediately decided to accept the offer and telephoned Seller’s office. Seller was out of town, and Boss left the following message: “Looks good. I’m sold. Call me when you get back so we can discuss details.”
Using the rough plans drawn by Rep, Boss also directed that work begin on the necessary pressroom renovations. By December 4, a wall had been demolished in the pressroom, and a contract had been signed for the new electrical installations.
On December 5, the President of the United States announced a ban on foreign imports of computerized heavy
equipment. The ban removed—from the American market—a foreign manufacturer that had been the only competitor of Mundo. That afternoon, Boss received an email from Mundo stating, “All outstanding offers are withdrawn.” In a
subsequent telephone conversation, Seller told Boss that Mundo would not deliver the presses for less than $2.9 million.
In a minimum of a 1,000-word contract analysis, discuss the following questions: Was Mundo obligated to sell the presses to Extra for $2.4 million? Assume Mundo was so obligated. What are Extra’s rights and remedies against Mundo?
Case analysis 1
Ever since man started living in social units, he has been engaging in economic activities in an attempt to improve his living standards and meeting his daily needs and demand. One of the core characteristics of his economic activities is entering into agreements and contract with his neighbors and partners to complete a certain task for a small fee. Therefore, for centuries and decades, people have been engaging in both written and spoken agreements, particularly one concerning employment, sales or residency that is intended to be enforceable by law. Notably, for a contract to be legally enforceable, it has to contain the five essential elements of a contract that include an offer, acceptance, consideration, capacity, and intention (Dawson, Harvey, Henderson, & Baird, 2013). According to the law, any legally binding contract must provide for damages in the case of physical harm caused by either of the parties in a contract or when one of the parties fails to honor their promises and end of the bargain.
Breach of a contract is a legitimate reason for activity and a kind of common wrong, in which an authoritative assention or an anticipated trade isn’t respected by at least one party to the contract. Therefore, in the case given, it is correct to state that Alfred breached his contract with Barbara when he failed to drill the well as per their agreement. Regardless of the cause of the delay, Alfred had an obligation of doing everything within his powers to ensure that by 1st June he was through with the well (Furmston, 2017). Therefore, Barbara was entitled to damages caused by the breach of contract by Alfred. The innocent party in a contract has a right to file a lawsuit to seek a legal remedy for the damages caused. However, it is worth noting that the type and form of damages awarded in a lawsuit are based on the nature of the claim filed by the innocent party. According to the law, the court of law has the mandate to award compensatory harm for not fully executing the terms of a contract. An award for damages for breach of contract is to indemnify the injured person with the sum of money for the loss as a result of the breach. This means that Barbara can sue Alfred for the $ 3500 she paid him for the drilling, the $ 4500 she paid Carl for drilling another well and the $ 15,000 loss as a result of the reduced amount of irrigation water. According to the case provided, Barbara would have saved her apple crop should Alfred have completed the well before 1st August. Therefore, she was entitled to claim compensatory damages as a result of all the loss incurred in the process because of the breach of contract (Furmston, 2017).
Compensatory damages refers to the amount the measure of cash offered in a common action by a court to indemnify a person for the harm , disadvantage or damage endured because of the illegal direct of the other party of the other party in a contract. Compensatory damages primarily help to put the plaintiff back to the original financial position before the breach of contract. The primary intention of this damage remedy is to make the plaintiff whole again. Therefore, to make Barbara whole again, Alfred had to pay a total amount of $ 23,000. There are two types of compensatory harms that incorporate expectation harms that are proposed to cover what the non-breaking party in an agreement anticipated that would get from the agreement and the consequential damages planned to repay the on-rupturing party for backhanded harms separated from the legally binding misfortunes (O’Sullivan and Hilliard, 2012). The level of evidence as to various consequential harms is constantly higher than that of direct harms. Notwithstanding, Barbara has the burden of demonstrating that the harms are not the proximate result of the rupture, but rather they were additionally sensibly predictable or inside the consideration of the agreement at the season of the agreement.
To calculate the amount of damage entitled to the non-breaching party, the court of law needs to:
Determine the amount of money the innocent party would have gained had the contract has been completed. Therefore, in this case, the court has to determine the amount of cost Barbara incurred as a result of a breach of contract. From the case provided, it is easy to point out that Barbara incurred the initial cost that she paid Alfred to drill the well, incurred an extra $ 4,500 that she paid Carl to drill another well as well as losing $ 15,000 worth apple crops as a result of lack of irrigation water (Davies, 2016). According to her, had Alfred completed the well by 1st August, most, if not all her crops would have been saved as she would have had enough water to irrigate her plants. In the case of Hadley v. Baxendale, the breaching plaintiff sued the defendant to recuperate not just the immediate costs that were episode to the charged rupture, yet additionally to recoup the expenses and misfortunes that were involved with the alleged breach. Therefore, Barbara has a right to sue Alfred not only to recover the direct cost incident to the breach but also to recover her crops that were lost as a result of the breach (Davies, 2016).
The court has an obligation to determine where Barbara now stands. Before arriving at the final judgment and determine the amount of damage that Barbara is entitled to, the court has to determine what the innocent party lost and has yet to regain. Consequential damages are often calculated on the basis of the amount of money lost by the non-breaching party. Therefore, Barbara has to prove in the court of law that she, directly and indirectly, lost as a result of the alleged breach (Furmston, 2017). Additionally, she has to prove that she is yet to regain the lost money from the breach.
Finally, the final decision is only made when the court calculates what it would take to bring the non-breaching party from where she currently stands, to where she would have been had the other party held their end of the bargain. Therefore, the court of law has to calculate the amount of money needed to ensure that the plaintiff is uplifted to the initial financial position that she would have had the contract been completed (O’Sullivan & Hilliard, 2012). Considering that Barbara has gained nothing from the contract, it is therefore correct to state that Alfred needs to compensate her $ 23,000 to fully compensate her and ensure that she is back to her initial financial position.
Case analysis 2
The business environment is full of contracts between entities and persons. While coral contract can be utilized, most organizations use formal written agreements while engaging in operations. Notably, the well-written agreement gives an opportunity for the organizations and individuals have a legal document highlighting the expectation of both parties in a contract and how the breach of contract by either of the parties can be solved. Several forms of remedies can be used by an organization in the case of breach of contract between parties. Some of the notable remedies that exist in an organization include damages, specific performance, rescission or restitution (Dawson, Harvey, Henderson, & Baird, 2013). However, it is worth noting that in the courts of limited jurisdiction, the primary remedy awarded to the non-breaching party in a court of law is damages. Giving the case study in this scenario, it is easy to point out that equitable remedies will be the right and the appropriate form of remedy for the extra newspaper. According to the law of the country, there are major categories of remedies that can be awarded to the non-breaching party in a contract and they include legal and equitable remedies. Legal remedies allow the innocent party in a contract to recover monetary damages incurred while the equitable remedies are actions and activities of the court of the law aimed at resolving the breach of contract or disputes in a contract (Dawson, Harvey, Henderson, & Baird, 2013).
In the case provided, it is worth noting that despite the fact that Extra publishers incurred the initial cost of freeing up the room to set up space for the new presses, legal remedies may have little, or no effect compared to the full execution of the contract. As a result, the court of law should award the newspaper company the equitable remedies to ensure that the company is fully compensated. There are three basic equitable remedies at the disposal of the courts of law to ensure that breach of contracts or disputes in a contract is fully resolved (Hallebeek & Dondorp, 2010). These remedies include:
Specific performance – this is the court order given to the breaching party, in this case, the Mundo manufacturers to completely perform their part of the bargain on the basis of the contract. Given the facts of the case, the Mundo manufacturers had initially agreed to sell the new presses for 2.4 million. This means that the company had an obligation of honoring their promise and end of the bargain to see throughout the contract. Therefore, the abolishing of their main competitor in the market should not have changed the terms of the contract, and the company would have gone further to deliver the new presses as initially agreed. However, their attempts to increase the cost of the presses to 2.9 million can be considered as a breach of contract which warranties a specific performance remedy from the court of law (Hallebeek & Dondorp, 2010).
Contract rescission – this form of remedy gives an opportunity for both parties in a contract to negotiate new terms by rescinding or canceling the old or the breached contract. In such circumstances, a new contract may be written which more clearly address the distinct needs and demands of the contracting party. According to the law, the non-breaching party in the contract should communicate its intention to cancel the existing contract by exercising its right to terminate the contract. Therefore, in the case given, Extra publishers have the right to cancel the contract of purchasing the new presses for 2.4 million after the Mundo manufacturers hiking the prices to 2.9 million (Beale, Bishop, & Furmston, 2008). As a result, Extra may seek to lay down the new terms for a new contract or go ahead a purchase the presses from another company.
Contract reformation – in this remedy, the court creates a platform where the contracting parties are given an opportunity to rewrite the old contract in a manner that reflects the real intentions of each contracting party in a more precise manner. However, this remedy requires the contracting parties to have a valid and working contract so that it can be re-written to capture the new intentions of the contracting parties (Witte, 2007). Notably, contract reformation can only be applied to situations and events where there was a mistake or misrepresentation regarding the contract.
Given the nature of the contract between the Extra publishers and the Mundo manufacturers, it is correct to state that specific performance would be the suitable remedy for the Extra publishers. Notably, specific performance is often used in the court of law, particularly when other remedies such as monetary compensation cannot be used. According to the provisions of the specific performance and Replevin, the actual property and not its monetary value must be transferred to the plaintiff in dispute. Therefore, Mundo manufacturers have an obligation of delivering the new presses to Extra publishers at 2.4 million as the original price in the contract. Notably, the only way the court of law can remedy this case is by ensuring that the original contract is executed since monetary compensation cannot be applied in the case. Moreover, according to the Uniform Commercial Code (UCC), the purchaser has a privilege of replevin for merchandise recognized to the agreement if after the sensible exertion he can’t impact cover for such products (김영주, 2013). In any case, the official courtroom can just authorize particular execution if the fundamental contract was reasonable and impartial. As indicated by the laws of the nation and UCC, other commodities that the courts have found to support specific performance include, but not limited to art, custom-made goods and goods short in supply. Therefore, the court should order the Mundo manufacturers to see out their contract.
Beale, H. G., Bishop, W. D., & Furmston, M. P. (2008). Contract: Cases and materials. Oxford: Oxford University Press.
Davies, P. S. (2016). 26. Compensatory damages. JC Smith’s The Law of Contract (DRAFT), 390-423. doi:10.1093/he/9780198733539.003.0026
Dawson, J. P., Harvey, W. B., Henderson, S. D., & Baird, D. G. (2013). Contracts: Cases and comment.
Furmston, M. P. (2017). 21. Remedies for Breach of Contract. Law Trove. doi:10.1093/he/9780198747383.003.0021
Hallebeek, J., & Dondorp, H. (2010). The right to specific performance: The historical development. Antwerp: Intersentia.
O’Sullivan, J., & Hilliard, J. (2012). Remedies I: compensatory damages. The Law of Contract, 377-413. doi:10.1093/he/9780199644803.003.0017
Witte, J. (2007). The reformation of rights: Law, religion, and human rights in early modern Calvinism. Cambridge: Cambridge University Press.
김영주. (2013). The Seller’s Right to Cure in the Uniform Commercial Code. KOREA INTERNATIONAL COMMERCIAL REVIEW, 28(2), 5-33. doi:10.18104/kaic.28.2.201306.5