Essay on "Law of Contract"

Essay 12 pages (3399 words) Sources: 7

[EXCERPT] . . . .

Consequently if one party to the contract has performed his obligations under the contract and other has yet to then in such a case a unilateral discharge is necessary and since there is no release by the non-performing party then such a discharge to be effective it must be under seal.

Upon the breach of contract by one party then the innocent party is entitled to the following remedies in law: treat the contract as being in existence and sue for damages for breach of warranty or treat the contract as discharged and sue for damages for breach of conditions.

Remedies for breach of contract

Upon the breach of contract by a party to the contract the innocent party is entitled to the following remedies in law; action for damages, action for specific performance, action for injunction, rescission and "quantum meruit"

In action for damages, the innocent may bring an action to court seeking damages for the breach of contract i.e. unspecified amount of money. Important to note is that this remedy is a common law remedy where a party is compensated in monetary terms.

In action for specific performance, the innocent may also bring an action for specific performance, which is a remedy in the nature of a court instructing the other party to specifically perform his or her part of the contract, this is an equitable remedy. Antony (2004, 232-320) noted in his studies that it is also a discretionary remedy that may not be granted in contracts involving minors, contracts to lend or to be lent, contract whose performance the court cannot supervise and where damages would be an adequate remedy. But this remedy is usual granted in contracts for the sale of land, contracts for the sale of rare items and contracts for the subscription of shares.

In action for injunction, this is a remedy in the nature of an order of court instructing the other party not to perform or continues to perform an act that is resulting in injury to other party, it is also an equitable remedy and injunctions may be of two forms, either permanent injunction or temporary injunction.

Uniform commercial code (UCC 2 article)

First published in 1952, uniform commercial code is asset of uniform acts that have been entrenched into the constitution of the United States of America; these uniform acts were established with an aim of harmonizing the law of sales and other commercial transactions within the country. Harmonization of laws that govern sales was deemed to be important because of the nature of commercial transactions that prevail in different states of the U.S. It is however important to note that the UCC deals only with transactions involving personal property and real property.

The article 2 of uniform commercial code deals with sales i.e. sales of goods. Goods here include item that are personal property and identifiable at the time of carrying out a sale transaction, for example the sale transaction of computers and automobile is covered by article 2 while the sale of a real property like transfer of land is covered by article 9. The main area that article 2 governs in sales transactions are in the formation of contracts, the repudiation and breach of sale contracts.

Charles, Nathan and Harry (2007, 990-1009) in their studies are quoted saying that there are three fundamental principles that always applies in article 2 of UCC. The first fundamental principal is utmost good faith; this is to mean that all parties entering into a sales contract must deal with honesty when it comes to essential elements of the contract. The second fundamental principal that applies is conscience; this means that contract for the sale of goods must be fundamentally fair and if contrary to this the court of law may deem such contract as void or enforce the contract without including the clause considered to be unfair. The third fundamental principal is the distinction between merchants and non-merchants and in this case article has given much priority to merchants than non-merchants.

Doctrine of promissory estoppels

This is a doctrine in the law of contracts in which a promise that is non-contractual and lacks consideration is rendered as enforceable in the court of law to avoid injustice. The doctrine of promissory estoppels is applied when an injustice can be corrected by enforcing a promise that was otherwise unenforceable in the court of law because of lacking consideration. An example of such a case where this doctrine applies is where another party had relied on a promise which if deemed to be non-binding it will would be unfair to such a party.

Robert and Jody (2003, 98-140) in their studies enlisted some elements of the doctrine of promissory estoppels and they include; an implied or express promise, actual detrimental reliance by the promise, a detrimental reliance by the promise foreseeable to a reasonable person in the position of one making the promise and in the performance of a specific function an injustice can be avoided by enforcing such a promise.

Express warranty

An express warranty is created when a seller affirms a fact or a promise to the buyer pertaining to the goods they are transacting in, which can include the description of such goods, and as such this affirmation forms the basis of the sale bargain. This express warranty means that the goods shall conform to the promise or affirmation made earlier by the seller.

Charles, Nathan and Harry (2007, 989-1020) among other law practitioners, have noted that an express warranty can only be legally binding if the statement made is objective and specific. For example if a seller makes a statement that "this vehicle goes for forty miles per gallon" then such a statement is express warranty as it is specific and objective, but if the seller states that "this cargoes excellent mileage" then this is does not create an express warranty. On the other hand a sample or a model of product that determines if the buyer will purchase such a product and forms the basis of sale bargain creates an express warranty that the aforementioned product will conform to the sample or model of the product earlier shown. The court of law allows a buyer to return a product once purchased for a full return if it proves contrary to the express warranty earlier made.

Implied warranty of merchantability

Joseph (1999, 234-239) argued that in a sale transaction between consumer and merchant there is always an existence of implied warranty of merchantability, in that the consumer expects that goods bought will be fit for its' ordinary use. For example when buying a car from a dealer there is an implied warranty of merchantability warranting that the car will perform its' basic functions. However this promise does not cover every other thing that could go wrong after the car has been bought since things like breakdown do not prove that the seller breached the warranty of merchantability.

A breach of the implied warranty only arises when the consumer can prove that the aforesaid defect existed at the time of sale and a defect that occurs after the sale may have existed at the time of sale or not, and hence the liability of the merchant is only judged case by case.

Modification of implied warranties

The law governing the warranty of merchantability prohibits merchants who offer buyers a written warranty from modifying or disclaiming such implied warranties. This is translated to mean that however narrow or broad a written warranty is, the buyer will always receive basic compensation of the implied warranty of merchantability.

It is however important to note that there is one modification that is permissible on implied warranties. In the case of a merchant who offers a limited written warranty, he or she is allowed by the law to include a provision on the warranty that restricts the time frame of the implied warranty to the duration he has stated on the warranty. An example of this is when a merchant offers a one year limited warranty this means that he or she has limited the implied warranty to a one year period. However in the case of a full written warranty a merchant cannot limit the time frame of the implied warranty.

In scenarios where the seller is not the manufacture of the product being sold and doesn't warrant the product in writing he or she can disclaim the implied warranty, because the responsibility of the implied warranty lies on the manufacturer not seller. In such scenarios it is good business ethic to give buyers written warranties from the manufacture of the products.

Case example

Drennan vs. Star Paving Company

In this case Star paving who is a subcontractor submitted a bid for a public school construction project to Drennan a general contractor. Drennan on reliance to the bid made by Star Paving of seven thousand one hundred dollars… READ MORE

How to Reference "Law of Contract" Essay in a Bibliography

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