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Australian Contract Law Assignment

Question

Group Assignment Question
Gareth operates a car hire and event organization company. He had entered in to a profitable contract with two tour operators in Melbourne i.e Visit Victoria and Peninsula Tours. The tour operators use the cars for taking their high-end customers on a sightseeing tour of Victoria’s top tourist attractions. He is also expanding his business. Over the course of the contract the following events happen.

  1. His contract with Visit Victoria requires him to provide eight cars every day in order to take visitors to tourist spots along the Great Ocean Road corridor. After two months, Gareth realises that the rising cost of operating the fleet has made it impossible to continue to provide the cars without incurring losses. He approaches Visit Victoria and informs them that he will be unable to deliver all the cars required starting from the following day. On the following and subsequent dates, Visit Victoria are expecting an influx of visitors and it would be impossible for them to make alternative arrangements to pick up visitors from the airport and take them on tour. Given this, Visit Victoria agrees to make $50 additional payment per car per day if Gareth agrees to continue to provide the cars. Gareth agrees but Visit Victoria refuses to pay when invoice is sent after the service was rendered. Is Visit Victoria under obligation to make the extra payment? What if the expected travellers are unable to come to Melbourne due to an eruption of a volcano which made air travel impossible? Discuss.
  2. The following happened in regards to the contract with Peninsula Tours. The agreement stipulated the provision of five cars with drivers every day. Due to resignation of drivers and breakdown of some of the cars, Gareth informed Peninsula Tours that he can only provide three cars per day while he recruits additional drivers. Gareth goes ahead and gets the cars fixed and hires additional drivers. He spent nearly $7000. However, after two months Peninsula Tours demanded payment of compensation for the two cars not provided totalling $1200. Is Gareth under legal obligation to pay the compensation? What if Peninsula Tours changes its mind and decides to take the three cars only after Gareth had spent considerable amount of money for fixing the two cars and hiring drivers? Discuss.
  3. In addition to his tour operation business, Gareth also owns an event organisation business. One summer he organised a music concert at a winery in Yarra Valley. For this purpose he hired a Melbourne based Event Rental Pty Ltd to provide large tents, portable stage, electrical sound systems and marquees. Two days before the event, a car delivering the equipment was involved in a serious accident and the delivery items were destroyed. The singer refused to sing given the substandard sound system that Gareth brought at the last minute from a neighbouring wine estate. Julie who travelled from inter-state for this occasion to celebrate her birthday is seeking a compensation for the disappointment she suffered in addition to refund. She is seeking $1000 for the disappointment and a refund of $800. Discuss the rights and obligations of the parties in light of the law.

Answer

Brief Facts: In the present case, Gareth who operates a car hire and event organization company had executed a contract with a tour company i.e. visit Victoria in Melbourne. It is furthermore submitted that the tour companies use their car for picking up their esteemed customers for sightseeing of Victoria’s top tourist’s attractions. As per the agreement between Gareth & Visit Victoria, he needs to avail eight cars per day to visit the tourist spots and Great Ocean Road corridor. But after two months, Gareth realizes that due to rising in prices, it is not possible for Gareth to provide the cars at the decided rate and for this purpose he met Visiting Victoria and informed them that he will not be able to provide the cars due to the losses incurred by him. But as Visit Victoria expecting the increase in customers agrees to make payment of $50 per day per car if car owner continues to provide the services. Car owner, i.e., Gareth agrees to the same, but when the invoice was sent to Visit Victoria, they refuse to make the payment after taking the services.

Australian Contract Law: That from the facts above and circumstances, the issue for consideration arises is whether the Visit Victoria is under the obligation to pay the extra amount after they agreed to make $50 additional payment per day per car. That from the facts above it is prima facie established that both the parties entered into the legally enforceable agreement(Carter, 2014). Under § 2-701 of Uniform Commercial Code, the remedies are given specified for the breach of the contract by any of the party. It is pertinent to mention here that the rights and obligations of both the parties could be determined by the terms and conditions of that contract. From the given facts and circumstances, there are express terms in the contract which are written in the contract at the time of signing the contract(Wright, Ellinghaus and Kelly, 2014). For the kind perusal, the express terms is defined as those terms which the parties have agreed to complete their contract. It is furthermore relevant to mention here that as per the agreed terms between both the parties, Gareth is required to provide eight cars per day at the decided rate but during the course of business it came to the knowledge of the Gareth that it results in loss to him and in this regard he informs Visit Victoria(Doris, 2014). To resolve the issue, Visit Victoria agrees to pay $50 additional for per car per day, this is known as the Collateral contract under the terms of the Australian Contract Law. The idea of collateral contract might be understand as the agreement where the amount is an entry into other contract and it is co-exists side by side with the large contract. A promise that could not exists in the principal agreement may be enforced as a collateral contract, as clearly exampled by Lord Moulton in Halibut, Symonds & Co v Buckleton: That a collateral contract usually takes the face of a unilateral contract. This promise is usually in the form of doing something in return for anything else. The offer by one party and the acceptance by the other party to the agreement is the original intention of the first contract which is the part of the record. The something in return of the collateral contract is the assurance to enter into the master agreement.

It is collateral to the master contract, but at the same time each has its individual autonomous existence, and they did not differ in respect of their possessing to the total character and status of a agreement. The collateral terms are those which could be considered during the business and the terms and conditions were of collateral agreement will be added later on(Doris, 2014). It is furthermore relevant to mention here that two essential requirements should be fulfilled to show the existence of the valid and legally binding collateral agreement. The first essential requirement is the person representing should have the intention to promise the legally binding and the second essential requirement is the person to whom represented should have entered into the main contract by the statement(Hesselink, 2015).
In the present given case, Gareth represented the Visit Victoria that due the production of cars he has to suffer loss and Visit Victoria in the expectation that their work will increase and they have no more further arrangements, agreed to pay $50 additional per day per car which forms the collateral contract as it was the intention of Gareth and the promise was the part of the main contract(Grundmann, 2011). It is furthermore relevant to mention here that it is up to the courts to hold that whether the collateral contract was in existence or not. As in the case of JJ Savage VsBlakney (1970) 119, CLR435, High Court of Australia held that the collateral contract was not in existence and the intention of the parties was not there.
Remedies: It is submitted that where the terms of the contract have breached, then the aggrieved party is entitled to the compensation from the other party. Under the common law remedies, the aggrieved party can seek the equitable remedies for the breach of the specific performance or can seek the injunction of the contractual breach, but if both these are not available then it is the discretion of the court to award the reasonable damage or compensation as the matter of right to the aggrieved party to contract. As per § 2-701 of Uniform Commercial Code, the remedies for breach of the collateral contract are not impaired (Schwartz and Scott, 2003). It is furthermore submitted that it is the well-settled law that the remedy available for the breach of the collateral contract is not the same as like of the main contract. But the party aggrieved from the breach of the collateral contract can take up the matter before the appropriate court and the court if found that the plaintiff has the prima facie case, can order the defendant to pay some compensation or damages for the breach of the collateral contract. So, from the facts above and circumstances, it is prima facie established that the Visit Victoria was expecting the influx of visitors but due to an eruption of volcano the tourist could not come which results into the inflation in the business of the Visit Victoria. It is submitted that it is prima facie established that the Visit Victoria had agreed to pay $50 additional per day per car but refused to pay after that which itself proves that the Visit Victoria had breached the terms of the contract and liable to pay compensation as well as damages to Gareth.
Conclusion: In the end it is concluded that a collateral contract is one that is a subsequent agreement that relates to the master agreement. It is used to insert an purpose that the goods purchased by the claimants must reflect the statements made before the contract came into force as to their durability and quality.That though there is not the specific remedy under the Uniform Commercial Code and Australian Contract law for breach of collateral contract but it is up to the courts to decide the remedy for the breach of the collateral contract.?
References
Carter, J. (2014). Good Faith in Contract: Why Australian Law is Incoherent. SSRN Electronic Journal.
Doris, M. (2014).Promising options, dead ends and the reform of Australian contract law. Legal Studies, 34(01), pp.24-46.
Doris, M. (2014).Promising options, dead ends and the reform of Australian contract law. Legal Studies, 34(01), pp.24-46.
Grundmann, S. (2011).The Future of Contract Law. European Review of Contract Law, 7(4).
Hesselink, M. (2015).Democratic contract law. European Review of Contract Law, 11(2).
Schwartz, A. and Scott, R. (2003).Contract Theory and the Limits of Contract Law. The Yale Law Journal, 113(3), p.541.
Wright, T., Ellinghaus, M. and Kelly, D. (2014).A Draft Australian Law of Contract. SSRN Electronic Journal.

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