Contract & Agency Law, Case Study Example

In regards to the case at hand, Land-O Pte Ltd (Land-O) formed a contractual agreement with caterer Soto Pte Ltd (Soto), which agreed to provide the main course, and then used D-Light Pte Ltd (D-Light) to purchase fruit sorbet desserts. Land-O and Soto formed a contract for six months at a discounted rate in which a minimum of $500 was set per month. Land-O schedule 2 months of services, when Land-O made the first order of $500 worth of desserts in which  Land-O lodge a complaint on the quality of the desserts supplied by D-Light, the contracted party from Soto. D-Light however brushed off the complaint, leaving Soto unsatisfied, in which they cancelled the order for Land-O on April 20, (the second order). While Soto decided to purchase from another vendor, in which Land-O endorsed, they invoiced D-Light for the extra $200 they paid for purchasing a better quality dessert. D-Light in returned issued an invoice for Soto for the $500 for the March 5th order, then another $600 for the April 20th order. However Soto only paid D-Light $300, on the March 5th order, which left the balance on the invoice of $800. In addition, Soto notified D-Light that it will be terminating their contract.

Based on the sum of events, Soto had the right to deduct the $200 order for March 5th because D-Light made a misrepresentation of their services. Although D-Light argued that it was their usual quality, the client was unsatisfied. Based on the legal principles of the law of contracts, D-light had a material breach of contract (non-performing their obligated duties). Their “standards” of providing full was not upheld to Soto, in delivering to the Land-O. Based on the Law of Contracts in Singapore, it follows the Law of Restitution in which, the Soto can claim, “for compensatory damages, which focus upon the damage suffered by the claimant, rather than the unjust enrichment of the defendant” (Practical Law, n.d). Using the case, StozniaGdanska SA v Latvian Shipping Co [1998] 1 WLR 574, the promisor (D-Light) failed to perform their contractual duties of providing quality food that matched the description to their packaging and services. Soto can provide claim that they had to contact another vendor on considerably short notice, which resulted in them paying over the sum, which was originally agreed on with D-Light.

Soto can also look to the term of commercial law in which deal with the sale of goods, where satisfactory quality implies that the condition in which the goods (dessert) is of satisfactory quality. Based on the claims from Land-O, the quality of the food was not satisfactory. Under section 14(2A), “goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking into account any description of the goods, the price (if relevant) and all other relevant circumstances” (Singapore Law, 2014). Based on this description Soto and Land-O believed that the goods were not in good condition, and since they are supposed to be sorbet, but instead tasted not as specified, and the description did not match the packaging. Under section 9.3.13 of Singapore Contract Law, the innocent party (Soto) has the right to terminate the contract for the breach of the condition of the desserts. The buyer (Soto) can reject the goods (dessert) and terminate the contract. This based on the description, and the unsatisfactory quality. Even if Soto chose not to terminate the contract they can invoke the breach of warranty in which would provide them the right to claim damages ($200). (Singapore Law, 2014)

Soto has a right to terminate the contract between D-Light, although there is not termination clause, because not only was there was misrepresentation of the materials, but also a breach of contract. A breach of contract is an illustration of “common wrong” wherein a lawfully obligatory understanding is not respected as it ought to be as stipulated in the agreement or any consented to an arrangement between two gatherings. At the point when the other party of the assertion does not satisfy his sworn guarantees to the next gathering, a break of agreement could be documented against the non-performing gathering. In matters of business, a break of agreement could be executed at whatever point the non-performing gathering puts the behavior and the exercises of the business at danger because of rebelliousness to the assertions. In the region of a break of agreement, there are two sorts: the real breach and the expectant breach. The previous happens when one gathering in the understanding does not satisfy his desires on the due date. A real breach likewise happens when one gathering just satisfies fractional work of what was conceded to. Then again, an expectant breach happens when one gathering proclaims that they may not have the capacity to perform what was concurred upon in the agreement on a set date. The other party can document for brought about harms when the breach is proclaimed. The contract can be discharged through the performance, due to the D-Light not did not fully perform their contract by providing satisfactory goods, and food that matched the description. They are entitled to claim for damages, and the ability to terminate the contract for breach of contract. The non-performance equals to a repudiatory breach in which Soto will be released from their obligations.

The rule established by Cutter v Powell, in which the D-Light would be paid upon completion, however they did not satisfactory complete their obligation, therefore, Soto is not obligated for payment. D-Light and Soto can agree while there was partial performance; Soto paid them, minus the damages that were made in Soto having to find a replacement business rapidly. Soto chose to notify D-Light that it would be terminating the contract, and not making any future orders. In their options, they can send a letter of rescission, in which they provided reasonable notice before the April 20th date, and have provided reasonable time between further commitments and find replacement business. If the contract has a remedies clause than D-Light would be forced to replace the “defective items”, or in this case provides satisfactory dessert to the Soto, for Land-O. Soto  can make a claim to damages in which D-Light breached the contract that were substantial, in which they could have suffered the loss of the client, Land-O, and the D-Light failed to mitigate the loss. When there is a breach of contract, the goods can be forfeited, and the contract can be terminated. Soto can withhold payments to D-Light due to a breach of contract, in which they choose legal arbitration, or take D-Light to civil court.

Question 2:

In the case of Benny, he entered into a contract with Born-Free Pte Ltd (Born-Free). However; the company begin to downsize, and terminated Benny’s services. Based on their agreement for termination, in which Benny would not directly or indirectly compete with Born-Free. In the question the legality of enforcing the non-competition agreement, in theory it is enforceable when the organization terminates the employer. In practice, it is liable when there is an additional compensation, such as a severance package, or other proceeds. The contract between the parties requires consideration made on both sides. Based on the facts of the summary, the three agreements made was that Benny would vacate his position at a specified date, not enter competition indirectly or directly for 6 months from the date of the termination. The agreement also stipulated that, Benny would not join any construction company in Singapore that specifically specialized in environmental friendly residential projects for 6 months. Patsystems Holdings Limited v Neilly serves as a reminder from the High Courts that consideration needs to be placed on restrictive covenants. Based on the facts of the case, Mr. Neilly was previously employed by Patsystems, in which his contract included a clause that would prevent him from joining a competing organization for 12 months. He agreed with the terms of his contract, and seven years later provided his resignation for three months’ notice. He told Pasystems that he would be joining a competitor in which Patasystems claimed that Neilly was in anticipatory breach of contract. (Dolye Clayton, 2012) Patasystems then fired Neilly based on his actions of repudiatory and anticipatory breach of contract. In applying to the High Court to enforce a non-competition clause, the High Court decided to dismiss Patsystem’s claim. The High Court stated based on the contract being void because, “12 months was a significant period of time in which to keep an employee out of the market in his chosen field. In this case, it went further than was reasonably necessary to protect Patsystems’ interests” (Doyle Clayton, 2012) Other inferences placed on the enforcement of non-competition clause is consideration placed on justifying the lengthy restriction, in which it needed to protect its interests. The clause can only be forced if the breath of the geographical area and the length of the post-termination are justified. In this case, Benny was restricted from working with any construction companies in Singapore or anywhere else. This is beyond the scope of the company, and cannot be legally enforced because it does not consider the field of interests of the ex-employee.

The remedies that Benny has under law deals with restrictive covenants. Benny has the right to appeal to the High Courts on the basis that Born-Free placed a blanket restriction, that was considered “over the top” in restricting him from joining any construction company anywhere in and outside Singapore. They can only be enforceable if they are reasonably necessary for protecting their proprietary interests. In the case of Benny, that can uphold the portion in which restricts him from joining a construction company that focuses on environmentally-friendly construction for residential projects around their geographical area. However, they cannot enforce beyond their geographical scope, and a step that the courts have taken to ensure that there is not any unreasonable restrictions placed on the ex-employee.

If the court does choose to find in favor of Born-Free, in which there was a repudiatory breach in contract, in which the courts can believe that due to the relatively short period can be enforceable to protect the business’s interests. If Born-Free feels that Benny has breached his post-termination restrictions they can seek an injunction, in which to prevent Benny from forming his company. It can also show that the company has suffered economic loss, can request that Benny pay legal costs, along with his legal fees, and can be entitled to sue for damages in order to cover the perceived loss that Born-Free has sustained. This can be substantiated following the cases of  Thomas v Farr Plc, and Intercall Conferencing Services Limited v Steer, in which the High Court sided with the employees in granting a contemporary injunction for a period of six months. If Benny has in his possession any documents, customer or pricing lists, can force Benny to hand back the documents. The court can choose to sever some of the agreed requirements in order to prove that Benny was in breach of his contract and restrictive covenant.

In the case, Derrick the son of John, the owner of First Class Education Pte Ltd (FCE), was given the job as an executive manager in the Score Well center, which is one of the centers that is licensed by FCE. John informed his son that in no means was he authorized to sign any agreement on behalf of FCE. Derrick chose to enter into a contract with Free-Rider Pte Ltd, in order to purchase a motorcycle, in which he gave Free-Rider the deposit of $2,000. In analyzing the summary facts, the contract between FCE and Free-Rider Pte Ltd is not binding. This is due to the mistake of the contract law, or in this case, mistake as to the identity. “Mistakes as to the identity are generally induced by fraud in that one of the parties is claiming to be someone who they are not” (E-Law Resources, n.d). In doing so, Derrick attempted to make a contract inter praesentes (face to face), where Free-Rider dealt with Derrick face to face, irrespective of the identity that was assumed by Derrick. The contract can be void, because Free-Rider intended to deal with an employee of FCE, Derrick knew of this intention, and it was of great important. When shown the business card that said Derrick was an employee of FCE, he took the perceived reasonable steps to check the identity.  Under the law of agency, the validity of the contract is questioned because, “On the other hand, if the agent signs off as “manager” or even “agent” without any other qualifying words, the issue will arise whether the agent was acting in a representative manner or if the words used are only intended to describe who the agent is or what he does, in which event the agent may be held to have contracted personally” (Singapore Law, 2014). This is found in Phillips v Brooks (1919), and in recent cases. However, the contract can be also found valid since Derrick gave his signature on the contract, and knew of his intentions. In the operative mistake, the consent is given for both parties, the contract can be valid, if the third party believes  that the person invoking the representation of the principal is who they say they are. Free-Riders is relying on not only the appearance of Derrick, but also on the appearance of a business card that states that he is an employee or executive manager of FCE. However, Derrick knowingly made the contract with Free-Riders under the presumption that he was an employee of FCE. The case of a mistake can be fundamental to the terms of the contract can make the contract void. This is seen in Shogun Finance v Hudson (2003) UKHL, Cundy v Linday, and other cases. The direction in which the High Courts are taking is to make the contract void from the start.

It is clear that Derrick has knowingly breach his contract with Free-Rider by entering into a contract in which he misrepresented his identity. Derrick made a contractual agreement with Free-Rider in which an offer was accepted, and a deposit was given with the exchange of goods. Derrick was not acting as the principal agent for FCE because he was not authorized to act on the company’s behalf. Even if Free-Riders believed that Derrick was acting as the principle agent for the company, Derrick has still breached his contract due to the acting on behalf of the company with actual authority. This will leave Derrick accountable or liable for the principal’s resultant loss and the liable for a breach of contract with a third party under the implied warranty of authority. Derrick has not only breached the contract with Free-Riders but also breached his duties with FCE. Since Derrick chose to act on the behalf of FCE, he breached the warranty of authority, which is implied in the contract. The falsely made the representation to Free-Riders that he was acting on the behalf of FCE, and the contract can be enforced, or Free-Riders can choose to bring a claim against Derrick or FCE, for any damages, such as in the case of Fong Maun Yee v Yoong Weng Ho Robert (1997).

In the case of Derrick acting as FCE, the third party enforcement of the contractual rights is not generally permitted.  Since John is the owner, he acts as the only representative for the company in a contract. Section 8.7.1. states, “as a general proposition, only persons who are part (i.e. privy) to a contract may enforce rights or obligations arising from that contract” (Singapore Law,  2014). Although Derrick was hired to work as an employee to a subsidiary, he cannot act as a representative for FCE. In the case of enforcing the contract between Free-Riders, under the contract law, Derrick cannot bring any legal action, since he breached the contract, Free-Riders is not obligated to perform their contractual obligations nor return his deposit. John does have the option to enforce the agreement with Free-Riders if all parties agree to bind themselves to the contract, or release themselves from the obligations of the contract. By initiating a contract of release they can terminate the original contract, but have a mutual release of their obligations that Free-Rider can request the motorcycle back, or restitution. John can also choose the remedy in which discharge the contract because of a breach. Using Derrick’s breach of contract as evidence, John can seek to terminate the contract based on a  unilateral mistake to identity in which, Derrick’s identity is a material to inducing the contract. The contract was signed fraudulently, and therefore can show in court where the contract should be voided.

What John can do to prevent future problems to implicate in his employee contracts, which no employee can act or is authorized to act on the behalf of the company, or establish a legal relationship with third party. In ways to prevent any future problems from employees, John can provide apparent authority, or move to revoke apparent authority in order to protect the interests of the organization. In establishing an agent/principle relationship, John must invoke the duty of loyalty into the contract in which requires that the agent acts solely in the best interest of the principal. This includes abstaining from conflicts of interest, self-dealing, and other abuses to the principal, in gaining personal advantage. The agents are not authorized to use the assets or corporate property for their corporate authorities or pursuits. If the agent chooses to violate this duty conducting in theft, conflicts of interest, or acceptance of secret commission they will violate their duty of loyalty, and therefore breach their employee contract. The employee or agent could also be liable for fiduciary duty, in which the employee would be liable for damages in the loss of profits. John should also use the duty of care in which to advise the fiduciary duty to his employees, in limiting their authority, in which implies that employees that act as agents has a limited amount of authority from the principle. The relationships are dependent on good faith, and they must act again in the best interest of the principle. In agents, he must also ensure that each employee know the type of relationship with the job.

References

Commercial Law: Chapter 8 The Law of Contract. (2014). Singapore Law. Retrieved from http://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-8

Commercial Law: Chapter 15 Law of Agency. (2014). Singapore Law. Retrieved from http://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-15

Commercial Law: Chapter 19 Restitution. (2014). Singapore Law. Retrieved from http://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-19

Doyle Clayton. (2012). High Court Rejects Attempt to Enforce 12 Months Non-competition Covenant. Doyle Clayton. http://www.doyleclayton.co.uk/blog/posts/high-court-rejects-attempt-to-enforce-12-months-non-competition-covenant

Remedies for breach of contract. (1999). Practical Law. Retrieved from http://uk.practicallaw.com/7-101-0603?q=&qp=&qo=&qe

Restitution. (2014). Practical Law. Retrieved from http://uk.practicallaw.com/1-107-7154