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Change Of Circumstances And Termination

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Change Of Circumstances And Termination

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Question:
Discuss about the Change of Circumstances and Termination.
 
 
Answer:

Introduction
The present study involves issue on the legal rights and obligations of the contracting parties based on the regulations of contract law considering the elements of offer and acceptance of contract. The assignment further covers the analysis of contract law elements on form of legal relationship, intention to create legal relationship, consideration, consent and legal capacity for Clara and Joseph together with the analysis of legal capacity by Edward or Marshall. The assignment also involves the discussion and analysis of termination of contract, situations for breach of contract as well as probable remedies available to the affecting parties as per the regulations of Australian Contract Law. For the purpose of analyzing the establishment of contract between the parties, it is essential to identify the type contract entered between the parties as per the regulations of contract law. 
The present situation associates with the issue of failure of contingent condition in the contract work from the point of contracting party, which caused Clara and Joseph huge loss in terms of renovating the house floor. It is stated that Clara and Joseph entered into contract with Marshall to install the floating timber floor at the rate of $40 per square meter. However, the quote presented by Marshall included the term “provider accepts no responsibility for defects in workmanship” that was accepted by Joseph and the work started on 14 February 2017. During the process of work, the room was found flooded due to the carelessness of Marshall since the tool bag placed over the outlet of drainage system. In addition, Joseph entered into the contract at cheaper rate to complete the work as soon as the structural issues are recovered. Accordingly, the present situation incorporates the issue of legal rights and obligations to Joseph and Clara for the occurrence of flood within the room that destroyed the under processed timber flooring.
According to the regulations of Australian Contract Law, the basic elements to bind a legal contract incorporate agreement, consideration, legal capacity, intention to create contract and certainty. In case any one of the basic elements is not present in the formation of contract, then the contract or agreement cannot be said to have formed as per the law (Austlii.edu.au 2017). In the present situation, contract between Joseph and Marshall incorporated all the basic elements with respect to agreement as the contract has been offered and agreed by both the parties against the consideration amounted to $40 per square meter. Further, both the parties, Joseph and Marshall considered to have capacity to enter in the legal contract in terms of legal age and sound mind. It has been noted that both the parties had intention to form the contract by incorporating certainty to complete the contracted work. Besides, consideration is the primary element to form a legal contract, which is a promise to provide something in return for a receipt of promise (Townley and Riazi 2014). Referring to the case of Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424, contract between Joseph and Marshall had been supported by the consideration amount therefore, the contract was legally formed.  
Offer and Acceptance are the most basic and important elements of a legal contract that contains several terms and condition offered by the contractor and accepted by the contractee. In order to form a legal contract, it is essential to express the willingness to form contract that may be offered by stating definite terms and in any form like letter, email, newspaper advertisement or fax (Barroso and Sthel 2015). The present case was similar to the decided case of R v Clarke (1927) HCA 47 CLR 227 in which court held that the reward could not be claimed by Clarke since the act was not performed in reliance to the contracted offer. In case of Joseph and Marshall, the contract was formed based on the agreement mentioning that the workmanship defects will not be responsibility of Marshall that was accepted by Joseph. In addition, the decided case of Helmos Enterprises Pty Ltd v Jaylor Pty Ltd (2005) NSWCA 235 stated the legal contracting parties are required to have intention to create the contract based on the commercial arrangements (Bayern 2015). In case of contract between Joseph and Marshall as well as the contract between Joseph and Edward involved intention to create the contract since, contract placed by Edward incorporated intention to complete the work against the consideration amount $38 per square meter. For a legal contract, it is essential to incorporate legal and genuine consent based on the reasonable grounds, which is referred in the decided case of Yerkey v Jones (1939) 63 CLR 6 (Ash and Cheesman 2016). In the present case, Joseph gave genuine consent to Marshall to complete the contracted work for the agreed amount as well as on agreed duration.
 
The contract further involves the issue of termination and breach of contract under the regulations of Australian Contract Law. As per the principles of contract law, the rule of common law exists against the perpetuities stating that all the legal contract should include the clause of termination based on the completion of work or expiry of agreed contract duration (Austlii.edu.au 2017). The contract automatically terminates if the contract work is completed or if the fixed time of contract expires (Zagenczyk et al. 2015). Referring to the case of Battery World Pty Limited v Heavenly Bound Pty Limited (2009) NSWSC 1309, court held that the contract was not terminated automatically since the work was not completed and the duration was not expired. Similarly, in the present case, contract between Joseph and Marshall was not terminated as the flooring was due to be completed while the contracted time did not lapse. However, the contract may be terminated by other ways that includes, expression of right, implied right and subsequent agreement under which the contracting party is required to provide notice. In addition, if any specific event occurred, then the parties have the express right to terminate the contract that may incorporate the termination of contract by way of breach (Han 2016). As per the regulations of Australian Contract law, a contract can be terminated for breach of any terms or conditions by conducting the appropriate test to examine the contractual essentiality (Austlii.edu.au 2017). Considering the case of Fitzgerald v Masters (1956) 95 CLR 420, court held that the contract party found to breach the terms of contract and the party was supposed to repay the contracted money.
In the present case, contract entered between Joseph and Marshall was not completed while Joseph terminated the contract alleging the failure in contract work performance of Marshall. Joseph contended that due the room was flooded due to placement of tool bag on the drainage outlet, which caused a portion of land was subsided while the floor was collapsed. Therefore, Joseph terminated the contract which formed termination by way of breach since the contract work and duration was still due. Similar to the case of Shevill v Builders Licensing Board (1982) 149 CLR 620, court held that contracting party was liable for the damages in the contracted work therefore. In the present case also, act of Marshall caused damage to Joseph and incurred heavy losses on part of breach of contract. Besides, Joseph did not accept any compensation amount as an apology from Marshall and eventually breached the contract. In view of the decided case laws and regulations of Australian Contract Law on breach of contract, it can be said that Joseph was liable to Marshall for breach of contract (Austlii.edu.au 2017). As the contract term offered by Marshall contained the condition “provider accepts no responsibility for defects in workmanship”, placement of tool bag on the drainage outlet could not be held Marshall’s responsibility (Fried 2015). Besides, Joseph had the right to claim for compensatory damages as the tool bag was Marshall’s property and he was responsible to place it appropriately. As the contract formed between Joseph and Marshall formed formal contract both the parties held liable as per the Australian Contract Law. Joseph was liable to breach the contract while Marshall was liable to incur contractual damage to the party due to lack of appropriate performance in the contract work. Accordingly, the remedy available to both the parties is to claim compensation for damages or the parties can claim award for specific performance and recession since the contract is a formal contract.
Conclusion
Considering the above discussion on the legal formation of contract It can be concluded that Joseph and Marshall were the contracting parties. Contract between Joseph and Edward could be considered as contract as it incorporated all the basic elements but as Edward did not start the renovation work, it can be said that the Joseph was not held liable to for breach of contract. Besides, contract between Joesph and Marshall was terminated by way of breach due to the contractual work damage hence both the parties held liable to compensate for respective damages. Joseph and Marshall can apply for the contractual remedy that may be received in the form of compensatory damages as well as compensation for specific performance.
 
Reference List and Bibliography
Andrews, N., 2016. Remedies for Breach of Contract. In Arbitration and Contract Law (pp. 279-333). Springer International Publishing.
Ash, A. and Cheesman, E., 2016. Employment: Post-employment restraint after repudiation of an employment contract. LSJ: Law Society of NSW Journal, (21), p.76.
Austlii.edu.au. 2017.Australasian Legal Information Institute (AustLII). [online] Available at: https://www.austlii.edu.au/ [Accessed 1 Feb. 2017].
BARMES, E., 2016. Remedies for Breach and for Wrongful Dismissal.
Barroso, L.A. and Sthel, L.P., 2015. The Role of Objective Good Faith in Current Contract Law: For a General Duty of Inter Partes Cooperation and Solidarity. J. Civ. L. Stud., 8, p.187.
Bayern, S., 2015. Offer and Acceptance in Modern Contract Law: A Needles Concept. Cal. L. Rev., 103, p.67.
Fried, C., 2015. Contract as promise: A theory of contractual obligation. OUP Us.
Han, S., 2016. Force majeure, change of circumstances and termination of contract. Journal of Law, Society and Development, 3(1), pp.31-44.
Hiscock, M.E., 2016. The Universality of Good Faith and Moral Behaviour: A Challenge for the Principles of Asian Contract Law. In Legal Thoughts between the East and the West in the Multilevel Legal Order (pp. 355-367). Springer Singapore.
Spitko, E.G., 2016. The Will as an Implied Unilateral Arbitration Contract. Fla. L. Rev., 68, p.49.
Townley, A. and Riazi, M., 2014. Analysis of authentic legal negotiation: Implications for teaching contract negotiation to undergraduate law students. International Journal of Language Studies, 8(4).
Zagenczyk, T.J., Cruz, K.S., Cheung, J.H., Scott, K.L., Kiewitz, C. and Galloway, B., 2015. The moderating effect of power distance on employee responses to psychological contract breach. European Journal of Work and Organizational Psychology, 24(6), pp.853-865.

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