Breach of Contract Case Analysis

The Issue

The issue to be further analyzed in this paper is concerned with a breach of contract by one party, which led to the decrease of revenue incurred by the non-breaching party, Party A and Party B respectively. Party A purchased a car in a wholesale market for $15,000 and contracted to sell the car to Party B for $20,000. In Australian consumer law, when a vehicle is to be purchased, the customer may be asked to sign a contract that signifies the record of the agreement (or a part of the deal) between the buyer and the seller (Legal Aid Queensland, 2020).

In such contracts, it is essential that contract information is clear and concise in order for it to be legally enforceable, and for both parties to abide by it (Legal Aid Queensland, 2020). After being contracted to purchase the car, Party B refused to take its delivery, leading to Party A suing Party B for breach of contract. In this scenario, two significant issues are to be resolved. First, it is vital to determine what damages can Party A, the non-breaching party, claim against Party B. Second, in case if Party A sells the car for $2,000 cheaper to another buyer, it is necessary to consider whether it will be entitled to any damage claims. This problem is linked to the fact that the initial contract between Party A and Party B specified the price of the car as $20,000, and the seller had to lower the price after the breach of the contract to make at least some profit.

The Law

In Australian law, a cause of action for breaching a contract emerges when one party does not perform its obligations as specified by the contract. Once parties enter a deal, they are required to abide by its terms and provisions (Douglas, 2020). When any breach occurs from either party, the non-breaching party will accrue the right to claim damages; however, it may not always be entitled to an automatic right to terminate the contract (Davis, 2017). The Australian Consumer Laws apply nationally, allowing the parties to decide the terms of the contract; however, the rights under that consumer law can also apply to contracting parties.

The Law differentiates between four significant types of breaches of contract that occur the most. The first type is a material breach, which occurs when one of the main elements of the contract has not been provided or carried out as agreed. For example, when one party purchased a product online and was not sent that product, the latter party materially breached the contract. The second type is a minor breach, which does not necessarily lead to the immediate contract cancellation and can be remedied before an actual breach takes place. The third type is anticipatory breach takes place when one of the parties states that they are unable to fulfill their obligations based on the contract before they are due to do so. Finally, an actual breach occurs when either of the parties does not perform their side of the contract by the defined terms of the contract.

Once a contract between two parties is made, either individual will be breaching it if they do not abide by its terms or decide to change their mind and not perform their obligations by the contract. If either party commits such an act, there are several remedies available (Common remedies available for breach of contract cases, 2019). In particular, there are punitive damages intended for compensating the non-breaching party for any damage incurred as well as Court Orders for either requiring the breaching party to carry out their obligations or forbidding the party from committing such a breach (Owen Hodge Lawyers, no date). The types of remedy to be enforced depending on the nature of the contract and the kind of infringement itself.

Regarding compensation and settlement, the non-breaching party may sue for damages in order to acquire compensation for the adverse implications arising as a result of the breached contract (Contracts, no date). In case when there is no significant loss sustained, nominal damage may be awarded to recognize the infringement of a legal right (Owen Hodge Lawyers, no date). Liquidated damages occur when a contract explicitly mentions a particular amount that must be paid out by the party at the fault of a breach. Such an amount is either liquidated or becomes penalty damages. Unliquidated damages appear when there is no mention in the contract regarding the number of damages to be awarded to a non-breaching party, thus leaving the decision to the Court.

The Case

An example of the case to support the analysis is Francis Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321. In the case, it was decided whether the defendant was entitled to terminate the contract under its terms (Australian Contract Law, 2019). The burden of proof was associated with whether the terminating party breached the contract in order for the defendant to be required to pay damages to the plaintiff for the breach.

Application

Party A can claim either liquidated or unliquidated damages, depending on the type of contract, for Party B breaching the contract to purchase a car for $20,000. Therefore, he is entitled to compensation for any adverse implications caused by the contract’s breach. In matters that deal with car purchases, it is clear that when a party expresses interest in a car, they do not have to buy it. However, when a contract is signed between two parties, and there is a specified price for the vehicle stated on the contract, the buyer is obligated to purchase the car (Motor vehicle sales contracts and cooling off, 2017).

If to differentiate the type of breach that took place in the case represents an actual breach of contract, with Party B failing to follow up with their obligations and not performing their end of the deal with Party A. Therefore, as laid out in Australian Law, the breach of contract by Party B is punishable by damages for which Party A will sue. In case if the contract between Party A and Party B included a clause regarding the set amount that should be paid for damages in case of the contract breach, the breaching party will be required to pay that amount. If the contract did not include such considerations, then the Court will decide on the appropriate sum that would satisfy the demands of the plaintiff.

If Party A sells the car to another buyer for $18,000, there may be no damages to which he is entitled. Assuming that Party B compensated Party A for the breach of contract according to the Court ruling, there are no other damages to consider since Party B is out of the binding contract. Considering the fact that the car was initially purchased in the wholesale market for $15,000, Party A is still making a profit when selling it for $18,000. The case only applies to the compensation for any damage or financial loss caused by the breach of contract between Party A and Party B. The subsequent sales and contracts that Party A makes with other buyers bear no relevance to the contract breach issue. Only if Party A can prove in court that the breach of contract by Party B resulted in a decrease in the price of the vehicle, and if such connection exists, then Party B can be put at fault for the price decline.

Conclusion

If two parties have signed a contract that obliges one to provide a product or service and the other to purchase the said product or service, both obligations must be fulfilled. Therefore, the breach of contract by the party, which failed to fulfill their responsibility under the discussed terms, entails the eligibility of the non-breaching party to sue for damages. To be eligible for claiming damages for the losses that resulted from the contract breach, Party A should prove breach of contract in Court. In particular, Party A needs to show that the term of the contract existed and that Party B breached the said term. In the analyzed scenario, the breach of contract took place, which means that the party has to pay damages as decided by the Australian Court or pre-determined in the contract.

Reference List

Australian Contract Law. (2019) Cases. Web.

Common remedies available for breach of contract cases. (2019). Web.

Contracts. (no date). Web.

David, W. (2017). Breach of contract. Web.

Douglas, J. (2020). 4 types of breach of contract. Web.

Legal Aid Queensland. (2020). Buying a used car from a motor dealer: your legal rights. Web.

Motor vehicle sales contracts and cooling off. (2017). Web.

Owen Hodge Lawyers. (no date). Breach of contract. Web.