Case Study on Contract and Sale of Goods

Case Study on Contract and Sale of Goods

A contract is an agreement that two or more people make, which is enforceable by law. Parties must fulfil several elements for a contract to be deemed as legal. One party must make an offer that expresses the intention to create a legal relationship, which should be accepted by another party. It should include a consideration, which is the payment given for a particular good or service. One of the most popular contracts is the Sale of Goods contract, which involves parties conducting business transactions, as was the case among Blackboard, PosterPLUS, and SEASTORM Containers Ltd. A breach of contract arises when either of the parties subject to it violates the implied or expressed terms. Drawing focus to the three companies stated above; one can identify the requirements for a legal relationship, conditions that lead to the breach of contract, and the remedies available.

Legal Relationships

A legally binding contract existed between Blackboard Pty Ltd and PostersPLUS Pty Ltd. In July 2018, they signed an agreement with the former as the seller to supply cast vinyl films to the latter for twelve months. It implied that both parties had agreed to the terms and conditions outlined in the contract.

A legal relationship existed between PostersPLUS, and SEASTORM Containers Ltd created through the sale of goods law, with the former as the manufacturer and the latter as the consumer. The Australian Consumer Law (2010) governs the transactions between both companies. It highlights several implied conditions. Firstly, PostersPLUS had the right to sell labels to SEASTORM Containers Ltd as they had acquired the material for them legally. Secondly, the goods ought to be reasonably fit for the purpose disclosed. By .

supplying labels to SEASTORM Containers Ltd, PostersPLUS implied that they were fit for the use and were of merchantable quality.

No legal relationship existed between Blackboard and SEASTORM Containers Ltd. Although both parties had business transactions with a mutual party, they did not have any direct sales. The first provision for the creation of a contract is an offer made by one party to another to fulfil a particular issue[1]Neither company made such an offer; hence they did not enter into a contract.

Breach of Contract and Damage Assessment

Blackboard breached the contract with PostersPLUS Ltd due to a false and misleading representation about goods. According to the Sale of Goods Act, the products should correspond to the description provided.[2]In this case, the former expected the latter to supply cast vinyl film, which is considered to be of high quality. It is durable and is expected to manufacture products that have a lifespan of five to seven years. However, the cast vinyl film that Blackboard supplied PostersPLUS with did not match the specifications as the labels they had manufactured for SEASTORM Containers Ltd using the film began to fade within months of production.

PostersPLUS did not breach its contract with SEASTORM Containers. The former was not aware that they had acquired low-quality cast vinyl film as it was entering the contract. Upon investigation was when it realized that Blackboard had used an insufficient amount of ultraviolet stabilizer, which reduced the lifespan of the cast vinyl. SEASTORM Containers filed one claim against PostersPLUS concerning 100 containers. The latter compensated the former with new labels worth $10,000.

The court must assess the damage that has occurred due to the breach of contract. Damages aim at restoring the plaintiff to the original position he was before the breach of contract.[3]While assessing the damage, the court should consider the total monetary loss that the breach caused. In this case, Blackboard supplied PostersPLUS with cast vinyl film worth $200,000. Although it sold more than 90% of the labels, it manufactured to SEASTORM Containers, and the company only filed one claim worth $10,000 for new labels to replace the defective ones. Afterwards, the company had $20,000 worth of the cast vinyl film remaining. Therefore, the total amount that Blackboard owes PostersPlus in damages is $30,000 (20,000 + 10,000) as it is the loss that the latter incurred. Since SEASTORM Containers did not claim the rest of the money for the labels sold, PostersPLUS retained the profit they made from those sales.

Blackboard Controversial Clause

The contract between Blackboard and PostersPLUS had a clause stating, “Blackboard gives no warranty that the goods are fit for any particular purpose.” The Australian Consumer Law (2010) defines a disclosed purpose as the particular purpose for which the consumer expressly or impliedly acquires the goods. According to the facts, Blackboard was aware of the product that PostersPLUS intended to manufacture using the cast vinyl film when signing the contract. Blackboard included the clause to absolve itself of any issue that may arise as a result of using the vinyl since the law gives one the right to sue a company for defective goods.

However, Blackboard breached the contract with PostersPlus as it supplied cast vinyl film that was not durable for labelling. According to The Australian Consumer Act (2010), the clause “Blackboard gives no warranty that the goods are fit for any particular purpose, ” is an unfair term to use against a consumer. It stipulates that a term of a consumer contract is declared void if it is unjust. It includes any clause that would be financially detrimental to one of the parties if relied upon in a court of law. In this case, the term was economically unfair to PostersPLUS because it prevents it from seeking compensation in case of defective goods. Blackboard failed to uphold transparency, which is necessary for a valid contract.  Since the Act nullifies that particular clause, PostersPLUS can sue Blackboard based in the provision that the goods Blackboard supplied were unfit for the intended purpose.

Conclusion

The law of contract and sale of goods are crucial elements in business transactions. A deal must fulfil several conditions for it to be legally viable. Companies should be whole keen entering into contracts to ensure that they are conversant with all the terms and provisions outlined to protect them from unfair conditions. Furthermore, it enables them to know the rights and remedies available to them in case either party breaches the terms of the contract. From the case described above, it is clear that PostersPLUS did not thoroughly go through the contract with Blackboard before signing it. Consequently, it resulted in the inclusion of a clause that was unfair to the former. In case of a breach of contract, the court reserves the right to assess the damages before awarding the plaintiff compensation.

 

 

 

 

 

[1]—the rule of law Institute of Australia, ‘Contract Law in Australia-2019’ (2019).

[2] Australian Consumer Law, 2010.

[3] Robinson v Harman [1848]