Contract and Rescission

Contract and Rescission

Based on the information provided in the case study, the party that breached the contract is Grove Theatre. The agreement agreed upon by the two parties in the case study lacked an express warranty clause. An express warranty clause is a guarantee that the item bought or sold will meet a specified level when considering the product’s reliability and its quality. In a situation where the product fails to meet level of security and quality defined in the contract, the manufacturer or the company that sold the item should either choose to fix the product or replace it and no additional charge will be required.

Grove Theatre continually used a faulty air-conditioning system while withholding the payment of the product. Acme Manufacturing Company has a valid argument since the contract agreed up by the company and Grove Theatre left no room for complaints that the system was not up to standards or was defective. Furthermore, the system should have been returned upon the discovery that it was faulty. However, Grove Theatre decided to use the system, which they had not paid for during the next three months. Hence, the party, which had the right to rescind the contract, is Acme Manufacturing Company. Furthermore, Acme managed to perform three repairs to the system even though the other party had breached the contract by failing to pay the stipulated amount for the product or return the faulty product to the manufacturing company (Leitzel, 1989).

As one of the members of the Jury, my decision would be in support of Acme Manufacturing Company. In the contract, the company managed to provide a product detail clause, which showed the maximum temperature of its air-conditioning system. Furthermore, this company stipulated in its sales contract that no express warranties were made regarding the product. Hence, Grove Theatre did not have an express warranty that required Acme to fix or replace the air-conditioner system if it is faulty. However, the company went out of their way to make repairs on the system even though they had not received any payments. Furthermore, Grove Theatre’s argument relies on the fact the temperatures where the theatre has been established are usually high. Hence, an air-conditioning system needs to provide cooling and make sure the theatre’s patrons are comfortable. However, if the cooling required surpasses the maximum temperature stipulated in the contract, the air conditioner in question cannot be regarded as faulty. Overall, there was no alleged warranty or express warranty as established in the contract agreed upon by the two parties (Donley, 1937).

The right to rescind the contract will fall on Acme Manufacturing Company. The primary reason as to why Acme is entitled to the right is because Grove Theatre breached the contract. Grove withheld the payment of the product and used it for three months. Grove Theatre should have returned the product as soon as it realized that it was faulty or should have asked Acme to come and collect the system. In the three months that Grove used the system, Grove asked Acme to repair the air conditioning system thrice even though no express warranty had been provided in the contract. The company repaired the system, yet no payment had been received for the product. This shows some of the benefits Grove Theatre received from the breach of the agreement (Black, 1916).  The law, when considering a problem of this nature, should provide a clause which requires the seller to provide an express warranty for such a product. An express warranty will make sure the seller takes care of the repairs for a stipulated period. Another clause that can be added will focus on damage to the product as a result of the buyer’s actions. Such a clause will leave the buyer liable for the damage incurred by the product. Hence, the seller will not be obligated to perform any repairs to the product.

References

Black, H. C. (1916). A Treatise on the Rescission of Contracts and Cancellation of Written Instruments (Vol. 1). Vernon law book Company.

Donley, R. T. (1937). Rescission For Breach of Seller’s Warranty. West Virginia Law Review, 43(2), 5.

Leitzel, J. (1989). Reliance and contract breach. Law and contemporary problems, 52(1), 87-105.