Remedies of contract breach

Topics: Contract, Contract law, Breach of contract Pages: 17 (5712 words) Published: March 25, 2014
Group A8
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Question 1
HowCan Pte Ltd enters into a contract of sale with Panda Ltd in China for the sale of perishable goods, F.O.B (free on board: i.e. buyer has to make the shipping and other arrangements).
Howcan Pte Ltd then gets SureCan Pte Ltd to transport perishable goods from China to Singapore. The ship is supposed to transit via Vietnam. The goods are shipped out of China, but due to improper planning on the part of SureCan Pte Ltd, they are wrongly dispatched in Vietnam and further, SureCan Pte Ltd has not bothered to remedy the situation.

Howcan Pte Ltd managed to trace the goods, but by that time, the goods have already gone bad. Howcan Pte Ltd is thinking of writing off its losses instead of suing SureCan Pte Ltd as the latter is in liquidation. However meanwhile, the liquidator of SureCan Pte Ltd wants payment for shipping the goods from China to Vietnam.

(a) Is SureCan Ltd entitled to any payment?

According to the general rule, one cannot seek payment from the other party if he has not completely performed his obligations, so the contract was not discharged by performance. In the case of Ocean Projects Inc v Ultatech Pte Ltd (1994), the defendants were engaged to transport the goods from Houston to Dumai by ship. They loaded the goods from Houston but, due to some reason, unloaded them in Singapore without going to Dumai. Since they did not complete the voyage, the court held that the defendants were not entitled to any payment for shipping the goods from Houston to Singapore. The same rationale applies in this case as well. Payment is conditional only upon complete performance. SureCan did not complete the contract and wrongly dispatched in Vietnam instead of Singapor. Therefore, in this case, SureCan is not entitled to any payment because it did not completely perform its obligation of shipping the goods from China to Singapore.

However, there are four exceptions to this general rule. If SureCan has fulfilled any one of the exceptions, it may nevertheless be entitled to some payment.
The first exception is substantial performance. If there is no complete performance, but there is substantial performance, the party performing may nonetheless be able to claim the contract price, less the cost of making good any omissions or defects in execution. As stated in the contract, SureCan needed to ship the perishable goods in proper condition from China to Singapore, by transit via Vietnam. Since the goods were shipped from China to Vietnam but were wrongly dispatched in Vietnam, there was no substantial performance as the goods did not reach its supposed final destination which is Singapore. Hence, Sure Can is not entitled to any payments under substantial performance.

The second exception is divisible contracts. Certain contracts may be divisible into stages, and after each stage is completed, the party performing will be entitled to payment. However, from a legal standpoint, there is no mention of any divisions within the contract in the question. Furthermore, delivery job is normally regarded as an entire obligation. It is very hard to divide it into different stages since the goods have to reach the buyer’s hand eventually for the credit of full performance. The customary practice for payment of shipping goods by sea is to make the full payment only after the contract is fully performed. Therefore, SureCan cannot seek payment by divisible contract.

The third exception is prevented performance. If SureCan has begun performing his obligations, but has been prevented by the HowCan from continuing, SureCan who has performed part of the contract may nonetheless be entitled to payment on a quantum meruit basis, that is, payment based on the value of services rendered. In this case, there is no prevented performance, since HowCan did not prevent SureCan from completing its contractual duties in any way. The failure to transport the goods to its destinated...
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