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Effects Of Psychological Contract Breach On Customer Service

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Discuss about the Effects of Psychological Contract Breach on Customer Service.



The contract was void for unilateral mistake. In case of unilateral mistake, one party is responsible for the breach of contract. In this case contract took place between Kim’s Fun Cruises Ltd (KFC) and John for the booking for travelling in boat on 22nd December evening. The rate was also fixed between them at $5,000. A write contract was done between them on 19th December. The contract was void because of the mistake and negligence of Kim’s Fun Cruises Ltd (KFC). In the contract it was stated that that on 22 December John and his family will get the meal in the boat and licensed captain will also be provided to the. The terms of the contract has been breached by KFC because of his mistake. He told that someone has booked the boat and signed the contract with double price before contract with John but he forgot that. In this case negligence has been done by him (Fitzgerald, 2011). It is not only a mistake but an act of misrepresentation or fraudulence which KFC done with John and his family by breaching the written contract with John and giving it to a third party who has done the contract with high price.

John can ask for remedy from KFC in several ways. Firstly breach of contract have took place, so in that case compensatory damages or actual damage can be taken from Kim’s Fun Cruises Ltd (KFC) by asking refund of the money in term of financial damage (, 2017). Special damages can be asked by consequential contract. Punitive damages can also be asked because fraudulence has been done by KFC with John. If the damages were not fulfilled than John could sure KFC to court (Bordia, 2010). Even according to Misrepresentation Act John can sue KFC because the contract is only breached by him because of the double money he took from the third party. In case of contract, he is not allowed to perform such acts because when one contract is done then it is not allowed to sign other contract but KFC did it by fraudulence. In this case misrepresentation has been done which is the reason that the contract is void or cancelled. Unilateral mistake cannot be proved as excuse here (McKendrick, 2014). In this case misrepresentation and breach of contract has been done which is the reason that penalty can be taken from KFC by John.

is described. On 2008 the famous musician “Price” was sued by Revelations Perfume and Cosmetics Company. The company was seeking $100,000 damages for the agreement reneging. It was promised by the flamboyant pop star that he will promote the album on the new perfume of the company and he will also allow his name to use in the package of the perfume but later for granting the interviews Prince refused (, 2017). As it was the contract, so Prince did breach of contract because by mistaken he has sign the contract with someone else o that period. In this case the company sued Price for breach of contract and asked him punitive damages of nearly $4 million to the Revelations Perfume and Cosmetics Company (, 2017).

If contract is done between both the parties, but in the mean time if the storm destroy the York which is unknown by both the party then the contract can be cancelled between both the parties. This type of case is known as Common mistake. There are three part of common mistake which is the reason of void of contract. They are Res extinct, Res sua and Mistake as to quality.

In this case it can be inferred as Res extinca. Here both the party has a wrong belief that the thing or place exist which is the subject of the contract but later their illusion is broken when they come to know that the subject has been destroyed or do not exist. As per section 6 of Sales of Goods Act 1979 the contract can be cancelled in this case where the storm destroyed the York in 18th December and as the parties are not aware about the contract till 20th December 2011 (Bridge, 2012). So in this case, it is a legal advice that after knowing about the contract, the contract may be cancelled by both the parties proving it as Res extinct of Common mistake in void contract (Sales of goods act, 2017)..

For example, in Purshotumdas and Co. v Mitsui Bussan Kaisha Ltd. (1911) 12 SSLR 67, In this case the party entailed the precious sale of the goods. According to section 16 and 17 of Sales of Goods Act when something is brought in a market in its quality is needed to be checked.

If John and his family (Estelle and Mike) have taken decision to begin a cruise then it is a legal advice to them to open the cruise somewhere else but not in York because terrorist attack may take place there. Before opening cruise, the travel and cruise rules are needed to be followed by John and his family.

The Finished Timber Company Pty Limited was liquidated. The director of the company was Kevin and Robert. As they are director of the company, so it is their duty to solve the debt of the creditors. As per section 588G of Corporation Act 2001 it is the duty of the director to pay dividend. As per Dividend 1 redeeming money is also the duty of the company’s director. It is the absolute and strict liability to fulfil the needs of the company which is basically one by the director of the company (Varzaley, 2011). In this case 30 days time is given to the company to pay the debt of the creditor and liquidator.

In this case it is also described that the creditors and liquidators will not ask compensation if the money is credited between 3 days and failure to do so can be punishable offence. In this case with the directors of the company the other people may also be in risk and it will be hard to make standing approach for the company.         

According to section 588 H of Corporation act proceedings and consideration has done that the director of the company has to give some basic reason to appeal request for some more time dor crediting the money. A director can prove his worst financial condition and he can also prove his illness with strong medical prove which can help him to get some more time to give back the money. There is certain expense where it is described that it is not the director’s is take that the company has experienced certain great loss. It is necessary that to absorb certain great loss proper formulation is needed to be stated whenever necessary (Gevurtz, 2010).

According to Company’s liquidation Act, both Robert and Kevin can take help from Australian Government through which they can get financial help from government. According to Liquidation law, if the liquidated condition is needed to be confined than under the Fair Act if he worse conditions needed to be proved in the court which can be the reason through which the court may give more time to Robert and Kevin (Singh, 2015). As per Company Act, it is necessary that some rules of the company should be fulfilled by the members of the company. It is necessary that several laws are needed to be incorporated through which different substantial acts on director duty can be fulfills.


Duty of diligence has been given by the director of the company. It is the liability of the director to fulfil the rules of the company and save the finance of the company. Here Kevin and Robert has breached due diligence of the director which is the reason that the creditors are asking money from them in time (Loubser, 2010). It is hard for them to give the money in time, so several processes are needed to be used by them to handle the liquidated sate in a proper way. Generally certain regulations are needed to be qualified so that the company’s rules can be fulfilled. In case of several consequences, it is necessary that different subject of approach should be fulfilled and the directors should consciously fulfil the work of the company by not breaching the rules of the company.

For example MH Carbon goes into voluntary liquidation case is sated. In this case MH Carbon Company used to sell credits in market (, 2017). Then voluntary liquidation was experienced by the company. In that process the company was about to be closed, at that moment the company proved its liquidated condition to the court which is the reason that they got 6 months time to give their money to the creditors.

In this case Mike and Ian were the director and shareholder of Windmill Pvt Ltd Company. Ian is the managing director and Mike is the shareholder of the company. In this case an agreement was done by Ina and the third party who wanted to purchase the shares of the company. This is the reason mike was approached by Ian to sell the shares of Windfall to him for the wellbeing of the company. Later Mike become aware that at large price Mikes share has been given to the third party and Mike id not got profit from that deal.

In this case misrepresentation is done by Ian with Mike with fraudulence. For his own profit he has deprived Mike. Breach of duty of diligence is done by Ian by doing fraudulence with Mike who is the minor share holder of the company (Degenhardt, 2010). It is the director’s duty to give notices and ask for the approval of the share’s price but here Ian has not fulfilled the duty of the directors. According to section 588G of Corporation Act 2001 for breaching the rules of the act, he may be punished under Corporation Act 2001. The Minority share holder (Mike) can sue Ian to court for misrepresentation him and doing fraudulence with him taking his shares with a less price and selling it in high price (Sheikh, 2013).

Directors owe the fiduciary duties. It is necessary that good faith is needed to be maintained and the share holder of the company should be benefitted. There is a resolution for Mike. Under unfair dismissal of Company’s Act implications of the breach can be taken. The shareholder can remove the director from office. The injunction of force can be stopped. In the place of the director the shareholders can act. Mike can remove the director Ian from the office under Companies Act, 2006. Here breach of directors’ fiduciary duty has been done by Ian. So in this case the role of the directors is needed to be explained in director’s board meeting and in that meeting, it is needed to be described that what the fraudulence act which is done by Ian. By this way Mike can not only remove Ian from office but he can also claim compensation for breaching the fiduciary duties by taking his shares in a low price and selling it is high price (Villiers, 2010). All this things wasted the good faith of the director and that is the reason that penalty is needed to be taken for him or else he may be sued to court for is deeds.  

For example a case of Company Act is described that is Brady V Brady [1988] 2 All ER 617 HL Case. In this case share capital of the company is maintained but while involving with the company’s market value dismissal in act of the company is found because Brady breached the rules of Corporation Act


References (2017). CORPORATIONS ACT 2001 - SECT 477Powers of liquidator. [online] Available at: [Accessed 9 May 2017]. (2017). SALE OF GOODS ACT 1923 - SECT 5Definitions. [online] Available at: [Accessed 9 May 2017]. (2017). SALE OF GOODS ACT 1923. [online] Available at: [Accessed 9 May 2017]. (2017). Musician Prince Settles Lawsuit Over Perfume Deal. [online] Available at: [Accessed 9 May 2017].

Bordia, P., Restubog, S. L. D., Bordia, S., & Tang, R. L. (2010). Breach begets breach: Trickle-down effects of psychological contract breach on customer service. Journal of Management, 36(6), 1578-1607.

Bridge, M. G. (Ed.). (2012). Benjamin's sale of goods (Vol. 11). Sweet & Maxwell.

Degenhardt, K. (Ed.). (2010). Companies Act 2006. BoD–Books on Demand.

Fitzgerald, A. M., Fitzgerald, B. F., Middleton, G., Clark, E., & Lim, Y. F. (2011). Internet and e-commerce law, business and policy. Thomson Reuters (Professional) Australia Ltd.

Gevurtz, F. (2010). Gevurtz's Corporation Law, 2d (Hornbook Series). West Academic.

Loubser, A. (2010). The business rescue proceedings in the Companies Act of 2008: concerns and questions (part 1). Tydskrif vir die Suid-Afrikaanse Reg, 2010(3), 501-514.

McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).

Sales of goods act, (2017). [online] Available at: [Accessed 9 May 2017].

Sheikh, S. (2013). A guide to the Companies Act 2006. Routledge.

Singh, A. (2015). Company law.

Varzaly, J. (2012). Protecting the authority of directors: an empirical analysis of the statutory business judgment rule.

Villiers, C. (2010). Directors’ duties and the company’s Internal structures under the UK Companies Act 2006: obstacles for sustainable development’. Research Paper Series, (2010-03).


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