Qantas Airbus Contract
1. Qantas Airlines Ltd signs a contract with Airbus Corporation Ltd for Airbus to build a new aeroplane. On average, Qantas would make $ 800 000 profit per day from using such an aircraft.
The contract has 545 terms. Term 56 says that the plane must be able to travel 10 000 km at 800 km per hour. Term 455 says that the aircraft must have an in-flight video system capable of showing 36 channels of entertainment to passengers.
After the contract is signed, Airbus sends to Qantas a package containing a large number of documents, including the contract itself and examples of the colour scheme that will be used. In the middle of these documents there is also a new document headed ‘Limitation of Liability’, the key part of which states as follows:
The liability of Airbus Corporation Ltd for breach of contract is capped at $ 300 000.
When the plane is delivered, its engines are as required, but, due to confusion at the factory, the wrong software has been loaded into the entertainment system, which has only 34 channels. It would take a week to re-configure the software. Advise Qantas Airlines fully as to what its legal position is, citing relevant case law.
2. Frank runs a shop that sells appliances such as ovens, fridges and freezers. He is a sole trader – his business is not incorporated. Gemma is employed by Frank as a salesperson. Among the second-hand appliances in the shop is a dishwasher, priced at $ 350. One day Tom, is browsing in the store, sees the dishwasher, and says to Gemma “That’s a great price – I will just go home to see if I have space for it”.
Gemma’s niece, Frances, is getting married next month. Gemma knows that Frances needs a dishwasher. Gemma quickly phones Frances and says “Get to the store quickly – I think I can get my boss to agree to take $ 300 for a fantastic dishwasher”. Gemma tells Frank that she doesn’t think that the dishwasher will ever sell for $ 350, but that a customer might pay $ 300. Frank authorises Gemma to sell the dishwasher for $ 300. Frances comes in and Gemma sells it to her at that price. Later, while Gemma is on her lunch break, Tom comes in to the store. When he inquires about the dishwasher, Frank tells him that it was sold that morning for $ 300. Tom tells Frank that he would gladly have paid $ 350 for it.
Another salesperson, Bob, has the job of selling large quantities of washing machines to commercial laundries. He has frequently negotiated with Angela, who owns a chain of laundries, to sell her washing machines. Bob frequently comes to work late and is sometimes drunk. One Friday afternoon, Frank says to Bob “You are fired with immediate effect –clear out your desk and leave”. Frank then rushes off to a meeting across town without making sure that Bob actually leaves the premises.
Bob sends an email to Angela, saying that he has just received ten new industrial washing machines which he can sell to her for $ 1000 each. Angela agrees, and makes an electronic transfer of $ 10000 in payment, saying that she will collect the machines on Monday. Bob withdraws the $ 10000 from the Home Appliance Specialists bank account and disappears overseas with it. When Angela comes to collect the machines on Monday, Frank refuses to give them to her, saying that Bob had no authority to sell them as he had been fired. Angela has sued Frank for delivery of the machines.
Give Frank legal advice in relation to the above situations.
In the case law that is provided the issue is whether Airbus Corporation Ltd is in breach of the terms of the contract by providing the wrong software in the entertainment system by providing only 34 channels while the contract specifically specifies for 36 channels?
The basic elements of a contract consist of offer, acceptance (DeMott, 2014). The offer should have been made for a consideration and then the obligations of both the parties are decided. The parties should also be competent to contract and they should also have the capacity. These are few of the basic elements which need to be kept in mind while forming a valid contract. Another important thing that should be kept in mind while forming a contract is that any goods which a seller is willing to sell should match the description which is made in the contract. A buyer has every right to get only that product and also to pay for that product.
Another important principle which needs to be kept in mind while forming a contract is that once the terms of the contract have been decided if any change needs to be incorporated or any new document needs to be included whether it be from the buyers side or from the sellers side then the new document needs to be accepted by both the parties (Fisk & Barry, 2012). If one of the parties is against this incorporation of the new document then in that case the contract is voidable on the choice of that party. If both the parties agree to the incorporation of the new document or term to the contract then the contract remains valid.
Some of the basic things to be remembered while entering into a contract are the terms of the contract. The terms of the contract which the parties agree to form the vital part and if any of the parties fail to honor the terms then the contract becomes voidable at the choice of the other party. Compensation can also be claimed by the party who faced the loss whether it be the buyer or the seller in the form of damages or other forms as decided by the parties themselves or by the court.
Goods description as mentioned above also is an important part while forming a contract. This basic rule was put down in the case of Manbre Saccharine Co. Ltd v. Corn Products Co. Ltd. The case dealt with selling of starch in 280lb bags. The contract had specified that the goods will be delivered to the buyer in the proper packaging but the goods were unfortunately shipped partly in 280lb bags and the rest in 140lb bags which was against the terms agreed between the buyer and seller. The seller was of the view that packaging does not form an essential element when it comes to description of goods and also that this condition was not vital for the agreement. The court on the other hand was of the view that the seller could not escape this liability by saying that packaging was not an essential part of the agreement and that it did not form an important part when it came to description of goods. The court was also of the view that the seller was in breach of their duties by providing goods in packages which were contrary to the description of goods mentioned in the contract.
Legal Principles for Contracts and Description of Goods
Thus from the case mentioned above it can be inferred that description of the goods whether it be in the form of packaging or any other form should be maintained by the seller (Smith & Lee, 2014). Any provision regarding how the contract needs to be performed should be followed. Another case which can be referred to in this matter is that of Benabu & Co. v. Produce Brokers Co. Ltd. This case deals with the sale of beans in bags arriving by a steamship. The dispute arose when the steamship arrived much earlier which was before the contractual date and dropped off the goods which was not known either to the buyer or seller. The buyer after getting the knowledge accepted the necessary document but refused to take the goods as they had not arrived on the appropriate date as mentioned in the contract. The court was also of the view that the buyer had acted within their rights by rejecting the goods and that they could claim the price which had been paid.
In the present case Qantas Airlines Ltd had formed a contract with Airbus Corporation Ltd for building up of a new airplane. The contract had a total of 545 terms out of which number 455 stated that the airplane should have an in-flight video system which should be able to show 36 channels of entertainment to the passengers. These were the specific terms of the contract. During the delivery of the aircraft it was seen that the software which had been provided for the entertainment only consisted of 34 channels and not 36 as the terms of the contract mentioned. This would be treated as a breach of contract on the part of Airbus Corporation Ltd. The terms of the contract specifically asked for 36 channels of entertainment and by providing only 34 channels not only has the description of the goods not been met but the terms have also not been honored by Airbus Corporation. Thus the buyers Qantas Airlines Ltd can sue for damages.
Another important factor which needs to be mentioned in the present case is that after the terms of the contract had been decided by the parties and also signed, Airbus Corporation while sending a large package of documents which also included the contract sent a new document named Limitation of Liability which stated that the liability of the company towards Qantas for any breach of contract would amount to $ 300000. The thing which needs to be mentioned here is that this is a new document which the buyers Qantas Ltd were not aware of while forming the contract. Inclusion of new documents is allowed but in the present case since the buyers were unaware of this document, the contract is voidable. If Qantas Ltd accept this new document which means that they agree to the terms then in that case the contract is still valid. In case they do not accept this new document then the contract is voidable from their behalf.
Case Law for Contracts and Description of Goods
Thus it can be concluded from the analysis made above that Airbus Corporation was responsible for breach of contract as they had failed to provide 36 channels of entertainment and had provided with only 34 channels.
In the case law that is provided the issue is whether Gemma acted outside her authority when she sold the dishwasher to her niece Frances for a lesser amount and also what are Frank’s rights as a seller when he was sued by Angela?
The relevant rule that applies in this case is that of Fiduciary Relationship (Selmi, 2012). Fiduciary Relationship is a relationship whereby a person places faith and trust on another person. The other party has a fiduciary duty to maintain that trust and faith. The party who has been bestowed with this trust has a fiduciary duty to act in the interest of the other party. There are various examples of fiduciary relationship namely that which exists between an employer and an employee (Weidner, 2016). An employer puts their faith on their employee that they will act in the best interest for the said employer. The employee thus has a fiduciary duty to act in the best interest. In case the employee does not act in the interest of the employer then they would have been known to act in contravention to the relationship that is shared between the said employer and the employee.
When an employee acts in contravention to their duties and are in the breach of fiduciary relationship then the employer can sue for damages or refuse to pay any outstanding amount which the employee might be entitled to. The employer also has the right to terminate the said employee (Leib et al., 2013).
One relevant case law where the court passed a landmark judgment was in the case of Mattheus. The employee had acted in contravention to their fiduciary duty which is why the employer was of the view that the said employee should not receive the salary. The Court however was of the view that the said employee could not be disentitled from getting their salary because the said employee had acted in contravention to their duties only for this particular period (Bruner, 2013). Other than this particular instance the term that was served by the said employee showed no sign of acting in contravention to the trust of the company. Thus the said employee was entitled to their salary. This did not however imply that the court let the said employee go unscathed. The Court was of the view that the employer could claim for damages (Velasco, 2012).
Frank's Shop Appliances
In the present case Gemma had been working for Frank and had also acted outside the scope of her power of authority. Gemma not only took undue advantage of the trust placed in her but also acted beyond her authority. As an employee of Frank she was duty bound to see that Frank and his business flourish. On the contrary Gemma sold the dishwasher for cheaper just to her niece because of the fact that it was her wedding. Thus as an employee she had acted outside the interest of Frank. Frank and Gemma were employer and employee and therefore a fiduciary relationship existed between them. Gemma if would have acted under the orders of Frank during the course of her employment then such would have become the responsibility of the employer as the said employer would have been aware of the whole transaction (Rave, 2013). In the present case however Gemma though acted in the course of her employment but not under the orders of Frank. Gemma took undue advantage of the fiduciary relationship that existed between employer and employee. Gemma acted for her own benefit and not for the employer. Gemma’s act did not have bona fide intentions. Gemma must compensate Frank for the loss occurred and is also liable for not maintaining fiduciary relationship between the said employer and employee.
On the other hand Bob was a salesperson under the employment of Frank therefore an implied trust is in existence between them. An employer gives certain responsibilities to the employee. An employer also gives power to the employee to carry out those responsibilities. Such powers are however restricted and should not be misused (Aviram, 2013). In the given case however the employee did not act within his jurisdiction. The acts committed by Bob show that he did not have any bona fide intentions. An employee is expected to follow certain etiquette while they are at their workplace. Attending work late and drunk is not appreciated by any employer. An employer thus reserves the power to maintain the work place atmosphere. Bob acted dishonestly to show his displeasure and to get his revenge. Angela mostly transacted with Bob for buying washing machines. Therefore she cannot be expected to know that Bob got fired on that day. Angela on getting an email from Bob agreed to buy the ten washing machines and immediately transferred the amount. Angela should not have acted so readily without making proper investigations, firstly such as she did not go to the shop to check whether there are ten machines as said in the mail. Secondly she should have looked into the fact whether the machines were in working condition or whether they had been already reserved by some other customer. Frank on the other hand should have taken due care to find out that Bob left the office after being fired. Frank should have given proper notice of Bob’s termination to people who transacted with Frank and his employees. In the given case Frank was bound to deliver the machines to Angela. Angela is a third party over here who acted with good intention. Frank being the employer is responsible for Bob’s activity in the present scenario. However he can file a case against Bob for recovering the amount and compensation for all the expenses and hardships he had to go through.
Thus from the above discussion it can be seen that even though Frank was unaware of Bob’s actions still Angela would get the machines as she had acted in good faith but Frank could sue Bob for damages.
Aviram, A. (2013). Officers' Fiduciary Duties and the Nature of Corporate Organs.
Bruner, C. M. (2013). Is the Corporate Director's Duty of Care a Fiduciary Duty-Does It Matter. Wake Forest L. Rev., 48, 1027.
DeMott, D. A. (2014). Relationships of Trust and Confidence in the Workplace. Cornell L. Rev., 100, 1255.
Fisk, C., & Barry, A. P. (2012). Contingent Loyalty and Restricted Exit: Commentary on the Restatement of Employment Law.
Leib, E. J., Ponet, D. L., & Serota, M. (2013). Translating Fiduciary Principles into Public Law.
Rave, D. T. (2013). Politicians as Fiduciaries.
Selmi, M. (2012). The Restatement's Supersized Duty of Loyalty Provision.
Smith, D. G., & Lee, J. C. (2014). Fiduciary discretion.
Velasco, J. (2012). The Role of Aspiration in Corporate Fiduciary Duties. Wm. & Mary L. Rev., 54, 519.
Weidner, D. J. (2016). Cadwalader, RUPA and Fiduciary Duty.
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