Legal Issues Surrounding Qantas And Airbus Contract Essay.

Discuss about the Masters of Accounting for Qantas Airlines Ltd.

The issue is that Qantas Airlines Ltd got into contract with Airbus Corporation Ltd so that Airbus may build for it a new airplane. Using such airplane would earn Qantas $ 800.00 profit per day. The contract had numerous. One of the terms says that the plane must travel 10000 km at 800 km per hour. Another term among the many terms agreed upon was that the aircraft must have an in-flight video system that is able to show 36 channels of entertainment to passengers. However, after signing of the contract the Airbus forwarded a package of documents that included the contract itself, examples of the color scheme to be used, and also attached another document with a title ‘Limitation of Liability’. In the attached document Airbus stated that its liability for breach of contract is $ 300 000. When the airplane was delivered the engine was as per the contract, but due to company confusion, they loaded the wrong software into entertainment system that had 34 channels instead of 36. It will take one week for the software to get reconfigured. Therefore, Qantas Airline needs full advice on its legal position.

In this regard contract law provides the rights, duties and obligation of each party that has entered into legally abiding agreement. Parties entering into a contract have the responsibility to make whatever the requirements they feel will satisfy their needs in relation to the conditions and subject matter of the transaction (Grisham, 2016). A contract is a legal a binding agreement. For a contract to be valid, it must satisfy the following three essentials; agreement, intention to be legally bound, and consideration. The law requires that any party may fail to perform as per the agreement will have breached the contract. Moreover, when one party violates the agreement, the injured party may claim for damages. On the other hand, if the goods and services are not satisfactory, the buyer has the right reject them and claim for damages (Grisham, 2016). The damages may include the Liquidated damages and Compensatory damages. Under s. 17 Sale of Goods Act 1923 an implied condition clause states that the seller has a right to sell, and that agreement to sell will have right to sell at time property transfer (Yu,1999). Also s.18 of the Sales of Goods Act an implied condition states that goods should correspond with description.

Application

The case between Qantas and Airbus shows that there was an offer, acceptance and consideration. Qantas wanted an airplane of which Airbus agreed to manufacture as per the contract. This means that the two parties were expecting to gain something from the contract as stated under consideration doctrine. Qantas expected to receive a plane while Airbus expected to receive money out of it. Additionally, offers can be expressed orally or in writing or be implied from conduct. The cases Brambles Holdings Ltd v Bathurst City Council (2001) and Empirmall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) the court held that the agreement could be inferred from conduct. 

Under section 266 of the Sales of Goods Act, the Airbus is required to repair, replace, refund or pay for the damages within a reasonable time (Dewez, Ramberg, Uribe, Cabrillac & Pradera, 2011). In this case, it is evident that Qantas expects to make $800.00 profit per day, however, because of the one week requested by Airbus it will lose a lot of money. Therefore, for it to recover the damages, Airbus will have to take the responsibilities for the damage. If the defect is a major failure, the buyer in this case Qantas Airlines can either reject the plain or claim for damages measured in relation to the price paid and the value of the plane under (s259, 3). It is also possible for the buyer to sue the seller for damages for any consequential losses.

Airloom Holdings Pty v Thales Australia Ltd is a case that concerns the termination of the irloom to Thales. In the proceedings, claimed for damages against Thales, which was $60,000 for breach of contract that included $25, 882 as the profit margin for the supply of goods. Airloom argued that it should be put in the same position it would have been, if the if the agreement had been performed fully. The court used the case Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 to rule that the affected party should be put in the same position it would have been in, if the contract could have been performed (Heath, n.d). This same case could apply to Qantas case where it can argue that it expected to earn $ 800.00 profit per day, and in one week it would lose $ 560.0. Therefore, it would need Airbus to pay for the damages for it to be put back in the same position it would have been if the contract could have gone through.

Conclusion

Furthermore, goods must correspond to description of the goods in specified in the contract under s. 18 of the Sales of Goods Act. Beale v. Taylor (1967) 1 WLR 1193 is a case where Mr. Beale bought a car from Mr. Taylor believing that the car was a 1961 herald, but later found that it was half of a 1961 herald and half an older one (Knowler & Rickett, 2011). Mr. Beale sued Taylor for refund. The court held that Beale was entitled to a refund.  For example, Airbus had a responsibility to confirm that the software installed in plane was able to show 36 channels instead of 34.

Conclusion

In reference to the above discussion, it can be said that the promise made Airbus Corporation Ltd to Qantas to deliver a plane in time and in accordance to conditions in the contract was not fulfilled. As a result, Airbus violated contract terms. On the other hand, Airbus also was liable for the breach cost and therefore, is required to pay the agreed amount. Lastly, Airbus is also liable for the damages incurred by Qantas during the one week extended.

There are two issues that need to be decided in this case. First, Frank learns that his salesperson, Gemma sells a dishwasher at $300 yet there was a customer who would have bought it at its initial price of $350. Here, Frank loses $50, which he would have received if Gemma would not have convinced him to reduce the price. As such, the issue here is whether Gemma owed Frank a duty of care in the business.

Second, when Frank fired Bob, Bob decides to lie to Angela that he would sell to her ten new industrial washing machines at $1000 each. Angela sent the amount for the ten machines to the Home Appliance Specialists bank account which Bob withdrew and disappeared with the whole amount. When Angela gets to the shop to pick the machines, Frank refuses to give her since Bob sold them when he was already fired. Thus, it needs to be decided whether actually Frank is liable for what Angela lost or not.

In the first issue, tort of negligence applies. This is the law that there was failure of reasonable care towards someone resulting to the individual suffering harm (Barravecchio, 2013). Besides, negligence would also be doing something that is not expected of any reasonable person, which eventually causes harm (Pagura, 2015).

Issue

In the second issue, there is a contract law where there is a contractual agreement between two parties – the offeror and the offerree. Besides, according to the law, the defendant is supposed to prove that the plaintiff did not take reasonable care for her interests, which resulted to her loss. Section 5R of the Civil Liability Act 2002 (NSW) and the common law require that the plaintiffs are supposed to take reasonable care so that they can avoid causing harm to themselves (Katter, 2006). Aside from that, Section 5G of the Civil Liability Act 2002 (NSW) presumes that anyone who takes part in actions that are inherently and obviously risky are thereof aware of the risks of their acts (Kim, 2011). By so doing, then the plaintiff is said to have accepted the risk and as such, cannot sue the individual involved in planning the activity.

In the first issue, Frank can sue Gemma for breaking the law of Torts, in particular the tort of negligence, making him suffer harm in his business by losing $50. Gemma owed Frank a duty of care in the business, breached Frank’s standard of care and her conduct also caused harm to Frank. In this regard, Gemma proves to default on the three essentials of negligence, and thus, Frank can establish a claim in negligence.

The case of Donoghue v Stevenson describes the issue of reasonable foreseeability, which is also adopted by the Civil Liability Act 2002 (NSW) in section 5B(1) (Katter, 2006). Based on the case of Donoghue v Stevenson, Gemma had foreseen that her conduct would cause harm to the business but she still carried on with selling the dishwasher at a lower price. As a reasonable person, she would have foreseen that by selling the product at a lower price, the business will lose a certain amount of money. Since she had already found someone willing to buy it at the set price of $350, then she would not have put her personal interests of selling the product to Frances her niece, at a lower price. As a result of that, Gemma breached the standard of care as it is a requirement that she should have acted as a reasonable person in a position in the situation. Thus, according to the Civil Liability Act section 5B(2) in line with the case of Bolton v. Stone [1951] AC 850, Gemma was negligent breaching the duty of care.

Negligence

In the second issue, it is clear that there was a contract law between Angela and the business. However, Frank can still defend himself based on remoteness. As a matter of fact, Bob caused harm to Angela, but this was not reasonably foreseeable to Frank who is the owner of the business and who is now supposed to pay for what Bob did. According to The Wagon Mound (No 1) case, it was not reasonably foreseeable that oil floating on water would burn a wharf (Kim, 2011). As a result, the court decided that the defendant was not liable. Similarly, Frank did not expect that Bob would do such a thing in his absence after being fired from work, and so, he is not liable.

 Besides, there was contributory negligence on the plaintiff’s side as she could not risk sending money without the immediate exchange of the products she wanted. Angela did not take reasonable care for her own interests. As a corollary, contributory negligence can work as a partial defense to Frank. This is not different from the case of Mak Woon King v Wong Chiu [2000] 2 HKLRD 295 where the plaintiff failed to adjust safety guards forcing the court to decide that the plaintiff was partially a reason for the harm caused.

Lastly, Angela was aware of the risk she was putting herself into by sending money without picking up what she was buying right at that point. The phrase volenti non fit injuria puts it well that ‘no harm can be done to one who consents’ and Frank can use this as a complete defense (Goodin, 2006). Therefore, since Angela according to section 5G had accepted the risk, then she cannot sue Frank for her loss.

Conclusion

As a corollary, it is quite clear that in the two issues, Frank can prevent himself from harm, or compensatory charges according to the law. In the first instance, Gemma failed to show a duty of care by breaking the law of Tort in the Tort of negligence, and therefore, she is answerable to the loss in the company. In the second situation, Frank can overturn the claim by Angela by using the defenses of remoteness, contributory negligence and volenti non fit injuria. As such, he is not liable to the harm caused to Angela.

References

Barravecchio, J. A. (2013). The Tort of negligence. Legaldate, 25(4), 4-7.

Dewez, J., Ramberg, C., Uribe, R. M., Cabrillac, R., & Pradera, L. M. (2011). The Duty to Renegotiate an International Sales Contract under CISG in Case of Hardship and the Use of the Unidroit Principles. European Review Of Private Law, 19(1), 101-154.

Goodin, R. (2006). Volenti goes to market*. Journal Of Ethics, 10(1/2), 53-74.

Grisham, j. G. (2016). Sixth Circuit Upholds Jury Award Of Compensatory Damages Against CRA Under The FCRA For Negligence, But Vacates Punitive Damages Award. Venulex Legal Summaries, 1-3.

Heath, H. (n.d). Educator wins $96K in breach of contract suit. South Carolina Lawyers Weekly,

Katter, N. (2006). Negligence and intoxication -- Has civil liability reform gone too far?. Deakin Law Review, 11(2), 161-172.

Kim, J. (2011). Compensating for unforeseeable damages in torts. Journal Of Economics, 104(3), 265-280.

Knowler, J., & Rickett, c. (2011). Implied Terms in Australian Contract Law: A Reappraisal After University of Western Australia V Gray. Monash University Law Review, 37(2), 145-161.

Pagura, I. (2015). Negligence: What you need to know. Journal Of The Australian Traditional-Medicine Society, 21(4), 254-256.

Yu, L. (1999). Chapter 8: Legal Environment. In , International Hospitality Business: Management & Operations (pp. 193-214). Taylor & Francis Ltd.