Understanding The Cessation Of Contracts And Remedies For Breach

Andrew and Margaret visit their local travel agent to discuss the possibility of taking a holiday on an island off the Queensland coast. Neither has previously travelled outside Melbourne and they explain to the agent that they would like his advice on the best value available, specifying they would like a restful holiday. They require access to a nice beach and facilities for golf and water skiing.

The agent recommends that they go to Gunk Island, which he assures them, will satisfy all their stated requirements. They book accordingly.Gunk Island fails to live up to their expectations. Their accommodation is a deserted cabin with
no water, no toilet facilities and no vehicle access. It appears to have been deserted for some time. The only beach within walking distance is covered with rocks and coral, and is very unsuitable for swimming. There are no facilities for water skiing and the only golf course on the island is a mini golf course in the village, four kilometres away, which has been vandalised by youths.

The price paid by Andrew and Margaret for their holiday package was approximately the same as for most alternative resorts for which they had been shown brochures by the travel agent. Upon their return to Melbourne, Andrew and Margaret consult you and state that they wish to take legal actions against the travel agent. They point out that, apart from the cost of the holiday,they have incurred other expenses. These include the cost of medical treatment for Margaret,who suffered a nervous breakdown as a result of unsatisfactory facilities on Gunk Island; Margaret’s anticipated loss of wages (she will be unable to resume work for at least three months); and the cost of additional airfares incurred.

They instruct you because the facilities at the resort were so poor they decided to catch an earlier flight home. As a result, they had to pay an extra amount for their flight as their holiday package required them to fly home on a specific
date.Advise Andrew and Margaret as to their prospects of success in an action against the travel agent. If they succeed, what will be the extent of the remedies that will be available to them Your answer must provide relevant justifications and refer to legal principles and cases to support your discussion.

The Case: Andrew and Margaret's Disappointing Holiday

A contract is the formation of an agreement which when combined with consideration by capable parties with legal intention is enforceable legally. It is obligatory on the parties to comply with contract terms (Rowan 2012). However, to bring any contract to its end, there are several manners. Through this essay an attempt is made to understand as how a contract is cease to exist. Also, there are two major questions that are evaluated, that is,

1. Can Andrew and Margaret sue the travel agent under the law contract?
2. What are the remedies that can be sought by Andrew and Margaret against the agent?

The major issues are arisen because of the fact that Andrew and Margaret intend to take a holiday at Queensland coast. They visit their local travel agent. Since they have not travelled outside Melbourne, so they seek the advice of the agent on the best holiday location that should opt for. It is recommended by the agent that they must visit Gunk Island. He assures them that the island will satisfy all of their needs and thus a booking was done accordingly. But, the Gunk Island is not what is expected by Andrew and Margaret and failed to live up their expectations.

Now, thus it is important to understand as when a contract is breached then what breach of terms results in the remedies. 

Contract – cessation of a contract

A contract can cease to exist by performance, that is, there is nothing left to be done by the parties as the parties have discharge their contractual obligations and thus there is no contract that is left amid the parties. (Singapore Law Watch 2018)

The contract is also stands terminated when there is incurrence of breach of contract by either party to the contract.  Now, when the party does not comply with the contract term then there is breach. But, the consequence of the breach will depend upon the kind of term which is violated. Thus, the terms can be bifurcated as:

Conditions

In the leading case of Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938), it was held that when the term is of such grave importance that no contract can be performed unless such term is comply with then it is a condition. A condition is the heart and root of the contract and the reason because of which the contract was established and is also analysed in Associated Newspapers Ltd v Bancks (1951).

Remedy

If a condition is violated then the aggrieved party has the right to cancel the contract and seek damages and is held in Poussard v Spiers (1875).

Warranty

The non essential terms of the contract which are only required for effective working of the contract are warranties and is rightly analyzed in Bettini v Gye (1876).

Remedy

When there is breach of warranty then only damages can be claimed.

Damages must not be remote

But, if there is breach of contract because of non compliance of term, then, the damages that can be claimed but only such damages can be sought which are not remote and which can reasonably foresee by the defaulting party. The loss which arose naturally or which can be contemplated by the parties can be recovered and is held in Hadley v Baxendale [1854] and Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949].

Damages to be recovered

The damages that can be recovered are:

1. Which put the defaulting party at the same position as of no loss is incurred and is held in Commonwealth v Amann Aviation Pty Ltd- [1991]and Robinson v Harman (1848).
2. Compensation for actual loss

• No damages for non- pecuniary losses, that is, feeling, annoyance and is held in Addis v Gramophone Co Ltd[1909] and Jarvis v Swans Tours Ltd [1972].
• Position of Andrew and Margaret

It is found that:

1. The accommodation that was provided to them was a deserted cabin. Andrew and Margaret always wanted a restful holiday, but the cabin that was provided was deserted with no water and toilet faculties. There is no vehicle access and thus is a totally deserted place from some time.
2. Also, Andrew and Margaret can walk up to a beach but that was also covered with coral and rocks and thus is not suitable for swimming. It was specifically told by Andrew and Margaret that they wish to take water skiing but there were no faculties that were available;

• There was no golf course on the island though a mini golf course was available in the village which is 4 Km away which was also vandalised by youths. Andrew and Margaret wanted a place with nice beech and the facilities of golf which was not present.

Thus, the prime motive of making the booking at the Gunk Island was that the agent confers that all the requirements that are desired by Andrew and Margaret will met. These ate the terms upon which Andrew and Margaret are making contract with the agent. If such conditions are not met then Andrew and Margaret would not have made the contract? Thus, all the above term was condition which were violated by agent.

So, Andrew and Margaret have the right to cancel the contract and seek damages. But, what exactly damages can be sought by Andrew and Margaret 

Though the cost of the holiday package is same as the other tourist destination shown by the agent but they have also suffered other expenses which include:

1. Medical expenses suffered by Margaret from the nervous breakdown. This damage can be anticipated by the agent and thus recoverable.
2. Margaret was not able to resume work for 3 months and thus there is an unexpected loss of wages. This loss is too remote and thus not recoverable.

• Additional airfares as the faculties at the resort were so poor that they had to catch an earlier flight to return home. This is an anticipated loss which is the direct result of the reach of contract and is thus recoverable.

Conclusion

It is thus concluded that the agent is found to be in reach of the contract and there are several remedies that can e avail y Andrew and Margaret.

Reference List

Rowan, S 2012, Remedies for Breach of Contract: A Comparative Analysis of the Protection of Performance, OUP Oxford.

Case Laws

Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 ;

Addis v Gramophone Co Ltd [1909] AC 488 

Bettini v Gye (1876) 1 QBD 183;

Commonwealth v Amann Aviation Pty Ltd - [1991] HCA 54

Hadley v Baxendale [1854] EWHC J70;

Jarvis v Swans Tours Ltd [1972] EWCA 8

Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286;

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528;

Robinson v Harman (1848) 1 Ex Rep 850 

Poussard v Spiers (1875) LR 1 QBD 410.

Online Material

Singapore Law Watch, 2018, Ch. 08 The Law of Contract.