Legal Case Study: Breach of Contract and Business Structure for a Gardening Business

The Case Study of a Delivery Transportation Company

Case Study

Micky Lam owns and operates a delivery transportation company.  He says to Jerry Kong (a supplier of commercial vehicles): “The 15 tonnes lorry that I use to transport goods has broken down and needs replacing.  I want a new one that will run without any problems. It is critical that I have a lorry that is in a tip top condition at all times.”  Jerry says that he will be able to deliver to Micky such a lorry. Micky emphasised that the changeover must go smoothly, failing which his business will suffer losses.

’I have clients that need my delivery transportation service each day and if there is any disruption they’ll go elsewhere.”  Micky and Jerry then agree that Jerry will sell a 10 tonnes lorry to Micky and deliver it to Micky’s shop on the first day of the following month.   

When the lorry is delivered Micky got rid of his old lorry.  Two weeks later, the new lorry stops working.  Micky calls Jerry who promised that he will send the mechanics to check what is wrong and they find that the electronic components of the lorry are faulty.  It will take at least three (3) days to get the lorry repaired.  Micky immediately telephones Jerry, who says that he will send a replacement lorry the next day.   

Micky is due to deliver some goods for his very regular customer with whom he has an ongoing contract for a year.  He is worried that he will not be able to deliver the goods on time.  He rented a lorry for RM400 to send the goods but it was already late in the day and the shop had closed for the day and Micky cannot deliver the goods for his client. The client, furious at being let down, says he will no longer use the transportation services provided by Micky.   

The next day, Jerry delivers a replacement lorry as promised. However, Micky lost a contract valued at RM20,000 to transport goods for his client.   

Micky now wants to bring an action for breach of contract against Jerry to recover the following:

a. RM400, being the cost of renting the lorry;  

b. RM20,000, being the profit he would have made over the rest of the year on the contract which his client has now terminated. Such contracts are very hard to get; and

c. RM1,000 for the anxiety he suffered from while dealing with these events.   

Jerry says he has now delivered a good lorry and denies any further liability under the contract to Micky.             

Using the for step process discuss the relevant principles of law for claimable damages and advise Micky if he will be able to claim for all the losses mentioned above from Jerry.

     (50 marks)   

                                  (maximum 1000 words)

SECTION B: (50 marks)

Answer BOTH questions.

You are NOT required to use the 4 Step Process to answer these questions.

 

Question 1:

 

John is a very keen gardener. He has recently retired from his job as an engineer but at the age of 55 he is still keen to work and earn a living. Over the years he has enjoyed gardening and helped many of his friends, families and colleagues design and establish their gardens during his free time. John is particularly interested in designing gardens for small patio areas. He is keen to turn his hobby into a small business.

John seeks your advice about which business structure would be most suitable keeping in mind the following:

o He wants a simple structure that is relatively easy and cheap to set up;

o He wants to maintain control over the business; and

o He wants to keep his business affairs private.

 

Consider the various business structures and advise John on what is the most appropriate business structure for him and explain why the business structure is most suitable.                     (25 marks)

                   

Question 2:

Martha owns a bakery business; she sells an assortment of cakes, biscuits and pastries and delivers them. Martha is new to the business and has attempted to draft her own contracts with her clients. She included a number of clauses excluding various types of liability in the receipts she gave to her clients for the purchases they made.

Jessica, who wants an assortment of cakes for her birthday party came to Martha’s bakery and made her order. She was given a receipt for the orders she made. The road to Jessica’s house is extremely bumpy and she was concerned about the delivery. She reminded Martha to be extra careful with the packaging to which Martha said “Don’t worry! If any of the cakes are damaged I will replace them”.

All of the cakes were damaged during delivery. Martha is attempting to rely on a clause in the receipt which states “The seller excludes liability for all damage to the product during delivery”.

Advise Martha if she would be able to rely on this exclusion clause to avoid any liability to Jessica.