Business Case Study on Legal Remedies for Breach of Contract

In this case, Cabinet Co. had paid for a bunch of defective goods from its supplier. Whereas the company did not check the shipment upon receiving it to determine if it met the required standard, it is clear that there was a breach of contract. Most commercial agreements have certain provision for remedies. The case being studied here is a contract for the sale of goods. Cabinet Co. is entitled to require the supplier to make quality or replace defective items. Since the seller supplied defective goods, Cabinet Co, has to seek a legal remedy to solve the situation. The goal of a cumulative remedies provision is to ensure that the rights of the parties in the agreement are followed on top of the rights provided by general law. On that account, Cabinet Co. can pursue several legal remedies due to this breach of contract by the seller.

Damages

In contrast to the equitable remedies for injunction or certain performance, damages of loss in regards to a breach of contract claim are available as for right. Cabinet Co. may claim damages from the supplier of casters in regards to all breaches of contract. Since Cabinet Co. had to incur a 15% rise in the effort to replace the product, the damages in this case are substantial. This kind of damages are awarded in the form of monetary compensation for the loss incurred due to the breach committed by the seller (Marsh, 2017). To receive the substantial damages, Cabinet Co. should show that it has suffered the loss due to the breach or remoteness and the amount of loss incurred (measure). It will be up to the supplier to argue that Cabinet Co. failed to prevent the loss.

Remoteness of Loss

            Cabinet Co. may only recover damages for the loss incurred due to the breach as long as it is not too remote. The goal of damages is to put Cabinet Co. in a state that the company would have been if the goods supplied were not defective. The principles of remoteness provide the losses can be recovered in certain cases; (1) the loss stems naturally from the breach; (2) the loss was under the terms of the parties at the time the contract was drawn up as a probable consequence of a breach (Boundy, 2016). If the loss does not meet these standards, then it will not be able to be recovered since it will be too remote. In this case, it is apparent that the loss that Cabinet Co, suffered meet all these considerations, thus it is suitable that the firm pursue damages since it will be within the provision of loss of remoteness.

Measure of Damages

This is the technique for determining the damages to which Cabinet Co is entitled to. It covers the expectation loss or loss of bargain (Boundy, 2016). The typical objective of the court will be to put Cabinet Co. in the position that it would have been if the supplier sold it quality casters. The two typical ways to examining are cost of cure and difference in value. Generally, the court will use the one which appropriate in the case. Since the expectation of loss is not difficult in this case, a reliance loss will not be sought out. The supplier will simply have to reimburse Cabinet Co the 15% extra cost they incurred.

Overall, the remedies in the case depend if the contract had liquidated damages and penalty causes. It is typically for the parties to explicitly state in the contract that if there is a breach. A particular sum will be paid or that the goods will be rejected. These clauses are referred to as agreed damages or liquidated clauses (Latimer, 2016). They are usually included in commercial contracts, whether negotiated individually or on the standard business terms of a party. In this case, it will be in regards to defective performance, due to the supply of casters that did not match the required standards. If Cabinet Co. pursues this clause, the recovery of its loss will be much easier and it will avoid the issue of proving the actual loss. Further, it will avoid arguments regarding the type of indirect loss and it will ensure the seller is bound by the contract.

Based on the above description, the normal rules are applicable when determining whether a provision works as a penalty or liquidated damages apply regardless of the type of contract that Cabinet Co and the supplier drew up. A distinction must be developed between clauses which claim to impose a penalty on the breaching part and clauses which seek liquidated damages form the party. To that extent, it is appropriate that Cabinet Co. seeks for liquidated damages since the loss it incurred can be substantiated. Further, liquidated damages are enforceable while liquidated damages are not. By pursuing this clause, Cabinet Co will be able to recover the loss that it suffered as it received defective casters from the supplier.

 

References

Boundy, C. (2016). Business contracts handbook. Routledge.

Latimer, P. (2016). Protecting consumers from unfair contract terms: Australian comparisons.

Marsh, P. (2017). Contract law. In Contracting for Project Management (pp. 65-80). Routledge.