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Case Analysis Notes

LPC Law Notes > Commercial Dispute Resolution Notes

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Case Analysis What is the cause of action / defence?
Breach of Contract The Claimant must show that there is a contract with the Defendant and that the Defendant has breached a term of that contract. The Claimant can claim damages to put themselves into the position they would have been in had the contract been properly performed. Express terms Consider carefully the precise terms of any written contract. Remember that the terms may form the basis for a defence e.g. limitation clauses, exclusion clauses. Implied terms Terms may have been implied by statute e.g.?

Section 14(2) Sale of Goods Act 1979 (in a contract for the sale of goods) or Section 4(2) Supply of Goods and Services Act 1982 (in a contract for the provision of services): Where the seller sells/transfers goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality. Section 13 Supply of Goods and Services Act 1982: In a contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill.

Negligence The Claimant must show that:
? The Defendant owed the Claimant a duty of care.
? The Defendant has breached that duty of care.
? The Claimant suffered loss as a result of the Defendant's breach of duty of care. The Claimant can claim damages to put them back into the position they would have been in if the Defendant had not been negligent.

Private nuisance The Claimant must show that the Defendant has unlawfully interfered with the Claimant's use or enjoyment of its land. "Unlawful" means that the Defendant's interference must be unreasonable according to ordinary usages of mankind living in society or in a particular society. This will include considerations of:
? The duration/frequency of the interference.
? Whether the interference is excessive.
? The character of the neighbourhood.
? Whether there is malice on the part of the Defendant.
? Whether the Claimant is abnormally sensitive. The Claimant can claim damages for the interference with their enjoyment of their land and any consequential losses provided that:
? The damage was caused by the interference and
? The type of damage was foreseeable to someone in defendant's position at time of interference.

Infringement of Copyright

1. Copyright must exist in the works in respect of which the Claimant alleges infringement. For artistic, literary, musical or dramatic works, the works must be original (i.e. not copied from elsewhere).

2. The Claimant must own the copyright. If works are created by employees in the course of their employment, the employer will own the works, unless there is something to the contrary in their contracts of employment.

3. The main way to infringe copyright is to copy a "substantial" part of the work. "Substantial" is a qualitative, not a quantitative test. There is a presumption that the work has been copied if the Defendant had access to the original work, and the materials are so similar that copying is the most likely explanation.

Inducing a third party to breach a contract The Claimant must show that:

1. The Defendant knew of the contract between the Claimant and the third party, and

2. The Defendant intended to procure the third party to breach the contract, and

3. The Claimant has suffered damage as a result.

Misuse of confidential information The Claimant must show that:

1. The material has the necessary quality of confidence. Did the Claimant reasonably believe that the materials were confidential and that their release would injure the Claimant or advantage their rivals?

2. The material was imparted to the Defendant in circumstances importing an obligation of confidence.

3. The Defendant used the materials without the Claimant's authorisation. If (2) does not apply to the Defendant but the material was imparted to a third party in circumstances importing an obligation of confidence, then the Claimant must also show that the Defendant improperly obtained the confidential material or, if the Defendant initially obtained the material innocently, that the Defendant improperly retained/used the confidential material when they knew or ought to have known that it was confidential.

Case Analysis: There is a contract and it has been allegedly been broken. Issue: is whether Smithson's is liable to SPL in breach of contract or in tort for the loss SPL has sustained from Smithson's chicken feed. Legal issue: is whether the chicken feed supplied by Smithson was of satisfactory quality and fit for purpose and safe under the implied terms of the Sale of Goods Act 1979 s 14. Factual issue: SPL has sustained loss to their chickens claiming that the chickens became infected with the micro-organism from Smithson's feed causing death and others failing to produce eggs. Client:

Smithson Cereals Ltd ('Smithson')

Managing Director:

John Smithson

Registered office: 26, Baltic Parade, Hull, HU6 7EB Business: Issue:

Producer of animal feed for sale to a wide customer base in many different countries complaint received 1 September 2015 that chickens have become infected with micro-organism resulting in death or not laying eggs and blaming it on order of 8,000 tonnes of chicken feed in mid-2015 to Shining Poultry Ltd ('SPL'), Taiwan delivered 24 June 2015 and want a proposal for loss SPL 8,000 tonnes at cost of PS290/tonne plus shipping total contract including shipping


Possible liability: SPL is also asking for replacement of the defective shipment valued at
PS3,120,000 150,000 chickens dead or no longer egg producing - NT$150 each=


Destruction of chickens


Loss of egg production 900,000 eggs/week x 3 weeks NT$2.25 profit per egg NT$6,075,000 Cost of replacement feed 6,000 tonnes NT$15,000 per tonne Total loss

NT$90,000,000 NT$119,125,000

Total loss in GBP (NT$119,125,000 x 0.020810) =


Possible claimant: SPL Possible other defendants to investigate:?

Robinson Seeds Ltd ('Robinson') - Smithson purchased wheat from them to manufacture the feed o Was there any damage to the chicken feed during shipping?
o What happened to the other batch of feed (4,000 tonnes)?
Biotech S.A. supplier of 'Vegetal' which is used in the manufacturing process to produce nutritionally satisfactory animal feed o Have there been any issues with the Vegetal?

1. Perform a detailed initial analysis of a commercial dispute, including: a) Identifying the relevant cause(s) of action, the remedies available and any potential defences; There is no breach of any express terms of the contract between Smithson's and SPL. However, the Sale of Goods Act 1979 s 14 implies terms into the contract that the chicken feed supplied by Smithson would be of satisfactory quality and fit for purpose and safe. Possible potential Defences:

Clause 4.1 excludes all warranties or conditions as to quality, condition, description, compliance with sample or fitness for purpose. Clause 4.2 only permitted rejection of the feed within seven days of delivery for products that did not comply with the specifications. This is confirmed in clause 5.5 that the client must reject the delivery within seven days of delivery of defects that do not comply with the warranty and are apparent on reasonable inspection. (A micro-organism may not have been visible on visual inspection and therefore not reasonably apparent). Clause 5.6 Smithson's does not have any liability after delivery unless there are latent defects. Clause 7.1 passes the risk and responsibility to the client once they have been delivered to the carrier. Clause 10.1 Smithson's liability in contract and tort is limited to PS1,500,000. Clause 10.2 Smithson is not liable for any indirect, special or consequential losses so the potential loss to goodwill should be excluded. Clause 10.2.3 Smithson's is not liable for any loss of actual or anticipated profit, interest, revenue or damage to goodwill. This would exclude the loss of profit from the eggs Clause 10.3 Smithson's will not be liable for any losses from SPL's subsequent use or misuse of the products unless there is a latent defect 10.3.3. The issue is whether there was subsequent misuse of the chicken feed resulting in SPL's losses. Clause 10.4 limits the latent defect discovery to within three months of delivery. The products were delivered for shipment on 20 May 2015. According to Clause 7.1, risk and responsibility passes on delivery to the carrier. Receipt of the delivery to SPL in Taiwan occurred on 24 June 2015. Written notification of the latent defect was received 1 September 2015. If the risk passed on 20 May 2015, then the latent defect notice period has passed. Otherwise, SPL will have notified Smithson within the latent defect notice period. Possible tort claim: SPL may make a claim in tort that Smithson's owed them a duty of care in supplying the feed that is not contaminated and are in breach of that duty causing loss to SPL. SPL is alleging that the chicken feed supplied by Smithson had a microorganism causing death and loss of egg laying to their chickens resulting in death or not laying eggs and blaming it on order of 8,000 tonnes of chicken feed in mid-2015 to Shining Poultry Ltd ('SPL'), Taiwan delivered 24 June 2015 and want a proposal for loss. Possible potential defences:?SPL misused the chicken feed The chicken feed was damaged in transit The micro organism resulted from the wheat supplied from Robinson's

b) Identifying any related claims involving other parties; Counterclaim - agreement entered into 3 December 2014 for a term of 36 months - not relevant as either party can terminate the contract with notice. Robinson Seeds Limited - if the wholewheat grain was not of satisfactory quality

Biotech SA - if there was a defect in the Vegetal c) Identifying any other legal issues including issues of limitation and jurisdiction; Smithson's has limited liability in tort and contract to PS1,500,000 and it excludes any indirect or consequential losses or any loss to profit. Smithson's must be notified within three months of the delivery date of any latent defects. The issue is when did SPL take delivery. The agreement is subject to the jurisdiction of England and Wales. The contract between Smithson and Robinson is governed by jurisdiction in England and Wales and the Sale of Goods Act 1979 is expressly included in their standard terms and conditions that their product would be of satisfactory quality on delivery only (Clause 7). d) Identifying any further information required; and 8 April 2015 Smithson's took delivery of 15,000 tonnes of British whole wheat grain from Robinson at cost of PS1,980,000.???????3,000 tonnes of the wheat grain shipment was sent 15 April 2015 to a purchaser in Ireland - were there any issues with the 3,000 tonnes of wheat?
12,000 tonnes of the shipment was used in production of feed sent to SPL. 4,000 tonnes of feed went where? Was there a problem with it?
'Vegetal' is an additive to the feed? Were there any other problems with it?
Where there any issues with the shipping?
Who is the shipping carrier?
Were SPL feeding the chickens the feed that had been shipped by Smithson's or was it some other feed?
How was the feed stored?
When did they start feeding the chickens with it? The complaint is 1 September and the delivery was 3 June and yet, SPL claims the chickens started becoming ill a week after they started feeding them the Smithson product. Was it mixed with other feed?
Was it stored with other feed?
It was only the vet's advice from a post-mortem report that there was a micro-organism in the feed, what is the testing that has been done?
Were there any other avian epidemics locally at the time?
What constitutes the 'date of delivery'? It is not a defined term. Was the wholewheat grain delivered by Robinson Seeds on 8 April 2015 of satisfactory quality and fit for purpose? (Clause 7 of the Robinson/Smithsons contract).

e) Identifying the commercial and other needs of your client. Smithson would like to maintain good relationship with SPL AND wants to minimise the company's exposure. SPL is a new client. Smithson's also has a commercial relationship with Robinson Seeds which has not been discussed and Biotech SA who are their suppliers.

2. Advise on the early steps which your client should take with a view to both protecting their position and resolving their dispute, including: a) Identifying and compiling the evidence needed to prove the client's case; and, b) Compliance with the Practice Direction on Pre-Action Conduct and any relevant Pre-Action Protocols.

3. Advise a client on different forms of dispute resolution and identify those which are most appropriate to the client's needs.

4. In a case where it is appropriate to use litigation, identify the most appropriate court in which to issue proceedings. The contract was expressly agreed to be subject to the jurisdiction of England and Wales.

Case Analysis for International Chicken Feed Breach Cause of action:

Breach of contract specifically Clause 4.1 the specification the product must comply Clause 4.1 has warranties and only gives rise to a claim for damages rather than termination SPL is alleging that there is a micro-organism in the feed which is not listed in the Specifications (Schedule 2) CONDITION gives rise to termination of contract Could have been raised SGA s 14 may apply - but it has been expressly excluded in a commercial contract Clause 10.4 limitation - supplier is not responsible for defects unless notified within 7 days or within 3 months if latent Could say you didn't notify within 7 days, however, they could say it was not be apparent. Therefore, 3 month limitation will apply. It was delivered on 24 June and faxed on 1 September 2015.

Possible defences:

Will have to show that feed caused the losses not some other problem The feed was fine when it left Smithson. It did conform with the specification when it left us. Not our fault when it left us: It was either the transport or how SPL stored it. It will be SPL's responsibility under Clause 7.1 when the risk passes to the carrier. It is not a claim that they can bring against Bussey Haulage. In the event it is their fault, the liability is limited to PS1.5 million or NT$2,478,000 loss cap.

10.2 and 10.3 excludes loss to goodwill and indirect and direct losses (loss of profit) Direct losses: dead chickens destruction of chickens cost of replacement feed Indirect: Loss of egg production SPL still needs to prove that it was the feed caused the death not just that feed contained micro-organism

Possible remedies: Any related claims against 3rd parties: Jurisdiction and Law: Limitation: Limitation to claim:

Court: (reference amount and CPR)

SPL can sue for damages subject to limitations or terminate subject to the clauses (Clause 8.2 within 30 days) which is not what Smithson wants because this is a lucrative contract. Could claim against Robinson if wheat was the problem or Biotech S.A. for Vegetal for loss of feed. Bring them in for a claim for a contribution and/or indemnity under Pt 20. If it is Bussey's fault, it is not our issue and SPL pursue them directly. England and Wales (Clause 11.2) and 11.1 English Law Clause 10.1 - Liability to PS1.5 million ~ NT$70,350,000Clause 10.4 limits latent defects notice to within 3 months of delivery (24 June 2015 delivery date - today's date is 3 September 2015 - no limit on legal action must be commenced - therefore within six years and they have notified)
? If shortened and equal bargaining power, courts will usually enforce commercial contractual provisions. Commercial Court - transactions in trade of commerce - import and export of goods over PS200,000 (CPR Pt 58.1(2)(a)(b)).

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