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Legal Aspects of Equity And Trust

Institution

Mary engaged in a contract to buy a car at £10,000 and paid a deposit of £500. She was informed that the car would be delivered in 20 days and while she was waiting for the delivery, she was told that the order was not successful due to computer system errors. The car vendor (O’Malley’s Bargain Car Dealership) advised her to put a new order only that this time she could not order the car at £10,000 because the car brand she wanted was earlier on a promotional offer price and the promotion had ended. What is the most appropriate equitable remedy for Mary?

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Mary can seek an equitable remedy because she entered into a valid contract with the car dealer and the car dealer breached the contract. According to Benjamin & Stephen (1997), a contract is a promise or a deal between two or more people to do something for each other. On the other hand, a breach of a contract occurs when one of the parties to the contract, or each of the parties fail to honour their promises (Baker, 2002). Thus, in this case, the car dealer (defendant) breached the contract it signed with Mary (the plaintiff) by not facilitating the order placement in the first instance, and by not delivering the car to Mary within 20 days – even though Mary had made a down-payment as required by the contract. There are many ways in which a breach of contract can be remedied i.e. through rescission, specific performance, restitution, damages or reformation. However, the specific remedy to be applied in the plaintiff’s case depends on the facts of the case.

Rule

Here, Mary’s case can be remedied by a rescission. According to Pearce & John Stevens (2002) rescission is a legal procedure that annuls or terminates the contract and requires both the breaching party and the injured party to give back any benefits they may have received while the contract was still in force; so that it appears as though the contract had not been formed. So, the defendant will have to refund the plaintiff an amount equal to the down payment she had made while the contract was still in force (i.e. £500). However, there are several tests that the case will have to be put through to ascertain whether it fulfils the conditions of a rescission. For instance, rescission remedy can only be granted if there was an innocent misrepresentation, unconscionability, undue influence, or any other action that makes the contract questionable from an equitable perspective (Hanbury & Martin, 2001).

Analysis

The plaintiff was not coerced into the contract (i.e. there was an agreed exchange of value) and therefore she cannot pursue rescission on the grounds of undue influence. Secondly, the defendant did not perform any intentional negligence or misrepresentation while signing the contract. However, the defendant’s actions are questionable especially on the account that there was a computer error and this is a sufficient ground upon which the plaintiff can seek rescission based on an anticipatory repudiation. According to Martin (2001), an anticipatory repudiation means that the party applies for the contract to be rescinded on the grounds that one party intentionally or unintentionally will not honour their part of the contract. It normally applies if the consideration fails to become available, inadequate or illegal (Haley & McMurtry, 2006). A similar example is that of SK Shipping (S) Pte Ltd v Petro export Ltd [2009]. In this case, the court resolved that only the injured party is entitled to rescind the case if it can demonstrate that the breaching party acted in a way that clearly indicated their inability to perform its obligations of the contract, and that the injured party must have a subjective and true belief that the other party will not honour the contract. Anticipatory repudiation emerges to be the most appropriate grounds on which the plaintiff will be granted a rescission remedy because the defendant showed intentionally that they would not deliver the car to the plaintiff. Secondly, even if they offered the plaintiff a second chance to order another car, the consideration was already inadequate because it was not given at the same price as the plaintiff expected. Thus, the case can be rescinded based on anticipatory repudiation.

Issue B

Mary ran fitness business that operated in a number of local branches operating under the name of Millhaven Gym Group Fitness centre. In July 2018, she signed a contract with the group and paid a lump sum to operate in the group’s fitness centres for three years. However, in September 2018, she was informed that Millhaven was intending to provide spa services in all its outlets and therefore she could no longer use the space. What is the appropriate equitable remedy for Mary?

Rule

Being a real property-related contract, the plaintiff can seek equitable remedy of specific performance. According to Pearce & John Stevens (2002), specific performance is a specialized remedy when any other kind of remedies e.g. money cannot put the plaintiff in the position they would have been in if the contract was performed.

Analysis

However, specific performance is only awarded to cases that the considerations are unique for example real property, jewellery, or in any case the amount of damages is unclear (Street, 2016). Secondly, specific performance would only be awarded to the plaintiff if it does not cause any hardship to the defendant, or if the contract is unconscionable (Martin, 2001). Yet, there were no unconscionable damages in this case because all she needed was space to operate her business, space that was available until the defendant changed their business strategy. Nevertheless, according to Hanbury & Martin (2001), one of the most significant preconditions that the court will consider in this case is whether the plaintiff has ‘clean hands’ or whether she had misbehaved in some way. A typical example of ‘clean hands’ is the case of New York Giants vs. Los Angeles Chargers [5th Cir. 1961], where the plaintiff’s request for specific performance was denied for having not sought equity with ‘clean hands’. Here, the plaintiff came with clean hands because there are no reports of her misbehaving against the defendant. In fact, she had cleared paying the lump sum for which the property was to be leased.

Conclusion

Therefore, in conclusion, Mary is entitled to equitable remedy by rescission in her case against O’Malley’s Bargain Car Dealership because the defendant’s action makes the contract questionable from an equitable perspective. In respect to her contract with Millhaven Gym Group Fitness, she is entitled to equitable remedy by specific performance because the consideration is a real property, and because of the need to put the plaintiff to the position she would be in if the contract was performed.

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References

  • Civil Remedies, 1st Edition, by Benjamin Andoh and Stephen Marsh, published by Dartmouth Publishing Company in 1997.
  • An Introduction to English Legal History, 4th Edition, by J. H. Baker, published by Butterworths LexisNexis in 2002.
  • The Law of Trusts and Equitable Obligations, 3rd Edition, by Robert Pearce & John Stevens, published Butterworths LexisNexis in 2002.
  • Hanbury and Martin Modern Equity, 16th Edition, by Jill E. Martin, published by Thomson an imprint of Sweet & Maxwell in 2001.
  • Equity and Trusts, by Haley and McMurtry, published by Sweet and Maxwell in 2006.
  • SK Shipping (S) Pte Ltd v Petroexport Ltd (The Pro Victor) [2009] EWHC 2974 New York Football Giants, Inc. v. Los Angeles Chargers Football Club, Inc., 291 F.2d 471 [5th Cir. 1961].

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