Make sure your answer is following the IRAC format. In February 1997, a trucking

Question

Make sure your answer is following the IRAC format.

In February 1997, a trucking company, and Maker, a manufacturer, negotiated an agreement under which Carrier promised to provide for two years all the transportation services required by Maker in exchange for monthly payments based on the number of packages transported. In response to Carrier's concerns over proposed legislation that would restrict its ability to use more efficient "triple-trailer"" trucks, the parties agreed that Carrier could terminate the contract if such legislation were enacted. No such law was ever passed.

Carrier drafted a document embodying the agreed terms and, on March 1, 1997, sent two signed copies to Maker with a request that Maker sign and return one copy. Although Maker did not sign the document, the parties immediately began doing business according to its terms. During the next six months, Maker paid all of Carrier's monthly invoices on time. During the same period, Carrier declined two potentially lucrative offers from other manufacturers because performance of the agreement with Maker required most of Carrier's capacity.

In September 1997, Maker began to have concerns about the cost of Carrier's service. Maker sent a letter to Transport, one of Carrier's competitors, describing Maker's needs, Maker's agreement with Carrier, and the amount charged by Carrier. Transport offered to provide comparable transportation services at a lower cost. On September 20, Maker sent a fax to Carrier stating that Maker would no longer use Carrier's services as of November 1. Carrier responded with a fax to Maker which stated that Maker had no right to terminate the contract. On September 21, Maker suspended all business with Carrier and began doing business with Transport. Maker also refused to pay an invoice submitted by Carrier for transportation services rendered in September.

What, if any, rights and remedies does Carrier have against Maker? Discuss

Explanation / Answer

Contract termination means ending the contract prior to completion of contract period. However termination does not affect liabilities of the parties incurred prior to termination of the contract. Under general principles of law if the concerned party terminates the contract without sufficient justification then it is termed as wrongful termination. Furthermore it would be regarded as repudiation of the contract and thus in itself would be termed as material breach of the contract.

Contracts often provide with a clause enumerating the right of termination on occasion of the defaulting party failing to remedy its breach within the stipulated period of time. However if the contract contains no express provision on termination then termination facilitated with reasonable notice period could indeed be implied lawfully.

Note that termination clauses in contracts can be held to be unfair and as a consequence invalid either because of consumer rights legislation or as they are considered unreasonable under Unfair Contract Terms Act 1977. Whether or not a breach is repudiatory in nature so as to justify termination depends on varied reasonable factors.

Courts approach primarily is to first consider what benefit the injured party was intended to obtain from the performance of the contract and secondly to consider the effect of the breach on the injured party and whether it operates to deprive the aggrieved party substantially from all the benefits which the parties had initially agreed upon in the contract.

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