EG595B - Commercial and Contract Issues Assessment Answer

Scenario 1:

Facts

Based on the facts provided in the given scenario 1, points that are to be noted are that:

1. It has come to the knowledge of Superpump Limited that their rival company Pumps-R-Us Limited has finished manufacturing and is selling a high-pressured pump which goes by the name Pumps-R-Us Turbo.
2. This product manufactured by Pumps-R-Us Ltd happens to be a similar product to Superpump DBX, which is Superpump Ltd's very own high-pressure pump.

Issues

The issues identified in the given scenario are as follows:

1. Superpump Ltd has discovered that Maurice, who worked previously as a contractor in the Research and Design department of Superpump Ltd, is currently employed in Pumps-R-Us Ltd. Here, it is imperative to take note that Maurice's contract of employment with Superpump Ltd did not address any aspect relating to the ownership of Intellectual Property rights developed during his employment.
2. Another issue identified in the given case scenario is that Superpump had obtained a copy of Pumps-R-Us turbo's instruction manual, which happens to be written by Eric, who was an employee at Superpump Ltd at the time when Superpump DBX was made.

Question of Law

In the given scenario and considering the issues identified and highlighted, the questions of law that arise as per provisions of the UK’s Contract law and Intellectual Property Law are as follows:

1. Determining the aspect of the ownership of Intellectual Property Rights: Since the contract of employment between Superpump Ltd and Maurice did not explicitly address the aspect of the ownership of intellectual Property Rights developed during his course of employment, a suitable way to address this issue would be by following the Doctrine of "Sweat of Brow". The Doctrine of Sweat of Brow ^[1] It is a legal principle that was developed in the framework of intellectual property rights. This doctrine suggests that intellectual property protection can be claimed by an individual for a work that involves a significant amount of effort, skill or labour. So upon application of this principle, the default ownership of the intellectual property shall be of the creator in the first instance. (Rahmatian. A, 2013)
2. The aspect where the confidentiality clause of a contract of employment has been potentially breached: According to facts provided in the current case scenario, there is a distinct possibility that Morris, who was a former contractor and the Head of the Research and Design Department at Superpump Ltd, may have had access to a substantial amount of confidential and proprietary information regarding their product the Superpump DBX. The revelation of such information without any authorization while working for Pumps-R-Us Ltd could potentially constitute such an act to be a breach of confidentiality obligations towards the previous employer Superpump Ltd (McMillan & C, 2022) ^[2] .
3. The Infringement of Copyrights: As per the given scenario, Eric, who was a former employee of Superpump Ltd, was responsible for drafting the instruction manual for the product Pumps-R-Us Turbo. Since the former employee has reproduced a significant amount of data that is similar to the data available in Superpump DBX's instruction Manual, the given act can lead to an offence of copyright infringement. In this case, Superpump has every right to take action against Pumps-R-Us for the violation. ^[3] .

Legal Measures

In order to ensure that the damages caused by Pumps-R-Us Ltd are restored, the following legal measures can be taken:

1. To draft and send a Cease and Desist Letter to Pumps-R-Us Ltd: A Cease and Desist letter is a legal document that one party sends to another party in order to demand the other party to stop engaging in unfair competition and trade practices. Superpump Ltd could consider doing the same by sending a Cease and Desist letter which highlights concerns about similarities between the high-pressure pumps Superpump DBX and Pumps-R-Us Turbo. The letter should also emphasize the potential breach of intellectual property rights as well as the obligations related to confidentiality which were both breached.
2. Registration of intellectual property rights: As per the laws of Intellectual property, in order to gain protection, it is mandatory for the intellectual property to be registered under the appropriate authority as stated under its relevant legislation. Superpump can consider the registration of all potential intellectual property related to their product Superpump DBX and all other valuable assets which would strengthen their legal stand. (Mansell and Steinmueller, 2013)
3. A thorough review of the contract: Taking into account the fact that Maurice’s contract of employment with Superpump Ltd did not explicitly address the aspect of the ownership of Intellectual Property Rights, it would be a good idea to thoroughly assess if there are any implied terms, customs of the Industry or if there is any other agreement which could potentially affect the ownership.
4. Legal Action: In case the Cease and Desist letter does not manage to yield a satisfactory response from the responding company Pumps-R-Us Ltd, the aggrieved party (Superpump Ltd) can consider taking legal action against the defendant for potential Breach of Confidentiality and infringement of Intellectual property rights ^[4] such as Patents and Copyrights. (Atanasova. I, 2019)

Case Law

In the case of Designer Guild Ltd v. Russel Williams (Textiles) Ltd ^[5] [2001] FSR 113, Designer Guild had created a unique fabric design known as the "Fioravanti" and had got a copyright registered for the same. A competitor in the textile industry, Russel Williams, had produced and sold a similar fabric called the "Valencia", which was very similar to Designer Guild's Fioravanti. A lawsuit was filed against Russel Williams by Designer Guild for the infringement of copyright. The court had conducted an examination to determine significant similarities and differences in order to pass a verdict on the case. The court had come to the finding that the overall impression of the two designs was similar, with a blend of substantial differences in certain elements. Consequent to the results of the examination, the court had given out a significant doctrine that emphasizes the importance of proving similarity while claiming damages for infringement of copyright. It was held that the determination of similarities is as crucial as identifying the differences as well. During the examination of evidence, both aspects shall be equally considered during the passing of a verdict.

Scenario 2:

Issue

Based on the facts stated in the given scenario, it appears that Superpup Ltd encountered a severe defect in the equipment package that they supplied to Bigoil Plc as part of a contract that was worth 4.5 million pounds. The use of Grade B steel instead of Grade A steel in the process of manufacture led to the situation of a defect arising in the first place, causing the equipment not to be delivered as per terms of the contract and causing the equipment to be unfit for safe installation and use. Due to such performance, Superpump had incurred damages and costs worth 200,000 pounds to pay for remedial works in order to replace all parts which were found to be defective. Not only did it cost so much but also, it had caused the project to be delayed for a period of three weeks. This delay had caused Bigoil Plc to incur a loss of 500,000 pounds in their speculated profits which were to come from oil production.

Legal Considerations

In order to address these issues and to find a remedy for damages and costs incurred, there are a few legal considerations and potential solutions in the given case:

1. Breach of contract:
   1. Breach Committed by Superpump Ltd: There was a breach of contract committed by Superpump Ltd by supplying equipment that does not meet the specifications which were agreed upon in the contract. The defect, which was caused by the Grade B steel supplied by Wheeler's Steel, renders it unsafe for installation and use.
   2. Potential remedies: Since, in the given scenario Bigoil Plc is the party whose rights have been breached and infringed, it is entitled to seek remedies ^[6] Available under the scope of law, such as:
      1. Damages: Bigoil Plc can claim damages for the losses suffered by them due to the defect in the equipment. The amount of damages shall also include the costs of remedial works, which were around 200,000 pounds, and also speculated profits of around 500,000 pounds, which were not met due to the delay in operations.
      2. Specific Performance: In case the aggrieved party is of the opinion that damages would not be an adequate remedy for the losses incurred, Bigoil Plc may also choose to seek an act of specific performance. Specific performance is a legal remedy where an order is given by the court compelling Superpump to deliver a piece of conforming equipment as agreed to in the contract. (Caggiano. I, 2016)
2. Defective Steel which was supplied by Wheeler’s Steel company:
   1. The liability of Wheeler’s Steel: As per facts stated in the scenario, there is also a possibility to hold Wheeler’s Steel responsible and be made held liable for supplying Grade B steel instead of Grade A steel which in the first place had directly caused a defect in the equipment.
   2. Potential remedies: It is also possible that Superpump Ltd can claim damages from Wheeler’s steel which is sufficient enough to make up for costs incurred in remedial works which was around 200,000 pounds and for any other losses as well which potentially arose from the defect. Superpump in this scenario, also has the option to consider seeking indemnity from Wheeler’s Steel for any damage awarded to Bigoil Plc.
3. Delay in operations caused due to the arising of defect:
   1. Cause of delay: The detection of defects in the equipment and the remedial works done subsequently had caused a halt in the operations of the project which resulted in a delay of three weeks in the completion of the project.
   2. Potential remedial action: In this case it is possible to hold Superpump Ltd liable for the delay in completion caused to Bigoil Plc. The aggrieved party (Bigoil Plc) can claim damages incurred on speculated profits amounting to around 500,000 pounds which had resulted due to the halt in operations and the delay in completion of the project by a period of three weeks ^[8] .

Legal Measures

In order to make up for losses and damages that were incurred to Bigoil Plc due to multiple challenges and defects that arose due to the breach of contract by parties of a contract, the following could be considered as potential solutions under the scope of the UK’s contract law:

1. To negotiate a settlement between the parties: There is a possibility that Superpump and Bigoil can both engage in negotiations which will allow both parties to amicably resolve disputes and resort to a suitable agreement of settlement. The consensus of settlement which the parties will resort to shall also involve Superpump Ltd to reimburse Bigoil Plc for the losses which they have incurred due to non-compliance and breach of contract and also to allow both parties to reach an agreement on the delivery and installation of the remaining equipment .
2. By Taking legal action: In case negotiations fail and turn out pointless, either of the parties can consider going ahead and initiating legal proceedings against the other in order to seek damages and remedies available to them in the given scenario. As per the facts state, there is a possibility for Superpump Ltd to pursue a claim against Wheeler’s Steel Ltd to make up for the cost of defective steel supplied by them while simultaneously, Bigoil Plc can pursue a lawsuit against Superpump Ltd in order to seek compensation for damages and losses which were incurred due to the halt caused in operations of the project carried by the company and the delay in completion of the project which are both a result of non-compliance on the part of Superpump Ltd with respect to the contract. The claim for damages to be slammed on Superpump Ltd can also include loss of speculated profits which is around 500,000 pounds .
3. Mitigation of Losses: It is the duty of both parties to work towards mitigating losses which were incurred by them. Superpump Ltd should take measures to promptly rectify the detected defects and should complete the delivery of the remaining conforming equipment. In contrast, Bigoil Plc should work on minimizing the amount of loss incurred by opting to reschedule the production and to explore alternative options during the day.

Case Law

The facts of a landmark case law of HADLEY vs BAXENDALE (1854) [9 Exch 341] ^[11] , are that Plaintiff Hardley worked in a mill and had entered into a contract with the defendant Baxendale as he needed to transport a broken mill shaft to an engineer with the idea that the engineer will use the same as a model to produce a new shaft. The defendant in this case caused a substantial delay in delivering the shaft to the engineer which had caused Hadley to suffer a loss of profits due to a prolonged halt in operations of the mill.

In this case, a general rule was laid referring to damages in the scenario of a breach of contract by Judge Sir Edward Hall Alderson. He stated that when two parties enter into a contract where one of them has failed to perform, the damages which the other party is ought to receive consequent to the breach of contract should be fairly and reasonably considered. Consideration of losses incurred due to the breach of contract should either arise naturally according to the usual course of things or should arise by the breach itself or it should be such as which may reasonably be expected to have been in contemplation of the parties to the contract as the probable outcome in case of a breach. The rule given in the landmark case law of Hadley v. Baxendale talks about damages which are of two types. One being general damages and the second being consequential or special damages. The principle is also popularly known as the “Hadley Rule” which is known for establishing a test for determining the extent of damages that can be recovered from a party upon the breach of contract.

Scenario 3:

The facts given in this scenario is a revised version of the previous scenario where, Superpump Ltd manufactures the equipment and here, there is no steel defect arising. In the given scenario, a fire breaks out at Superpump Ltd’s premises causing serious damages to the equipment right before the day the equipment was scheduled to be delivered to Bigoil Plc. It appears that the fire broke out as a consequence of a fault in the electrical circuit which was previously tested and was found to be in a good working order.

Legal Remedies

In this case scenario, there can be a considerations under the scope of the UK’s Law of contract which can be pursued to make up for losses and damages which both parties will be facing as a consequence to the fire break out. They are as follows:

1. Frustration of Contract: The Frustration of a Contract occurs due to the happening of an unforeseen event which is beyond the control of either party. The happening of such unforeseen causes the performance of the agreed terms of a contract to be either radically different from what was earlier agreed upon or causes the performance of the contract to be impossible. The spontaneous break out of fire due to a fault in the electric circuit and the subsequent damage caused to the equipment as a result to the fire break out can be considered as a case of Frustration of Contract. This consideration can be taken either at the discretion of the parties or, when a court examines the situation thoroughly and declares that the contract in the scenerio has been frustrated. Upon such declaration, the parties will automatically be discharged from their obligation to perform as per agreed terms and the parties will also be relieved from further performance as well if any. (Hasan & Abdullah, 2013)
2. Mitigation of Losses: Based on the facts of the scenario, the given event synopsis descries an even of a fire breakout due to a fault in the electrical circuit causing the impossibility of performance on the part of Superpumps Ltd. As a result to which, Bigoil Plc is a party to bearing losses incurred for the damages caused. In such scenario, another valid legal obligation would be for companies party to the contract (Superpump Ltd and Bigoil Plc), to both mitigate their losses. Superpump Ltd is of the duty to take prompt action towards the damaged equipment and get it repaired at the earliest. Doing this will not only moinimize their repair costs but this will also help them to resume the production process at the earliest possible. On the other hand, Bigoil Plc in order to mitigate their losses should explore for alternative options available to them and should work on adjusting their project plan and accordingly try to source all required equipments from other supplies and making it feasible.
3. Claim for Damages: The aggrieved party is entitled to claim for damages in this scenario, only when the court upon examination does not find any substantial ground to declare a frustration of contract. In case the court does not declare a frustration of contracft in this scenerio, the contract will still remain binding and enforceable by law and both parties will be of the obligation to perform their part of the contract before the prescribed time period. Non-performance as per obligation of parties set by the contract will cause the aggrieved party to have every right to sue the other party for non-compliance and entitles the aggrieved party to claim for damages to make up for losses which were incurred during the course of the contract (Pearce and Halson, 2008).

Legal Measures

In order to make up for losses and damages that were incurred to Bigoil Plc due to the fire breakout at Superpump Ltd, the following could be considered as potential solutions under the scope of the UK’s contract law:

1. To negotiate a settlement between the parties: It is possible for Superpump and Bigoil to negotiate and both come to a mutually acceptable agreement ^[15] which will include the act of Superpump Ltd to compensate for losses caused to Bigoil Plc. The compensation of losses can also include the loss of 2 million pound loss of speculated profits and wasted expenditure.
2. Claim for Insurance: Superpump Ltd should consider evaluating the extent of their coverage under the subscribed insurance policy. Based on this, they can file their claims at the insurance company and recover costs incurred for the repair of equipment and making up for other losses caused by the fire.
3. Assessment of Frustration: In case, the parties do not come to an amicable solution, they will both need to thoroughly assess whether or not the contract is frustrated due to the fire. This assessment will include the examination of specific circumstances and the terms of contract. In case of Frustration of contract, the parties will immediately be discharged from further obligations.

References

Rahmatian, A., 2013. Originality in UK copyright law: The old “skill and labour” doctrine under pressure. IIC-International Review of Intellectual Property and Competition Law, 44(1), pp.4-34.

^] MacMillan, C., 2022. Contracts and Equality: The Dangers of Non-disclosure Agreements in English Law. European Review of Contract Law, 18(2), pp.127-158.

Mansell, R. and Steinmueller, W.E., 2013. Copyright infringement online: The case of the Digital Economy Act judicial review in the United Kingdom. New media & society, 15(8), pp.1312-1328.

Atanasova, I., 2019. Copyright infringement in digital environment. Economics & Law, 1(1), pp.13-22.

Designer Guild Ltd v. Russel Williams (Textiles) Ltd [2001] FSR 113

Caggiano, I. (2016) Disgorgement, Compensation and Restitution: A Comparative Approach . Global Jurist, Vol. 16 (Issue 2), pp. 243-266

Pearce, D. and Halson, R., 2008. Damages for breach of contract: compensation, restitution and vindication. Oxford Journal of Legal Studies, 28(1), pp.73-98.

Rowan, S., 2010. Reflections on the introduction of punitive damages for breach of contract. Oxford Journal of Legal Studies, 30(3), pp.495-517.

Harrison, D., 2004. Is a long‐term business relationship an implied contract? Two views of relationship disengagement. Journal of Management studies, 41(1), pp.107-125.

Liu, Q., 2007. Inferring future breach: towards a unifying test of anticipatory breach of contract. The Cambridge Law Journal, 66(3), pp.574-604.

HADLEY vs BAXENDALE (1854), [9 Exch 341]

Hasan, A.A. and Abdullah, N.C., 2013. Doctrine of Frustration as the Second Level of Protection: The Case of Frustrated Travellers. In Proceedings of the International Conference on Consumerism (pp. 312-320).

BARNETT, K., 2016. Substitutive damages and mitigation in contract law. Singapore Academy of Law Journal (Special Issue), pp.795-824.

Ibid 7

Banakas, S., 2009. Liability for contractual negotiations in English Law: Looking for the litmus test. InDret, 1.

Roberts, T., 2003. Commercial impossibility and frustration of purpose: A critical analysis. Canadian Journal of Law & Jurisprudence, 16(1), pp.129-145.

You Might Also Like:-

Contract Law Assignment Help

Assignment of The Week – Contract Law

Looking For Complete Assignment Sample Get It On WhatsApp