#13627 - Case Analysis - Commercial Dispute Resolution

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.

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.

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.

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.

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.

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.

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: Producer of animal feed for sale to a wide customer base in many different countries

Issue: 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 290/tonne plus shipping

total contract including shipping 3,120,000

Possible liability:

SPL is also asking for replacement of the defective shipment valued at 3,120,000

150,000 chickens dead or no longer egg producing – NT$150 each= NT$22,500,000

Destruction of chickens NT$550,000

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 NT$90,000,000

Total loss NT$119,125,000

Total loss in GBP (NT$119,125,000 x 0.020810) = 2,478.991.25

Possible claimant: SPL

Possible other defendants to investigate:

• Robinson Seeds Ltd (‘Robinson’) – Smithson purchased wheat from them to manufacture the feed

  • Was there any damage to the chicken feed during shipping?

  • 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

  • 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 1,500,000.

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;

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