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A contract is an agreement between two or more parties intending to be legally binding.

There are three essential aspects recognised in any contract. These three aspects are offer, consideration and acceptance. An offer is an expression of willingness to contract on specified terms with a willingness to become binding as soon as it is accepted by the offeree.1 We can see that an offer was made by VSS when they sent the email to Andy on the 1st August stating the terms of the contract the price and the date of delivery. A counter offer is when the offeree introduces new terms or attempts to vary the terms proposed in the original offer. This then becomes a counter offer which destroys the original offer, making it incapable of acceptance. The leading case concerning counter offer is Hyde v Wrench. The judge said if the offer had been unconditionally accepted there would be a perfect binding contract, instead the plaintiff made an offer of his own, therefore rejecting the original offer previously made by the defendant2. One major difference between Hyde v that can be distinguished from the scenario is in Hyde v Wrench the defendant refused for the counter proposal but here there is no counter proposal but a mere enquiry which should have been answered and wasnt . Andy did send a fax on the 2nd August asking if VSS would take 55,000 to remove the old engines and replace the new ones, this might be considered a counter offer. However, Andys solicitors may reject the fax was a counter offer and argue it was a mere request for information as it was to clarify if the offeror would consider changing certain aspects of the offer. The leading case is Stevenson v McLean, the court held the first telegram was a request for information and not a counter offer. There was no attempt to introduce new terms into the contract but a genuine enquiry. Andys fax on the 2nd August asked VSS if he would be prepared to take 55,000 to remove the old engines and fit the new ones. To distinguish whether this fax was a counter offer or a mere request for information the court may consider the wording and language used. Andy asked if VSS was prepared to take 55,000 and did not say I offer you 55,000 therefore wasnt attempting to vary the terms proposed he was just asking whether VSS consider modifying certain aspects of the contract. A breach of contract occurs where a party to a fails to perform, his obligations under the contract. This can be by failing to supply goods or to perform a service as agreed. In this case the breach of contract was done by VSS by selling the engines to a third party when they were already in a legally binding contract to sell to Andy. A breach of contract may entitle the victim of the breach to bring a claim for damages. The purpose of compensation for damages is to put the victim of the breach, into the same position they would have been if the contract had not been broken this is the fundamental principle and was stated in Robinson v Harman. Due to the breach of the contract Andy had to find replacement engines from an alternative source which ended up costing him 70,000. This could not be delivered until the 21st August this late delivery will mean he will lose out on two weeks of service therefore losing money. Andy will only be able to sue VSS for either expectation loss or reliance loss as the courts generally will not allow the injured party to claim for both. The leading case is Anglia TV Ltd v Reed Lord Denning held that A plaintiff has a choice to claim for loss of profits; or for wasted expenditure. He cannot claim both. If he has not suffered any loss of profits or if he cannot prove what his profits would have been he

Stefan Fafinski, Contract law, (2nd edn, Pearsons Education Limited, Essex 2010) Chris Turner, Unlocking Contract Law, (3rd edn, Hodder Education, 2010)

can claim in the alternative.3 Andy is able to prove loss of profit as a result of the breach. Andys original daily profit with the old engines was 3000 he worked out that with the new engines it would increase his daily profit to 6000 by being able to run additional and faster trips. One main reason why Andys claim might be successful is VSS were able to guarantee Andy the new engines would increase the speed of the plane and able to run additional trips which means additional profit. Causation is the first barrier that needs to be cleared for the injured party to recover damages. The breach must also be the cause for the loss. After a link between the breach and the loss has been established the defendant is not necessarily liable for all the loss. If the loss from a breach of contract is too remote then it is not recoverable. A two-part test was derived from the case of Hadley v Baxendale regarding the liability for damages and is based on foreseeability. Common knowledge is the loss arising naturally from the breach within the foresight of the parties and Actual knowledge is a loss reasonably within the contemplation of both parties at the time the contract was formed. The court will be able to use this test in Andys case. The first limb covers damage that is an inevitable consequence of the breach. Andys original profit before the breach was 3000 a day and the delay of the engines means he will lose out on two weeks worth of profit. VSS must have foreseen at the time of entering the contract failing to deliver the new engines would have caused this. Therefore Andy will be able to recover damages for the loss of additional profit. In addition to extra flights Andy thought he could start running tourist flights to Newquay from London and calculated he could expect to make 2000 profit from each trip and wants to sue VSS 50,000 loss in the space of two weeks. Andy will not be able to sue successfully for the loss of profit on the Newquay trips because VSS were unaware of Andys plans to start tourist flights. A similar case was the Victoria Laundry where the claimants were able to recover damages for loss of profit but not for loss of revenue from government contracts because the government contracts were unaware to the defendants at the time the contract was formed. Similarly VSS were also unaware of Andys plan for tourist during the time the contract was formed. Mitigation is an essential factor that the plaintiff must take into account. A party that is injured by a breach of contract must take reasonable steps to minimise the extent of their losses. There is no duty of them to mitigate their duty is to take reasonable steps. In the case of Payzu v Saunders the court decided the burden of proof on the issue of mitigation is on the defendant. However, he is not bound to go to extraordinary lengths in order to mitigate his loss. As we can see Andy did take reasonable steps in order to minimize his loss by trying to find replacement engines from an alternative source which ended up costing him 20,000 extra. The courts for many years limited damages to only pecuniary loss but now it is recognised that there are situations in which damages may be paid in relation to feelings, mental distress and loss of amenity4. The first case where the courts refused a remedy for mental distress was Addis v The Gramopohone the court held where the loss of reputation caused by wrong dismissal of the plaintiff

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Paul Richards, Law of Contract, (8th edn, Pearsons Education Limited, Essex 2007) Stefan Fafinski, Contract law, (2nd edn, Pearsons Education Limited, Essex 2010)

was irrecoverable.5 In recent years a number of cases undermined the principle from Addis v Gramophone and allowed the courts to award damages for mental distress. One of the cases was Jarvis v Swan Tours at first the plaintiff only recovered a sum to cover the cost of the features he did not receive but on appeal the award was increased to reflect disappointment. In this case Lord Denning stated Damages for mental distress can be recovered in contract, just as damages for shock can be recovered in tort. One such case is a contract for a holiday or any other contract to provide entertainment and enjoyment. If the contracting party breaks his contract, damages can be given for the disappointment. Andy wants to claim 1,500 for disappointment following the initial principle of Addis v Gramophone Andy would not be able to recover any money for his disappointment for the breach of contract also if we follow the statement made by Lord Denning in Jarvis Andy still will not be able to recover any monies for disappointment since the contract formed by Andy and VSS is not one of case relating to holiday, entertainment or enjoyment. Therefore, his claim for disappointment will fail.

To conclude

Paul Richards, Law of Contract, (8th edn, Pearsons Education Limited, Essex 2007)