Gina Ltd's Rights & Liabilities: Advise on Damages & Remedies - Research Paper

Introduction

This essay will chronologically attempt to dissect the various issues in the four parts of the problem whilst laying down the relevant law in advising the various parties involved.

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Advise Gina Ltd as to their rights and liabilities under their contract with Ali. Consider any question about available damages and remedies.

It was an express term of the contract that the seller shall not be liable for "for any damage or injury caused by the defective functioning of the power generator". Therefore, this expressly excludes Gina Ltd.'s liability concerning the damage caused to Ali's premises.

Gina Ltd would now need to determine if the proper functioning of the generator (so much so that the mishap in the question would not have happened) have been impliedly incorporated into the contract either by law or implied in fact. Under common law, it can be argued that the term that the power generator would not function in a defective manner could be implied into the contract by law to ensure fairness and efficacy of the contract. Alternatively, those terms could be said to have been impliedly incorporated in fact as it complies with the officious bystander test in Shirlaw and the business efficacy test in the Moorcock. This is because a term requiring the generator to function in a normal manner during business would be so obviously necessary to ensure the efficacy of the contract (to allow Gina Ltd to conduct business as usual).

Under statutory law, s14 Sales of Goods Act 1979 implies into a contract that goods sold by a seller in the course of business must be of satisfactory quality. S14(2B) expressly states that safety and durability are factors which would be taken into consideration. Hence, it could be argued that Gina Ltd can claim there was a breach of such a term in the contract due to the defective functioning of the power generator.

Therefore, it can be argued by Gina Ltd that there is a breach of contract by Ali for supplying the defective generator so Gina Ltd has a claim against Ali in the contract. The question is what remedy Gina Ltd. obtains concerning this breach. Under the compensatory principle, claimants are to be put so far as money can in the position that the claimant would have been in had the contract been properly performed (Robinson v Harman). Gina Ltd generally has a right to elect reliance or expectation damages but Fuller and Purdue think that the orthodox position is to protect expectation loss. Therefore, the expected loss is calculated using the diminution in value principle (Ruxley v Forsyth) which stipulates that the court will only give damages based on what is reasonable. This hinges on the purpose of contracting, the intention to cure and the proportionality of the cost to cure. Hadley v Baxendal and Achilleas also stipulate that the claimant can only recover damages which have foreseeable consequences within the ordinary course of thing.

Further, the Unfair Contracts Terms Act 1977 (UCTA) can be used by Gina as a defence. S3 UCTA dictates that where one party deals as a consumer or on the other party's written standard terms of business, then the other party cannot exclude or restrict his liability for breach of contract, non-performance of the contract or different performance of the contract unless the exemption clause satisfies the requirement of reasonableness. As per s3 (1), this applies only to standard terms of business, that is commercial contracts concluded on standard terms of the other party. S2 (2) UCTA means that any term purporting to restrict or exclude liability for other loss (property/economic loss) from negligence is enforceable only so far as the term satisfies the requirement of reasonableness. The reasonableness test is set out in s11 which takes regard to the circumstances which were or ought to have been in the reasonable contemplation of the parties when the contract was made and in Schedule 2, looks at the relative bargaining power; inducements to agree on the term and reasonable knowledge of the existence of such a term (Smith v Eric Bush). The burden of proving reasonableness is on the party seeking to rely on the exclusion as per s11 (5) UCTA. The clause in the contract between Gina Ltd and Ali. Inc. regarding the latter's waiver in liability arising from the defective functioning of the power generator sold seems to be a standard term of business as per s3 UCTA and falls short of the requirement of "reasonableness" as it could have been in the reasonable contemplation of both parties that the generator would function normally.

Furthermore, under s6 UCTA, any term purporting to deviate from the description/quality/ fitness for the purpose sold cannot be excluded unless the reasonableness test is satisfied. Again, Ali. Inc.'s generator falls short here.

Therefore, the exclusion clause can be struck down.

Write an essay intended for publication in the local newspaper explaining whether and to what extent Gina Ltd might be liable in criminal law

Corporate Criminal Liability

Corporate activity is as broad as human activity itself. The economy is driven by the concerns of small businesses. Corporate criminal liability will impact on those in a very personal way much more so that it will concerning the big corporations, were in effect a conviction does not touch / concern an individual very closely. The conviction of a small business is a little bit like the conviction of an individual himself. The bigger the corporation, however, the bigger the risk of doing harm (and good).

The precise model in the common law was inadequate as highlighted in the Herald of Free Enterprise 1997. Initially, a prosecution for gross negligence manslaughter was taken out against the company itself (P&O Ferries). At first instance, the defence said that they had no case to answer. There may have been negligence / gross negligence but it was not on part of the company. Rather, it was gross negligence by several individuals holding key posts on the ferry. The judge ruled that this was correct and the prosecution could go no further. The reason this conclusion was reached was that the tragedy was caused by principally due to the sleeping boatswain. He was fast asleep since he was continuously on duty. When the bow doors are open, a warning light is supposed to flash in the captain's cabin but this did not work. The captain was himself negligent in the sense that he should have checked that all warning systems were working before setting out. In an inquiry into the disaster, the judge said that the entire company was infected from top to bottom with 'a disease of sloppiness'. P&O management had allowed boats to carry on without doing anything to ensure that the boats/crew were fit for duty. The judge ruled that it would be impossible to put together the individual acts of negligence on the part of the company to find the company grossly negligent. Scholars have agreed that it is right to see this case in which it is not appropriate to load up a few individuals lower down in the chain when the responsibility lies higher up. Ashworth claimed that it made no sense to see this case as the responsibilities of a few individuals when none of them had the necessary AR and MR. Pettit believed that while individuals could not bear a high degree of responsibility, together as a corporate enterprise, they should have carried full responsibility.

So, the Corporate Manslaughter and Corporate Homicide Act 2007 (CMHCA) was mooted as an idea by trade unions so that corporations will recalibrate their decision-making calculus: instead of placing profit-making ahead of the safety/health of their employees, the Act seeks to reorder their incentive structure, with the aim of providing practical justice, something that was needlessly denied in the HMS Free Enterprise Tragedy owing to the limitations of the identification doctrine. Whether the Act deals adequately with the problem of corporate homicide is to what extent the act manages to achieve the aforementioned objective. The Act has been able to overcome severe evidential problems caused by the Identification Doctrine by recasting the net of corporate homicide. Instead of being contingent on a few guilty 'directing' members of the corporation, it is now contingent on the corporation's gross breach of a duty of care, in the way that they have organized or managed their activities, causing a death. A substantial part of the breach must be a result of the way senior management has managed the activity, as noted in S1(3). However, its overall effectiveness is still overall limited by its inclusion of elements such as a gross breach of duty of care, and the requirement of senior management.

Identification Theory

The origins of the identification doctrine can be found in civil liability cases (Lennard's 1915) and later on in the realm of criminal law as per Tesco v Natrass 1972. The purpose is to identify individuals that personify the company and was the directing mind and will of the company that the acts of the individual could be equated to that of the company. In that case, it was satisfied by the wrongdoer being the director of the carrying company, the director of the company managing the carrying company and the managing owner of the ship who represented the "very ego and centre of personality" of the company. On the face of it, this seems like a rather high threshold to meet which means that companies could arguably get off the hook where the wrongdoer did not represent the ego/personality of the company. The logic of the identification doctrine based on the directing mind and will be extended to criminal cases like DPP v Kent where a company's transport manager who submitted incorrect statements was found to be the directing mind and will of the company.

The high threshold is precisely confirmed in the case of Tesco v Nattrass where the HOL held that the directing mind and will does not encompass more junior management. In this case, Lord Reid held that inaccurate advertising of sale prices of goods placed by the stock boy and branch manager could not be equated to the actions of the company since they did not embody the company nor carry out managerial functions and hence don't make up the directing mind and will of the company. This created confusions as in the same judgment, Lord Reid recognised the fact that the directing mind and will of the company in the form of the board of directors could exercise delegation to the effect that those delegates can act as the company, yet ruled otherwise. There is arguably inconsistency and incoherency as to what purports to the proper attribution of criminal liability. Further, implied is Tesco's judgment was the fact that to be the directing mind and will, it had to be someone fairly high up in the corporate ladder.

Purposive Approach

It was only later in the Privy Council case of Meridian Global Funds 1995 that the court set out a broader approach, not considering the issue of attribution by looking at one's position in the corporate ladder but rather, considering the issue of attribution to achieve the purpose to be achieved by the statutory position. This meant that courts became prepared to identify lower-ranking individuals whose acts may be attributed to the company, making it criminally liable. In Meridian, where a Chief Investment Officer filed to disclose an investment in breach of the NZ Securities Amendment Act 1988 which requires speedy disclosure of significant shareholdings, Lord Hoffman held that the knowledge of this employee can be rightly attributed to Meridian and hence, Meridian as liable. This was even though the employee was a CIO and could arguably be labelled as the "directing mind and will of the company". To achieve the purpose of the statute, it was apt that the knowledge of that employee who was a CIO be attr...