Breach of Contract Research Paper AirMalaysia Case

Theresa booked a flight ticket with AirMalaysia to fly her from Kuala Lumpur to Melbourne on the 1st of December 2009. She has booked and paid the ticket in advance and the flight has confirmed. However, on the 1st of December 2009 the flight was cancelled and the airline was unable to give Theresa an alternative flight on same day. Consequently, Theresa was forced to put up a night in Kuala Lumpur. The next afternoon, she able to flew to Melbourne on another airline. Due to the cancellation of flight she arrived in Melbourne late and she had lost a business opportunity which causes her losing a considerable sum of money.

The main issue in this question is whether Theresa able to sue for her damages. Law and Implication For there to be a valid contract between Theresa and AirMalaysia, there must be a proposal, acceptance and consideration. Proposal is defined in Section 2 (a) Contract Act 1950 as when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal.

The moment when Theresa booked the flight ticket online with AirMalaysia, acceptance was took place, Theresa have accepted the offer proposed by Airmalaysia. Acceptance is describe In Section 2 (b) Contract Act 1950 as when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Consideration refers to what one party to an agreement is giving or promising in exchange for what is being given or promised on the other side, it must be exist in every contract.

Section 2 (d) Contract Act 1950 describe consideration as when, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise. On the 1st of December 2009, the flight that Theresa booked earlier was cancelled and the airline was unable to replace Theresa an alternative flight on the same day.

Thus, there is a repudiatory breach of contract between AirMalaysia and Theresa. Breach of contract is defined in Section 40 Contract Act 1950 as when a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirely, the promise may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance. The breach of Contract by AirMalaysia has created a problem for Theresa to look for alternative way to fly herself to Melbourne.

As a result, Theresa was forced to put up another night in Kuala Lumpur due to the change of flight to Melbourne with another airline. According to Section 76 Contract Act 1950 a person who rightly rescinds a contract is entitled to compensation for any damage which he has sustained through the non fulfillment of the contract. Damages are granted to a party as compensation for the damages, loss or injury he or she suffered through a breach of contract. Theresa reserved the right to request for compensation and sue for damages that resulted from cancelation of flight by AirMalaysia.

In Section 74 Contract Act 1950 states that an innocent party may claim damages for other expenses and loss of profit that have incurred as a result from the party in breach of contract. The damages may be nominal, liquidated or unliquidated. Nominal damages are awarded where the innocent party has suffered no loss as a result of the other’s breach, liquidated damages is an an amount of money agreed upon by both parties to a contract that a party who breaches the contract will pay to the other party and unliquidated damages refers to damages in a breach of contract case that were not predetermined by the party.

Unliqudated damages are divided into two limbs, the first limb is damages which may fairly and reasonably be considered as arising naturally from the breach and second limb is damages which the parties knew, when they made the contract, to be likely to result from the breach of it. In order to recover unliquidated damages the innocent party must take steps to reduce the possible losses and show that the amount he or she has suffered actual loss, if there is no actual loss he will only be entitled to nominal damages.

On the fact, Theresa have tried to look for alternative ways to fly her to Melbourne but she ended up stay another night in Kuala Lumpur to wait for her next flight. Consequently, she was forced to spend more on transport expenses to travel to airport and accommodation fees, these examples of expenses fall under first limb of unliquidated damages and Theresa is entitled to obtain the compensation for these damages. However, Theresa is not entitled to claim the amount she has losses resulted from losing a business opportunity in Melbourne which fall under second limb of unliquidated damages.

In Hadley v Baxendale (1854) 9 Exch 341 a shaft in Hadley’s (Plantif) mill broke rendering the mill inoperable. Hadley hired Baxendale (Defendent) to transport the broken mill shaft to an engineer in Greenwich so that he could make a duplicate. Hadley told Baxendale that the shaft must be sent immediately and Baxendale promised to deliver it the next day. Baxendale did not know that the mill would be inoperable until the new shaft arrived. Baxendale was negligent and did not transport the shaft as promised, causing the mill to remain shut down for an additional five days.

Hadley had paid 2 pounds four shillings to ship the shaft and sued for 300 pounds in damages due to lost profits and wages. The jury awarded Hadley 25 pounds beyond the amount already paid to the court and Baxendale appealed. The court held that in this case however the rule should be that the damages were those fairly and reasonably considered to have arisen naturally from the breach itself, or such as may be reasonably supposed to have been in the contemplation of both parties at the time the contract was made.

The court held that if there were special circumstances under which the contract had been made, and these circumstances were known to both parties at the time they made the contract, then any breach of the contract would result in damages that would naturally flow from those special circumstances. Damages for special circumstances are assessed against a party only when they were reasonably within the contemplation of both parties as a probable consequence of a breach. The court held that in this case Baxendale did not know that the mill was shut down and would remain closed until the new shaft arrived.

Loss of profits could not fairly or reasonably have been contemplated by both parties in case of a breach of this contract without Hadley having communicated the special circumstances to Baxendale. The court ruled that the jury should not have taken the loss of profits into consideration. On the fact, Theresa did not tell her purpose of travel to Melbourne, such special circumstance was not communicated to AirMalaysia and there is no responsible for AirMalaysia to compensate Theresa’s extraordinary losses. Conclusion.

In this case study, there is a valid contract between Theresa and AirMalaysia. However, AirMalaysia have breach the contract that resulted Theresa to suffer a sum of losses. Refer to Hadley v Baxendale (1854) 9 Exch 341 the court established the principle that where one party is in breach of contract, the other should receive damages which can fairly and reasonably be considered to arise naturally from the breach of contract itself or which may reasonably be assumed to have been within the contemplation of the parties at the time they made the contract as being the probable result of a breach.

If there were special circumstances under which the contract had been made, and these circumstances were known to both parties at the time they made the contract, then any breach of the contract would result in damages that would naturally flow from those special circumstances. Damages for special circumstances are assessed against a party only when they were reasonably within the contemplation of both parties as a probable consequence of a breach.

On the fact, the breach of contract which cause Theresa losing a business opportunity and a considerable sum of money due to arrived in Melbourne too late is not communicated to AirMalaysia by Theresa. Thus, Theresa is only entitled to obtain compensation for the damages that fall under first limb of unliquidated damages which is the expenses that Theresa spend on a extra night in Kuala Lumpur.