Question

Performance and Breach

Under what circumstances should courts not allow fully informed contracting parties to agree to limit remedies? Describe a specific situation where the contracting parties could or could not limit remedies. What societal and/or business principles might be involved in a court's decision?

Answer 1

The courts must not allow fully informed contracting parties to agree to limit remedies under following condition:

· One of the contracting parties is very strong and the other contracting party is weak.

· If the circumstances are that any one party’s agreement is dependent on other party’s agreement.

Remedy is the action that contracting parties can implement if the terms and conditions of contract are breached.

A specific situation where the contracting parties could not limit remedies is if a minor enters a contract with a vendor by falsifying his age in order to purchase sunglasses on credit. After some time when minor fails to pay vendor for sunglasses; vendor sues the minor to recover for the loss of price of sunglasses. While investigating the case the officials determine that defendant was a minor but s/he obtained sunglasses on false ground. It was also determined that sunglasses were not a necessity when they were purchased. Thus, the court considered the contract void on two grounds. First, defendant was minor and second, purchase was made for goods that were not necessary, therefore, contracting parties could not limit remedies to the contract.

Here, business principles that are involved in court’s decision are doctrine of strict necessity. Minor can enter the contract if the goods purchased were necessity. Other concept is contractual capacity. According to it, minor cannot enter a contract.