Business Laws in Contract Termination

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Introduction

The contract between the government and Chill-Out can be terminated. The Chill-Out company did not fulfill the exact expectations of the government. By law, a contract is an agreement between the employer and the employee where there is a mutual duty for each party (Carrigan, 2012). However, a contract can be terminated by either of the involved sides. The agreement between the government and the Chill-Out company can be concluded fairly by the law. For a termination to be just, it has to be performed correctly, both procedurally and substantively. The employer should have fair and valid reasons for contract dissolution.

The Commonwealth Government of Australia can terminate the contract with Chill-Out enterprise as the firm did not fulfill the requirements as per the will of its employer. The company caused significant loss to the Australian government, as the COVID-19 vaccines supplied to the Queensland hospital and other hospitals in New South Wales were damaged and could not be implemented in the future. In addition to that, a primary goal of a seller or an entrepreneur is to make a maximum profit (Cheeseman, 2012). The vaccines were of no benefit to the Commonwealth government since they could not be distributed, and no profit was to be gained. This event failed due to the employee’s mistake, which may initiate the termination of the contract.

An established contract can be concluded due to several major reasons. Such causes include poor performance, physical incapacity, misconduct, and also employer retrenchment (August et al., 2009). The law states that, even after a contract disagreement, no party can take disciplinary action against each other (August et al., 2009). A conflict may arise due to loss or a need for financial compensation, hence, coherent and justified contract termination is required regardless of the established fault. In the contract between the Commonwealth Government of Australia and Chill-Out company, dissolution can be applied because of the poor performance of the employed enterprise, as in the case of Abrams v RTO Asset Management (Court of Appeal of New Brunswick, 2020). Considering the damage to the COVID-19 vaccines in the Queensland hospital, the worker wrongly programmed the cooling system, significantly decreasing the surrounding temperature, which remained between -2 degrees Celsius to -8 degrees Celsius. On the contrary, a temperature between +2 degrees Celsius to +8 degrees Celsius is required from the manufacturer. The employer might consider this event a voluntary mistake, deciding to conclude the contract since the vaccines are damaged and cannot be used for subsequent profit.

The contract might also be terminated due to an employee’s lack of capacity. Incorporation of the exclusion clause is a clear indication that Chill-Out company was not fully willing to enter into an agreement with the Commonwealth government (August et al., 2009). The enterprise could have been aware that its workers are incapable of complying with the requirements. However, as the corporation intended to secure the profit of corroborating with the governmental structure, the clause that alleviated liability issues was included, similar to the case of Goodlife Foods v Hall Fire Protection (England and Wales Court of Appeal, 2018). After the COVID-19 vaccines were destroyed, the employer became knowledgeable of Chill-Out’s unreliability and absence of needed resources to fulfill the contractual agreements, prompting the dissolution of the engagement.

Misconduct is another reason that the termination of this contract can be based on. Misconduct is referred to as a worker’s misbehavior due to negligence or lack of capability (Cheeseman, 2012). In the discussed case, considering the vaccines transported to the Queensland hospital, the worker of Chill-Out company failed to set the cooling system as required by the manufacturer of the vaccines. The employee controlling the cooling system in the Queensland storage warehouse was highly intoxicated by alcohol, thus producing an incorrect input. Considerable temperature decrease and vaccine damage were the results of these actions. As the human body is very sensitive, any consumed substances can negatively impact its capacity.

Another instance of misconduct can be applied to Chill-Out’s decision to store the sensitive vaccination material in old cooling systems of New South Wales, which malfunctioned, originating a tremendous increase in the surrounding temperature. Any actions connected to medicine management should be handled with great concern since the results of these activities might greatly impact the body. Given that old cooling systems are inferior to newer analogs, the condition of the older machines should have been evaluated, and any possible cooling failures should have been reported and examined. Additionally, during the storage of COVID-19 vaccines, the material was exposed to high temperatures between +15 degrees Celsius to + 20 degrees Celsius, and the enzyme present in the vaccines was denatured. In this regard, the vaccines became unsafe for use, and the event constituted a loss to the Commonwealth Government of Australia. Considering that future depletion of financial and medical resources can cause adverse ramifications for the state and its citizens, the contract can be terminated.

Ignoring the Exclusion Clause, Explain Whether the Commonwealth is Entitled to Receive Some Compensation and If So, How Much

In a scenario where the exclusion clause does not exist, the Commonwealth Government of Australia is entitled to receive compensation given that the COVID-19 vaccines were damaged while handled by Chill-Out workers. The duty of the management of Chill-Out company is to monitor the work of its employees (August et al., 2009). The contract between the Commonwealth Government of Australia and Chill-Out established the collection procedures for the COVID-19 vaccines once they land in the country, as well as their future storage and distribution. The exclusion clause in the contract stated that after the damage of the vaccines by way of nature, the cost would be attributed to the Commonwealth government. Based on the characteristics of the contract, the compensation cost would be as follows if the exclusion clause was to be ignored:

$90,000,000 – the cost of vaccines taken to Queensland.
$180,000,000 – the cost of vaccines in New Wales South.
$5,000,000 – cost incurred for securing convoys in transport. Since the employer said, “We cannot just throw it into Bob’s pickup truck again and drive it down the road.”
Total calculations: $90,000,000 + $180,000,000 + $5,000,000 = $275,000,000.

The $3,000,000 should not be included in the compensation because the COVID-19 vaccines had not been transported to the hospital, hence, the freezers needed for hospital storage had not been discussed in the arrangement. The $20,000,000 should not be reimbursed as this cost accounts for additional community outreach. Considering that the COVID-19 vaccines were damaged during transport, they were not yet available for the population members.

Whether Chill-Out Would Escape the Liability by Relying upon the Exclusion Clause

Chill-Out has the right to avoid the termination of the contract and even escape the necessity of compensating the damage to the COVID-19 vaccines. A contract is a binding agreement between two parties whereby each of the two parties agrees to corroborate according to the terms and conditions laid down (Cheeseman, 2012). By incorporating the exclusion clause, Chill-Out company hoped that the management of the Commonwealth government would notice it, compelling the authorities to agree or disagree with the suggested terms. Chill-Out might evade compensation payments to the government since the contract that was signed by the state officials thoroughly indicated that under no circumstances will the carrier be responsible for the loss of the commodities.

The possibility of injury and carrier fault was also discussed in the clause. In addition to that, any delay in delivery, as well as damage or destruction of goods, “by whatever cause,” becomes the responsibility of the customer. However, the Commonwealth government representative decided to sign the contract form without reading the terms and conditions presented by Chill-Out company. Chill-Out can escape the liability by arguing that they assumed that the Commonwealth government agreed with the contractual details and the exclusion clause since the enterprise did not receive a letter declining the terms (Cheeseman, 2012). The representative of the Commonwealth possesses a mandate to act as a literate leader and read the statements in the contract form. By law, it is the mistake of the Commonwealth government representative to have signed the agreement without reading the terms and conditions, either knowingly or unknowingly, since a contract is legally binding. Chill-Out has the right to escape this liability and compensation payments to the Commonwealth Government of Australia.

References

August, R., Mayer, D., & Bixby, M. (2009). International business law: Text, Cases, and readings. Pearson.

Carrigan, M. (2012). Business law. Oxford University Press.

Cheeseman, H. R. (2012). Business law (8^th ed.). Pearson.

Court of Appeal of New Brunswick. (2020). Abrams v. RTO Asset Management [2020] NBCA 57.

England and Wales Court of Appeal. (2018). Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA Civ 1371.

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Business Laws in Contract Termination

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