Parties and obligations
The parties involved in this case are Solar Energy Power Plant (SEPP) and Utility Supply (US). In the first agreement, the US was obligated to supply solar panels to SEPP’s prospected solar plant in stages. The contract required the US to give SEPP certificates from the Energy Efficient Council (EEC) before payment was made. SEPP, in the agreement, was obligated to pay the US at each stage of construction as long as the latter is in a position to supply all the agreed panels for that level and presents a five-star standard certificate from EEC.
Facts
From the case, the following facts were picked out. First, is that a contract was signed that outlined the obligations listed above. The second fact from the case is that SEPP advised the US not to bother providing the certificate from EEC. Third, the work commenced and SEPP promptly paid for work done after the first two stages. The last fact identified from the situation is that SEPP came out to demand that an EEC certificate be provided before the third payment was made and that the first two payments be refunded.
Assumptions
The first assumption from the case above is that the advisement by SEPP to the US not to provide EEC certificates was made orally and was came after the contract had been signed. The second assumption is that the US-supplied panels in the first two rounds as required by the contract and that SEPP was satisfied with the quality of products provided. It is also assumed that SEPP is claiming a refund because no EEC-compliance certificates were provided. Another assumption from the case is that there people who saw SEPP advising the US to disregard the EEC certificate. The last assumption is that the contract did not have a clause that allowed for the implementation of oral advisements.
Can SEPP ask for a refund of sums of money for the first two payments?
Promissory Estoppel
One of the key legal doctrines that apply to this particular case is Estoppel, which is a principle that blocks an individual from asserting or denying anything to the contrary of that which has been confirmed as true, either by the acts of judicial or legislative officers, or by his own deed, acts, or representations, either express or implied (Blum 2007, 207). In this case, the kind of Estoppel that can unilaterally be used to govern the ruling is Promissory Estoppel. Promissory Estoppel precludes one party from going back on an agreement (written or verbal) made with another party if the latter has relied on the agreement to fulfill a particular duty (Blum 2007, 207). For Promissory Estoppel to apply, the following key elements must be present:
- There is an undisputable verbal, implied, or written promise (Blum 2007, 207).
- There is evidence to support the fact that the promisee acted on an agreement based on the promise (Blum 2007, 208).
- It is proven that the party making the promise intends to reverse the promise even though he knows that the promisee had fulfilled an obligation based on the promise (Blum 2007, 208).
In the SEPP v US case, there was a written promise upon which the promisee acted to fulfill the requirements of the initial contract. Had SEPP not advised the US against the provision of the EEC certificate, the latter would have ensured that the document was provided at the required time. The fact that SEPP is claiming a refund by going against the promise makes the case a good candidate for Promissory Estoppel.
This is especially in consideration of the fact that the company had already made payments without the certificates being provided, a clear indication that the verbal agreement was being implemented. A similar case to this is the Central London Property Trust Ltd v High Trees House Ltd.
Common law/Unidroit Principles
Common law holds it that “unless there is specific Act of Parliament which provides that it must be in writing, the contract does not have to be in writing” (Simpson 1987, 618). The same rule is upheld by Article 1.2 of the Unidroit Principles which states that “a contract does not to be in writing” (Simpson 1987, 618). In the SEPP v US case, an initial written contract, which stipulated the obligations of each party, was signed.
However, before the work began, SEPP made a verbal change to some of the requirements of the original contract. Assuming that SEPP does not deny making the amendment and that there were witnesses present when the promise was made, then the promise is a valid contract based on both the common law and the Undiroit Principles. It will, therefore, be illegal for SEPP to try and argue that no contract was signed directing the US not to provide certification from the EEC at each stage. This situation is similar to what was presented in the Vlad v Jose case.
Conclusion
Guided by Common law, Article 1.2 of the Unidroit Principles, SEPP has no authority to request for a refund for the first two deliveries because the promise they made, though verbal, is in line with the doctrines that permit for Promissory Estoppel, which the US will likely pursue (Hartkamp and Hondius 2004, 393). As was the situation in the case of Commercial Bank of Australia Ltd v Amadio, the court has a high likelihood of providing an unconscionability ruling against SEPP.
Can SEPP enforce the provision of an EEC certificate for the third payment?
It is assumed that the signed contract between SEPP held that all the payments needed to be made before the deliveries were made. In this regard, SEPP officials need to meet with US officials and inform them that all the demands of the signed contract must from that point onwards be met. In this situation, SEPP will be putting into practice Article 1.7 of the Unidroit Principles which states that in a contract,
- Each party must act in accordance with good faith and fair dealing (Ryan 2005, 223).
- The parties may not exclude or limit this duty (Ryan 2005, 223).
Like in the Burger King Corporation v Hungry Jack’s Pty Ltd case, both SEPP and the US will be acting in good faith to straighten the issues surrounding the contract. Because the US had not supplied any panels, SEPP can then make it mandatory for them to provide an EEC certificate before any payments are made. Assuming that the US is a company that believes in the quality of its product, getting the EEC certificate will not be a big challenge and they should, therefore, agree to the requirement. For a good working relationship to be maintained, it is paramount that the two parties strictly adhere to the mandate of the written contract (Ryan 2005, 223).
What steps should management take to ensure that the contract reflects the work required?
In order for the contract to reflect the work expected from the US, SEPP’s management needs to go through the contract together with US officials ensuring that each item listed has the same significance for both parties. Among the items that need to be made clear is the purpose of the contract, whereby the SEPP has to list its expectations and the US confirm if these expectations are agreeable as per the contract.
SEPP also has to confirm whether or not verbal communication can be used to amend the contract. Verbal communication in this instance includes communication by E-mail and both SEPP and the US have to come up with a written contract that explains which variations are considered valid. The circumstances leading to the termination of the contract need to be properly outlined and both parties should confirm that they have understood them.
A review of the work done also needs to be conducted in comparison with the requirements of the original contract with SEPP pointing out the areas that were not covered. The amended contract may have to require the US to first fulfill the demands of the original agreement before more supplies can be made. After every stage, SEPP officials should meet with US officials and go through the work done in consideration of the contract requirements. If any of the stipulations laid out by the contract are not met, then appropriate measures are taken including making demands for a refund.
References
Blum, B 2007, Contracts: Examples and Explanations, Aspen Publishers Online, New York.
Hartkamp, A & Hondius, E, 2004, Towards A European Civil Code, Kluwer Law International, London.
Ryan, D 2005, Essential Principles of Contract and Sales Law in the Northern Pacific: Federated States of Micronesia, the Republics of Palau and the Marshall Islands, and the United States Territories, iUniverse, Bloomington.
Simpson, A 1987, A History of the Common Law of Contract: The Rise of the Action of Assumption, Oxford University Press, Oxford.