10. Termination Flashcards
Two scenarios wherein the right to terminate arises
- Breach of a condition
- Very serious breach of an innominate term (repudiatory breach)
If one party breaches a condition in the contract, does it automatically terminate?
No, the innocent party has a choice to affirm the contract or treat it as over
If a party decides to affirm a contract and later wishes to change their mind and terminate - can they do this?
No, affirmation is a bar to terminating a contract
Does a breach of a contractual warranty give rise to the right to terminate?
No, but it gives rise to a claim in damages
If the innocent party affirms a contract wherein a condition has been breached - are they barred from pursuing damages?
No, they can pursue damages for loss from the breach
Can a contract be terminated if performance is complete?
No, termination only operates to discharge parties from future contractual obligations
Doctrine of Frustration: what is it and when is it relevant
- The contract is automatically brought to an end
- Due to an unforeseen event beyond either party’s control
- the law determines how loss should be borne by the parties
When will a change of circumstances leading to an inability to complete a contract amount to ‘frustration’
- The event makes performance of the contract impossible or radically different
- is beyond the ordinary risks the parties considered when making the contract
- was entirely beyond the control of either party
Under what circumstances could the performance of the contract be rendered ‘radically different’ (wrt frustration)?
- government intervention
- unavailability of a specific person crucial to the contract
- illegality
- destruction of the subject matter
- non-occurence of a fundamental event
(in all cases will be a question of degree)
When will ‘delay’ frustrate a contract?
- if there is a contractual provision for delay which does not cover a delay of this scale
- the delay is very long relative to the duration of the contract
- the delay means obligations in the contract cannot be performed on time
- the performance resumed is radically different from the contract
What is a ‘force majeure’ clause
Contractual clause providing for the occurrence of ‘unexpected events’ and ‘excusing’ non-performance
- will not be able to rely on doctrine of frustration if event is covered in this clause
Requirements for Force Majuere clause to be binding?
must comply with s 3 UCTA 1997 (pass the reasonableness test) in order to be upheld
If a contract is frustrated but money has already been paid under the contract - can this money be recovered / need outstanding money still be paid?
- Money paid before the event can be recovered
- Money that should have been before the event need not be paid
- at the court’s discretion, expenses occurred from either can be recovered out of the total sums paid / payable before the event (WIDE)
- if one party has conferred a valuable benefit on another before frustration, court may order a just sum be paid to them
If a contract is frustrated, what is the maximum the court can award for expenses incurred by the payee?
A sum equal to the total paid and payable before frustrating event OR the amount of the expenses incurred (whichever is lower)
If one party confers a valuable benefit on the other before the frustrating event but the frustrating event (eg. a fire) knocks out this benefit, can the worker still be compensated for it under s 1(2)?
Potentially not - as the benefit must be able to be ‘enjoyed’ by the other party to be a benefit
- if frustration occurs after a benefit is enjoyed, court can calculate a just sum (ie. a week of using a new house extension before it is destroyed)
What is the Doctrine of Complete Performance? What happens if the doctrine is not adhered to?
(1) Performance of contractual obligations must be precise and exact
(2) If payment is due after obligations are performed and obligations are not performed precisely and exactly, the payer does not have to pay any part of the price
Under the doctrine of complete performance - can the payer recover any money already paid under the contract if the doctrine has been violated?
No, not unless there has been a total failure of consideration (restitution)
Exceptions to the doctrine of complete performance
a. divisible obligations
b. substantial performance
c. wrongful prevention
d. voluntary acceptance of part performance
If the doctrine of complete performance is frustrated but one of the exceptions apply - what does this mean?
That the payee is entitled to recover some payment
Explanation of divisible obligations
If a contract is divided into stages (with payment attached to those stages), each stage is treated like its own contract and therefore once completed the contractor is entitled to be paid the agreed amount
Explanation of substantial performance
If a contractor completes the work but it is SLIGHTLY defective they will be entitled to the price LESS the cost of putting right to defect
- slightly defective: problem cannot be more than 1/14 of the contract price
Explanation of wrongful prevention
If a party is wrongfully prevented from completing their obligations they will be entitled to either damages or a reasonable sum in restitution for what has already been done
If a party is stopped from completing their work due to an alleged breach of an innominate term - can they argue ‘wrongful prevention’ to receive remuneration under the contract
- if the breach is VERY SERIOUS (ie. dangerous, very defective, in breach of s 13 SGSA 1982) their dismissal will be justified and wrongful prevention cannot be argued
- breach must deprive contractee of whole benefit they expect to receive under the contract
Explanation of voluntary acceptance of part performance
- non-defaulting party must have free choice and accept part performance and if they do, other party is entitled to a reasonable sum for work done
- if they have ‘no choice’ (ie. because work is abandoned) this does not count
