10. Termination

Question 2

Two scenarios wherein the right to terminate arises

Answer 2

1. Breach of a condition
2. Very serious breach of an innominate term (repudiatory breach)

Question 3

If one party breaches a condition in the contract, does it automatically terminate?

Answer 3

No, the innocent party has a choice to affirm the contract or treat it as over

Question 4

If a party decides to affirm a contract and later wishes to change their mind and terminate - can they do this?

Answer 4

No, affirmation is a bar to terminating a contract

Question 5

Does a breach of a contractual warranty give rise to the right to terminate?

Answer 5

No, but it gives rise to a claim in damages

Question 6

If the innocent party affirms a contract wherein a condition has been breached - are they barred from pursuing damages?

Answer 6

No, they can pursue damages for loss from the breach

Question 7

Can a contract be terminated if performance is complete?

Answer 7

No, termination only operates to discharge parties from future contractual obligations

Question 8

Doctrine of Frustration: what is it and when is it relevant

Answer 8

1. The contract is automatically brought to an end
2. Due to an unforeseen event beyond either party’s control
3. the law determines how loss should be borne by the parties

Question 9

When will a change of circumstances leading to an inability to complete a contract amount to ‘frustration’

Answer 9

1. The event makes performance of the contract impossible or radically different
2. is beyond the ordinary risks the parties considered when making the contract
3. was entirely beyond the control of either party

Question 10

Under what circumstances could the performance of the contract be rendered ‘radically different’ (wrt frustration)?

Answer 10

1. government intervention
2. unavailability of a specific person crucial to the contract
3. illegality
4. destruction of the subject matter
5. non-occurence of a fundamental event
   (in all cases will be a question of degree)

Question 11

When will ‘delay’ frustrate a contract?

Answer 11

1. if there is a contractual provision for delay which does not cover a delay of this scale
2. the delay is very long relative to the duration of the contract
3. the delay means obligations in the contract cannot be performed on time
4. the performance resumed is radically different from the contract

Question 12

What is a ‘force majeure’ clause

Answer 12

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

Question 13

Requirements for Force Majuere clause to be binding?

Answer 13

must comply with s 3 UCTA 1997 (pass the reasonableness test) in order to be upheld

Question 14

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?

Answer 14

1. Money paid before the event can be recovered
2. Money that should have been before the event need not be paid
3. at the court’s discretion, expenses occurred from either can be recovered out of the total sums paid / payable before the event (WIDE)
4. if one party has conferred a valuable benefit on another before frustration, court may order a just sum be paid to them

Question 15

If a contract is frustrated, what is the maximum the court can award for expenses incurred by the payee?

Answer 15

A sum equal to the total paid and payable before frustrating event OR the amount of the expenses incurred (whichever is lower)

Question 16

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)?

Answer 16

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)

Question 17

What is the Doctrine of Complete Performance? What happens if the doctrine is not adhered to?

Answer 17

(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

Question 18

Under the doctrine of complete performance - can the payer recover any money already paid under the contract if the doctrine has been violated?

Answer 18

No, not unless there has been a total failure of consideration (restitution)

Question 19

Exceptions to the doctrine of complete performance

Answer 19

a. divisible obligations
b. substantial performance
c. wrongful prevention
d. voluntary acceptance of part performance

Question 20

If the doctrine of complete performance is frustrated but one of the exceptions apply - what does this mean?

Answer 20

That the payee is entitled to recover some payment

Question 21

Explanation of divisible obligations

Answer 21

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

Question 22

Explanation of substantial performance

Answer 22

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

Question 23

Explanation of wrongful prevention

Answer 23

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

Question 24

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

Answer 24

• 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

Question 25

Explanation of voluntary acceptance of part performance

Answer 25

• 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