2. Contract Termination

Question 1

Define execution clause

Answer 1

Any clause that attempts to restrict or exclude the liability of one party for breach of contract or negligence

Question 2

What two factors will courts consider when evaluating an exclusion clause?

Answer 2

1. Whether the clause has been properly incorporated into the contract
2. Whether the clause is reasonable per statute

Question 3

What three factors must be considered for evaluating whether an exclusion clause has been properly incorporated?

Answer 3

1. Any exclusion clause must be given at the time that the contract is made
2. If a document is signed, parties are bound by its terms
3. If the document is not signed then the clause must have been sufficiently highlighted

Question 4

What is the Unfair Contract Terms Act 1977?

Answer 4

An act to regulate exclusion clauses where one party is acting in the course of business

Question 5

What three parts are there to the UCTA ‘reasonable’ test?

Answer 5

1. Any attempt to exclude liability for death or personal injury caused by negligence will be void
2. Any attempt to exclude any of the provisions of the Sale of Goods Act 1979 in contracts for the supply of goods and services to a consumer will be void
3. In a business to business contract, exclusion of other SOGA 1979 provisions will only be permitted after consideration of whether the term is fair and reasonable

Question 6

What was the impact of the Consumer Rights Act 2015?

How does this act define unfairness?

Answer 6

It strengthened consumer rights, introducing a fairness requirement in consumer contracts and notices

Unfairness: ‘contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer’

Question 7

To render a contract discharged through performance, both parties must what?

Answer 7

Perform their contractual obligations completely and exactly

Question 8

What three exceptions are there to the discharge meant through performance rule?

Answer 8

1. Substantial performance
2. Severance contracts
3. Complete and exact performance prevented by the other party

Question 9

Define frustration

Answer 9

If a contract becomes impossible or illegal to perform after the contract is entered into, it may be discharged by frustration

Question 10

The rights and liabilities of parties to a contract discharged by frustration are regulated by the ________

Answer 10

Law Reform (Frustrated Contracts) Act 1943

Question 11

What three events happen if a contract is frustrated?

Answer 11

1. Any monies paid must be returned
2. Any sums due cease to be payable
3. Expenses may be retained

Question 12

Define breach of contract

Answer 12

When one party fails to comply fully with all of the terms of a contract

Question 13

Any breach of contract gives the innocent party what?

The innocent party may also treat the contract as discharged if what?

Answer 13

The automatic right to claim damages

If there is a serious breach (repudiatory breach)

Question 14

A repudiatory/serious breach occurs in which three circumstances?

Answer 14

1. A fundamentally important term has been breached
2. The injured party has been deprived of substantially the whole benefit of the contract
3. There has been an anticipatory breach, I.e. one party has given notice of their intention not to comply with a contractual term

Question 15

What two rules are there to the ‘Remoteness of Damages’ test for a breach of contract?

Answer 15

1. Damage must arise naturally from the breach

2. Damages must be reasonably foreseeable in the eyes of both parties at the time the contract was formed

Question 16

What is the ‘doctrine of restitution’ in regards to breach of contract?

Answer 16

The aim to put the parties in a position they would have been had the breach of contract not been performed

Question 17

In circumstances where the innocent party sues for the costs and lost profits incurred, this is known as what?

Answer 17

Reliance interest

Question 18

What three rules are considered when evaluating the ‘reliance interest’?

Answer 18

1. Only actual financial losses may be recovered
2. Non-financial losses may be claimed where the contract is one for the provision of enjoyment
3. The injured party must take all reasonable steps to mitigate their losses

Question 19

What are ‘liquidated damage’ clauses?

When are these only upheld in court?

Answer 19

Agreement between parties for compensation for breach of contract in advance

Where they are felt to be a ‘genuine pre-estimate of the loss’

Question 20

Define specific performance

In what three circumstances will it not be upheld?

Answer 20

Where the court directs a party to complete their contractual obligations

1. Where the courts cannot supervise enforcement
2. Where a contract is for personal service
3. Where damages are adequate

Question 21

Define injunction

Give three examples of types of injunction

Answer 21

Where the court directs a party to refrain from breaching their contractual obligations

1. Mandatory injunction
2. Prohibitory injunction
3. Asset-freezing injunction