2. Termination of Contract

Question 1

How can a contract be brought to an end

Answer 1

Performance - both parties complete their contractual obligations.
Frustration - forces outside the contract make performance impossible.
Breach of contract - parties do not perform their contractual obligations.

Question 2

What is substantial performance in regards to termination of a contract

Answer 2

If a contract has been substantially performed with only minor defects then the performing party is entitled to the contract price less cost of remedying the defects.

Question 3

What is a severable contract

Answer 3

Contract can be discharged by performance of part of the obligations e.g. as different stages of a building contract is met, payment is due for the stage completed.

Question 4

What is quantum meruit

Answer 4

An order for the defendant to pay damages for the proportion of the contract price that the work is worth at this point. This would generally happen if the performing party is prevented from performing due to actions of the other party.

Question 5

What makes a contract frustrated

Answer 5

Where it is made impossible to perform the contract (not just difficult) and the impossible nature is not due to the other contracting party as this would be a breach.

Question 6

What is the Law Reform (Frustrated Contracts) Act 1943

Answer 6

Regulated the rights and liabilities of each party following the frustration of a contract.

Question 7

The Law Reform (Frustrated Contracts) Act provides that where a contract has been frustrated:

Answer 7

Amounts paid by parties are to be refunded.
Amounts O/S are no longer due.
Expenses may be offset against sums repaid provided they were incurred prior to the frustrating event.
If either party has benefited other than with a payment of money, the court can order a full payment of all or part of that value as it considers just.

Question 8

What are the two types of Breach of Contract

Answer 8

Actual Breach - at the time performance was due to happen
Anticipatory Breach - before the due date of performance, one party states they will not be performing.

Question 9

What are the 2 types of Anticipatory Breach

Answer 9

Express - party declares they have no intention to carry out their duty
Implied - one of the parties does something to make the performance impossible

Question 10

What are the options on anticipatory breach

Answer 10

Claim for breach immediately
Continue with contract until actual breach of contract and sue immediately

Question 11

What are the effects of breach of contract

Answer 11

Repudiatory breach - deprived the injured party of the main purpose of the contract.
Less serious breach - main purpose of contract complete but an incidental term has been breached.

Question 12

Are there circumstances when there is an excuse to breach a contract

Answer 12

There are lawful excuses where no breach has occurred.
- If one party has refused.
- If one party has made it impossible to perform the contract.
- Where both parties have agreed that certain obligations shall not be performed.

Question 13

What are the different types of damages

Answer 13

Liquidated damages - attempt to estimate value of losses (and put in contract).
Penalty clauses - arbitrary or excessive sum imposed which is not usually enforceable.
Unliquidated damages - contract does not state what will be reward in case of a breach.

Question 14

What are the 2 measures of unliquidated damages

Answer 14

Remoteness of the losses - damages only awarded for losses which are not too remote.
Measure of the losses - cost to put the claimant into the position they would have been in if the contract was properly performed aka protecting the expectation interest of the claimant.

Question 15

What makes a loss not too remote

Answer 15

Natural consequence of the breach
Losses in both parties contemplation as a possible consequence at the time of the agreement.

Question 16

What ideas are considered when valuing the damages to be rewarded

Answer 16

Reliance losses - if claimant incurs expense due to the reliance on the other party to perform their part, they may be granted payment to cover this.
Mitigation of losses - where claimant could mitigate their losses, they should do so, if not payment of damages may be reduced to reflect this.

Question 17

Can damages be awarded for loss of enjoyment

Answer 17

Not normally but can be only if main purpose of the contract was relaxation and peace of mind

Question 18

What 3 scenarios will an equitable remedy not be granted

Answer 18

Damages are an adequate remedy
The claimant has acted unfairly
The claimant has unduly delayed bringing an action to court

Question 19

What are the two types of equitable remedy

Answer 19

Specific performance
Injunctions

Question 20

What is specific performance and when is it likely to be granted

Answer 20

An order to the defendant to perform his/her part of the contract.
Likely to be granted in contracts that involve unique goods such as land.

Question 21

What is an injunction

Answer 21

An order for a person to do or not to do something

Question 22

What are the 3 types of injunction

Answer 22

Mandatory - order to do something
Prohibitory - order to not do something
Asset-freezing - stops the defendant trading in named assets

Question 23

What is an exclusion clause

Answer 23

Terms in written contracts in an attempt to exclude or limit liability for a breach.

Question 24

What are the two common law rules to make an exclusion clause valid (what tests are applied)?

Answer 24

Incorporation - clause must be an integral part of the contract where the claimant has either signed or reasonable steps have been taken to bring it to the claimants attention.
Interpretation - the wording of the clause covers the loss the claimant has suffered

Question 25

If an exclusion clause passes common law rules, what must it also satisfy to be valid

Answer 25

The statutory rules

Question 26

What is the statutory test of reasonableness under the Unfair Contract Terms Act 1977?

Answer 26

Whether it’s fair and reasonable with regard to all the circumstances which were, or which or ought to have been known to the parties at the time of the contract.

Question 27

When would specific performance be an adequate remedy?

Answer 27

When damages are not adequate. In scenarios such as a sale of land where the claimant would need that specific land for a particular purpose.

Question 28

When is specific performance not granted?

Answer 28

If the performance requires supervision e.g. building a house or a performance of personal service e.g. employment contract.

Question 29

What is expectation interest?

Answer 29

When considering how much money would be needed to put the claimant in the position that they would be shoukd the contract have been performed, this is known as protecting their expectation interest.

Question 30

What is reliance interest?

Answer 30

When looking to put the claimant in a position that would be in had they not relied on the contract, this is protecting their reliance interest.
This would be claiming for wasted expenditure.