3: Termination of Contract Flashcards
3 ways a contract can be brought to an end?
Performance
Frustration
Breach
What is ‘performance’ of the contract?
Contract is usually discharged by the performance by both parties of their duties
Performance must be exact and complete
Partial performance is no performance
- unless substantial performance
Partial performance may discharge contract if freely accepted by other party
What is substantial performance?
If performance is ‘substantial’ that will be sufficient discharge.
If a contractor has substantially performed the contract with only minor defects they are entitled to the contract price less remedy
What are severable contracts!?
When contracts are divisible
If several points, things can be paid in reference to different periods
What is quantum meruit?
If one party is presented from performing his or her duties under a contract due to the other party
Offer of performance is sufficient to discharge contractual obligations
Party can bring on quantum meruit - order for defendant to pay damaged for proportion
What is frustration of the contract?
When a contract is made and then the performance becomes impossible due to a matter for which neither party is responsible
Performance MUST be impossible
What does the Frustrated Contracts Act 1943 regulate?
The rights of each party following a frustration:
- Amounts paid by parties is to be refunded
- Amounts still outstanding are no longer due
- any expenses prior to the frustration may be repaid
- court can order payment of all or part of value of ‘other benefit’ that is sees as just
What is a breach and what are the two types?
Contractual duties not properly performed
Actual breach
Anticipatory breach
What is an actual breach
Happens when the performance of the contract was due. Either:
- one party doesnt do any performance
- performance is so inadequate the injured party is substantially deprived of the whole benefit
What is an anticipatory breach?
Before the due date, one party states or shows by actions that they will not be performing the contract
- express: party declares that they have no intention of carrying out the duty
- implied: one of the parties does something that makes performance of the contract impossible
What are the two options available to a party with anticipatory brreach?
- contract can be treated as discharged immediately and injury party can sue
- injured party may continue with obligations until an actual breach happens
What is the effect of breach?
Damages may always be sought in breach
But only if the breach goes to root of the contract can contracted by ended
If repudiatory breach (very serious breach), injured party can end or affirm the contract.
What is a lawful excuse?
One party has offered to perform, but other party has refused
One party makes it impossible for other to perform their obligations
Parties have agreed that certain obligations shall not be performed
What are the key procedures of alternative dispute resolution?
Arbitration
- settled by independent person chosen by parties, acts like a judge
- arbitration agreement submitted into at start of relationship
Meditation and concilliation
- independent party assisting the parties in coming up with their own solution.
- solutions are not automatically legally binding
Ads of alternative dispute resolution?
An expert in the field
Cheaper
Private
Not limited to damages
Quicker
Dis of alternative dispute resolution?
Decision lacks legal authoriry
Cost advantage is lost if dispute lasts ages
Solutions not immediately legally enforceable
No impetus to keep to timescale
What are damages? Three types?
They are a common law remedy, the main remedy for breach of contract - available as a right
Put both parties in the position they have would have been in had the contract been properly performed
Unliquidated
Liquidated
Penalty clause
What are unliquidated damages? On what ways are they judged?
The court determined the damages payable as there is no provision in the contract
- remoteness
- measure
- loss of enjoyment
- loss of bargain
- reliance losses
- mitigation of loss
Unliquidated: how is remoteness judged?
You cant blame the party for ALL of the consequences of their actions - only the ones which are a natural consequence
Also can get damages if both parties know it could be a possible consequence at the time of agreement
Unliquidated: how is loss of enjoyment judged?
Very rare occasions - award for mental distress
- courts can recognise ‘peace of mind’ obligations, especially in terms of pleasure and leisure
Unliquidated: how is measure judged?
Cost to put the claimant back in the position they would have been in if the contract has been properly performed
Protecting expectation interest of claimant
Unliquidated: how is loss of bargain judged?
If the claimant has suffered no actual loss, buyer will be awarded nominal value
Unliquidated: how is reliance judged?
Claimant can recover compensation for expenses incurred before breach
May be claimed where such losses exceed any likely profit
Unliquidated: how is mitigation judged?
Court will assume that the claimant had taken all the steps that could be reasonably expected to mitigate loss
Otherwise nominal only damages
What are liquidated damages?
A genuine pre-estimate of the expected loss
Enforceable by court
Fixed sum as part of the contract
What is a penalty clause?
Another kind of fixed sum in contract, but this is excessive or arbitrary, and is not enforceable
Court would rather deem as unliquidated!
What are the tests for penalty clauses?
- is the amount out of proportion to the potential losses
- is the same amount given for a number of potential losses
- is it an obligation that imposes a detriment out of all proportion to any legitimate interest of the innocent party
When can penalty clauses be awarded?
If felt excess in proportion to losses suffered
What are equitable remedies and when will they NOT be granted?
Three types?
Discretionary remedy. Court can decide, unlike damages which must be paid
Not granted if:
- damages are adequate
- claimant acted unfairly
- claimant has been unduly delayed bringing action to court
Specific performance
Rescission
Injunctions
What is specific performance?
An order for the defendant to perform his or her part of the contract
Only granted in sale of land - too unique, cant get damages!
- sale of goods similar, if unique
- not for personal services, unfair to force someone to work for another after court.
- must be mutually enforceable
What is an injunction and the three types?
Order for person to do or not do something
Mandatory
- party should take positive steps to undo something
Prohibitory
- observe a negative promise in a contract
- dont do something!
- not granted if it causes undue hardship
Asset-freezing
- prevents defendant dealing with assets
- if injunction not awarded, asset might disappear
What are exclusion clauses? The tests?
Terms written in contracts in an attempt to exclude or limit liability
Clause is interpreted against the person who is trying to rely on them
Common law tests
- incorporation
- interpretation
Statutory rules
What are the common law tests?
Incorporation
- wording of clause must cover loss
- must be integral part of contract
- signature - if signed, they are bound!
- notice - defendant must take reasonable steps to being clause to claimant’s attention, at time of agreement or before
Interpretation
- can only rely if it covers the loss the claimant has suffered
Two statutory rules on exclusion clauses
Unfair Contract Terms Act 1977
Consumer Rights Act 2015
What does the Unfair Contract Terms Act 1977 consider?
Clause exempting liability is void when:
- death of injury due to negligence
- other loss due to negligence
Party has to prove it is reasonable
Strength of bargaining parties
Inducement to agree to term?
What does the Consumer Right Act 2015 consider?
Is the contract fair
Is the term automatically unenforceable? If so, void
Factors to consider if fair:
- consumer at disadvantage?
- relevant circumstances?
- nature of contract?
- plain and intelligible clause?
- terms prominent?
- would an average consumer be aware of the term?
If unfair, not binding
