CH 9 - The end of the contractual relationship Flashcards
4 main methods of ending a contract include…
Performance
– Breach
– Agreement between the parties
– Frustration
Discharge by Performance
- Contractual obligations are discharged when each
party satisfactorily completes its part of the
bargain - If failure to perform is insignificant or only involves
minor term (warranty), contract is considered
performed
Conditions
terms essential to substantial
performance
– Where breached, victim relieved of obligations
Warranties
Where breached, performance still required minor terms of contract
Whats the difference in the agreements of conditions and warranties
Ex lets say I hire someone to paint my house, in the agreement this needs to be done by the end of November, but they finish by dec 1st, the courts are gonna look at the contract, and theyre gonna say is it condition or warranty, its one day late so who cares.
Ex lets say Im selling my property but I need it done by nov 31st, but I need it done by then so I can close the house, in this scenario this is essential, courts may say well its essential because it needed to be done.
Breach of Contract
A contract is breached when there is:
– Improper or incomplete performance
– Refusal to perform
May lead to discharge of the contract
Breach by Refusal to Perform
(Repudiation)
One party indicates to the other an intention to
abandon and altogether to refuse performance of
the contract
* Anticipatory breach: refusal occurs before
performance is due
– Victim may choose to accept the repudiation and end
the contract, or insist on performance
Ex painter comes and tells me mid nov, im extremely busy, can we change it by december instead due to being busy. I can either allow them, or insist to fix it, either I accept or force them. But courts could believe this is anticipatory breach and may not award damages.
This is an example of
Breach by refusal
Discharge by Agreement
Contracts can be modified or ended by agreement
– Modifications must have consideration
* Bilateral or unilateral discharge
– All rules of contract formation apply
* Where changes to a contract are significant, the
original contract is discharged and is substituted
by the new one
Frustration
Outside, unforeseen event which
– Makes performance impossible
– Changes the nature of the contract
* Frustrating events end contractual obligations
– Events that radically alter contractual obligations
– Disability or illness of an employee
* Frustration does not occur when:
– one party is responsible for an act that frustrates a
contract (just a breach)
Impossible to paint a house that burnt down considered frustration.
Ex bob is a truck driver and loses his ability to see, prevents bob from fulfilling his contract
Ex bob gets DUI and get licencse taken away, however its not frustration he did it to himself
Frustration pt 2
Circumstances not constituting frustration:
– Self-induced frustration is a breach of contract
– Increased difficulty or increased cost
* Event must be unanticipated to be frustration
– performance must be impossible or the foundation or
purpose of the contract must be fundamentally or
radically changed
I hire contractor to build deck, but price of lumber sky rockets, “I cant fix this anymore due to inflation” can argue frustration and its an unsee event, it costs more I have to buy more. Courts will not look at this as frustration.
Effect of Frustration
Covid is a frustration event, makes performance impossible.
Effect of Frustration
Determining who suffers the loss when the
contract is discharged is major problem of
frustration
* Legislation requires costs to be apportioned
following a frustrating event
– Formerly, “Let the loss lie where it falls”
– Legislation now allows courts to:
order a party to pay the other
split a deposit to pay costs incurred
Damages
Court tries to put victim of breach in the position
they would have been in if the contract had been
properly performed
* In a breach of contract damages look forward in
time
– court asks what loss has been suffered by the plaintiff
and compensates for those losses
Damages types
Damages awarded may be special, general, or
punitive
– Special damages: specific costs and expenses
– General damages: estimate of what has been lost
– Punitive damages: intended to punish the offending
party rather than compensate the injured; rarely
awarded
Equitable Remedies
Equitable remedies are discretionary and will be
granted only when the judge thinks it right and fair
to do so
* Recession: returning parties to their original
position
– Terminates the contract “ab initio”
* Rectification: court interprets and corrects wording
of a document to reflect agreement of parties
– Corrective remedy used to align the written contract
with what the parties agreed to
