Ch.13 Performance of Contractual Obligations

Question 1

Performance:

Answer 1

Contract must be performed by parties in accordance with terms

Must be exact and precise in order to constitute discharge of contract

Anything less is default liable for breach of contract

Principle of good faith

Question 2

Principle of good faith

Answer 2

regard for the contractual interests of partner

Question 3

Tender

Answer 3

act of performing a contract or the offer of payment of money due under a contract

Question 4

Tender of payment:

Answer 4

Performance is made when money paid at time and place required under the contract

Legal tender (other than limited amounts of coin)
- Cannot be refused if tendered by buyer
- Seller can refuse credit card, check, bill of exchange, unless specified as form of payment

Question 5

Breach of contract

Answer 5

failure to perform a contract in accordance with its terms

• Gives rise to the right of action by party affected by the breach
• Can have effect of discharging the injured party from any further performance

Question 6

Contract provides for a termination right

Answer 6

Option to terminate by one party giving notice to the other

Frequently time limit attached - at expiry of notice period, agreement ends

If done improperly may be liable for damages for improper termination

Question 7

Express terms

Answer 7

discharge by the occurrence of an event specified in the contract

Question 8

Condition Subsequent

Answer 8

condition that alters rights or duties of the parties to a contract, or that may have terminate the contract if it occurs

Question 9

Force majeure

Answer 9

major, unforeseen event outside the control of the parties that occurs that prevents performance of a contract or damages property

Question 10

Act of God

Answer 10

natural disaster or other calamity beyond human control that prevents performance

Question 11

Implied Terms

Answer 11

discharge by the occurrence of an event that by custom of the trade would normally result in exemption from liability

• Conditions subsequent may be implied by the courts
• Example: common carries responsible for ordinary losses or damage are exempt from Acts of God
  – Carries take added precaution of making terms express by including them on bills of lading

Question 12

Implied terms and doctrine of frustration:

Answer 12

Frustrated contract -contract under which performance by a party is rendered impossible due to an unforeseen or unexpected change in circumstances affecting the agreement

• Results in contract being discharged
• Force majeure clause should be inserted in agreement

Question 13

Sales of Goods Act:

Answer 13

Provides that destruction of specific goods (through no fault of buyer or seller) will void contract

Provides for frustration in certain circumstances

Question 14

Doctrine of frustration also applicable where:

Answer 14

Personal services of one party required but through death or illness, party is unable to do so

An event that occurs so alters
circumstances that performance will be virtually impossible for a promisor

• Example: World War 1 and World War 2 - goods diverted for war purposes
• Frustration requires impossibility not mere hardship or greater expense

Question 15

Self Induced Frustration

Answer 15

Doing something not necessarily required to avoid a contract

Question 16

Non Culpable Dismissal

Answer 16

Dismissal of an employee where the inability to perform is not self induced but due to frustrating factors (e.g. loss of professional license)

Question 17

Loss of frustration

Answer 17

normally lies with the parties absorbing their losses as of the time of the frustrating event unless contract is fully executed by one party

Question 18

Condition Precedent

Answer 18

condition that must be satisfied before a contract may come into effect

• Often agreement is prepared and signed, only performance is postponed
• If condition not met it discharges both parties from performance
• Inserted for the benefit of the one party, not both

Question 19

Operation of Law

Answer 19

Discharged by operation of law
-Example: if two companies entered into partnership to carry on unlawful business, agreement discharged
-Specific legislation discharges certain contracting parties:
– Bankruptcy and Insolvency Act
– Bills of Exchange Act

Question 20

Law also comes into play when too much time passes before enforcing breach of contract

Answer 20

Doctrine of laches - undue delay in bringing an action against a party for failure to perform at Common Law

Limitations Act - actions not brought within specific time limit are statute - barred

Merger may also discharge contract

Question 21

Waiver

Answer 21

express or implied renunciation of a right or claim

• If neither party has full performed consideration is flowing to each
• If one party full performed but the other has not, performed party may waive rights to performance
• Without consideration is a mere gratuitous promise
• Must either provide consideration or sign under seal

Question 22

Material alteration

Answer 22

major alteration of an agreement that has the effect of discharging the contract and replacing it with another
- Change must go to root of agreement
- Minor alterations or a number of minor alterations is not enough

Question 23

Substitute agreement:

Answer 23

Substitution may affect the discharge