Chapter 3 Flashcards
3 types of discharge of contract
Performance
Frustration
Breach
Performance discharge
Contract comes to and end as both parties have fulfilled their obligations
Frustration
Imposssible to perform contract but at no fault of either party
Quantum mercuit
As much as he deserved action to claim for the amount of work already completed
Planche v Colburn 1831
Claimant had a green to write a book on armour for Defendants library. He was to receive £100 for completion but D abbandonned the series
Claimant was entitled to £50 on a quantum mercuit basis
Factors of frustration
-contract must’ve been legal and possible at point of entry
-if a contract includes a force majure clause to deal with contracts which have become impossible to perform after the contract is entered, the clause will come into play
-a contract will not be discharged where another mode of performance is still available
Examples of frustration discharge
Destruction of the subject
Personal incapacity to perform a contract
Government introduction: where an outbreak of war or new legislation prevents further performance
Non-occurrence of an event which is the sole purpose of the contract
The law reform (frustrated contracts) act 1943
The act applies unless the contract expressly provides otherwise. The consequences of the act are
-any money paid under contract before the frustrating event are to be repaid
-any sums of money due for payment cease to be payable
- if either party obtained a valuable benefit under the contract the court could make you share
BP exploration (Libya) v Hunt (no2) 1982
Hunt owned a BP concession in Libya - BP were contracted to explode an exploit potential oil fields for a share
BP’s investigations revealed a large oil field. Libyan government then cancelled concession
BP were entitled to £35m as Hunt gained a valuable benefit of a £85m increase in value of his concession
Lawful excuses for breach of contract
Where he had offered performance but this had been rejected
Other party has made it impossible for performance
Pathos have by agreement permitted non performance
Repository breach
Significant breach where breach deprives the injured party and the whole benefit of the contract
Anticipatory beach
Where one party renounces his contractual obligations explicitly or implicitly in advance by showing he has no intentions of performing them
Where the breach is serious the injured party may chose to either
treat the contract as discharged immediately and sue for damages OR
Allow the contract to continue until there is an actual breach and take action at the time
Rochester V De La tour 1853
D engaged c as a courtier to accompany him on a European tour commencing on 1 June
On May 22 d said he no longer needed c
C commenced legal proceedings for anticipatory BOC
Courts determined this was correct
Remedies for breach of contract
Of the innocent party elects to test the contract as discharged he must notify the other - this may be by way of refusal to accept further performant or refusal to performed his own obligations. In this case the following apply:
-He is not discharged from the contractual obligations which were due at the time of termination but is discharged from future ones
- need not accept not pay for further performance
- he may be able to refuse to pay for partial or defective performance
-can reclaim money already paid for defective performance.
-can still claim damages
Purpose of Damages
To put parties in position that they would have been in if the contract had taken place
Remoteness of damages
How far downs the chain of causation we go - under rule of Hadley v Baxendal - damages may only be awarded in respect of the losses which may fairly and reasonably be considered as either
Naturally arising or to have been in contemplation of both parties at time of making contract
Hadley v Baxendale
Claimant owned a mill - the mill shaft broke. It is. It is normal business practice for them to have a spare one. Claimant ordered Defendant to deliver a new one. This was delayed as D didn’t know that C didn’t have a spare one
Therefore loss of profits wasn’t a natural consequence of the delay as Defendant didn’t know it would be the result of not having a shaft as they were meant to have a spare
Victoria laundry v Newman industries
D contracted to sell a large boiler to c for immediate use but were late. D was aware of the nature of C’s business. C tried to sue for normal damages of loss of profits and for abnormal as they lose a lucrative deal
Loss of normal profits was successful but abnormal wasn’t as D had no knowledge of this.
Expectation interest
Put the person in the place they would have been if the contract took place
Reliance interest
Put person in the position they would e been in if he had not relied on the contracf
Reliance interest
Put person in the position they would e been in if he had not relied on the contract
Angela TV vs Reed
C engaaged an actor to appear in a film they were making for TV. He pulled out last minute and projected was scrapped
Claimant claimed preparing expenditure such as hiring other actors and researching suitable locations
Angela TV used reliance interest as its hard to see how well film would’ve done so they couldn’t use expectation interest
Jarvis v Sean tours
Jarvis entered into contract with ST at a winter spots centre l. What was provided was significantly inferior to what was promised in the brochure. Damages on the financial loss were £32 -
The damages should be increased to £125 to compensate for the disappointment and distress as the principle purpose of the contract was to provide pleasure
Mitigation of loss
In assessing the amount of damages it is assumed the claimant will take all reasonable steps to reduce or mitigate their loss
No risky measures required
Burden of proof is on the defendant to prove the claimant didn’t do this
Pausing Saunders 1919
Parties had entered into a contract for the supply of goods to be delivered and paid by installments
When c failed to pay first installments D decided to make no further deliveries unless C paid cash in advance
C refused to accept deliveries on these terms
D had no right to repudiate original contract and was therefore liable in damages. However, C should’ve mutated the loss by accepting the cash payment
Liquidated damages
Pre estimate of potential damages written into contract
Effective provided it is a genuine attempt to pre estimate losses
Penalty cause
Where the liquidated damages are excessive the penalty cause is not enforceable
Ford motor v Armstrong
D had undertaken not to sell Cs cars below list price, not yo sell Ford cars to other dealers and not to exhibit any Ford cars without permission.
A £250 penalty was payable for each breach
Was in nature of a penalty therefore not enforceable
Parking eye v Bevois
There were signs around a 2hr feee car park to warn of £85 parking fine if exceeded. Bevis didbt pay after staying for 3 hours as it was a fine
Supreme Court ruled that the charge was a detract rather than a penalty fine and it was not excessive as there was a legitimate interest to keep traffic moving freely
