Chapter 3 - Termination of Contract Flashcards
What is the normal method of discharging a contract
Performance - each party fulfils/performs contractual obligations
T/F
So long as there is substantial performance of party’s contractual obligations that will be sufficient discharge
True
What happens if one party prevents performance
offer of performance by the other is sufficient discharge they can sue for damages for breach or bring ‘quantum merit’ action to claim for work completed
Planché v Colburn 1831
P had agreed to write book on costumes and Arbor for a book series and was to receive £100 on completion. Did some research and wrote some, series abandoned by C.
Held P was entitled to 50 guineas (little over 50£) as reasonable remuneration on quantum merit basis
When is a contract discharged by frustration
If after made, performance or further performance is impossible or totally futile by some extraneous cause (for which neither party is responsible and there is no prevision for) the contract will be treated as discharged by frustration
If it is impossible to perform the contract when it is made then
there is usually no contract at all
Frustration
Destruction of subject matter example Taylor v Caldwell 1863
Hall let to musician for series of concerts, but before date of first concert, hall accidentally destroyed by fire
Frustration
Personal incapacity to perform contract of personal service
Condor v the Barron Knights 1966
Drummer contracted to perform 7 nights a week, due to ill health could only perform 4
Frustration
Government intervention explanation
Where outbreak of war/new legislation rendered further performance of the contract illegal
Frustration
Non-occurrence of an event which is the sole purpose of the contract
Krell v Henry 1903
Room let for sole purpose of overlooking coronation procession of a king, illness caused the procession to be postponed
What regulates the rights and liabilities of parties discharged by frustration
Law reform Frustrated Contracts Act 1943
Consequences of frustration under Law reform frustrated contracts act 1943
Money paid before frustrating event to be repaid
sums due for payment cease to be payable
if person has to repay money, or must forego payment that should have been made before frustrating event, may be able to recover expenses incurred if they were incurred in performance of the contract and before frustrated
If either party has obtained a valuable benefit under the contract before it is discharged, the court may in its discretion order them to pay the other party all/such part of the value as it considers just having regard to all circumstances of the case
BP Exploration Libya ltd v Hunt 1982
Hunt owned oil concession in libya, BP contracted to explore and exploit oil fields in return for share of concession if successful, investigation revealed large oil field, pipes laid, Libyan government cancelled concession, frustrated contract
Held Hunt received valuable benefit 85m in terms of increased value due to discovering oil, court awarded just sum (35m) to represent this, taking account of circumsatances
Breach of contract is where
a party does not perform their contractual obligation sufficiently
When is there a lawful excuse and no breach of contract (3)
Tendered performance but this has been rejected
other party made it impossible for them to perform
Parties have by agreement permitted non-performance
Repudiatory breach
Breach is of a term that is fundamentally important/has effect of depriving injured party of substantially the whole benefit of the contract
Yes
Repudiatory breach
Where one party renounces their contractual obligations explicitly or implicitly in advance by showing they have no intention of performing them
Yes - also known as anticipatory breach
Where breach is sufficiently serious, injred party may choose to either
treat contract as discharged immediately and sue for damages, or allow contract to continue until actual breach and take action at that time
Can the injured party seek damages for any breach of contract
Yes
Poussard v Spiers 1876
P agreed to sing in opera, she was ill and couldn’t perform opening night. Producer engaged substitute who insisted on being engaged for the whole run, when P recovered, producer declined to accept services.
Held failure to sing opening night was breach of condition, entitled producer to treat contract for remaining performances as discharged
Rochester v De La Tour 1853
DLT engaged H as courier to accompany on European tour on 1 June, on 11 May DLT wrote saying no longer required services. 22 May, H commenced legal proceedings for anticipatory breach, DLT stated no actionable breach until 1 June
Held H entitled to sue as soon as anticipatory breach occured
T/F
If innocent party elects to treat contract as still in force after anticipatory breach, may continue with preparations and recover agreed price. Duty to mitigate less does not arise until accept breach, need to show losses caused by actual breach
True
t/f
if innocent party elects to treat contract as discharged, must notify other party.
True
T/F
if innocent party elects to treat as discharged by refusal to accept further performance/refusal to perform own obligations then
They are not discharged from obligations due at the time of termination, but from future obligations and cannot be sued on them
True
T/F
if innocent party elects to treat as discharged by refusal to accept further performance/refusal to perform own obligations then
Need not accept/pay for further performance
True
T/F
if innocent party elects to treat as discharged by refusal to accept further performance/refusal to perform own obligations then
May refuse to pay for partial/defective performance already received
True - unless contract is severable
T/F
if innocent party elects to treat as discharged by refusal to accept further performance/refusal to perform own obligations then
May refuse to pay for partial/defective performance already received
True - unless contract is severable
T/F
if innocent party elects to treat as discharged by refusal to accept further performance/refusal to perform own obligations then
Can still reclaim money already paid in respect of defective performance
True
T/F
if innocent party elects to treat as discharged by refusal to accept further performance/refusal to perform own obligations then
can still claim damages from defaulter
True
What are damages designed to do
Put the claimant in the position they would have been in had the contract been performed
what is considered regarding remoteness of damage
How far down the sequence of cause and effect the consequences of breach should be tranced before they should be ignored
Damages may only be awarded in respect of losses that may fairly and reasonably be considered as either
arising naturally from breach or such as may reasonably be supposed to have been in contemplation of both parties at the time of making the contract as the probable result of the breach
Hadley v Baxendale 1854
C owned mill, when shaft broke, made contact for transport of broken shaft to greenwich to serve as pattern for making new shaft. Due to D neglect, delivery delayed mill out of action, D didn’t know mill idle, just to transport broken shaft
Held although D failure was direct cause, claim must fail as it was not natural consequence of delay in transport of broken shaft
T/F
If the defendant can show the chain of causation was broken and the claimant cause the loss, the defendant is not liable
True
T/F
If losses are exceptional/abnormal and not reasonably foreseeable, the defendant will be liable only if they knew (at time of contract) of special circumstances from which abnormal consequence of breach could arise
True
Victoria Laundry v Newman Industries 1949
D contracted to sell large boiler for immediate use, but were late delivering. D was aware of the business and had been informed they were anxious to put boiler into use in shortest possible space of time. C claimed damages for normal loss of profits and abnormal from highly lucrative dyeing contracts that could have been undertaken if delivered no time.
Held damages normal profits were recoverable, but no special profits as no knowledge of dyeing contracts
When considering damages, need to consider what ‘measure of damages’ is needed explained
how much money is needed to put the claimant in position they would have been if the contract had been performed
What is protecting reliance of interest
position they would have been in had they not relied on the contract
Anglia television v Reed 1972
actor engaged to appear in film, actor pulled out at last moment, project abandoned. C sought compensation for predatory expenditure.
Damages awarded, impossible to tell if unmade film success or failure so couldn’t claim loss of profits, but can claim expenditure.
Jarvis v Swan Tours 1973
C entered into contract for holiday accomodation at winter sports centre, what was provided was inferior to description in travel brochure. Damages on final loss only assessed at 32£
Court held damages increased to £125 to compensate for disappointment and distress as principal purpose of contract was giving of pleasure
T/F
In assessing damages, it is assumed the claimant will take all reasonable steps to reduce/mitigate loss. However not required to take discreditable or risky measures
True
Pays Ltd v Saunders 1919
Parties entered contract for supply of goods to be delivered and paid for by instalments When claimant failed to pay, defendant declined to make further deliveries unless paid in cash in advance, C refused to accept delivery, price of goods rose and sued for breach
Held the defendant had no right to repudiate the original contract, and was liable in damages. Claimant should have mitigated loss by accepting delivery against cash. Damages limited to amount of assumed loss.
if a liquidated damages clause does not protect legitimate interest of innocent and is excessive it may be construed as
a penalty clause and will not be enforceable
Penalty clause definition
clause that introduces an obligation to pay the innocent party more in damages than their actually losses will be enforceable provided it is in proportion to the primary obligation under the contract
ParkingEye Ltd v Beavis 2015
Claimant managed carport at retail park, notices stating two hours free parking and 85£ charge if stay in excess of that. B stayed for nearly 3 hours but refused to pay stating it was penalty
Held charge acts as deterrent, and should not be deemed a penalty. C had legitimate secondary interest that is not satisfied by recovering damages for breach of contract.
What type of remedy is specific performance
an equitable remedy, which orders defendant to perform their part of contract rather than allowing them to buy themselves out of it
When is specific performance awarded
when damages are not an adequate remedy
When will specific performances not be granted
if it would require supervision of the performance/contract for personal service (e.g. employment)
Three types of injunction
mandatory injunction
prohibitory injunction
Asset-freezing injunction
Mandatory injunction
restorative in effect, directs defendant to take positive steps to undo something they have already done in breach of contract.
Prohibitory injunction
requires defendant to observe negative promise in a contract
Asset freezing injunction
prevents defendant from dealing with assets where Claimant can convince court they have good case and there is danger defendants assets will be exported or dissipated
For an exclusion clause to be properly incorporated into contract, the clause, or document containing exclusion of liability must be
an integral part of the contract
Olley v Marlborough Court 1949
Husband and wife arrived for hotel and paid room in advance, on reaching bedroom saw notice on wall where hotel disclaimed liability for loss of valuables unless handed to management. Thief obtained key and stole wife’s furs.
Held hotel could not rely on the notice as contract had been made when checked in and disclaimer too late
T/F
if document is integral part and signed it will be regarded as binding, even if person has not read term
True
T/F
If document is integral part and not signed, it must be shown the person whose rights it restricts was made sufficiently aware at the time of making contract, onerous terms must be highlighted
True
what is the unfair contract terms act 1977 UCTA make legislative provision for
exclusion clauses in certain contracts, sometimes rendering them void if they fail to satisfy test of reasonableness
Does UCTA cover insurance and land transfer contracts
No
Main provisions of UCTA
Any clause attempting to exclude/restrict liability for death/personal injury arising from negligence is void
any clause attempting to restrict liability for other loss or damage arising from negligence is void unless can be shown to be reasonable
In contracts of sale/hire purchase, clause excludes or limits liability for breach of obligations regarding title of seller/owner implied by sale of goods act 1979 is void
Exclusion clause - who does burden of proving reasonableness lie with
person seeking to rely on the cluase
Consumer rights act 2015 provides statutory control in respect of
Consumer contracts and notices. provides terms in contracts between business and consumer are only binding they are faire
CRA 2015 - factors to consider if a term is fair
whether puts consumer at disadvantage
relevant circumstances when contract was signed
nature of contract
terms in plain, intelligible language
relevant terms prominent
Does an unfair term invalidate the whole contract
No - it will continue as far as possible
What meaning is given when a contractual term is open to different meanings
the meaning that is most favourable to the consumer
R&B Customs Brokers Ltd v United Dominions Trust Ltd 1988
claimants, company owned by Mr and Mrs bell operating as shipping broker bought second hand car to use partly for business and early private
this was a held to be consumer - as not in business of buying cars
Will the following lead to a contract being frustrated
Destruction of subject matter
Yes
Will the following lead to a contract being frustrated
Personal incapacity to perform a contract of personal service
Yes
Will the following lead to a contract being frustrated
Government intervention
Yes
Will the following lead to a contract being frustrated
Non-occurrence of an event that is the sole purpose of the contract
Yes
Alternative Dispute resolution
negotiation
Mediation
arbitration
adjudication
expert determination
Hadley v Baxendale Recoverable damages should be
such as arise naturally from the breach or
which the parties may reasonably be supposed to have contemplated in making the contract as the probable result of a breach o fit
t/f
anticipatory breach may be implied from conduct and need not be explicit
True
T/F
Damages for breach of contract are primarily intended to restore the injured party to the same position they were in at the time when the contract was made
False - position they would have been had the contract been performed
T/F
Claimant is required to take every opportunity to mitigate their loss arising as a consequence of breach of contract
False - only reasonable steps, not ones that carry undue risk or are discreditable
T/F
Mandatory injunction compels positive action
True
T/F
A clause limiting liability for personal injury from negligence in a contract between two private individuals is subject to the reasonableness test under UCTA 1977
False - contract between two private individuals is not subject to UCTA
What is the description of the statutory test of reasonableness under UCTA 1977
Whether it is fair and reasonable with regard to all the circumstances which were or which ought to have have been known to the parties when the contract was made
T/F
special performance would be awarded in a case involving a contract to build a house
false - would require supervision
T/F special performance is a common law remedy for breach of contract
False - it is an equitable remedy
What does a prohibitory injunction require the defendant to observe
a negative promise in a contract
UCTA 1997 how define consumer
someone who does not make a contract in the course of business
Under UCTA, are clauses in hire purchase contracts that attempt to limit liability for undertaking in respect of the title of the seller voidable
no
When is an act already performed before act/promise given in return sufficient consideration
a person performs a service at another request and is later promised payment (request for service carries implied duty to pay)
Under UCTA 1977 an attempt by any person to exclude/restrict liability for damage to property caused by negligence is
void unless reasonable
What is an exclusion clause
contractual clause which limits/excludes entirely a person’s obligation to perform a contract or their liability for breach of contract
If a pre=arranged sum is judged to be a penalty clause then the clause is
void
in damages for breach of contract, damages representing expectation interest are
peony to put the claimant in the position they would have been in if the contract had been properly performed
