Chapter 6 Flashcards
When is a contract discharged?
When all the right and obligations under the contract come to an end.
How is a contract discharged? (Please follow all rules)
Performance, Frustration, Agreement and Repudiation.
How is a contract discharged by frustration?
When after the contract has been entered into, through no fault of the parties, an unexpected or unforeseen event that is beyond the control of the parties occurs, rendering the contract impossible or illegal to perform.
What happens when a contract is deemed to be frustrated? (2)
(1) the contract is automatically discharged
(2) the contracting parties are relieved of their obligations under the contract.
Why would a contract be impossible to perform? (2)
(1) It is a personal service contract and the provider of the service dies or suffers from physical incapacity
(2) The subject-matter of the contract no longer exists.
Why would a contract be illegal to perform? (3)
(1) change in law
(2) state intervenes
(3) trade sanctions
What are the exceptions to frustration? (2)
(1) mere inconvenience or higher costs
(2) force majeure clause
Explain ‘mere inconvenience or higher costs’. What does the Court do with the contract?
There may be unforeseen events beyond the parties’ control which make the performance more inconvenient or expensive. The court does NOT consider the contract frustrated.
Why does the Court not consider the contract frustrated? Give an example.
The contract can still be fulfilled by looking into other sources.
With regards to sources, when will the Court consider the contract frustrated?
If the contract specifies that the subject-matter must be from a particular source and the subject-matter is now impossible or illegal to attain from that source.
The Force Majeure clause is an example of how ____. (explain)
Parties may actively take steps to provide in their contract how they intend to deal with unforeseen events that they have no control over.
What does the Force Majeure clause deal with? (2)
(1) Natural disasters and acts of nature
(2) Labour disputes- strikes and lockouts
What does the Force Majeure clause do?
Parties will be free from their liabilities under the contract.
What is the effect of frustration under common law? (2)
(1) contract comes to an end
(2) parties are discharged from their liabilities
Are the parties’ liabilities enforceable when a contract is frustrated under common law?
Yes- before frustration
No- after frustration
