Contract 9 - Discharge Flashcards
What are 4 methods of discharging a contract?
- Performance 🕺
- Agreement 🤝
- Frustration 😰
- Breach 💥
What is the general rule as to discharge by performance and 4 exceptions?
🕺
Complete performance of obligations - a promisor who performs part doesn’t discharge 🚫🎲
1. Acceptance of Partial Performance: defaulting party paid on quantum merit basis 👷🏠🧱
2. Substantial Performance: defaulting party obtains contract price with deduction to reflect cost of remedying defect🫠
3. Stage payments: performing party paid for each part performed🧱
4. Wrongful Prevention of Performance by Other Party 👿: entitled to payment despite not completed; innocent party can sue for damages or claim a quantum meruit
What is the meaning of acceptance of partial performance?
must be freely given,
- not possible for half built building but was for bricks left on land 👷🏠🧱
- may get quatum merrit if part performance voluntarily accepted
What is the meaning of ‘substantial performance’?
🫠
Does defect go to root of the contract?
🌳
- Small defects did not prevent decorator from being paid 👨🎨
- Central heating installed but didn’t work, not substantial performance ♨️
What is the defence for failure to perform?
🤺
Tender of Performance:
- unconditionally offered to perform their obligations in line with contract terms but 🍆
- promisee refused 🤬
Doesn’t discharge but creditor can’t claim interest/damages 🪙💵
How can a contract be discharged by agreement?
🤝
- By operation of an original contract term:
a) condition precedent 👈or
B) subsequent 🔮 - By a subsequent binding contract between the parties: requires
a) agreement obligation is released (accord); 🤝
b) consideration for promise to release (satisfaction) 🎁
Where one party has completed its obligations but other hasn’t, what can be done for discharge by agreement by subsequent binding contract?
Completed party can release other’s obligations
- under deed🧾
OR
- accept something else in place of former obligation 🎁
What is the meaning of a condition precedent?
Condition which must be satisfied before any rights come into existence - contract suspended until condition satisfied
🏁
What is the meaning of a condition subsequent?
Term providing for the termination of a contract in event of specified occurrence
🔮
What remedies are there for breach of contract?
- Compensatory damages 💵
- Specific Performance 🫵
- Injunction ✋
What are the 2 types of breach?
- Anticipatory Breach 🧨: party indicates they won’t perform obligations in advance
- innocent party has automatic right to ‘accept’ the renunciation and treat contract as terminated.
- Repudiatory Breach 💥: breach of condition (or innominate treated as such) entitling other to treat contract as terminated party can either
- affirm & claim damages, or
- terminate & claim damages
What must be shown to treat contract as terminated for an anticipatory breach?
🧨
That if breach occurred at time performance was due, it would have been repudiatory (I.e. a term rather than a condition)
What are the risks of wrongful termination?
Court could, after termination for repudiation, later find term was a warranty/treated as one which means they would’ve had no right to terminate = wrongful termination
Wrongful notice seen as serious breach
Risk particularly high for terms not defined as conditions and depending on test
What are benefits of affirming a contract?
- Contract survives & rights of innocent party preserved
- Commercial reasons
- Innocent party doesn’t sacrifice opportunity to claim for damages
How can one affirm?
Must be evidence of a very clear and unequivocal commitment to continuing the contract
What limitations are there for the right to affirm?
- Cooperation of breaching party required for continued performance 🤝
- Innocent party must have a legitimate interest financial or otherwise, in affirming and continuing 🤑
What is frustration and what’s its effect?
😰
Events:
- that occur after formation of the contract, and 🕰️
- are beyond control of either party 🧟♂️ and
- render performance radically different 🐴➡️🦄
Effect: relieves a party from further obligations under the contract - contract ends automatically 😮💨
How may performance be rendered radically different?
🐴➡️🦄
Performance is
- impossible, 🪄
- unavailable 🫥
- illegal 👮
- common purpose is frustrated i.e. can’t be carried out 👯♀️😭
What is not a frustrating event?
- Merely an increase in expense/onerousness 💰💰💰😩
- One which parties could’ve reasonably foreseen 🧐
- Provided for in the contract i.e. force majeure clause 📝
- Caused by party’s default 😈
What happens to obligations arising to frustrating event?
- Money paid before can be recovered & money that should’ve been paid no longer need to be ⏳💵
- Expenses of payee can be recovered at discretion of the court 🧑⚖️💵
- Where benefit was non-monetary, a party who received it may be required to pay a just sum for it 🎁🏠⚖️💵
What is the case on acceptance of partial performance?
👷
Builder went broke halfway through project.
- No payment for part completed building as C couldn’t reject. 🏠
- Payment for building materials left on land s could have returned 🧱
What is Wrongful prevention of performance and what are the remedies
😈
Party prevented from completing work due to fault of other party.
- sue for damages 💵
OR
- claim quantum meruit 🧱💵
What are the cases on frustration?
Impossibility 🪄
Unavailability 🫥
Illegality 👮
🪄
- Music hall destroyed=frustrated 🎼💥
- Install Machinery in a factory but factory destroyed=frustrated ⚙️🏭💥
🫥
- Ill drummer=frustrated 🥁🤮
- ship requisitioned 5 months = frustrated 🚢🇮🇴 but 5 years not (it’ll be done soon).
👮
- war made deliveries to Poland illegal 🚢🇵🇱❌
What are the cases on frustration of common Purpose?
👯♀️😭
Must be purpose of both parties
- Hired room to watch coronation that was cancelled = frustration
👑🤮😢 - hired boat to watch Navy show which was cancelled. Still have a boat = not frustrated 🛥️🚢❌
- lease of office no longer needed due to brexit = not frustrated 🏢🇪🇺💥❌
What are the cases on frustration
- Difficult or expensive? 💰💰💰😭
- Self-induced 🤪
- Foreseeable 🧐
💰💰💰😭
- Built houses cost more than expected = not frustrated 🏘️💰😭
🤪
- rig moving boat 1 sunk, rig boat 2 leased = not frustrated as choice to lease rig boat 2 🚢❌🚢✅😭
🧐
- Contract signed during civil unrest, got worse = not frustrated as foreseeable
🇬🇷🎼🔥➡️💥❌
- No frustration of force majeure clause in contract.
What are the consequences of frustration?
- money paid before event can be recovered 💵💥😊
- money should have been paid before frustrating event need not be paid 🤑💥😊
- expenses by supplier can be recovered out of sums paid/payable before event👷♂️🧱💷
- all future obligations cancelled 🔮😮💨
What’s the case on the amount of expenses payable to the supplier and frustration?
Value of benefit payable to supplier is benefit received not costs of supplier
Libyan Oilfield case
😊BP🛢️👨🔬 🏗️🧔🏽♂️😭😢
-🛢️👨🔬 ❌
- 😢 ✅
