Contract Law: Validity, Discharge and Remedies (2)

Question 1

Discharge by performance

Be aware is there is case of a lump sum contract, in which payment occurs after performance is complete. There are two exceptions that give the defaulting party some relief:

Answer 1

• Substantial perfomance (except for a few minor aspects the obligations are fulfilled)
• Divisible contract (contract can be divided into a number of separate, specific parts)

Question 2

Discharge by performance

Answer 2

The aim of a contract. Both parties have done what was agreed upon.

Question 3

Discharge by agreement

Answer 3

Ends the contract automatically based on an agreement that the parties made, or if a new agreement replaces the old one

Question 4

Discharge by agreement:

Bilateral discharge

Answer 4

The case where both parties have not performed, and exchange promises not to comply with the original contract

Question 5

Discharge by agreement:

Unilateral discharge

Answer 5

In case of partial performance by one of the parties, but the other one has not fulfilled its obligations

Question 6

Discharge by agreement:

What does unilateral discharge require?

Answer 6

ACCORD and SATISFACTION

Question 7

Discharge by agreement:

When discharge?

Answer 7

Only if the non-performing party draws up a deed or provides fresh consideration, which does not need to be adequate but must be of VALUE. It is also possible for one party to WAIVE their rights to performance as stipulated in the contract. A waiver can be legally enforceable without consideration.

Question 8

Discharge by breach

Answer 8

Occurs when a party has failed to adequately perform its contractual obligations

Question 9

Discharge by breach:

Notice of default

Answer 9

Described the action of telling someone they are in breach and giving them a certain amount of time to fix it

Question 10

Discharge by breach:

Differences civil law and common law?

Answer 10

In civil law:
Rules regarding breach are strict

In common law:

• Motive for breach is irrelevant
• The innocent party can always sue for damages and there is no need for them to give a notice of default
• There is no general principle for the suspension of performance by the innocent party

Question 11

Discharge by breach:

What does a ‘fundamental breach’ (material breach in US) require?

Answer 11

Breach of a CONDITION

Question 12

Discharge by breach:

Anticipatory breach

Answer 12

Refusal to perform announced before the date due for performance

Question 13

Two cases on how to handle discharge by breach:

Answer 13

• When the party has REPUDIATED the contract by making it clear that he will not carry out his obligations.
  If this is done before the due date, it is an anticipatory breach.
• FUNDAMENTAL breach

Question 14

Discharge by breach:

an initio

Answer 14

The contract is destroyed as if it never existed

Question 15

Discharge by frustration

Answer 15

Occurs when through no fault of the parties events after the formation of the contract make it impossible to perform the contract or the contract becomes commercially sterile or futile, which indicates that both parties are excused from performance.

Question 16

Discharge by frustration:

Frustration of the common venture

Answer 16

The commercial purpose of a contract is said to be defeated if the essential commercial purpose no longer exists.

Question 17

Discharge by frustration:

When does frustration apply?

Answer 17

There must be a radical change of circumstances so that the contract has become fundamentally different from the original undertaking

Question 18

Discharge by frustration:

Losses are said to ‘lie where they fall’

Answer 18

It is generally not possible to recover money due or paid before the frustrating event

Question 19

Discharge by frustration:

What should you include in your contract?

Answer 19

Force majeur clause (which lists events considered to be beyond the control of the parties, such as war, riot, fire flood etc)

Question 20

Discharge by frustration:

In the US, the doctrine of frustration is referred to as…

Answer 20

the doctrine of impossibility

Question 21

Discharge by frustration:

Reasons for discharge by frustration include:

Answer 21

• Destruction
• Inability
• Law changes or governmental actions
• Death of permanent illness

Question 22

Discharge by frustration:

There are limitations to the frustration doctrine that apply if:

Answer 22

1) The contract is more difficult and less profitable than expected
2) The parties included an EXPRESS CLAUSE dealing with the event or should have foreseen the frustrating event
3) a FORCE MAJEUR CLAUSE in contracts allows the parties to determine what they will consider to be frustration rather than breach

Question 23

The contract is destroyed as if it never existed

Answer 23

An initio