Contract - Performance

Question 1

What is performance?

Answer 1

• precise and exact completion of the obligations both parties undertook in the agreement.

Question 2

Pacta sunt servanda

Answer 2

• Agreements must be kept.

Question 3

Types of performance?

Answer 3

• Entire
• Substantial
• Partial

Question 4

What is entire performance?

Answer 4

• Lump sum contracts.

- Payments only made when complete.

Question 5

What is substantial performance?

Answer 5

• One method to avoid entire contracts (unjust enrichment).
• Invoked by distinguishing terms v conditions.
• Applies where minor incomplete works or defects as judged against overall contract value.
• Set-off for defects against overall sums due.
• Does not apply where the works are entirely different than agreed or of no use to the other party.

Question 6

Who must prove substantial performance?

Answer 6

• the party claiming has the obligation of proof.

- in the case of abandoned contracts, the promisor is liable for rectification and completion.

Question 7

What are divisible contracts?

Answer 7

• Contracts that contain agreements that can be separated from one another.
• Past performance is independent of future obligations.

Question 8

Name the two types of contracts as they relate to performance?

Answer 8

• Entire
• Divisible
• Multiple obligations under contract can render a contract entire in one sense and divisible another.

Question 9

Why are entire contracts enforced?

Answer 9

• Risk is assumed by the promisor to achieve completion and priced accordingly.
• Significant incentive to complete.
• Compensation for breach difficult to determine (i.e. set-off v abatement).

Question 10

How can entire contracts be avoided?

Answer 10

• acceptance of partial performance.
• doctrine of substantial performance.
• when the injured party has received incontrovertible benefit.

Question 11

What is partial performance?

Answer 11

• injured party must have a genuine possibility to accept partial performance and payment under quantum meruit. OPTIONAL!
• if contract for goods, SoG Act 1979 provides for quantum meruit claims.
• if injured party does not accept partial performance, the party in breach must prove incontrovertible benefit to claim restitution.

Question 12

Types of Performance Obligations (4)

Answer 12

• Time
• Place
• Quantity
• Quality

*** Contract terms will determine which apply

Question 13

Time Obligations

Answer 13

• can be a warranty or condition.
• generally not an implied term. Must be express.
• can become an express term upon written notice to the party in breach requiring performance within a reasonable time.
• if no time stated, it must be in a reasonable time.
• time is usually a condition for mercantile or shipping contracts. Rarely in construction.

Question 14

Place Obligations

Answer 14

- unless specified:
# buyer collects goods at sellers
# debtor pays at creditors

Question 15

Quantity Obligations

Answer 15

• under the terms of the contract
• remains subject to the SoG Act 1979 in commercial transactions (slight differences are not grounds for rejection only damages).

Question 16

Quality Obligations Types

Answer 16

• End product obligation

- Process obligation

Question 17

What are end product obligations

Answer 17

• fitness for purpose
• conformity to the sample
• according to the specification
• of reasonable quality

*** Implied terms from the SOG 1979 act apply.

Question 18

What are process obligations?

Answer 18

• method rather than outcome.

- i.e. exercise of due care and skill or a particular type of equipment used

Question 19

Abatement v Set-off

Answer 19

• abatement amends the contract value for quality failures only.
• set-off is a counterclaim as a defence to a claim for payment under the contract under the rules in the HGCRA.
• set-off reduces the payments to the original contract value due to delay, quality or other failures.