Contract - Performance Flashcards
What is performance?
- precise and exact completion of the obligations both parties undertook in the agreement.
Pacta sunt servanda
- Agreements must be kept.
Types of performance?
- Entire
- Substantial
- Partial
What is entire performance?
- Lump sum contracts.
- Payments only made when complete.
What is substantial performance?
- 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.
Who must prove substantial performance?
- the party claiming has the obligation of proof.
- in the case of abandoned contracts, the promisor is liable for rectification and completion.
What are divisible contracts?
- Contracts that contain agreements that can be separated from one another.
- Past performance is independent of future obligations.
Name the two types of contracts as they relate to performance?
- Entire
- Divisible
- Multiple obligations under contract can render a contract entire in one sense and divisible another.
Why are entire contracts enforced?
- 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).
How can entire contracts be avoided?
- acceptance of partial performance.
- doctrine of substantial performance.
- when the injured party has received incontrovertible benefit.
What is partial performance?
- 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.
Types of Performance Obligations (4)
- Time
- Place
- Quantity
- Quality
*** Contract terms will determine which apply
Time Obligations
- 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.
Place Obligations
- unless specified: # buyer collects goods at sellers # debtor pays at creditors
Quantity Obligations
- 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).
Quality Obligations Types
- End product obligation
- Process obligation
What are end product obligations
- fitness for purpose
- conformity to the sample
- according to the specification
- of reasonable quality
*** Implied terms from the SOG 1979 act apply.
What are process obligations?
- method rather than outcome.
- i.e. exercise of due care and skill or a particular type of equipment used
Abatement v Set-off
- 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.
