Contract Termination

Question 1

Exclusion clause

Answer 1

Clause that attempts to exclude the liability of one party for a breach of contract or negligence

Validity determined by :

Whether clause is properly incorporated into contract

Whether clause is reasonable per statute

Question 2

Common law incorporation and interpretation

Answer 2

Included if express can be included if implied

Following rules :

1) exclusion clause must be given at time contract is made
2) if a document is signed parties are bound regardless of whether they have read them (as long as no misstatements)
3) if the document is not signed the clause must have been significantly highlighted

Even if clause is incorporated - if there is ambiguity it’ll be interpreted against the party relying on the clause

Question 3

Statutory rules unfair contracts act 1977

Answer 3

Whether or not a clause is valid under statute

Unfair contract terms act 1977 (UCTA 1977)

Regulate exclusion clauses where one party is acting in the course of business (not insurance employment or land contracts)

Must pass reasonable ness test :
1) excluding death or personal injury through negligence - void

2) attempt at excluding provisions from sales of goods act 1979 to a consumer is void
3) Business 2 Business contract- exclusion of other SOGA 1979 provisions (other than title ) will be permitted if considered fair and reasonable in regards to all circumstances including :

• Relative Bargaining power of parties
• Whether any inducement was accepted in waiver of rights
• whether customer had/ought to have knowledge of clause

Question 4

Statutory rules consumer rights act 2015

Answer 4

Considerably strengthened consumer rights

Introduced a requirement for fairness in consumer contracts and notices

Unfair if contrary to the requirement of good faith, causes a significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer

Factors considered when determining if unfair :

• excluding lia for death + injury , restricting consumer rights = automatically unenforceable
• disproportionate payment by consumer if they fail to perform obligations
• binding consumer to terms they had no chance to read before concluding contract
• allowing trader to unilaterally alter terms of the contract with no valid reason
• allowing trader to determine price payable after consumer has been bound by contract

Forcing customer to perform obligations when trader doesn’t perform theirs

Question 5

Discharge performance

Answer 5

Both parties perform their obligations COMPLETELY and EXACTLY

Unless

Substantial performance - other party can seek remedy for part not completed (builder entitled to contract price - cost of replacing handles)

Severable contracts - contracts in stages

Complete and exact performance prevented by other party - innocent party may sue for damages

Question 6

Discharge : Frustration

What is it

Examples

Regulation

When isn’t it frustration

What happens if contract is frustrated

Answer 6

If a contract becomes impossible or illegal to perform after being agreed

Parties free to negotiate escape clauses (force majeure)

If no express provision dealing with the contracting becoming impossible to perform then it’s ended

Examples of frustration :

Destruction of subject matter
Personal incapacity (ill)
Non occurrence of event
Government intervention 

Regulated by law reform (frustrated contracts) act 1943- any express provision will prevail

Contract will not be frustrated if another alternative no matter how hard or expensive

Intervening event must not be the fault of either party

If contract is frustrated then
Any monies paid must be returned
Any sums due cease to be payable
Expenses to be retained

Question 7

Beach of contract

Answer 7

When a party fails to comply fully with all of the terms in a contract

Innocent party = Automatic right to claim damages , may also treat contract as discharged if serious breach (repudiatory)

Repudiatory breach:

• fundamentally important item breached
• injured party deprived of substantially the whole benefit of the contract
• there has been an ANTICIPATORY breach

ANTICIPATORY breach- one party gives notice of their intention not to comply with the contractual term

Innocent party can treat as discharged and immediately sue for damages

Or allow contract to continue until an actual breach occurs and take action then

Innocent party must notify other party of decision to discharge - either through refusal to accept further performance or refusal to complete his obligations

Duty to mitigate doesn’t arise until you accept the breach

Question 8

Remoteness of damages

Answer 8

Damages must:

1) Arise naturally
2) Be reasonably foreseeable in the eyes of both parties when contract was formed

Damages can not be claimed if too remote

If losses are exceptional or abnormal and not reasonably foreseeable then defendant only liable if he knew of special circumstances causing the abnormal breach (at the time contract was made)

Question 9

Measure of damage

Types

Awards

Answer 9

Compensatory in nature

Return the injured party to where they would have been if the contract was completed (no breach)- EXPECTATION INTEREST

injured party may also wish to sue for costs and lost profits incurred - RELIANCE INTEREST

When awarding monetary amounts the courts will consider :

• Only financial losses may be recovered
• Non financial losses may be claimed where contract was for provision of entertainment
• injured party must take all reasonable steps to mitigate loss