Discharge and Breach of Contract Flashcards
Lecture 7
What does Discharge of Contract mean?
- Termination of contract and the release of parties from further obligations (contract brought to an end)
- Four ways for contract to be breached: performance of contract; agreement; operation of law; breach
What is discharge by performance?
- General rule: contract becomes discharged when parties have fully complied with terms of contract
- Full compliance extends to coverage of all implied and express terms of the contract (i.e., does not correspond with description of goods)
- Contract only discharged if full performance {Re Moore case}
What is the entire obligation/performance rule?
- Both parties need to PERFORM what was agreed under contract
- Exactly WHAT was agreed {e.g., description of product)
- ENTIRELY what was agreed (e.g., quantity of products delivered)
- Relevant cases: Cutter v Powell & Sumpter v Hedges
What are some exceptions to the entire performance rule? (part 1)
- Divisible contract: courts can award for parts of contract that have already been completed (quantum meruit principle link)
- Acceptance of partial performance: one party agrees to accept partial performance, than a sum payable for work completed but this must be voluntarily accepted {Sumpter v Hedges}
What are some exceptions to the entire performance rule? (part 2)
- Contract substantially performed: when actual performance falls not far short of required performance, and if cost of remedying defects is not too great in comparison {Hoeing v Isaacs case}
- Breach of terms/prevention of performance by another party
What is discharge by agreement? (part 1)
- Where parties agree to release one another from any further obligations existing from the original contract
- Discharged despite parties failing to fully/partially discharge their obligations
- Bilateral = both parties discharged
- Unilateral = one party discharged
What is discharge by agreement? (part 2)
- Requires a new agreement/second contract to discharge the first (or made in the form of a deed)
- Requires fresh consideration
- Formality = depends how far the parties intended to alter their contractual relationship
What is discharge by the operation of law?
- Contract discharged due to certain legal requirements/provisions, rather than by the actions of the parties themselves
- Ex1 Frustration: external event, law automatically brings contract to end
- Ex 2 Sale of house: ownership title transferred when contract comes to end
What does discharge by breach mean?
- “A breach of contract is committed when a party without lawful excuse fails or refuses to perform what is due from him under the contract, or performs defectively or incapacitates himself from performing.” (Treitel)
- Consequences: remedy for breach, depending on type of breach
Summarise the principle of conditions, including the result and remedy it provides.
- Major term of contract
- A requirement/event that should be performed before the completion of another action
- Directly associated with the objective of the contract
- Can be classed by statute, parties /courts classifying terms as condition
- Result: termination
- Remedy: reject contract as well as claim damages
State the significance of repudiatory breaches. (termination as a remedy)
- Terminates performance of contract
- Innocent party has choice either to terminate or affirm contract + claim damages
- Termination must be communicated to party in breach {Vitol SA} + prospective only with future obligations {Johnson v Agnew}
Summarise the principle of warranties, including the result and remedy it provides.
- Minor element of contract
- An assurance given by the seller to the buyer about the state of the product, that the prescribed facts are genuine
- Subsidiary provision (related to object of the contract)
- Result: claim damages for breach
- Remedy: claim damages only
What are innominate terms?
- Neither a condition nor warranty. We look at the effect of the breach and whether the IP was deprived of substantially the whole benefit of the contract
- Does not automatically give rise to a right to terminate performance
What are anticipatory breaches and its significance?
- Whereby before performance of the obligation is due to take place, one of the parties informs the other that they will not be able to fulfil their part of the obligation
- Allows innocent party to: terminate performance & claim other remedies immediately (e.g,m damages)
What are express anticipatory breaches?
- Occurs when one of the parties declares, before due date of performance, that they have no intention of complying with terms of contractual agreement {Hochster v De la Tour case}
- If choosing to wait before due date, there is a risk of contract becoming frustrated (lose remedy for damages for breach)
What are implied anticipatory breaches?
Does not arise from any direct indication from either of the parties that they will not perform their contractual agreement, but results from the situation where one of the parties does something, which makes subsequent performance of their contractual undertakings impossible
State the general rules of breach and time of performance.
- Time is not an essence of contracts
- But in certain circumstances can be: when specified time for completion is provided and failure amounts to breach of contracts + no mention (contract carried out within reasonable time)
What are the overall effects of breach? (term breached = effect/right of innocent party format)
- Condition = Damages + right to terminate
- Innominate term = Damages + may be right to terminate, depending on the nature and effect of breach
- Warranty = damages only
