Discharge & Frustration

Question 1

Ways in which a contract might be discharged?

Answer 1

A contract might be discharged in one of the following ways:
(a) Performance;
(b) Expiry
(c) Agreement;
(d) Breach; or
(e) Frustration.

Question 2

What is a termination clause in a contract?

Answer 2

A termination clause in a contract specifies that the contract will come to an end upon the occurrence of specified events, such as a particular date or other specified conditions.

Question 3

What is the right of election in contract law?

Answer 3

The right of election refers to the choice made by the aggrieved party in response to a repudiatory breach of contract. They can either treat the breach as repudiating the contract and terminate it, or affirm the contract and continue with its performance.

Question 4

How can a contract be discharged by expiry and by performance?

Answer 4

A contract can be discharged by expiry when it is completed according to its own terms or when a stipulated event, such as the expiry of a fixed term, occurs. A contract can be discharged by performance when a complete performance of the contractual obligations is achieved.

Question 5

How does the innocent party communicate their decision to terminate a contract?

Answer 5

The innocent party must make their decision to terminate the contract known to the party in default. This communication is necessary for the termination to be effective.

Question 6

How can a contract be discharged by agreement?

Answer 6

Parties can discharge a contract by agreeing to do so in a subsequent binding contract. The new contract needs to be supported by consideration, unless it is effected by deed. Care should be taken when one party has already performed the old contract in full, as being released from it may not be considered good consideration.

Question 7

What are divisible obligations in contracts?

Answer 7

Some contracts are clearly intended to be divided into parts, such as the payment of a salary under a fixed contract of employment. If this is the case, then the performing party is entitled to payment for each part that is performed.

Question 8

What are the two alternatives available to the innocent party when deciding whether to terminate a contract?

Answer 8

The innocent party has the option to either terminate the contract or affirm it. The decision is based on their assessment of the benefits of each alternative.

Question 9

What is a condition precedent in a contract?

Answer 9

A condition precedent is a condition that must be satisfied before any rights come into existence. It prevents the contract from becoming binding in the first place.

Question 10

What options does the innocent party have when the other party wrongfully prevents performance?

Answer 10

The innocent party has two options: (a) To sue for damages for breach of contract; or (b) To claim a quantum meruit.

Question 11

What is the entire obligations rule in relation to discharge by performance?

Answer 11

The entire obligations rule states that a contractual obligation is discharged by a complete performance of the obligation. The contract is only discharged once all obligations are fulfilled.

Question 12

What is the difference between discharge by expiry and discharge by performance?

Answer 12

Discharge by expiry occurs when a contract is completed according to its own terms or when a stipulated event, such as the expiry of a fixed term, occurs. Discharge by performance happens when a complete performance of the contractual obligations is achieved.

Question 13

What are the benefits of affirming a contract?

Answer 13

If the innocent party elects to affirm the contract, the contract survives and their rights under the contract are preserved. There may be commercial reasons why affirming the contract is a better option than termination.

Question 14

What is a condition subsequent in a contract?

Answer 14

A condition subsequent is a term in a contract that provides for the termination of the contract and the discharge of outstanding obligations upon the happening of a specific event.

Question 15

What is discharge by agreement and what is required for it to be binding?

Answer 15

Discharge by agreement occurs when the parties agree to release each other from some or all of their obligations. For it to be binding, the agreement needs consideration.

Question 16

What is the defense of tender of performance in a breach of contract case?

Answer 16

In an action for breach of contract for failing to perform an obligation, it is a good defense for the defendant to show that they ‘tendered performance’. This means that they unconditionally offered to perform their obligations in accordance with the terms of the contract, but the promisee refused to accept such performance. Tender of performance can relieve the defendant of liability for failing to perform.

Question 17

How does a contract expire?

Answer 17

A contract can expire when it is completed according to its own terms or when a stipulated event, such as the expiry of a fixed term, occurs.

Question 18

How can a contract be discharged by breach?

Answer 18

A contract can be discharged by breach when one party breaches a term of the contract that is either a condition or an innominate term treated as a condition. The innocent party may treat the contract as terminated for repudiatory breach in certain circumstances.

Question 19

What happens when a party is wrongfully prevented from completing performance by the other party?

Answer 19

When one party performs part of the agreed obligation and is then prevented from completing the rest by some fault of the other party, they will be entitled to payment despite not having completed the rest of the obligation. The innocent party can choose to sue for damages for breach of contract or claim a quantum meruit.

Question 20

What is discharge by breach and what options does the innocent party have?

Answer 20

Discharge by breach occurs when one party breaches a term of the contract. The innocent party has the option to treat the contract as terminated for repudiatory breach and claim damages, or to affirm the contract and claim damages.

Question 21

What is the difference between affirming a contract and waiving damages from a breach?

Answer 21

Affirming a contract does not waive the right to claim damages arising from the breach. The innocent party can still retain a claim for damages while affirming the contract. However, termination cannot be a result of affirming the contract.

Question 22

What is the usual remedy for breach of contract?

Answer 22

The usual remedy for breach of contract is an award of compensatory damages, which is monetary compensation for the specific breach. However, the innocent party does not always acquire the right to terminate the contract as a result of a breach.

Question 23

How is a contractual obligation discharged by performance?

Answer 23

A contractual obligation is discharged by a complete performance of the obligation. The promisee is entitled to the benefit of complete performance exactly according to the promisor’s ‘undertaking’. If a promisor only performs part of their obligation, they are not discharged from that obligation.

Question 24

What is frustration in relation to contract discharge?

Answer 24

Frustration refers to events that occur after the formation of the contract and render performance radically different from what was agreed upon. It relieves a party from further obligations under the contract.

Question 25

How is a contract affirmed?

Answer 25

To affirm a contract, there must be evidence of a clear and unequivocal commitment to continue with the contract. This commitment is typically demonstrated by the innocent party’s actions or statements.

Question 26

How can a contract be discharged by agreement?

Answer 26

A contract can be discharged by agreement in two ways: (a) By a subsequent binding contract between the parties; or (b) By operation of a term of the original contract.

Question 27

What happens if a promisor only performs part of their obligation?

Answer 27

If a promisor only performs part of their obligation, they are not discharged from that obligation. The promisee is entitled to the benefit of complete performance exactly according to the promisor’s ‘undertaking’.

Question 28

What is repudiatory breach of contract?

Answer 28

Repudiatory breach of contract occurs when one party breaches a term of the contract that is either a condition or an innominate term treated as such. The innocent party may treat the contract as terminated for repudiatory breach.

Question 29

What is accord and satisfaction in relation to discharge by agreement?

Answer 29

Accord and satisfaction refers to the situation where there is an agreement to release an obligation (accord) and consideration for the promise to release a party from the obligation (satisfaction). It is a way to discharge a former obligation and form a new agreement in new terms.

Question 30

What are the three categories of frustration mentioned in the lecture?

Answer 30

The three categories of frustration mentioned in the lecture are performance becoming impossible, performance becoming illegal or prevented by government intervention, and frustration of a common purpose.

Question 31

What are the limitations on the right to affirm a contract?

Answer 31

There are two important limitations on the innocent party’s right to affirm a contract in response to a repudiatory breach. First, the cooperation of the breaching party is required for continued performance of the contract. Second, the innocent party must have a legitimate interest, financial or otherwise, in affirming the contract and continuing with performance.

Question 32

What is the significance of the entire obligations rule in contract performance?

Answer 32

The entire obligations rule states that a contractual obligation is discharged by a complete performance of the obligation. If a promisor only performs part of their obligation, they are not discharged from that obligation. The promisee is entitled to the benefit of complete performance exactly according to the promisor’s ‘undertaking’

Question 33

What is the difference between a condition precedent and a condition subsequent in a contract?

Answer 33

A condition precedent is a condition that must be satisfied before any rights come into existence. It suspends the contract until the condition is satisfied. On the other hand, a condition subsequent is a term providing for the termination of the contract and the discharge of outstanding obligations in the event of a specified occurrence.

Question 34

What are the consequences of terminating a contract for repudiatory breach?

Answer 34

Terminating a contract for repudiatory breach puts an end to all primary obligations of both parties that remain unperformed. The innocent party can claim damages not only for the specific breach but also for the loss of the contract caused by its termination. However, any rights and obligations that have accrued before termination remain enforceable.

Question 35

What are the consequences of frustration in a contract?

Answer 35

The consequences of frustration in a contract are that the party affected by the frustration is relieved from further obligations under the contract. However, there are rules and limitations regarding the return of payments and other matters.

Question 36

What happens when a contract is terminated for repudiatory breach?

Answer 36

Terminating a contract for repudiatory breach puts an end to all primary obligations of both parties that remain unperformed. The innocent party can claim damages not only for the specific breach but also for the loss of the contract caused by its termination.

Question 37

What risks are associated with terminating a contract for repudiatory breach?

Answer 37

Terminating a contract for repudiatory breach involves a high degree of risk, particularly the risks of wrongful termination. If the termination is found to be wrongful, it can lead to counterclaims and damages against the terminating party.

Question 38

What is the purpose of the Law Reform (Frustrated Contracts) Act 1943?

Answer 38

The Law Reform (Frustrated Contracts) Act 1943 introduced changes to the law that help deal with issues arising from frustration in contracts, such as the return of payments and other matters.

Question 39

What is the effect of a condition subsequent in a contract?

Answer 39

A condition subsequent is a term that provides for the termination of the contract and the discharge of outstanding obligations if a specified occurrence happens. When the condition subsequent is fulfilled, the remaining obligations under the contract are discharged.

Question 40

What is anticipatory breach in contract law?

Answer 40

Anticipatory breach refers to a situation where a party indicates in advance that they will not perform their contractual obligations. This gives the innocent party an immediate right to accept the renunciation and treat the contract as terminated.

Question 41

What are the exceptions to the entire obligations rule?

Answer 41

There are several exceptions to the entire obligations rule that mitigate its potentially harsh effect. These exceptions include acceptance of partial performance, substantial performance, divisible obligations, and wrongful prevention of performance.

Question 42

What is the concept of mutual waiver in relation to discharge by agreement?

Answer 42

Mutual waiver refers to a new contract formed by both parties agreeing to waive their rights under the old contract in consideration for being released from their obligations under the old contract. This type of arrangement is common in commercial situations where parties wish to end an existing contract and achieve commercial certainty.

Question 43

What is acceptance of partial performance?

Answer 43

Acceptance of partial performance occurs when the innocent party, instead of rejecting the work done, accepts that part of the performance. However, such acceptance is at the discretion of the innocent party. If the innocent party voluntarily accepts partial performance, the party in default will be entitled to payment on a quantum meruit basis.

Question 44

What is quantum meruit and how is it relevant to acceptance of partial performance?

Answer 44

Quantum meruit, meaning ‘as much as is deserved’, is a remedy whereby the party in default, who has given only partial performance of the contractual obligations, may be able to claim a reasonable sum so that the innocent party is not unjustly enriched. The court assesses the value of a quantum meruit award on an objective basis using available information, such as the usual market price for goods or services.

Question 45

What happens when one party has performed its obligations but the other party still has something to do?

Answer 45

If one party has performed its obligations in their entirety but something remains to be done by the other party, the party to whom the obligation is owed may release the other party by a subsequent agreement under deed. This avoids the need for consideration because a gratuitous promise made in a contract in the form of a deed is enforceable without consideration.

Question 46

What is the effect of a condition precedent not being fulfilled?

Answer 46

When a condition precedent is not fulfilled, there is no true discharge because the rights and obligations under the contract were contingent upon an event that did not occur. In other words, the rights and obligations never came into existence in the first place.

Question 47

What is substantial performance and how does it affect contract payment?

Answer 47

Substantial performance occurs when a contract has been mostly performed, with only minor defects or aspects remaining. In such cases, the party who rendered substantial performance may be entitled to the contract price, subject to a deduction to reflect the cost of remedying the remaining defects. The court determines whether the defect goes ‘to the root of the contract’ and assesses the cost of remedying the defect against the contract price.

Question 48

What is the purpose of the remedy of quantum meruit?

Answer 48

The remedy of quantum meruit allows the party in default, who has given only partial performance of the contractual obligations, to claim a reasonable sum so that the innocent party is not unjustly enriched. It prevents the party in default from receiving full payment without having fully performed their obligations.

Question 49

What is the purpose of assessing substantial performance based on the ‘root of the contract’?

Answer 49

Assessing substantial performance based on the ‘root of the contract’ allows the court to determine whether the defect or aspect that has not been performed goes to the core purpose of the contract. If the defect is too serious and goes to the root of the contract, the party who rendered the defective performance will not be entitled to recover any money.

Question 50

What is the usual remedy for breach of contract?

Answer 50

The usual remedy for breach of contract is an award of compensatory damages, which is monetary compensation.

Question 51

What is the Hong Kong Fir test and why do commercial parties often agree on a list of breaches in contracts?

Answer 51

The Hong Kong Fir test refers to the uncertainty surrounding the test for determining whether a breach of contract is repudiatory. To inject certainty into their contracts, commercial parties often explicitly agree on a list of breaches that will give rise to a right to terminate.

Question 52

What are the risks of wrongfully terminating a commercial contract for repudiatory breach?

Answer 52

Terminating a commercial contract for repudiatory breach often involves a high degree of risk for the terminating party. If a court later finds that the breach was not repudiatory, the terminating party’s notice to terminate may be considered wrongful. This can lead to a damages claim against the terminating party and potential reputational damage.

Question 53

What are the two options when a contract is affirmed?

Answer 53

When a contract is affirmed, there are two options: elect to affirm or elect to terminate. Electing to affirm requires a clear and unequivocal commitment to continue with the contract, while electing to terminate requires notification and entitles the innocent party to damages.

Question 54

What factors contribute to the risks of wrongful termination in cases of repudiatory breach?

Answer 54

The risks of wrongful termination in cases of repudiatory breach are exacerbated by the fact that the categorization of the breached term as a condition or warranty depends on the application of the Hong Kong Fir test. This test sets a high bar and can be difficult to establish. Additionally, terminating a contract without proper justification can turn the terminating party into the party in repudiatory breach, leading to potential damages claims.

Question 55

What is the right of election in the context of repudiatory breach?

Answer 55

The right of election refers to the choice given to the innocent party to either terminate the contract or affirm it. The innocent party must make their decision known to the party in default, and they are allowed a period of time to decide between these two alternatives.

Question 56

How is a contract affirmed after a repudiatory breach?

Answer 56

Affirmation of a contract after a repudiatory breach requires clear and unequivocal commitment to continue with the contract. The innocent party must make their decision to affirm the contract known to the party in default. Affirmation preserves the contract and the rights of the innocent party, but does not waive damages from the relevant breach.

Question 57

How can commercial parties inject certainty into their contracts regarding termination rights?

Answer 57

Commercial parties can explicitly agree on a list of breaches that will give rise to a right to terminate. This helps inject certainty into their contracts and provides clarity on the circumstances under which termination is justified.

Question 58

What happens if a party affirms a contract despite an indication of non-performance by the other party?

Answer 58

If a party affirms a contract despite an indication of non-performance by the other party, the innocent party can still perform their own obligations and claim the sum due under the contract in a debt action. However, the innocent party retains a claim for damages arising from the breach and cannot terminate the contract as a result of it.

Question 59

What might render performance of a contract radically different?

Answer 59

Performance of a contract may be radically different if it becomes impossible, illegal, or if the common purpose of the contract is frustrated. These events occur after the formation of the contract and render performance different from what was agreed upon.

Question 60

What happens if a contract becomes impossible to perform due to the destruction of an essential object?

Answer 60

If a contract becomes impossible to perform due to the total or partial destruction of an object necessary for performance, the contract may be frustrated. The innocent party is relieved from further obligations under the contract.

Question 61

What happens to fees owed for services provided prior to termination of a contract for repudiatory breach?

Answer 61

If a customer owes fees for services provided prior to termination of a contract for repudiatory breach, they would still be obliged to pay those fees. However, they would no longer be obliged to accept and pay for services going forward.

Question 62

What is the significance of the co-operation of the breaching party in affirming a contract?

Answer 62

The co-operation of the breaching party is required for continued performance of the contract. If the innocent party requires the co-operation of the other contracting party to fulfill their obligations under the contract, this will prevent the innocent party from claiming the contract price.

Question 63

Can frustration be raised as a defense to an action for breach of contract?

Answer 63

Yes, frustration can be raised as a defense to an action for breach of contract. It relieves the party from further obligations under the contract.

Question 64

How does the innocent party make the election to terminate the contract known to the party in default?

Answer 64

The innocent party must communicate their decision to terminate the contract to the party in default. This ensures that the termination is legally effective.

Question 65

What factors should be considered when assessing whether unavailability is sufficient to amount to frustration?

Answer 65

When assessing whether unavailability is sufficient to amount to frustration, a multifactorial approach should be adopted. The factors to be considered include the terms of the contract itself, its matrix or context, the parties’ knowledge, expectations, assumptions, and contemplations, as well as the nature of the supervening event and the parties’ reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances.

Question 66

What is the key test for determining frustration in the case of Canary Wharf (BP4) T1 Ltd v European Medicines Agency?

Answer 66

The key test is whether the event would have informed the manner in which the parties assessed the risk of entering into the contract. Highly theoretical risks that the parties would not have taken into account are not relevant.

Question 67

What is the concept of frustration of purpose in contract law?

Answer 67

Frustration of purpose occurs when the common purpose for which a contract was entered into can no longer be carried out due to some supervening event. This can lead to the contract being frustrated, even if it is still physically possible to perform the contract.

Question 68

What is a force majeure clause and how does it relate to frustration of a contract?

Answer 68

A force majeure clause is a contractual provision that states what will happen to the contractual relationship between the parties should a particular set of circumstances, which could otherwise amount to frustrating events, materialize. The inclusion of a force majeure clause allows the parties to allocate risks in relation to these events at the outset and may allow for the continuance of the contractual relationship in circumstances that would otherwise amount to frustration of the contract.

Question 69

What was the outcome of the case Krell v Henry and how does it relate to frustration of purpose?

Answer 69

In the case of Krell v Henry, the defendant agreed to hire a room to view a coronation procession, but the procession did not take place due to the illness of King Edward VII. The Court of Appeal held that the common foundation of the contract was frustrated because the purpose of hiring the room was to view the procession. This case is an example of frustration of purpose.

Question 70

What is an example of a contract that was not frustrated despite a change in circumstances?

Answer 70

An example of a contract that was not frustrated despite a change in circumstances is Herne Bay Steamboat Co Ltd v Hutton [1903] 2 KB 683. In this case, the plaintiff hired their steamboat to the defendant ‘for the purpose of viewing the Naval Review and for a day’s cruise round the fleet. The naval review was cancelled, but the cruise could still go ahead. The court held that the contract was not frustrated because viewing the naval fleet might have been the principal motivation for the defendant, but it was not the common foundation of the contract.

Question 71

Under the Law Reform (Frustrated Contracts) Act 1943, what happens to money paid before the frustrating event?

Answer 71

Under the Law Reform (Frustrated Contracts) Act 1943, money paid before the frustrating event can be recovered even if failure of consideration is only partial.

Question 72

What is the significance of a common foundation in determining frustration of purpose?

Answer 72

In cases of frustration of purpose, it is important that there is a joint purpose of the parties. It is not enough for it to be the purpose of just one party. The common foundation of the contract must be frustrated for the doctrine of frustration to apply.

Question 73

What happens to money payable but not yet paid under the Law Reform (Frustrated Contracts) Act 1943?

Answer 73

Under the Law Reform (Frustrated Contracts) Act 1943, money payable but not yet paid ceases to be payable.

Question 74

What are the limitations on the doctrine of frustration?

Answer 74

The doctrine of frustration must be applied within very narrow limits. It is not lightly invoked to relieve contracting parties of the normal consequences of imprudent commercial bargains. Additionally, frustration will not apply where the event was induced by one of the parties, meaning that self-induced frustration is not a valid defense. Furthermore, the doctrine of frustration is a means of allocating unforeseen risks, and it is unlikely that a contract will be frustrated merely because an event has occurred that renders the contracted-for performance worth less or more expensive.

Question 75

When can performance of a contract be considered impossible?

Answer 75

Performance may be considered impossible if the contract becomes impossible to perform due to the total or partial destruction of some object necessary for performance. For example, if the subject matter of the contract is destroyed or an essential asset for performance is destroyed.

Question 76

What discretionary power does the court have under the Law Reform (Frustrated Contracts) Act 1943?

Answer 76

Under the Law Reform (Frustrated Contracts) Act 1943, the court has a discretionary power within specified limits to allow the party returning the money to retain a sum for expenses incurred in attempting to perform the contract.

Question 77

How does the Law Reform (Frustrated Contracts) Act 1943 address expenses incurred by the payee?

Answer 77

Section 1(2) of the Act allows for the recovery of money paid before the frustrating event and the non-payment of money that should have been paid before the event. Expenses incurred by the payee can be recovered out of the total sum paid or payable before the event, subject to the court’s discretion.

Question 78

What is the principle regarding contracts that become more difficult or expensive to perform?

Answer 78

Contracts that become more difficult or expensive to perform due to unexpected events are not automatically frustrated. The fact that a contract becomes more onerous than anticipated is not by itself a ground for relieving a party of their obligations under the contract.

Question 79

What is self-induced frustration and how does it affect the doctrine of frustration?

Answer 79

Self-induced frustration occurs when an event is induced by one of the parties, meaning it was their fault or choice. In such cases, the doctrine of frustration does not apply. If a party successfully proves that the frustrating event is self-induced, the defense of frustration fails and the party will be in breach of contract.

Question 80

What is the relationship between foreseeability and the doctrine of frustration?

Answer 80

The doctrine of frustration is a means of allocating unforeseen risks. While most events are to some degree foreseeable, that does not mean they cannot lead to frustration. Even events that are not merely foreseen but made the subject of express contractual provision may lead to frustration if they go beyond the risk assumed under the contract and render performance radically different from what was contracted for. However, the less foreseeable an event is in its type and impact, the more likely it is to be a factor that may lead to frustration.

Question 81

What is the purpose of a force majeure clause in a contract?

Answer 81

The purpose of a force majeure clause is to state what will happen to the contractual relationship between the parties should a particular set of circumstances, which could otherwise amount to frustrating events, materialize. It allows the parties to allocate risks in relation to these events at the outset and may allow for the continuance of the contractual relationship in circumstances that would otherwise amount to frustration of the contract.

Question 82

What is the effect of express contractual provision on the doctrine of frustration?

Answer 82

The doctrine of frustration cannot override express and unambiguous contractual provision for the frustrating event. Commercial contracts often contain force majeure clauses, which state what will happen to the contractual relationship if specific circumstances, which could otherwise amount to frustrating events, occur. These clauses allow the parties to allocate risks and may allow for the continuance of the contractual relationship in circumstances that would otherwise frustrate the contract.

Question 83

What must the court do when a party receives a non-monetary benefit prior to the frustrating event?

Answer 83

According to the Law Reform (Frustrated Contracts) Act 1943, when a party receives a non-monetary benefit prior to the frustrating event, the court must identify and value the benefit conferred, and make an assessment of a just sum to be paid by that party for the benefit.

Question 84

What discretionary power does the court have in relation to expenses incurred by the payee?

Answer 84

The court has a discretionary power to order the retention or recovery of money as it thinks just in all the circumstances to account for expenses incurred by the payee (normally the supplier).

Question 85

What are the limitations on the amount of money that can be retained or recovered by the court for expenses incurred by the payee?

Answer 85

The amount retained or recovered by the court cannot exceed (i) the actual expenses incurred nor (ii) the amount paid or payable by the paying party.

Question 86

Which of the following is an exception to the entire obligations rule?

Quantum meruit

Complete performance

Substantial performance

Partial performance

Answer 86

Substantial performance

This is the correct answer. A contractual obligation is discharged by a complete performance of the obligation. The effect of this is that a party is entitled to payment only after he has completed performance. However, an exception arises where a contract has been substantially performed. The party who rendered substantial performance may be awarded the contract price subject to a deduction to reflect the proportion of the obligation not performed.
The other exceptions to the entire obligations rule are acceptance of partial performance, divisible obligations and wrongful prevention of performance.

Question 87

What is the meaning of the entire obligations rule?

Answer 87

An obligation is discharged by complete performance of the obligation. Until the obligation is completely performed, the performing party is not entitled to payment

Question 88

What is the meaning of a condition precedent?

Answer 88

It is a condition in a contract that must be fulfilled before the contract itself or certain contractual rights or obligations become binding

Question 89

A dress maker agrees to sew a dress for a customer. The customer pays the dress maker a deposit of half the contract price. The dress maker starts sewing, but when she has sewn a third of the dress, she falls down the stairs and breaks both her arms. What is the best way to terminate the contract amicably?

The dress maker and customer can bring their contract to an amicable end if the dress maker refunds the deposit to the customer

There is no amicable way to end the contract. The customer should sue the dress maker for breach of contract

The dress maker and customer can enter a new contract in which they waive their rights under the old contract in consideration for being released from their obligations under the old contract

The dress maker and customer can enter a new contract in which the customer agrees to release the dress maker from her obligation to complete sewing the dress

Answer 89

The dress maker and customer can enter a new contract in which they waive their rights under the old contract in consideration for being released from their obligations under the old contract

This is the correct answer. This is known as mutual waiver.
The other options are problematic for various reasons: only one party is released from their obligation, no consideration has been provided in the new contract, and in the case of Jenny suing Cathy for breach of contract, litigation is normally not an amicable means of resolving a problem

Question 90

What is repudiatory breach?

Answer 90

This is where one party breaches a term of the contract which is either a condition or an innominate term which is to be treated as a condition

Question 91

A dressmaker agrees to sew a wedding dress for a bride for a wedding in 3 months. The bride pays the dressmaker the full contract price and the dressmaker starts sewing the dress. However, when the dressmaker has sewn half the dress, she falls down the stairs and breaks both her arms. The dressmaker is unable to sew with broken arms and her arms will take at least six months to mend. The bride sues the dressmaker for breach of contract. What is the dressmaker’s best response to the action?

The dressmaker should defend the action on the ground that the contract has been frustrated as it is more onerous to perform

The dressmaker should defend the action on the ground that the common purpose of the contract has been frustrated

The dressmaker should defend the action on the ground that the contract has been frustrated as performance of the contract is illegal

Defend the action on the ground that the contract has become frustrated as performance is impossible

Answer 91

Defend the action on the ground that the contract has become frustrated as performance is impossible

This is the correct answer. Frustration due to impossibility can extend to illness and other reasons. In Condor v Barron Knights, the contract was frustrated when the drummer in a pop group was taken ill and only capable of performing 3 or 4 nights a week. The dressmaker should therefore run frustration as a defence to the action

Question 92

Two steps in a 1(3) claim to claim money back for frustration?

Answer 92

two steps involved in a s.1(3) claim: (i) identification and valuation of the benefit and (ii) the assessment of a ‘just sum’. The court examined these two steps in detail in the decision.
Regarding the other answers, Gamerco SA v ICM/Fair Warning (Agency) Ltd is the leading case on s.1(2) of the Act, and Appleby v Myers and Taylor v Caldwell are common law decisions that pre-date the Act.

Question 93

Which of the following provides the best summary of the decision in Gamerco SA v ICM/Fair Warning (Agency) Ltd?

Answer 93

The decision clarified that the court has a broad discretion under s 1(2) Law Reform (Frustrated Contracts) Act 1943 to order such retention or recovery of money as it thinks just in all the circumstances to account for expenses incurred by the payee.

Question 94

What could a contract radically different to perform?

Answer 94

(a) Government intervention
(b) Unavailability of a specific person crucial to the contract
(c) Illegality
(d) Destruction of the subject matter
(e) Non- occurrence of a fundamental event

Question 95

Can parties put clauses in their contract to make non-performance governed by the contract rather than frustration?

Answer 95

Yes, they can put a force majeure clause in the contract Force majeure clauses will be upheld
provided they satisfy the reasonableness test in the UCTA 1977. If there is a valid force
majeure clause the contract will not be frustrated.