*DISCHARGE OF A CONTRACT BY PERFORMANCE AND BREACH*

Question 1

What is the doctrine of complete performance?

Answer 1

• where both parties complete the contract and do both of their obligatory duties ie complete performance
• Cutter v Powell demonstrates this doctrine
• performance of contractual obligations must be precise and exact

Question 2

Exceptions to the doctrine of complete performance?

Answer 2

1) wrongful prevention of performance by other party
- e.g if person asking for service changes mind halfway through
- they would be in breach of contract so other party would bring a claim to recover damages
- would be able to recover their loss of profit
- or claim a quitus meruit which is a claim in restitution

2) voluntary acceptance of partial performance by other party
- Sumpter v Hedges
- could claim quitus meruit
- e.g driver drives goods halfway and other party agrees to pick up from there
- some damages should be recoverable for partial performance

3) substantial performance
- in order for this to apply the work must be finished but slightly defective
- then it is necessary to consider the nature and extent of the defects
- compare contracts price with amount needed to rectify the defects
- Hoenig v Isaacs
- Bolton v Mahadeva

4) divisible obligations
- this is where the parties have agreed payments for a distinct part or stage of work
- here each part or stage is treated like a separate contract

Question 3

What must be present for discharge by agreement to be valid?

Answer 3

• where the parties to a contract may agree to release one another form outstanding obligations
• there must be offer, acceptance, consideration and contractual intention

Question 4

What is a condition, warranty and innominate term?

Answer 4

Condition: major term

Warranty: minor term

Innominate term: neither condition or warranty

Question 5

How do you determine whether something is a condition or warranty? What will be the appropriate remedy for the three different terms?

Answer 5

• court do objective test where they look at whether a reasonable person would think parties intended term to be a condition or warranty
• it will often say in contract whether it is a condition by using the word specifically however, in Schiller v Wickman Machine Tool Sales ltd the parties had described term as a condition but it wasn’t one in legal sense
• if it’s a condition then innocent party can terminate contract and recover damages
• its a warranty then innocent party cannot terminate contract but can sue for damages
• if its an innominate term it depends on whether the entire benefit of the contract has been stripped

Question 6

Hong Kong Fir Shipping Co ltd v Kawasaki Kisen Kaisha Ltd

Answer 6

• a test which should be used to determine whether innocent party can terminate the contract was to ask if that event had occurred ie the breach of contract, had substantially deprived the whole contract

Question 7

Advantages and disadvantages of classification of terms?

Answer 7

A:
- certainty, meaning both parties know what’s at stake

D:
- unfairness
- party may use breach of contract to terminate even if breach is minor

Question 8

Are ss13 to 15 of the SGSA 1982 a condition/warranty or innominate term?

Answer 8

• because these are IMPLIED terms, they are treated as innominate

Question 9

What is an action for an agreed sum?

Answer 9

• if one party shall pay a sum of money to the other and the time arises for them to pay but they refuse, then the payee can bring a claim for agreed sum
• this is called a debt action
• remoteness and mitigation need not be an issue its a straightforward payment

Question 10

When can a party terminate a contract?

Answer 10

• if a condition is broken then could TERMINATE
• if warranty then sue for DAMAGES and not terminate
• if an innominate term is broken then can only terminate if the innocent party has been deprived of the whole benefit of contract

Question 11

If a breach does entitle the party to terminate, what is the breach called?

Answer 11

Rescinded/ repudiatory

Question 12

What is the effect of termination?

Answer 12

• the contract is at an end and future obligations will be
  discharged.
• this means that neither party need perform any future obligations under the
  contract.
• the innocent party can also sue for damages for any loss suffered.
• the decision to terminate must normally be communicated to the other party.

Question 13

What is the effect of affirmation?

Answer 13

• contract is not over and both parties should continue to perform their obligations.
• if the innocent party does decide to affirm the contract, the innocent party should make it clear that it is treating the contract as continuing.
• the innocent party can still claim damages for loss suffered.

Question 14

What is the special remedy for sale of goods contracts?

Answer 14

• if there is a breach of ss9-11 of CRA 2015 or s13 or 14 of SGA 1979, the buyer could be entitled to reject the goods

Question 15

What is an anticipatory breach?

Answer 15

• if a party gives advance warning that they will not be complete in contract when they are meant to
• the other party can terminate and sue for damages immediately
• or they can continue with contract in hopes that other party will complete contractual obligations

Question 16

What is a specific performance order?

Answer 16

• an order from court saying that party must complete their contractual obligations
• this is an fair and optional remedy but not granted easily
• equitable remedy when damages are not adequate on their own

Question 17

When is a specific performance order unlikely to be granted?

Answer 17

• where damages are an adequate remedy
• specific performance may not be granted where the court would have to supervise the parties over a period of time because of the difficulty of continuous supervision
• contracts involving services
• the reason for this restriction on the grant of specific performance is because such contracts usually depend on a certain amount of trust and confidence. If the relationship between the parties has broken down, it would not be advisable to force them to work together
• only if just and equitable to grant (would there be disproportionate hardship on d)

Question 18

What is an injunction? What are the two types of injunction?

Answer 18

• an equitable remedy used by the courts in a variety of cases to avoid injustice
• injunctions can be prohibitory (negative), in which case they prevent a party from doing something, or mandatory (positive), whereby a party is compelled to do something.

Question 19

Explain negative injunctions using two authorities.

Answer 19

Negative injunction

• Warner Brothers Pictures Incorporated v Nelson
• Page One Records v Britton
• here court said they should not enforce negative promises in contract of personal services if injunction meant D either had to remain idle or performed the positive agreements in contract (re-employ C as manager)

In summary, when deciding whether to grant an injunction enforcing a term of a contract whereby a party agrees not to work for someone else or in a particular capacity for a period of time, the court will consider such matters as:

• length of time – if the injunction will last for only a relatively short time (eg a few weeks), it is more likely to be awarded;
• whether granting the injunction will have the effect of seriously affecting the party’s career – if so, it is unlikely to be granted.
• an injunction will not be granted if the court feels that the inevitable result would be to compel the party to work for the original employer

Question 20

What is the aim of restitution?

Answer 20

• the general idea behind a restitution remedy is to prevent one party being unjustly enriched at the expense of the other

Question 21

When may a claim in restitution arise?

Answer 21

1) where money has been paid by one party to another under a contract and there has been a complete failure of the consideration;
- this means where payee has not done any part of what they were meant to do or what they’ve done is useless

2) where one party has done work for the other, or supplied goods to the other, and wants to be compensated for the work done or goods delivered
- this may be due to a broken contract due to party asking for contract in first place (other party will receive a reasonable sum for work done ie a quantum meruit)
- or because a contract was never formed

Question 22

British Steel Corp v Cleveland Bridge & Engineering Estate co Ltd v Parkside Homes

Answer 22

The claimant manufactured steel nodes for the defendant’s tender, in the construction of a building. The defendant sent a letter of intent which recorded the defendant’s intention to enter into a contract for the supply of the steel nodes at the price itemised on an original price estimation which was based on incomplete information. The claimant did not reply to the letter of intent but began to manufacture the steel nodes. Further negotiation ensued and the parties failed to agree on price and important contractual terms like delivery dates. The claimant sued for value of nodes on quantum meruit, contending no binding contract had been entered into; the defendant counterclaimed for breach of contract for late delivery of the nodes.

Held:
CONTRACT WAS NEVER MADE THEREFORE RESTITUTION WILL BE GRANTED

The letter of intent did not create an executory contract since the parties were still neogtiating over material contractual terms such as price and delivery dates, which made it impossible to say what the terms of contract were. The claimant was entitled to recover for the nodes on a quantum meruit basis.

Question 23

What is a contract of guarantee

Answer 23

• a contract of guarantee is a contract under which one person (the guarantor) guarantees that if another person (the debtor) does not pay back money owed then the guarantor will pay the money instead.
  E.g a parent might guarantee a child’s overdraft so that the bank will agree to lend money to the child under the overdraft facility.
• a secondary obligation to pay
• they must be evidenced in writing

Question 24

What is an indemnity?

Answer 24

• unlike guarantee, this is a primary obligation
• do not need to be evidenced in writing
• one party will promise to reimburse the other party in respect of a particular loss arising under contract
• e.g a potential buyer of land discovers it is contaminated and that cleaning it up will cost £100,000. The buyer could negotiate an appropriate price reduction or alternatively seek an indemnity for £100,000. A price reduction would effectively solve the problem. An indemnity solves the problem provided the seller reimburses £100,000 as and when required to do so.

Question 25

Compare Hoeing v Isaacs and Bolton v Mahadeva.