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Contract Law > Discharge of Contract > Flashcards

Discharge of Contract Flashcards

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1
Q

By what 4 ways can a contract end?

A
  1. By Performance
  2. By Agreement
  3. By Breach
  4. By Frustration
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2
Q

What does it mean when a contract is ended by performance?

A

When contractual obligations are performed

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3
Q

What does it mean when a contract is ended by agreement?

A

When parties to a contract agree to end it?

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4
Q

What does it mean when a contract is ended by breach?

A

When a party fails or refuses to perform his/her obligations under a contract

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5
Q

What does it mean when a contract is ended by frustration?

A

When a frustrating event occurs after the contract is formed that makes the performance of that contract impossible of illegal

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6
Q

What is ‘frustration’?

Describe its’ width of application?

A

The doctrine of frustration is applied when performance of a contract is impossible, illegal, or radically different from that which was originally agreed, when a frustrating event happens after the contract is made

Very narrow doctrine, ‘impossible’ means literally that, and cases are often of an exceptional nature

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7
Q

Historically, what was the courts attitude toward ‘frustration’?

A

Historically a strict approach, courts not wiling to allow a party to escape contractual obligations due to frustrating events

  • Instead parties were allowed to use ‘hardship clauses’
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8
Q

How has the courts attitude to ‘frustration’ changed over time and why?

A

Became less strict, and began to apply the doctrine through process of implication: Taylor v Caldwell [1863], Taylor approach rejected in Davis Contractors Ltd v Fareham UDC [1956]

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9
Q

What modern test for frustration was laid out in Davis Contractors v Fareham UDC [1956]

A
  • The court said that ‘frustration occurs where to require performance would be to require something radically different from what was undertaken’
  • Not enough to argue that performance has turned out to be difficult/extremely difficult
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10
Q

What modern test for frustration was laid out in National Carriers v Panalpina [1981]?

A

The court said we must ask if there ‘supervervens an event which significantly changes the nature of the outstanding contractual rights… then it would be unjust to hold the parties to them’

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11
Q

What is the significance of the Davis Contractors case?

A

It established that courts will not regard an event as frustrating ,merely if and when performance of contract becomes onerous and expensive

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12
Q

Give 5 examples of frustrating events

A
  1. Destruction of the Subject matter
  2. Death or incapacity
  3. Legal impossibility
  4. Government interference or delay
  5. Whole commercial purpose of the contract has changed
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13
Q

What case establishes destruction of subject matter as ground for frustration of contract?

A

Taylor v caldwell

not in Bunge v Kyla [2012] as damaged ship was insured

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14
Q

What case establishes death or incapacity as grounds for frustration of contract?

A

Condor v Barron Knights [1966]

BUT

If someone has fluctuating capacity, the courts may not regard the contract to be discharged for frustration - Blankley v Central Manchester [2015]

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15
Q

What case establishes legal impossibility as grounds for frustration of contract?

A

Courts may hold a contract frustrated if contract becomes illegal to perform
- E.g. due to change in law/outbreak of war = Avery v Bowden [1855] (Crimean War)

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16
Q

What case establishes Government interference or delay as grounds for frustration of contract?

A

Metropolitan Water Board v Dick Kerr [1918]

House of Lords held that the restriction imposed by the ministry of munitions was indefinite, which made the performance of the contract impossible

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17
Q

Give an example of ‘the whole commercial purpose of the contract changing’ as an example of a frustrating event

What two cases demonstrate a contracted frustrated, and one not

A

E.g. cancellation of an event on which the contract is based

Krell v Henry [1903] - coronation procession case - contract frustrated

Herne Bay Steam Boat Co. v Hutton [1903] - Royal fleet case - NO frustration because no complete failure of its’ purpose

18
Q

What is self-induced frustration as a limitation on the doctrine of frustration?

A

A contract can be discharged only if a frustrating event is not attributable to the fault of a party that relies on frustration

19
Q

What are express provisions in a contract as a limitation on the doctrine of frustration?

A

If a contract makes clear what happens if a particular, supervening event occurs, then the doctrine of frustration will not be applied (Fibrosa Case [1943] )

20
Q

What case establishes ‘foreseeability of a frustrating event’ as a limitation on the doctrine of frustration?

A

Amalgamated Investment v John Walker [1977]

21
Q

What case establishes ‘more difficult/costly to perform’ as a limitation on the doctrine of frustration?

A

David Contractors v Faveham [1956]

22
Q

List the 4 common law effects of frustration

A
  1. A frustrated contract is automatically discharged: the contract ends
  2. Contractual parties are released from their contractual obligations form he point that the frustrating event occurred
  3. Parties are nevertheless bound by any contractual obligations that arose before the frustrating event occurred
  4. A party that made payments prior to the frustrating event could recover these payments only if there is a total failure of consideration - Fibrosa case
23
Q

When will a ‘breach’ occur of a contract?

A

A breach will occur where, without a lawful excuse, a party fails/refuses to perform a contractual obligation imposed by the terms of the contract or performance is defective

24
Q

What happens if you terminate a contract when not entitled to?

A

Then you’re in breach of contract yourself, the other party can terminate and claim remedies from you

25
Q

When can an innocent party terminate a contract?

A

They’re entitled to breach only if there’s been a serious breach i.e. Renunciation/ Repudiatory breach

26
Q

When determining if you’re allowed to terminate or not, this depends on the type of term breached. What is a ‘Condition’, and what can be done if a ‘Condition’ is breached?

A

Condition = important, essential term, goes to the root of the contract - express or implied

An innocent party is entitled to repudiate the contract and claim damages

27
Q

When determining if you’re allowed to terminate or not, this depends on the type of term breached. What can be done if ‘Warranty is breached’? What cases are examples of case law around Warranty breach?

A

The innocent party is only entitled to claim damages

Compare:

Poussard v Spiers [1876]

Bettini v Gye [1876]

28
Q

Why did the court want to create a new type of term?

A

Rules on conditions and warranties, (termination and only damages) could be harsh. Court recognised this in Hong King Fir Shipping v Kawasaki [1962]

29
Q

What is an innominate/intermediate term?

A

A contractual term that the breach of which doesn’t automatically discharge the innocent party from its obligations under the contract

30
Q

What is the test for the right to terminate via an innominate term?

A

The right to terminate would depend on the seriousness of the factual consequences of the breach,

Test: did the breach ‘deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract’

31
Q

What 3 things help determine if a term is condition?

A
  1. Certain terms are defined by statute
  2. Or by precedent
  3. Or by express or implied designation by the parties
32
Q

Why is precedent a condition?

A

Judicial decisions classify terms as conditions e.g. Bunge Corporation

33
Q

How can express or implied designation by the parties determine that a term is a condition?

A

Look at the intention (common sense/reasonable man) including e.g. if designated to be treated as a ‘condition’ by the contract

NB: if parties call a term a condition, doesn’t mean it is one e.g. Schuler v Wickman [1974]

34
Q

What are innocent parties entitled to receive when the three different types of terms are violated?

A
  1. Conditions - Repudiatino (termination) and/or damages
  2. Warranties - Damages Only
  3. Innominate Terms - Depends on the consequences of the breach
35
Q

What is Repudiatory breach?

A

One party wrongfully abandons (renounces) the contract (either by express words or conduct)

36
Q

What is Anticipatory breach?

A

Now party announces/indicates by conduct, BEFORE the time for performance, that he will not be performing when the time arrives

37
Q

In anticipatory situations, what are the innocent party entitled to do?

A

The innocent party is entitled to terminate the contract here and now, at the time of announcement (no need to wait for the moment of the breach)

38
Q

What problem arises regarding repudiatory and anticipatory breach? What case acts as precedent for this?

What has the House of Lords said on this decision?

A

Problem occurs when the other party want to carry on with the contract (White and Carter Councils v MacGregor) [1962]

House of Lords said sometimes the party can carry on but only if: 1) doesn’t need the other party’s cooperation and 2) has a ‘legitimate interest’ in performing

39
Q

What effect does termination of contract have?

What aspects of contracts might ‘survive’ termination?

A

When the termination IS justified, the effect is that both parties will be discharged from performing any more of their primary obligations under the contract - but secondary obligations may still exist

Other aspects such as exclusion clauses and arbitration clauses

40
Q

Concerning the breaching party’s rights, in a situation where termination is justified, does the breaching party have to be paid for work done?

A

Depends on the nature of the contract - ‘Entire’ or severable obligations.

Entire contract (entire obligation) = the obligation to pay comes when all the work is complete

Severable (divisible) contract = obligation to pay comes when each part is complete

41
Q

What payment rule exists for ‘Entire’ contracts and where does this rule come from?

Why and how has this changed?

A

That work must be completed before payment is due - Rule from Cutter v Powell [1975]

Rule can lead to hard consequences so courts have tried to find away around it:

Restitution available where part-performance is accepted, and

Doctrine of substantial performance

Contract Law (5 decks)

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