DISCHARGE OF CONTRACTS, BREACH AND REMEDIES

Question 1

Discharge of Contracts

Answer 1

cancellation of the obligation of a contract (make the contract null and inoperative, cancellation)

Question 2

Discharge of Contracts 2 ways

Answer 2

1. Frustration
2. Operation of Law

Question 3

Discharge by Frustration

Answer 3

• situations in which a contract becomes impossible to perform or is fundamentally different than what the parties have agreed to

Question 4

Requirements of Frustration (4):

Answer 4

(1) Frustrating event must have been unforeseen;
(2) Frustrating event must be outside the control of the parties;
(3) Frustrating event must occur AFTER the agreement was made;
(4) Frustrating event must make performance impossible, purposeless, or “radically different” than what was intended by the parties.

Question 5

Self-Induced Frustration

Answer 5

Where a party willfully disables itself from performing a contract to claim that the contract has been frustrated.
- Breach Of Contract

Question 6

Frustrated Contracts Act

Answer 6

The Act provides rules for restitution:

Money paid before the frustrating event may be recoverable.

Expenses incurred before the frustrating event may be deducted from recoverable sums.

The value of benefits already received (e.g., partial performance) may be adjusted to ensure fairness.

Question 7

Sale of Goods Act (Section 8)

Answer 7

Where there is an agreement to sell specific goods and subsequently the goods, without any fault on the part of the seller or buyer, perish before the risk has passed to the buyer, the agreement is “avoided” (i.e. same effect as frustrated).

Question 8

Discharge by Operation of Law (2)

Answer 8

1. Bankruptcy and Insolvency Act (Bankruptcy cancels all debts by discharging contracts, leaving you debt-free except for student loans.)
2. Limitations Act (In Ontario, you have two years to sue for a breach of contract or tort, starting from when the breach occurs or is discovered, after which your claim is barred by the Limitations Act.)

Question 9

Condition vs. Warranty

Answer 9

Condition: An essential term of the contract. If a condition is not met, the contract may be void.

Warranty: A non-essential term of the contract, often a representation where a party assures certain details.

Contracts often list “conditions” and “warranties” separately to indicate which terms are essential and which are secondary. If not specified, courts examine the contract’s obligations to determine whether a term is fundamental (condition) or incidental (warranty).

Question 10

Breach of contract

Answer 10

= a situation in which a party doesn’t perform their obligation under a contract
either at all or under a deficient matter

Question 11

2 types of breaches:

Answer 11

1) Minor breach = A breach of breach of warranty or an essential term in a minor respect; (you may sue for damages)
- preform inadequately

2) Major breach = A breach of the whole Contract or of a condition so that the purpose of the Contract is defeated.
- fail to preform
(Either accept the repudiation, discharge the contract or reject it and demand performance. If the other party fails to perform, you can sue for damages.)

Question 12

When can a breach occur?

Answer 12

Breach can only occur after contract has been formed.

Question 13

3 ways a breach can occur

Answer 13

1. Express Repudiation
2. Rendering Performance Impossible
3. Failure to Perform / Inadequate Performance

Question 14

Express Repudiation (Anticipatory Breach)

Answer 14

= Declaration of intention by one party to not perform

Options to non-breaching party:
- terminate contract and reserve the right to sue for damages
- Insist on performance and wait for non-performance (must remain ready and willing to perform on their side of the contract).

Question 15

Rendering Performance Impossible

Answer 15

= One party purposefully makes the contract impossible to perform. (likely a breach of the implied duty of good faith)
* A.k.a. self-induced frustration
* Example: double booking, not getting building permits on purpose…
* Can occur before or at the time performance is due.

Question 16

Failure to perform

Answer 16

= breaching through conduct
* Can only occur when performance is due (otherwise the party can always perform later and still meet their obligations under the contract).
- can be total or partial failure.

Question 17

Exemption Clause

Answer 17

= a clause in a contract that exempts a party from liability for failing to perform some or all of its contractual obligations.

Courts will not enforce exclusion clauses that shield parties from fundamental breaches or contravene public policy.

Question 18

Defences to Exemption Clauses

Answer 18

• Inadequate notice
• Contra proferentum
• Misrepresentation
• Non-Est Factum

Question 19

3 Types of Remedies

Answer 19

1. Damages
2. Equitable Remedies
3. Quantum Meruit

Question 20

Concept of Mitigation

Answer 20

= action by an aggrieved party to reduce the extent of its loss caused by the breach of the other party.

Requirement is “reasonable” mitigation.

Betterment: the plaintiff should not be put in a better position then he or she was prior to the breach of contract

Question 21

Damages (main measures)

Answer 21

• Expectation Damages: Expected profits under the contract at the time of contract formation.

Opportunity cost: Lost your chance of making a similar contract with a different promisor, so should be entitled to your profits.

• Consequential loss: other reasonably foreseeable damages that flow from the breach (e.x. shutting down business operations).
• General Damages: Damages that are not quantifiable (e.x. lost reputation).
• in business relate to goodwill. For example, if Loblaws couldn’t sell lettuce, their brand reputation might suffer, costing an estimated $100 in goodwill loss. Total damages would thus be $300, plus any additional mitigation costs.

Question 22

Measurement of Damages (other measures - 3)

Answer 22

Reliance Damages: Damages for wasted effort

Liquidated Damages: An amount agreed to be paid in damages by a party to a contract if it should commit a breach.

Nominal Damages: Where loss sustained is negligible.

Question 23

Hard to estimate damages for

Answer 23

Mental Anguish, Wrongful dismissal and Lost enjoyment

Question 24

Equitable Remedies in Law

Answer 24

Court-ordered solutions other than monetary damages used when financial compensation is insufficient to resolve the dispute.

Question 25

5 Key Characteristics of Equitable Remedies in Law

Answer 25

Discretionary Nature: Courts have the power to decide whether equitable remedies should be granted, based on the circumstances.

“Clean Hands” Doctrine: The party seeking equitable relief must act fairly and ethically, demonstrating good faith.

Timeliness: The action must be brought within a reasonable time to prevent undue delay.

Protection of Innocent Third Parties: Equitable remedies cannot be granted if they negatively impact an innocent third party.

Commensurate Consideration: The promise in question must be proportionate to the consideration exchanged in the agreement

Question 26

Types of Equitable Remedies

Answer 26

1. Specific Performance
2. Injunctions

Question 27

Specific Performance

Answer 27

= a court order requiring a party to fulfill their contractual obligations, usually to complete a specific transaction (ideal for unique items or real estate transactions)

Limitations: Rarely granted in contracts involving employment or personal services due to the difficulty of enforcement and the potential for coerced labor.

Question 28

Injunctions

Answer 28

= a court order prohibiting a party from performing certain acts.

Requirements:
- Typically, the contract (K) must include a negative covenant—a promise not to do something.
- used to prevent ongoing or future harm, such as stopping a breach of contract

Use in Employment Contracts:
- may apply in non-compete clauses or misuse of confidential information

Types:
- Interim Injunctions: Temporary orders issued to preserve the status quo until the case is resolved.
- Permanent Injunctions: Final orders restraining actions indefinitely.

Question 29

Quantum Meruit

Answer 29

= the amount a person merits to be paid for goods or services provided to the person requesting them.

What is the breaching party entitled to if they partly performed their requirements under the contract?

Is an exception to the general rule that expectation damages are to apply

Question 30

judgment

Answer 30

a court order requiring one party to pay to the other damages or perform as per an equitable remedy.

The parties: Judgment Creditor (the party that wins) and Judgment debtor.

Question 31

Execution

Answer 31

= the process by which a court judgment is enforced. It ensures that a creditor can recover a debt owed by a debtor as declared by a court decision.

Common Methods:
o Writ of Seizure and Sale: This allows a sheriff to seize and sell the debtor’s personal property or real estate to satisfy the judgment.
o Writ of Delivery: Used for the return of specific personal property to the creditor.
o Writ of Possession: Enables enforcement of orders involving land or premises.

Question 32

Garnishment (+ 2 examples)

Answer 32

= a legal procedure by which a creditor can collect a debt by requiring a third party (e.g., an employer or a bank) to pay money directly to the creditor instead of the debtor.

Examples:
Wages: A portion of the debtor’s wages is sent directly to the creditor.

Bank Accounts: Funds from a debtor’s bank account can be garnished to satisfy the debt.

Question 33

Examination

Answer 33

= the post-judgment process where the debtor is questioned under oath about their financial situation to decide on the most effective method of enforcement.

Question 34

Discharge by Performance

Answer 34

Occurs when both parties fulfill their contractual obligations as agreed.

Question 35

Discharge by Agreement

Answer 35

The parties mutually agree to terminate the contract before full performance.

Waiver: Both parties agree to cancel the contract.
Substituted Agreement: A new agreement replaces the original.
Condition Precedent or Subsequent: Events specified in the contract trigger termination.
Option to Terminate: Allows termination with notice​.