General Principles of the Law of Contract- week 5

Question 1

Upon what three ways may an obligation be terminated on?

Answer 1

1. full and proper performance,
2. by agreement,
3. by operation of law or by the unilateral act of the aggrieved party in the case of a breach of contract that is sufficiently serious to allow cancellation by the aggrieved party.

Question 2

What are the three kinds of Termination?

Answer 2

1. Termination by Performance
2. Termination by Agreement
3. Termination by Operation of Law

Question 3

List and explain the six Performances under: Termination by Performance

Answer 3

1. Required performance - Only full and proper performance, as agreed, will extinguish the obligation.
2. Performance by a third party - Generally, for an obligation to terminate, the person who performs the obligation must be the person who agreed to perform. However, the obligation may also be extinguished where a third party performs on behalf of the debtor. The creditor cannot refuse such
   performance if he or she would not be prejudiced and if performance is effective. The creditor may refuse performance by a third party where the performance is of a personal nature. E.g in acting
3. The person to whom performance must be made - Performance should ordinarily be made to the creditor. The creditor may, however, appoint another person to whom the debtor may perform.
4. Place of performance - Performance must be made at the place agreed by the parties.
5. Time of performance - The time for performance may also be agreed upon expressly or tacitly.
6. Performance as a bilateral act

Question 4

List and explain the five forms in which the termination of an obligation by agreement may take place.

Answer 4

1. Release and Waiver - A release is an agreement that the debtor be freed from an obligation. The term ‘waiver’ is sometimes used synonymously with release but is also sometimes used to refer to a unilateral act of abandoning a right that exists for a party’s sole benefit.
2. A novation is an agreement to extinguish and replace one or more obligations with a new obligation or obligations. If the original obligation is void, the novation will also be void.
3. A compromise is an agreement whereby parties settle a dispute or some uncertainty between them.
   New obligations are created, and any existing
   obligations are extinguished. Where payment is made in full and final settlement, it will depend on the circumstances whether this is an offer to compromise.
4. Effluxion of time-If a contract fixes a specific period for its duration, it terminates automatically at the end of such period. Section 14 of the Consumer
   Protection Act contains mandatory rules on fixed-term contracts covered by the Act.
5. Notice - Contracts for an indefinite period are terminable upon reasonable notice unless specifically agreed otherwise.

Question 5

May obligations be terminated by operation of law, as in the case of set-off, merger, supervening impossibility of performance, prescription, insolvency and death?

Answer 5

Yes

Question 6

List and discuss the six Termination by Operation of Law that occurs that leads to Termination.

Answer 6

1. Set-off occurs automatically when two parties have claims against each other provided its requirements are met.
2. Merger - Extinction of a debt by merger occurs when one person becomes both creditor and debtor in respect of a debt.
3. The requirements for supervening impossibility of performance are that the performance must be objectively impossible due to an event that was unforeseen and unavoidable by a reasonable person. Supervening impossibility of performance generally terminates the obligation and any
   counter-obligation.
4. Prescription entails the extinction of obligations by lapse of time and is regulated by the Prescription Act.
5. Generally, contractual rights and duties are transmissible upon death although not in the case of an express or tacit agreement to the contrary.
6. Insolvency – certain contractual obligations are terminated when one becomes insolvent.