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18BSA026 - Principles of Law > L7 - Contract Law- Discharge, Breach of Contract > Flashcards

L7 - Contract Law- Discharge, Breach of Contract Flashcards

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1
Q

What is the Discharging of a Contract?

A
  • The obligations of a contract come to an end.
  • All duties which arose under the contract are terminated.
  • The parties are no longer bound by law.
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2
Q

What are the 4 main ways to discharge a contract?

A
  • agreement
  • Breach of Contract
  • Performance
  • Frustration
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3
Q

What are the two types of Agreement as a way to discharge a contract?

A

can be done two ways:

  • bilateral agreement
  • unilateral agreement
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4
Q

What a bilateral agreement?

A
  • Neither party has completed all obligations.
  • They agree to release each other from the agreement.
  • Each receive a benefit from the release
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5
Q

What is a Unilateral Agreement?

A

One party has completed all obligations but the other one wishes to be released before completion.

  • (a) Consideration for the release is needed –> pay off the rest of the contract OR
  • (b) an agreement by deed is made.

(a) When there is consideration the agreement is an ACCORD and the consideration is called SATISFACTION. The arrangement is referred to as an accord and satisfaction.

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6
Q

What is Performance as a way to Discharge a contract?

A

General Rule

  • Each party does precisely what they promised to do.
  • The contract ends because all obligations have been performed in full.
  • It must not be less than agreed.
  • If a party does not totally complete their side cannot sue on it.
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7
Q

What is the Case of Performance as a way to discharge a contract?

A

Cutter v Powell (1795)

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8
Q

What is the Case of Cutter v Powell (1795)?

A

0 Cutter agreed he would sail with Powell from Kingston, Jamaica to Liverpool, England. The contractual note read as follows.

  • “Ten days after the ship Governor Parry, myself master, arrives at Liverpool, I promise to pay to Mr. T. Cutter the sum of thirty guineas, provided he proceeds, continues and does his duty as second mate in the said ship from hence to the port of Liverpool. Kingston, July 31st, 1793.”
  • Cutter died after seven weeks and Powell didn’t pay the widow any money at all.
  • His wife sued for part payment.
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9
Q

What is the Issue of Cutter v Powell (1795)?

A

Issue:

Performance of contract

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10
Q

What is the Ruling of Cutter v Powell (1795)?

A

Ruling:
The contract required entire performance and payment was agreed on completion of the voyage.
Harsh? Unjust?

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11
Q

What are the 4 exception to Performance as a way to Discharge a Contract?

A

Due to the harshness of ‘Cutter v Powell’, four exceptions are allowed.

  • Substantial Performance.
  • Divisible Contracts
  • Acceptance of Partial Performance
  • Prevention of Complete Performance
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12
Q

What are the 5 cases of exception to Performance as a way to Discharge a Contract?

A
  • Hoenig v Isaacs (1952)
  • Bolton v Mahadeva (1972)
  • Ritchie v Atkinson (1808)
  • Sumpter v Hedges (1898)
  • Planche v Colburn (1831)
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13
Q

What was the Case of Hoenig v Isaacs (1952)?

A
  • Mr Hoenig was meant to decorate and furnish Mr Isaac’s flat for £750.
  • When the work was done, there were problems with a bookcase and wardrobe, which would cost £55 to fix.
  • Mr Isaac refused to pay the £350 outstanding.
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14
Q

What was the Issue of Hoenig v Isaacs (1952)?

A

Issue:

Substantial Performance of contract?

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15
Q

What was the Ruling of Hoenig v Isaacs (1952)?

A

Ruling:
The contract was substantially performed.
The claimant was entitled to the contract price less the £55.

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16
Q

What was the Case of Bolton v Mahadeva (1972)?

A
  • Mr Bolton installed central heating for £560 in Mr Mahadeva’s house.
  • It was too cold, the heat came unevenly and it gave off fumes.
  • Bolton refused to correct it, which would cost £174. Mahadeva refused to pay any money at all. Bolton sued.
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17
Q

What was the Issue of Bolton v Mahadeva (1972)?

A

Issue:

Substantial Performance of contract?

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18
Q

What was the Ruling of Bolton v Mahadeva (1972)?

A

Ruling:

Held that Bolton was entitled to nothing because there had been no substantial performance at all.

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19
Q

What was the Case of Ritchie v Atkinson (1808)?

A
  • By contract the claimant agreed to carry a cargo of specified quantity of hemp and iron.
  • The price agreed was £5 per ton for the hemp and 5 shillings per ton of iron. The claimant only carried part of the agreed quantity.
  • The defendant argued the contract had not been fully performed and therefore no payment was due.
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20
Q

What was the Issue of Ritchie v Atkinson (1808)?

A

Issue:

Performance of divisible contract?

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21
Q

What was the Ruling of Ritchie v Atkinson (1808)?

A

Ruling:

  • Held. The contract could be divided into separate parts as the parties had agreed a price per ton.
  • The claimant was thus entitled to payment for the amount carried although the defendant was entitled to damages for non performance in relation to the amount not carried.
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22
Q

What was the Case of Sumpter v Hedges (1898)?

A
  • Mr Sumpter was a builder. He had a contract to build two houses and stables for Mr Hedges for £560.
  • He did work valued at £333 and said he had to stop because he had no more money.
  • Hedges finished the building, using materials which Sumpter had left behind.
  • Sumpter sued for the outstanding money.
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23
Q

What was the Issue of Sumpter v Hedges (1898)?

A

Issue:

Performance of partial contract?

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24
Q

What was the Ruling of Sumpter v Hedges (1898)?

A

Ruling:

  • Bruce J found that Mr Sumpter had abandoned the contract.
  • He could obtain money for the value of the materials but nothing for the work.

The party accepting partial performance must have a genuine choice whether to accept or reject the partial completion of the contract.

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25
Q

What was the Case of Planche v Colburn (1831)?

A
  • The claimant agreed to write a book on costume and armour .
  • The agreed contract price was £100 to be payable on completion. The claimant commenced writing and had completed a great deal of it when the defendant cancelled the series.
  • The defendant refused to pay the claimant despite his undertaking and the fact that the claimant was still willing to complete.
  • The claimant brought an action to enforce payment.
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26
Q

What was the Issue of Planche v Colburn (1831)?

A

Issue:

Prevention of Complete Performance?

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27
Q

What was the Ruling of Planche v Colburn (1831)?

A

Ruling:
Held: The claimant was entitled to recover £50 because the defendant had prevented the performance.

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28
Q

What is a Breach as a way to discharge a contract?

A

If one of the parties breaks or has indicated they intend to break one or more of the contract terms.

  • Serious Breach – Terminated
  • Insignificant Breach – Warranty (damages), but innocent party must still uphold their side of the bargain.
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29
Q

What is a serious Breach?

A
  • Breach of terms – when the contract is due and one party fails to carry it out.
  • Repudiation (anticipatory) – when a party expressly informs the other that they do not intend to carry out the contract.
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30
Q

What is a Repudiation or Anticipatory Breach?

A
  • the innocent party has the option to treat their obligations under the contract as being immediately at an end.
  • They can also recover damages for the loss of benefit they would have had if the contract was performed.
  • the innocent party has no obligation to sue straight away. They have a choice.
  • They could wait to see if the contract comes good.
  • Contract could be ‘frustrated’ in the meantime.
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31
Q

What were the 3 Cases of an Anticipatory Breach as a way to discharge a contract?

A
  • Hochster v De La Tour (1853)
  • Vitol SA v Norelf Ltd (1996)
  • Avery v Bowden (1856)
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32
Q

What was the Case of Hochster v De La Tour (1853)?

A
  • In April, De La Tour agreed to employ Hochster as his courier for three months from 1 June 1852, to go on a trip around the European continent.
  • On 11 May, De La Tour wrote to say that Hochster was no longer needed.
  • On 22 May, Hochster sued.
  • De La Tour argued that Hochster was still under an obligation to stay ready and willing to perform till the day when performance was due, and therefore could commence no action before.
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33
Q

What was the Issue of Hochster v De La Tour (1853)?

A

Issue:

Anticipatory Breach?

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34
Q

What was the Ruling of Hochster v De La Tour (1853)?

A

Ruling:
Held: The claimant did not have to wait until the contract was actually breached.
As soon as they were aware they could bring an action.

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35
Q

What was the Case of Vitol SA v Norelf Ltd (1996)?

A
  • Vitol ordered goods from Norelf to be loaded and delivered by ship.
  • Whilst at sea V sent a telex rejecting goods. A breach of contract.
  • On receipt of telex, N didn’t communicate with V, nor send the usual bill of lading.
  • N then sold the goods to a 3rd party and sued V for breach of contract.
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36
Q

What was the Issue of Vitol SA v Norelf Ltd (1996)?

A

Issue:

Anticipatory Breach?

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37
Q

What was the Ruling of Vitol SA v Norelf Ltd (1996)?

A

Ruling:
Held: The claimant did not have to communicate their acceptance of the breach if their conduct shows it is at an end. By not sending the bill of lading showed they were treating it as finished.

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38
Q

What was the Case of Avery v Bowden (1856)?

A
  • By contract the claimant was to carry cargo for the defendant.
  • The claimant arrived early to collect the cargo and the defendant told them to sail on as they did not have any cargo for them to carry and would not have by the agreed date.
  • The claimant decided to wait around in the hope that the defendant would be able to supply some cargo.
  • However, before the date the cargo was supposed to be shipped the Crimean war broke out.
39
Q

What was the Issue of Avery v Bowden (1856)?

A

Issue:

Anticipatory Breach?

40
Q

What was the Ruling of Avery v Bowden (1856)?

A

Ruling:
The claimant lost their right to sue for breach. Had they brought their action immediately they would have had a valid claim.

41
Q

What is Frustration as a way to Discharge a contract?

A

The contract is impossible to complete due to events through no fault of either party. (Avery v Bowden (1856))

Impossibility of Performance
Frustration of the commercial purpose.

42
Q

What is the case of Frustration as a way to discharge a contract?

A

Fibrosa Spolka Akcyjna v Fairbairn Combe Barbour (1943)

43
Q

What was the Case of Fibrosa Spolka Akcyjna v Fairbairn Combe Barbour (1943)?

A
  • A contract was made in 1939 in which Fairburn (English) agreed to supply machinery to Fibrosa (Polish).
  • Fibrosa paid £1000 in advance
  • Before the machinery was delivered, Germany invaded Poland.
  • Fairburn refused to pay back the £1000.
44
Q

What was the Case of Fibrosa Spolka Akcyjna v Fairbairn Combe Barbour (1943)?

A

Issue:

Frustration

45
Q

What was the Case of Fibrosa Spolka Akcyjna v Fairbairn Combe Barbour (1943)?

A

Ruling:
Held: It was illegal to deal with an enemy-occupied.

46
Q

When will a contract not be frustrated?

A

A contract will not be frustrated if:

  1. It is more difficult or expensive to perform.
  2. Impossibility of performance is the fault of either of the parties.
  3. Where there is a force majeure clause.
  4. Where the frustrating event could be foreseen.
47
Q

When can impossibility of performance not allow a contract to be frustrated?

A
  • Destruction of the subject matter.
  • Personal Incapacity of one of the parties
  • Injury or death
  • Good reason for unavailability
48
Q

What are the 3 cases where impossibility of performance does not allow for a contract to be frustrated?

A
  • Taylor v Caldwell (1863)
  • Condor v Barron Knights (1966)
  • Morgan v Manser (1948)
49
Q

What was the Case of Taylor v Caldwell (1863)?

A
  • Caldwell agreed to rent out a music hall for a series of concerts.
  • Taylor spent a lot of time and money to organise the concerts.
  • Before the concerts took place, the music hall was destroyed by fire.
  • Taylor tried to sue for breach of contract
50
Q

What was the Issue of Taylor v Caldwell (1863)?

A

Issue: Impossibility of performance

Destruction of the subject matter.

51
Q

What was the Ruling of Taylor v Caldwell (1863)?

A

Ruling:
Held: Performance of the contract was impossible therefore the contract was frustrated.
Both parties released from their obligations.

52
Q

What was the Case of Condor v Barron Knights (1966)?

A
  • Condor agreed by contract to play the drums for the defendant band for 7 nights per week for 5 years.
  • The claimant suffered a mental breakdown and was told by his doctor that he should not perform more than 4 nights per week.
  • The band dismissed him. He brought a claim for wrongful dismissal.
53
Q

What was the Issue of Condor v Barron Knights (1966)?

A

Issue: Impossibility of performance

Personal Incapacity - illness

54
Q

What was the Ruling of Condor v Barron Knights (1966)?

A

Ruling: The claimant’s action was unsuccessful as his medical condition made it impossible for him to perform his contractual obligations and the contract was thus frustrated.

55
Q

What was the Case of Morgan v Manser (1948)?

A
  • A contract for 10 years to perform was started in 1938 between a comedian and his manager.
  • Between 1940 and 1946 he couldn’t work as he was conscripted in the army.
56
Q

What was the Issue of Morgan v Manser (1948)?

A

Issue: Impossibility of performance

Personal Incapacity - circumstances

57
Q

What was the Ruling of Morgan v Manser (1948)?

A

Ruling. As the comedian’s presence was central to the contract it was frustrated.

58
Q

What is the Frustration of the commercial purpose?

A

It is still possible to carry out the contract, but the state of affairs central to the contract need to exist.

59
Q

What is the 2 Cases of Frustration of the Commercial Purpose?

A
  • Krell v Henry (1903)

- Herne Steam Boat Co v Hutton (1903)

60
Q

What is the Case of Krell v Henry (1903)?

A
  • Henry, agreed by contract on 20 June 1902, to rent a flat at from Krell, for the purpose of watching the coronation procession of Edward VII scheduled for 26 and 27 June.
  • The parties agreed on a price of £75, but nowhere in their written correspondence mentioned the coronation ceremony explicitly.
  • Henry paid a deposit of £25 to Krell for the use of the flat, but when the procession did not take place on the days originally set, on the grounds of the King’s illness.
  • Henry refused to pay the remaining £50
61
Q

What is the Issue of Krell v Henry (1903)?

A

Issue: Non-occurrence of event central to the purpose of a contract

62
Q

What is the Ruling of Krell v Henry (1903)?

A

Ruling:
Held: Watching the procession WAS the sole purpose of hiring the flat. The contract was frustrated.

63
Q

What was the Case of Herne Steam Boat Co v Hutton (1903)?

A
  • Mr Hutton, contracted to hire a steamship.
  • This was following a public announcement that a Royal naval review was to take place at Spithead on that day.
  • The contract was “for the purpose of viewing the naval review and for a day’s cruise round the fleet”.
  • Following the cancellation of the coronation, and of the naval review, the defendants refused payment, stating the contract was frustrated in purpose.
64
Q

What was the Issue of Herne Steam Boat Co v Hutton (1903)?

A

Issue: Non-occurrence of event central to the purpose of a contract

65
Q

What was the Ruling of Herne Steam Boat Co v Hutton (1903)?

A

Ruling: the Court of Appeal deemed the contract was not frustrated, and the balance in full was due to the claimant.
The hiring was not merely to witness the naval review, but also for a cruise around the fleet. This purpose was still entirely possible.

66
Q

What are the Limits of the Doctrine of Frustration?

A

Limits of the doctrine of frustration

1 -The event must occur after the contract has been entered into (Taylor v Caldwell)
2- There must be no commercial purpose left in the contract (Herne Bay Steam Boat v Hutton)
3 -The Parties must not have foreseen the event – if it is reasonable to assume so, then contract stands – War is the exception.
4 -The frustration must not be self-induced. (Maritime National Fish Ltd v Trawlers Ltd)
5 -No frustration if the parties have provided for the frustrating event in the contract (Metropolitan Water Board v Dick Kerr & Co)
6 - A contract that becomes more onerous is not frustrated (David Contractors Ltd v Fareham UDC)

67
Q

What are the 3 Cases of the Limits of the Doctrine of Frustration?

A
  • Maritime National Fish Ltd v Ocean Trawlers Ltd (1935)
  • Metropolitan Water Board v Dick Kerr & Co (1918)
  • David Contractors Ltd v Fareham UDC (1956)
68
Q

What was the Case of Maritime National Fish Ltd v Ocean Trawlers Ltd (1935)?

A
  • Maritime National Fish contracted to hire a steam trawler from Ocean Trawlers Ltd to add to their other four.
  • A license was needed to operate it.
  • Only three licenses were awarded which MNF used for their own boats and claimed frustration.
69
Q

What was the Issue of Maritime National Fish Ltd v Ocean Trawlers Ltd (1935)?

A

Issue: The frustration must not be self-induced

70
Q

What was the Ruling of Maritime National Fish Ltd v Ocean Trawlers Ltd (1935)?

A

Ruling: On appeal - the contract was not frustrated as MNF had chosen not to use a license for the hired boat.

71
Q

What was the Case of Metropolitan Water Board v Dick Kerr & Co (1918)?

A
  • Dick, Kerr & Co agreed to build a reservoir in six years for the Metropolitan Water Board (London).
  • The contract said that Dick, Kerr & Co should apply to the engineer for an extension of time in the event of delay ‘whatsoever and howsoever occasioned’.
  • Two years alter on 21 February 1916, due to the war, the Ministry of Munitions ordered Dick, Kerr & Co to stop work and sell their plant.
  • The MWD subsequently sued Dick Kerr to complete the reservoir.
72
Q

What was the Issue of Metropolitan Water Board v Dick Kerr & Co (1918)?

A

Issue: have the parties provided for the frustrating event in the contract

73
Q

What was the Ruling of Metropolitan Water Board v Dick Kerr & Co (1918)?

A

Ruling: The House of Lords held that the contract was frustrated, because the delay clause was intended to cover temporary difficulties, and not such fundamental changes in the contract’s nature.

74
Q

What was the Case of David Contractors Ltd v Fareham UDC (1956)?

A
  • Davis Contractors agreed with Fareham UDC to build 78 houses over eight months for £92,425.
  • It ended up taking 22 months, because Davis was short of labour and materials.
  • It cost £115,223. Davis submitted the contract was frustrated, void, and therefore they were entitled to the extra cost for the value of work done.
75
Q

What was the Issue of David Contractors Ltd v Fareham UDC (1956)?

A

Issue: A contract that becomes more onerous is not frustrated

76
Q

What was the Ruling of David Contractors Ltd v Fareham UDC (1956)?

A

Ruling: The House of Lords held that although the performance of the contract had become more onerous it was not frustrated. Delays happen in the building trade.

77
Q

What are the Consequences of Frustration?

A

Obligations that existed before the frustration still have to be met.

Law Reform (Frustrated Contracts) Act 1943 was introduced as current law didn’t reflect commercial reality. (The Fribosa 1943)

78
Q

What are different sections of the Law Reform (Frustrated Contracts) Act 1943?

A
  • S1 (2) –> Money owed under contract – all money still owing under the contract ceases to be payable.
  • S1 (2) –> Money paid in advance - Where expenses have been incurred this may be deducted from the amounts payable or paid. This is at the discretion of the court and is subject to what is just and equitable in the circumstances of the case. There is no provision allowing expenses to be recovered which exceed the amounts paid or payable.
  • S1 (3) –> Recovery of a sum for a value benefit - Where a valuable benefit has been conferred this must be paid for.
79
Q

How are Damages awarded in a Discharge of a Contract?

A
  • The purpose of an award of damages for breach of contract is generally to put the claimant in the position he would have been in had the contract been performed.
  • This is usually summed up in the view that such damages protect the claimant’s ‘expectation interest’.
  • It is not about punishing the party who has broken the contract.
  • When the innocent party has suffered no real loss, the damages awarded are nominal.
  • Sometimes the parties have agreed a ‘damages’ fee in the contract.
  • Otherwise the courts decide.
80
Q

What was the Case of How damages should be award when a contract is discharged?

A

Anglia TV Ltd v Reed (1971)

81
Q

What was the Case of Anglia TV Ltd v Reed (1971)?

A
  • Anglia asked Robert Reed to star in their TV film, The Man in the Wood.
  • Reed withdrew just before filming was about to start.
  • Anglia did not claim for loss of profits (expectation interest), because that was too uncertain.
  • Instead they claimed wasted expenditure.
  • Reed argued that damages could not be claimed when incurred before a contract, that was wasted, thrown away.
82
Q

What was the Issue of Anglia TV Ltd v Reed (1971)?

A

Issue: How much damages to award?

83
Q

What was the Ruling of Anglia TV Ltd v Reed (1971)?

A

Ruling. Lord Denning MR held that expenditure incurred before could be claimed, so long as it was within the contemplation of the parties.

84
Q

What is Remoteness when looking at Damage repayment when a contract is discharged?

A

Remoteness.

  • If the claimant is to succeed in an action for damages for breach of contract it must be shown that the loss suffered is not too remote.
  • This means that both parties to the contract must be aware of the possibility that a particular loss might result from the defendant’s breach of contract.
  • Two categories of remoteness: Normal and Abnormal
85
Q

What are the 3 Cases of Remoteness when looking at Damage repayment when a contract is discharged?

A
  • Hadley v Baxendale (1854)
  • Victoria Laundry v Newman Industries (1949)
  • Koufos v C Czarnikow Ltd (or The Heron II) (1967)
86
Q

What was the Case of Hadley v Baxendale (1854)?

A
  • A cam shaft broke in a mill. And a new one was ordered.
  • The owner of the mill contracted a carrier to deliver it.
  • The carrier didn’t know that the owner didn’t have a spare and delivered it late.
  • The mill couldn’t run and the owner sued for loss of profit.
  • Baxendale argued that he did not know that Hadley would suffer any particular damage by reason of the late delivery.
87
Q

What was the Issue of Hadley v Baxendale (1854)?

A

Issue: Remoteness of Damages

88
Q

What was the Ruling of Hadley v Baxendale (1854)?

A

Ruling. Court of Appeal ruled that Baxendale could only be held liable for losses that were generally foreseeable, or if Hadley had mentioned his special circumstances in advance.
The mere fact that a party is sending something to be repaired does not indicate that the party would lose profits if it is not delivered on time.

89
Q

What was the Case of Victoria Laundry v Newman Industries (1949)?

A
  • Newman was meant to deliver a boiler for Victoria Laundry. The delivery was five months late.
  • As a result of not having enough laundry capacity, Victoria Laundry lost a lucrative cleaning contract from the Ministry of Supply.
  • Victoria Laundry sued for the ordinary profit that it had forgone through not having the boiler on time.
  • It also sued for the extraordinary profit lost.
90
Q

What was the Issue of Victoria Laundry v Newman Industries (1949)?

A

Issue: Remoteness of Damages - could VL also claim the extraordinary profit it would have made

91
Q

What was the Ruling of Victoria Laundry v Newman Industries (1949)?

A

Ruling. Court of Appeal held that Newman Industries only had to compensate for the ordinary, not the extraordinary loss of profits.

92
Q

What was the Case of Koufos v C Czarnikow Ltd (or The Heron II) (1967)?

A
  • Koufos chartered a ship (the Heron II) from Czarnikow to bring 3,000 tons of sugar to Basra.
  • It was nine days late.
  • The sugar price had dropped from £32 10s to £31 2s 9d.
  • Koufos claimed the difference in the loss of profit.
  • Czarkinow knew there was a sugar market, but not that Koufos intended to sell it straight away.
93
Q

What was the Issue of Koufos v C Czarnikow Ltd (or The Heron II) (1967)?

A

Issue: Remoteness of Damages

94
Q

What was the Ruling of Koufos v C Czarnikow Ltd (or The Heron II) (1967)?

A

Ruling. The House of Lords held that the loss was not too remote.
The place of delivery was a sugar trading centre and the defendants should have expected the owners to want to sell it straightaway.

18BSA026 - Principles of Law (13 decks)

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