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Business Law > Module 4: Discharge of Contract > Flashcards

Module 4: Discharge of Contract Flashcards

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1
Q

What are the 5 ways a contract may come to an end?

A 
Agreement
Performance
Frustration
Novation
Breach
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2
Q

How would a contract come to an end by agreement?

A

Both parties agree

In England should be supported by consideration

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3
Q

How would a contract come to an end by performance?

A

Both parties fully perform their obligations

Most common

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4
Q

How would a contract come to an end by frustration?

A

After contract has been formed

Becomes impossible or illegal to perform the contract

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5
Q

How would a contract come to an end by novation?

A

Where a new obligation is substituted for a prior one
All liability of the prior obligation is extinguished
Contract must expressly provide that the new obligation is in substitution
Must be by mutual agreement

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6
Q

What is Frustration?

A

Events subsequent to the making of the contract may affect it so that performance becomes impossible, illegal or radically different
Without either at fault

Deemed to be frustrated and discharged from their obligations

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7
Q

Tsakiroglou and Co Lrd v Noblee Thorl 1962

A

Charter of ship to transport groundnuts
Suez Canal was closed after the contract was concluded
Not frustrated as ship could go alternate route
Greater cost not so fundamentally different

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8
Q

What type of contracts can be frustrated?

A

Happens to valid contracts

Does not make it void

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9
Q

Remedy for frustration?

A

No damages payable since neither party at fault

Any money already paid must be repaid subject to any deductions for part performance

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10
Q

Frustration with a contract involving delectus personae?

A

Frustrated by death or illness of one of the parties

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11
Q

Change in law after contract formed that renders performance illegal?

A

Lead to contract frustrated

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12
Q

In England where are the rules on frustration found?

A 
Statutory
Law Reform (Frustrated Contracts) Act 1943
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13
Q

What constitutes a breach of contract?

A

When either party refuses or fails, without legal justification, to perform in an acceptable manner any of the things which he is required by contract to do

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14
Q

Remedies for material breach/breach of a condition?

A

Greater remedies including right to bring the contract to an end and make a claim for damages

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15
Q

Remedies for non-material breach/breach of warranty?

A

No right to bring to an end

Claim damages or some other remedy

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16
Q

3 possible types of breach?

A

Failure to perform the contract
Delayed performance
Defective performance

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17
Q

What is failure to perform the contract?

A

Refuses or fails to carry out
Repudiation of the contract
A material breach that entitles the innocent party to withdraw

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18
Q

What is delayed performance?

A

Not performed on the due date
Was delay material/breach of a condition?- rescind
Not material/breach of warranty?- claim damages

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19
Q

What is defective performance?

A

Whether performance conforms to the requirements of the contracts
Material or trivial breach if does not?
Rescind if material/breach condition
Otherwise damages and still perform his side

20
Q

What is anticipatory breach?

A

Occurs where after the contract has been formed but before performed, one party to the contract gives notice that he no longer intends to perform his obligations

21
Q

What may the innocent party do in a case of anticipatory breach?

A

Do nothing- court order requiring, rescind, withdraw and damages
Take immediate action- immediately sue
Perform- sue for payment

22
Q

Hochster v De La Tour 1853

A

Contract to accompany on tour, then told no longer needed

Entitled to sue as soon as anticipatory breach took place

23
Q

White and Carter Ltd v McGregor 1962

A

Continued to perform in anticipatory breach
Entitled to recover agreed price for advertising services
Repudiation does not bring contract to end but gives innocent party choice of affirming or rejecting

24
Q

What is repudiation?

A

Failure to perform contract

25
Q

What are damages?

A

Sum of money to compensate the innocent party for losses resulting in breach of contract

26
Q

What is the purpose of damages?

A

Compensation rather than punishment

27
Q

What is the aim of damages?

A

To put the innocent party in the position he would have been in had the contract been performed

28
Q

Anglia TV v Reed 1971

A

Actor broke contract last minute
Had incurred preparator costs
TV company able to recover these expenses
Wouldn’t have been able to recover lost profits as impossible to determine film would have made a profit

29
Q

What are the principles which limit liability?

A

Causation
Mitigation
Remoteness of Loss

30
Q

What is Causation?

A

Requires that the loss suffered by the innocent party must be shown to have been caused by the breach

31
Q

Sykes v Midland Bank Executor and Trustee Co Ltd 1971

A

Solicitors acting in breach failed to advise their client of a disadvantageous term in a lease

Would have entered into contract even if advised
Breach did not cause the loss and no compensation payable

32
Q

What is mitigation?

A

Party claiming must take reasonable steps to minimise his loss
Not all possible steps, only reasonable
Not able to recover losses which might have been reasonably avoided

33
Q

Payzu Ltd v Saunders 1919

A

Mitigation may be reasonable to accept substitute performance- cost effective
Party claiming must take reasonable steps to minimise loss
Contract for goods in installments
Failed to pay 1st one
Refused to make further deliveries
Refused to accept terms
No more goods
Price rose and Payzu sued for breach
Payzu should have mitigated its loss by accepting offer of goods for cash in advance
Since it didn’t, limited damages to assumed loss had paid in advance

34
Q

What is remoteness of loss?

A

Does not hold us responsible for all the consequences of our actions
Loss may not be recoverable where it is too remote

35
Q

Remoteness of loss, damages may only be awarded for a loss suffered where?

A

Arose naturally from the breach
Reasonably foreseeable as liable to result from breach
Determined on basis of what was known by the party at the time the contract was made

36
Q

Hadley v Baxendale 1854

A 
Flour mill had broken crankshaft
Delayed replacement
Mill owner not entitled to damages
Not reasonably foreseeable to the carrier that the mill would be out of actions 
Expected mill would have spare 
Too remote
37
Q

How is everyone treated with regards to remoteness of loss?

A

Knowing what sort of loss the normal course of things involve
For liability to arise they should be told of any special circumstances that might give rise to abnormal/unexpected losses

38
Q

Victoria Laundry (Windsor) v Newman Industries 1949

A

5 months late in delivering boiler
Lost lucrative cleaning contract
Sued for ordinary profits
Only liable ton compensate for ordinary loss not exceptional loss
Would only be recoverable if has knowledge of the contract at the time

39
Q

Balfour Beatty Construction v Scottish Power 1994

A

BB while constructing power failed at critical point
Sued SP for breach
Court ruled loss too remote
Appealed to Inner House of Court of Session and claim succeeded on basis that SP had sufficient technical knowledge to foresee damage of power failing
SP appealed and House of Lords agreed with first ruling

40
Q

What are the 5 other remedies of breach of contract?

A 
Rescission
Specific implement/specific performance
Interdict/injunction
Retention
Lien
41
Q

What is rescission?

A

Innocent party declare an end to the contract and withdraws

Claim damages in respect to breach

42
Q

What is specific implementation/performance?

A

Where wants to force the contract breaker to perform
Court order requiring positive action
Circumstances where wouldn’t order it e.g. money, personal relationship, no jurisdiction

43
Q

What is an interdict/injunction?

A

Requires contract breaker not to do something

44
Q

What is Retention?

A

Party not in breach withholds performance of his own obligations

45
Q

What is Lien?

A

Party not in breach retaining or refusing to deliver the other party’s goods in his possession until he performs his obligations

Business Law (17 decks)

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