Module 4: Discharge of Contract Flashcards
What are the 5 ways a contract may come to an end?
Agreement Performance Frustration Novation Breach
How would a contract come to an end by agreement?
Both parties agree
In England should be supported by consideration
How would a contract come to an end by performance?
Both parties fully perform their obligations
Most common
How would a contract come to an end by frustration?
After contract has been formed
Becomes impossible or illegal to perform the contract
How would a contract come to an end by novation?
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
What is Frustration?
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
Tsakiroglou and Co Lrd v Noblee Thorl 1962
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
What type of contracts can be frustrated?
Happens to valid contracts
Does not make it void
Remedy for frustration?
No damages payable since neither party at fault
Any money already paid must be repaid subject to any deductions for part performance
Frustration with a contract involving delectus personae?
Frustrated by death or illness of one of the parties
Change in law after contract formed that renders performance illegal?
Lead to contract frustrated
In England where are the rules on frustration found?
Statutory Law Reform (Frustrated Contracts) Act 1943
What constitutes a breach of contract?
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
Remedies for material breach/breach of a condition?
Greater remedies including right to bring the contract to an end and make a claim for damages
Remedies for non-material breach/breach of warranty?
No right to bring to an end
Claim damages or some other remedy
3 possible types of breach?
Failure to perform the contract
Delayed performance
Defective performance
What is failure to perform the contract?
Refuses or fails to carry out
Repudiation of the contract
A material breach that entitles the innocent party to withdraw
What is delayed performance?
Not performed on the due date
Was delay material/breach of a condition?- rescind
Not material/breach of warranty?- claim damages
What is defective performance?
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
What is anticipatory breach?
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
What may the innocent party do in a case of anticipatory breach?
Do nothing- court order requiring, rescind, withdraw and damages
Take immediate action- immediately sue
Perform- sue for payment
Hochster v De La Tour 1853
Contract to accompany on tour, then told no longer needed
Entitled to sue as soon as anticipatory breach took place
White and Carter Ltd v McGregor 1962
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
What is repudiation?
Failure to perform contract
What are damages?
Sum of money to compensate the innocent party for losses resulting in breach of contract
What is the purpose of damages?
Compensation rather than punishment
What is the aim of damages?
To put the innocent party in the position he would have been in had the contract been performed
Anglia TV v Reed 1971
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
What are the principles which limit liability?
Causation
Mitigation
Remoteness of Loss
What is Causation?
Requires that the loss suffered by the innocent party must be shown to have been caused by the breach
Sykes v Midland Bank Executor and Trustee Co Ltd 1971
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
What is mitigation?
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
Payzu Ltd v Saunders 1919
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
What is remoteness of loss?
Does not hold us responsible for all the consequences of our actions
Loss may not be recoverable where it is too remote
Remoteness of loss, damages may only be awarded for a loss suffered where?
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
Hadley v Baxendale 1854
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
How is everyone treated with regards to remoteness of loss?
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
Victoria Laundry (Windsor) v Newman Industries 1949
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
Balfour Beatty Construction v Scottish Power 1994
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
What are the 5 other remedies of breach of contract?
Rescission Specific implement/specific performance Interdict/injunction Retention Lien
What is rescission?
Innocent party declare an end to the contract and withdraws
Claim damages in respect to breach
What is specific implementation/performance?
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
What is an interdict/injunction?
Requires contract breaker not to do something
What is Retention?
Party not in breach withholds performance of his own obligations
What is Lien?
Party not in breach retaining or refusing to deliver the other party’s goods in his possession until he performs his obligations
