remedies 1 - discharge and breach

Question 1

4 ways a contract can be discharged

Answer 1

1. performance
2. agreement
3. frustration
4. breach

Question 2

discharge by frustration

Answer 2

• contract is unable to be fulfilled after its valid creation, but neither party is at fault
• if there is a change in circumstances that makes the contract impossible to perform/deprives it of its commercial purpose = contract is frustrated
• all contractual obligations cease, neither party may sue for breach of contract or specific performance
  NB: frustration does not occur if the contract has become harder or more expensive to complete, if one of the parties is at fault or if the frustrating event could have been foreseen

Question 3

Impossibility: Taylor v Caldwell 1863

Answer 3

• destruction of the subject of the contract
• concert venue caught on fire days before event was to occur, contract is not able to be fulfilled

Question 4

Impossibility: Condor v baron Knights 1966

Answer 4

• incapacity of the parties
• band (baron knights) hire young drummer (16) to fulfill sold out gigs, condor diagnosed with BPD and hit depressive stage in illness = unable to play, band sued him
• courts ruled him incapable of fulfilling the contract = nobody’s fault, contract frustrated

Question 5

impossibility: Fibrosa Spolka v Fairbairn 1943

Answer 5

• subsequent illegality of the contract
• wartime case: in 1939, british company and polish company, machine parts –> WW2 starts, germany invades poland and takes over the factory; bc the UK is at war with germany; under the trading with the enemy act, it is illegal to trade with this company, no fault with either party, completely unforeseeable circumstance, contract deemed impossible to perform

Question 6

impossibility: Nicholl and Knight v Ashton, Elridge and CO 1901

Answer 6

• contract cannot be performed in the specified manner
• performance may be incredibly regulated, charter party = use of a ship for a certain time, charter party specified contract was for a certain ship with particular specificaions, but it sank –> all other ships were not to the charter party’s needs, impossible to fulfill contract

Question 7

deprived of commercial purpose

Answer 7

• coronation cases
• Krell v Henry 1903 (pall mall flat rental pointless)
• Herne Bay Steam Boat v Hutton 1903 (steamboat cruise still viable part of commercial package)

Question 8

discharge by breach

Answer 8

• breach always gives innocent party the right to claim damages
• innocent party may also have option of withholding his own performance/bringing contract to end due to breach
  NB: even in cases of serious breaches of contract (repudiatory breach), termination remains an option

Question 9

options in a repudiatory breach scenario

Answer 9

1. accept repudiation
2. affirm contract (may cost more money than its worth)

Question 10

the ‘entire obligation’ rule

Answer 10

• sometimes A not obligated to perform their obligation(s) until B has performed all their obligation(s)
• failure to perform an entire oblgation completely will be a repudiatory breach
• this is rarely litigated in practice - certainly in modern case law due to commercial payment arrangements

Question 11

Cutter v Powell 1795

Answer 11

• C engaged as second mate on ship sailing from Jamaica to Liverpool
• P promised to pay him 30 guineas 10 days after arriving in liverpool if he performed his duties for the whole voyage
• C died two weeks before arriving in Liverpool
• this was an entire obligation, so his estate was not entitled to anything from P

Question 12

Sumpter v Hedges 1898

Answer 12

• S contracted to build 2 houses on H’s land
• contract specified lump sum payment in £565
• S abandoned project after completing just over half of the project
• H completed building work using S’s materials
• S claimed payment for work and materials
• Awarded value of materials, but no payment for work
• not possible to infer a contract in S&H because the builder abandoned the contract, didn’t give the other party option to take the benefit of the work

Question 13

advantages of the entire obligation rule

Answer 13

• commercial contracts typically provide for instal payments - limited relevant of entire obligation rule BUT
• benefits consumers - withholding payment from a ‘cowboy’ contract is an important means of ensuring proper performance

Question 14

substantial performance

Answer 14

• exception to the entire obligation rule
• Dakin & Co Ltd v Lee 1916

Question 15

Hoenig v Isaacs 1952

Answer 15

• H agreed to decorate and furnish I’s flat for lump sum of £750
• I made some payments but on completion of work £350 still outstanding
• I refused to pay - claimed H’s workmanship was defective
• work found defective, but cost of cure was only £55
• CA found H substantially performed the contract and could recover contract amount, minus cost of remedying defects

Question 16

repudiatory breach - White and Carter (Councils) Ltd v McGregor 1962

Answer 16

• W&C supplied bins to council and were allowed to accept payments for advertising space
• agreement with M for 3 year contract, signed by local rep of M
• installments payable in 3 annual payments but under terms of contract could sue for full amount if an instalment was left unpaid
• cancelled by head office on the same day - rep had made a mistake
• W&C refused to accept repudiation - proceeded with advertising contract
• HOL: W&C were entitled to do so
  The non breaching party has a choice:
  To accept repudiation, and claim damages, or
  To affirm the contract and continue as before
  But can the innocent party always insist on further performance?
  Was it justifiable to perform and claim price (rather than to accept repudiation and claim damages)?
  Can the party in breach be trapped in the contract?
  2 exceptions:
  In most cases the circumstances are such that an innocent party is unable to complete the contract and earn the contract price without the assent or co-operation of the other party
  It may well be that, if it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself

Question 17

Hounslow London Borough Council v Twickenham Garden Developments Ltd 1971

Answer 17

• TGD were contractors working on a site owned by HLBC
• HLBC unhappy at slow rate of progress, sought to terminate contract
• TGD refused to accept termination and refused to leave the site
• HLBC sought an injunction to force them to leave

Question 18

Isabella Shipowner SA v Shagang Shipping Co Ltd (the Aquafaith) 2012)

Answer 18

• Good example of commercial conditions whereby the innocent party would wish the contract to continue
• Vessel chartered for a minimum period of 59 months
• Charterers were in financial difficulties
• The market was unfavorable and they sought to redeliver earlier and escape the contract 94 days early

Question 19

The Aquafaith

Answer 19

• Arbitrator allows contract to be repudiated - shipowner appealed to HC
• Previous authorities suggested that cooperation was required between charterer and shipowner bc a charter party is a contract for services, hence rule in W&C couldn’t apply
• Cooke J - in time charters, freight payments are automatically payable without the need for a shipowner to do anything extra: if charterer leaves the ship in the dock for the duration of the contract, they still have to pay
• Legitimate interest in maintaining the contract unless it would be ‘wholly unreasonable’ ‘extremely unreasonable’ or ‘perverse’ to insist
• Contract was allowed to continue and charterers were required to pay for the furation of the charterparty