Remedies for breach of contract

Question 1

Main common law remedies for breach

Answer 1

discharge or damages

Question 2

What is discharge?

Answer 2

-the innocent party is allowed to bring the contract to an end, allowed to treat the primary contractual obligatiions as discharged after a repudiatory breach of contract

Question 3

What are primary contractual obligations?

Answer 3

-obligations that relate to what the parties are supposed to do if the contract is performed according to its terms

Question 4

what are secondary contractual obligations

Answer 4

• obligations that kick in when the contract isn’t performed as its supposed to be/ when a primary obligation is broken
• e.g damages clause, exemption clause

Question 5

Is discharge automatic?

Answer 5

• no!

- contract is only discharged when innocent party elects for remedy of discharge

Question 6

What options are available to the innocent party after the breach?

Answer 6

they can choose to carry on (affirm) or they can treat contract as discharged (accept the breach)
-must be communicated t =o the party in breach

Question 7

What happens after innocent party affirms the contract?

Answer 7

-they wave the right to treat contract as discharged and contract remains in force

Question 8

is there a time limit on accepting the breach?

Answer 8

-no, but if the innocent part does nothing for long enough a factual inference is likely to be drawn that they have chosen to carry on with the contract

Question 9

Two situations where right of election would be restricted according to Lord Reed in White & Carter v McGregor (1962)

Answer 9

(1) continued performance of contract depends on co-operation of guilty party, if GP insists on non-performance IP is compelled to allow the contract to end
(2) no legitimate interest in maintaining the contract

Question 10

White &Carter v McGregor (1962)

Answer 10

• M owned garage business and concluded contract with advertising company for nine months
• M repudiated the contract
• M obliged to pay agreed sum for produced posters even though he made it clear before they commenced performance that he didn’t want to carry on
• W insisted repudiatory breach needs the innocent party to elect an option for anything to change
• M wanted W to accept the breach and sue for damages for a sum equivalent to the loss sustained from the breach (less than agreed sum)
• but W performed so M had to pay
• HoL ruled in favour of W, held that nothing happens unless innocent party exercises their right of election

Question 11

What does legitimate interest mean according to J Cooke in the Aquafaith (2012)

Answer 11

” an innocent party will have no legitimate interest in maintaining the contract if damages are an adequate remedy and his insistence on maintaining the contract can be described as “wholly unreasonable”, “extremely unreasonable””

Question 12

if the innocent party accepts the breach, are the entitled to damages?

Answer 12

-Yes, because they loose out on the performance of contract because of the breach

Question 13

What is a repudiatory breach?

Answer 13

-where the breach produces the result of a radical difference from what the contract had in mind to what actually happens

Question 14

Three forms of repudiatory breach

Answer 14

(1) failure to do what the contract requires that goes to the foundation of the contract
(2) renunciation–> contracting party ahead of date for performance says their not going to perform
(3) where one party, by its conduct/omission puts itself in the position where when time for performance arrives its not able to perform (self-disablement)

Question 15

Actual breach

Answer 15

-where time for performance arrives but performance doesn’t happen or doesn’t correspond with contract (sufficiently fundamental performance)

Question 16

Key characteristics for actual breach

Answer 16

• non-performance goes to the root of contract

- under contract IP should have certain benefit which breach deprives them of

Question 17

Maple flock v Universal furniture

Answer 17

• contract for sale of goods delivered in installments
• 16th installment was defective
• B had right to reject that installment and B also wanted to treat the entire contract as repudiate
• it wasn’t a repudiatory breach
• no more than 1-60 of total contract performance
• nothing indicated that future installments would also be defective and past installments were fine

Question 18

Questions to consider when looking at repudiatory breach question

Answer 18

• what financial loss has it caused?
• how much of the intended benefit under contract has IP already recieved?
• can IP be adequately compensated by damages?
• is the breach likely to be repeated?
• will GP resume compliance with his contractual obligations?
• has the breach fundamentally changed the value of future performance of GP’s obligations?

Question 19

is late performance a repudiatory breach?

Answer 19

• to determine whether late performance is repudiatory you must determine how crucial to the contract it is that performance is punctual
• the contract may answer by saying the time is of the essence which means late performance is repudiatory

Question 20

What if the contract doesn’t tell you you whether time is of the essence?

Answer 20

apply normal principle:

consider the significance of punctual performance in relation to the obligation in the context of the entire contract

Question 21

contracts where it is generally assumed time is of the essence

Answer 21

• commerical contracts

- contracts dealing with time sensitive/perishable goods

Question 22

Does it matter how late performance is if time is of the essence?

Answer 22

-doesn’t matter how late if its not performed on time it is a repudiation

Question 23

Can there be a repduiatory breach for late performance where time isn’t of the essence

Answer 23

• yes
• where failure to perform extends over such a long period of time that when performance commences it is fundamentally different than what the contract contemplated

Question 24

What is anticipatory repudiation?

Answer 24

where time for performance hasn’t arrived yet but party who is due to perform makes it clear that there won’t be performance when the time comes
-guilty party creates an inevitability of non-performance

Question 25

What happens after an anticipatory breach has been established?

Answer 25

-innocent party immediately has the right of election to discharge the contract

Question 26

two forms of anticipatory breach

Answer 26

renunciation or self generated disablement from performance

-only applies to repudiatory breach

Question 27

what is self generated disablement?

Answer 27

GP has put themselves in situation were it is impossible to meet the relevant obligations
-test is of factual impossibility

Question 28

What is renunciation?

Answer 28

-looking at what the other party has said/done and looking to see if a reasonable person would conclude the other party doesn’t intend to perform

Question 29

Can you prevent right of election from arising if there’s an actual repudiatory breach?

Answer 29

• there’s nothing you can do after the contract has been repudiated
• right of election given to the innocent party

Question 30

Union Eagle v Golden Achievement (1997)

Answer 30

• contract to purhcase flat in Hong kong, stated time was of the essence
• purchaser required to pay 10% deposit
• purchaser tried to meet deadline but arrived 10 mins late
• vendor refused to accept according to contract terms
• there was a repudiatoru breach so he could treat contract as discharged and pocket deposit
• privvy council upheld his position
• time was fundamental to the contract and as it wasn’t performed on time the innocent party has right of election

Question 31

Can you prevent right of election arising if there’s an anticipatory repudiatory breach?

Answer 31

• if the form of breach is self-disablement its impossible to cure the breach
• if its renunciation, its possible for the GP to change their mind, if the withdrawal of renunciatio happens before right of election it can be cured but if not then the contract is repudiated

Question 32

What if a breach you think is repudiatory is infact not?

Answer 32

• IP turns to GP
• if the IP has accepted the ‘repudiation’ that in itself is an actual repudiation of rhe contract
• the previous GP now has a right to elect in response to IP’s repudiation

Question 33

Common law test for repudiatory breach

Answer 33

-breach must go to the root of the contract

Question 34

Classification of contract terms

Answer 34

• way its been attempted to inject certainty when ascertaining repudiatory breach
• two categories are conditions and warranties

Question 35

What are conditions?

Answer 35

important terms of the contract

-if condition is broken it gives rise to right of election and possibility to treat contract as discharged

Question 36

Warrantees

Answer 36

-not that important, does not cause repudiatory breach

Question 37

How do you know if its a condition or a warrantee?

Answer 37

• reference when contract was concluded and look at the forseeable/predictable breaches of this term and onsider whether they would be serious enough for repudiation?
• if yes, condition
• if no, warantee

Question 38

Third extra classification of contract term

Answer 38

• innominate term (between condition/warantee)

- if breach of term is sufficiently serious it can be repudiated

Question 39

s12-15 SAG

Answer 39

• relate to right to sell according to description and satisfactory quality
• each section is implied into SAG contract as a condition

Question 40

s11(2) SAG

Answer 40

-if you have a breach of condition the buyer can elect to treat contract as repudiatory

Question 41

SAG 15A

Answer 41

unless the contract otherwise indicates there’s no right to treat contract as discharged for the breach of implied terms under s13-15 if the breach is so slight it would be unreasonable for the buyer to reject them
-if the breach is actually of the implied term is actually slight you treat it as a breach of warantee