Remedies for breach of contract Flashcards
Main common law remedies for breach
discharge or damages
What is discharge?
-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
What are primary contractual obligations?
-obligations that relate to what the parties are supposed to do if the contract is performed according to its terms
what are secondary contractual obligations
- 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
Is discharge automatic?
- no!
- contract is only discharged when innocent party elects for remedy of discharge
What options are available to the innocent party after the breach?
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
What happens after innocent party affirms the contract?
-they wave the right to treat contract as discharged and contract remains in force
is there a time limit on accepting the breach?
-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
Two situations where right of election would be restricted according to Lord Reed in White & Carter v McGregor (1962)
(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
White &Carter v McGregor (1962)
- 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
What does legitimate interest mean according to J Cooke in the Aquafaith (2012)
” 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””
if the innocent party accepts the breach, are the entitled to damages?
-Yes, because they loose out on the performance of contract because of the breach
What is a repudiatory breach?
-where the breach produces the result of a radical difference from what the contract had in mind to what actually happens
Three forms of repudiatory breach
(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)
Actual breach
-where time for performance arrives but performance doesn’t happen or doesn’t correspond with contract (sufficiently fundamental performance)
Key characteristics for actual breach
- non-performance goes to the root of contract
- under contract IP should have certain benefit which breach deprives them of
Maple flock v Universal furniture
- 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
Questions to consider when looking at repudiatory breach question
- 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?
is late performance a repudiatory breach?
- 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
What if the contract doesn’t tell you you whether time is of the essence?
apply normal principle:
consider the significance of punctual performance in relation to the obligation in the context of the entire contract
contracts where it is generally assumed time is of the essence
- commerical contracts
- contracts dealing with time sensitive/perishable goods
Does it matter how late performance is if time is of the essence?
-doesn’t matter how late if its not performed on time it is a repudiation
Can there be a repduiatory breach for late performance where time isn’t of the essence
- 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
What is anticipatory repudiation?
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
