Terminating a Contract

Question 1

What are the ways a contract ends?

Answer 1

Frustration. Performance. Breach of Contract.

Question 2

What constitutes performance?

Answer 2

Both parties have done what the contract asked of them. It must be exact and precise. It must be in line with what was asked of you. If the terms are there you have to act to them - wife couldn’t sue for wages of husband who didn’t finish journey bc dead.

Question 3

When would partial performance be ok?

Answer 3

When it has been agreed that it is sufficient by the other party.

Question 4

What is substantial performance?

Answer 4

Enough to constitute a sufficient discharge. Substantial performance with only a few minor defects. You are then normally entitled to the consideration minus the costs of changing those defects.

Question 5

What is a severable contract?

Answer 5

A contract under which the work will be done in stages e.g building. This means that at any given point the work may be partially done but the rest of the contract is then severed.

Question 6

What is quantum meruit?

Answer 6

The actions of one party hinder the ability of the other party to complete their contract. It then becomes the case that merely offering to complete the contract is enough to discharge the contractual obligations. You can then demand to be paid for as much as you did do because not completing it was out of your control.

Question 7

What is frustration?

Answer 7

There are factors outside of the control of any of the parties that make it IMPOSSIBLE to continue with the contract. It is forces greater than those under the control of the parties.

Question 8

What happens upon frustration?

Answer 8

The parties are refunded. Any debts are wiped clean. Expenses can be offset against refunds. Any non-monetary rewards obtained by the parties can be monetised and their value paid by that party to the other.

Question 9

What is the act that governs frustrated contracts?

Answer 9

The Law Reform (Frustrated Contracts) Act 1943.

Question 10

What are the two types of breach?

Answer 10

Actual and Anticipatory.

Question 11

What is an actual breach?

Answer 11

Happens at the time the contract was due to be performed. Happens when there is either no attempt at performance or the attempt is so poor that there is definitely not enough to satisfy the terms.

Question 12

What is an anticipatory breach?

Answer 12

Happens before the expected due date of the contract. One of the parties shows by their actions that they will not be performing the contract. Can be them saying such a thing expressly or it could be implied such as them doing something which makes it clear they will not be performing their part e.g moving country when to complete the contract they have to be there.

Question 13

What are the options to deal with anticipatory breach?

Answer 13

The contract can be treated as discharged and there is the option to sue for damages. You carry on with an acknowledgement of the anticipatory breach but you just wait for the actual breach and the point where the contract is not completed by the other party. This then allows them to claim the full damages at the point of breach.

Question 14

What does repudiatory breach mean?

Answer 14

The breach is very serious and goes to the root of the contract. Means that the other party is deprived the main purpose of the contract. Means that the contract has either ended or it can be affirmed by the other party.

Question 15

What happens when there is a less serious breach?

Answer 15

You cannot treat the contract as ended. It is less serious, the main purpose has been met but one of the outer terms has not ben met - e.g the car that is being sold has been sold, but it wasn’t cleaned before being delivered.

Question 16

What are the lawful excuses that negate a breach?

Answer 16

One party has offered and the other has refused. One party has made it impossible for the other party to do their duty. The parties have agreed that certain elements need not be completed.

Question 17

What is a liquidated damage?

Answer 17

The contract has already laid out the scope of damages that could have to be paid in the event of a breach. There is already a figure associated with it. These are enforceable by the court.

Question 18

What are unliquidated damages?

Answer 18

There was no provision made in the contract so the courts decide based on a set of principles how much to award in damages. There is no pre-arranged figure.

Question 19

What is remoteness?

Answer 19

One of the principles used by the court to decide if the awarding of damages would be too far removed. Is it justifiable to blame the losses on the other party or would that be too remote?

Question 20

What are the two types of losses that can be recovered?

Answer 20

Losses that are a natural consequence and losses that could have been known as an issue that would arise at the time the contract was formed - not ‘reasonably foreseeable’ but not beyond the realm of possibility. Depends on what is known by the parties at the time of contracting.

Question 21

What is normal practice for loss of enjoyment?

Answer 21

Where the original purpose of the contract was pleasure or peace of mind - then it will be awarded. Where I was not then the court are unlikely to award damages as the loss of any enjoyment is the same as a loss of what the parties initially contracted for.

Question 22

What is the expectation interest?

Answer 22

It links to what the parties expected to get out of the contract. The aim of the courts when awarding damages is to put the party in to the position they would have been had the contract been performed and the expectations met. It is normally the value of damages that are used.

Question 23

What happens with damages for loss of bargain?

Answer 23

The difference between what was originally agreed as part of the contract versus how much you then had to pay to get that same thing elsewhere. E.G you buy groceries but they refuse to deliver, so you then go get them elsewhere for £60, you could have just got them for £50 so then your damages are £10.

Question 24

What happens where there is no actual loss?

Answer 24

Nominal damages only.

Question 25

What are reliance losses?

Answer 25

They allow for the recovery of any expenses that were incurred in helping to perform that part of the contract before the breach occurred.

Question 26

What is meant by the mitigation of losses?

Answer 26

The court assumes that everything was done by C to mitigate the loss they suffered. It is expected that they have done everything and if they haven’t it can lead to a refusal of losses.

Question 27

What is a penalty clause?

Answer 27

These are not the same as liquidated damages. Where they exist the court will dish out unliquidated damages. They can be defined as clause that sets out an arbitrary sum with no relation to the actual breach. Also easy to spot as it is likely one amount for a number of different breaches. Seen in some cases to be like punishment so has to be proof that they are there to deter not punish for the courts to enforce.

Question 28

What is the situation with penalty clauses and secondary obligations?

Answer 28

The courts have developed a new test that states they are willing to apply penalty clauses with excessive amounts if the actual losses suffered by C are in proportion to the primary obligation.

Question 29

What are equitable remedies?

Answer 29

Used when damages are inadequate, the claimant has acted unfairly, the claimant has delayed bringing the action to court. They exist when there are no damages that would do the job.

Question 30

What is an order for specific performance?

Answer 30

The defendant must perform his or her part of the contract as instructed by the court. Very rarely used except in cases of sales of land, as land is so unique and if you don’t get the one you contracted for it is not easy to just go out and get another one the exact same.

Question 31

When will specific performance not be used?

Answer 31

When it is for personal services. It is likely that the lack of completing the contract has created beef and so it would be unfair to force an individual to carry on the contract in those circumstances. Also it would likely need to be monitored by the court so they are hesitant to award them.

Question 32

What is an injunction?

Answer 32

An order for a person to do/not do something.

Question 33

What is a mandatory injunction?

Answer 33

Order by the courts for a party to take steps to undo something they have done that constituted a breach of contract. e.g making them knock down a building that was built in breach of planning permission rules and guidance.

Question 34

What is a prohibitory injunction?

Answer 34

Order by the courts to observe a negative promise e.g stop working for someone else as per a non-compete clause in a contract. Will not be granted if the impact would cause undue hardship e.g deprive of the option to work at all.

Question 35

What is an asset freezing injunction?

Answer 35

Prevents the defendant from dealing with assets. To help keep assets that could later form damage payments from being used in the interim.

Question 36

What is an exclusion clause?

Answer 36

A clause which seeks to exclude liability.

Question 37

Why do the tests for exclusion clauses exist?

Answer 37

Exclusion clauses are not liked by the court - shouldn’t be able to void yourself of liability.

Question 38

What are the common law tests?

Answer 38

They are incorporation and Interpretation.

Question 39

What is the incorporation test?

Answer 39

Has it been properly incorporated in to the contract to cover that specific type of loss. Has C signed a document that says they agree to that exclusion. Has D taken reasonable steps to bring the clause to C’s attention? Must have happened at the time of the agreement or before. Basically has enough of an effort been made to ensure all parties know and agree to this clause.

Question 40

What is the interpretation test?

Answer 40

Can that clause be interpreted to include that specific kind of exclusion clause - the court will likely give the narrowest possible meaning. Anything that cannot be interpreted that way will be interpreted against the person seeking to rely on it.

Question 41

UCTA 1977 says? Statutory rule.

Answer 41

You can’t apply exclusion clauses for death or personal injury due to negligence. In the case of any exclusion clauses for negligence it must be the case that they are reasonable - did c know at time of contracting, could d insure, was the party bargaining power equal?

Question 42

CRA 2015 says? Statutory rule.

Answer 42

Exclusion clauses between business and consumer must be fair. So the consumer hasn’t been disadvantaged, the clause is plain and simple, the average well informed consumer would know about it. When they are unfair the consumer can still rely on them but the business can’t.