Termination

Question 1

When does the right to terminate arise?

Answer 1

When there is a breach of condition, or where there is a very serious breach of a term classes as innominate

Question 2

How can the innocent party respond to a breach of condition / innominate term?

Answer 2

Affirm the contract, or
Discharge the contract

Question 3

What is frustration?

Answer 3

When a party is excused for non-performance and the contract is automatically brought to an end

Law determines based on doctrine of frustration how any losses should be borne

Question 4

In what circumstances does frustration operate?

Answer 4

1. Supervening event / change must make performance of contract impossible or radically different
2. Event must be beyond ordinary risks that parties can be treated as having taken on board when entering into the contract
3. Event was beyond control of either party

Question 5

What are the consequences of frustration?

Answer 5

Future performance of contract is terminated AUTOMATICALLY as a matter of law

Non-defaulting party does not choice as to whether or not to terminate the contract

Question 6

What are the three key points within s 1(2) Law Reform (Frustrated Contracts) Act regarding consequences of frustrating events for many types of contract?

Answer 6

1. Money paid before the event can be recovered
2. Money that should have been paid before the event need not be paid
3. At the court’s discretion, expenses incurred by the payee can be recovered out of the total sums paid/ payable before the event

Question 7

What is the doctrine of complete performance?

Answer 7

That a contract can only be discharged by performance if performance of contractual obligations is precise and exact

Question 8

When would the doctrine of complete performance apply?

Answer 8

When the promise to pay is on completion e.g. of the construction - therefore only entitled to any payment once contract fully performed

Question 9

What are 4 exceptions to the doctrine of complete performance?

Answer 9

1. Divisible obligations - i.e. specific payments for distinct parts / stages of contract
2. Substantial performance - i.e. cost of rectifying slightly defence performance is not more than 1/14 of contract price
3. Wrongful prevention
4. Voluntary part-performance - i.e. other party accepts partial performance voluntarily