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Termination Flashcards

• Advising on when a party may be entitled to terminate the future performance of a contract breach • Advising on when a contract will be terminated by frustration and the effects of frustration. • Identifying the right and remedies of parties where performance of the contract is not complete and precise

1
Q

What are the four ways a contract may be terminated in contract law?

A

(1) Performance
(2) Agreement
(3) Breach
(4) Frustration.

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2
Q

What does “discharge by performance” mean in contract law?

A

It means the contract ends when all contractual obligations have been fully and properly performed by both parties.

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3
Q

What is the “entire obligations rule” in contract law?

A

A party must fully perform their contractual obligations before becoming entitled to payment. Partial performance does not usually entitle them to partial payment.

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4
Q

In a contract where B agrees to perform tasks in return for payment from A, when is A obligated to pay B under the entire obligations rule?

A

Only when B has fully completed the contractual obligations.

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5
Q

If a party dies before completing their contractual obligations, can their estate claim a portion of the agreed payment?

A

No, not under the entire obligations rule. If the contract is entire, incomplete performance—even due to death—does not entitle the estate to any payment.

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6
Q

What legal principle explains why no payment is owed when a party fails to complete an entire contract due to death or early termination?

A

The entire obligations rule, which requires complete performance before payment is due.

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7
Q

If a contractor completes two-thirds of the work and then unexpectedly dies, can their spouse claim partial payment?

A

No, the claim will fail because the contractor did not fully perform the contract; partial performance does not trigger payment under the entire obligations rule.

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8
Q

In a contract for a one-off service where time and completion are critical, what happens if the job is mostly—but not fully—completed?

A

The performing party is not entitled to any payment unless the entire obligation is completed, as time and full completion are essential.

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9
Q

What does the entire obligations rule state about when a contract is discharged by performance?

A

A contract is only discharged when the contractual obligations have been fully performed by both parties.

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10
Q

What is the exception to the entire obligations rule where a party only partially performs the contract?

A

If the innocent party voluntarily accepts the partial performance, the performing party may claim a reasonable sum (quantum meruit).

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11
Q

Under what condition can partial performance be accepted to entitle the performing party to payment?

A

Only when the innocent party had a genuine choice to accept or reject the partial performance.

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12
Q

What is the exception to the entire obligations rule where most of the contract is completed with minor defects?

A

This is called substantial performance, and it allows the performing party to claim the contract price minus the cost of remedying the defect.

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13
Q

How do courts decide whether substantial performance has occurred?

A

By asking whether the defect goes to the root of the contract or whether the defect is so serious that it defeats the whole purpose of the contract; if it does, performance is not substantial.

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14
Q

When is performance not considered substantial under contract law?

A

When the defect goes to the root of the contract or is so serious that it defeats the main purpose of the contract.

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15
Q

If a party completes work but it fails to function for its intended purpose, can they recover payment?

A

No. If the failure goes to the root of the contract, the performing party is not entitled to any payment under substantial performance.

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16
Q

What happens if a party provides partial performance but the innocent party did not accept it voluntarily?

A

The performing party cannot claim payment, even on a quantum meruit basis.

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17
Q

What is meant by “divisible obligations” in the context of contract performance?

A

Where the contract specifies separate payments for distinct parts or stages of performance, each stage is treated like a separate contract, allowing for partial payment upon completion of each stage.

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18
Q

When does the Entire Obligations Rule not apply due to divisibility of the contract?

A

When the parties have clearly agreed to pay for individual parts or stages separately, allowing payment for completed stages even if the full contract isn’t finished.

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19
Q

What remedy is available if one party completes only certain stages of a divisible contract?

A

The performing party may claim payment for the stages completed, provided these stages were distinct and separately priced in the contract.

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20
Q

What is the rule on wrongful prevention of performance in contract law?

A

If a party is wrongfully prevented by the other party from completing the contract, they may claim damages for breach or seek payment on a quantum meruit basis.

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21
Q

What are the remedies available when a party has been wrongfully prevented from completing their contractual obligations?

A

The wronged party can either sue for damages for breach of contract or claim a quantum meruit (reasonable payment) for the work already completed.

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22
Q

Under what statutory provision is the standard of reasonable care and skill implied in service contracts?

A

Section 13 of the Supply of Goods and Services Act 1982, which implies that services in business-to-business contracts must be performed with reasonable care and skill.

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23
Q

When a party is wrongly accused of breach and ordered to stop work mid-contract, what principle may allow them to recover payment or damages?

A

Wrongful prevention of performance — if found not to have breached the contract, the party may be entitled to quantum meruit or damages for being prematurely stopped.

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24
Q

What is the second method of terminating a contract in English contract law?

A

Discharge by agreement, where parties voluntarily end their contractual obligations either through a new binding agreement or by a contractual term.

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25
What are the two ways a contract can be discharged by agreement?
(1) Through a subsequent binding agreement (mutual waiver) (2) by the operation of a term in the original contract.
26
What is a mutual waiver and when is it used to discharge a contract?
A mutual waiver is a new agreement in which both parties release each other from their remaining obligations under the original contract.
27
What two legal elements are required for a mutual waiver to effectively discharge a contract?
Accord (agreement to release) and Satisfaction (consideration for that release).
28
What happens if only one party has fully performed their obligations under a contract—can mutual waiver still apply?
No, there is no consideration from the fully performing party. However, discharge can still occur through a deed or if they accept something different in return (e.g., earlier payment).
29
Can a mutual waiver be valid without consideration?
Only if the new agreement is made by deed, since a deed does not require consideration to be legally binding.
30
Why must consideration be provided by both parties in a mutual waiver?
Because it creates a binding contractual release—each party must give something in return for being released from their original obligations.
31
How can a party who has completed performance still give consideration to support a mutual waiver?
By accepting a variation to the original obligation—e.g., agreeing to accelerated payments instead of the full payment schedule.
32
What are the two ways a contract can be discharged by agreement?
(1) By a subsequent binding agreement between the parties (mutual waiver). (2) By operation of a term in the original contract (conditions precedent or subsequent).
33
What is a condition precedent in contract law?
A contractual condition that must be satisfied before any rights or obligations under the contract arise.
34
What happens if a condition precedent is never fulfilled?
The contractual rights and obligations never come into existence, and the contract remains suspended.
35
When does a contract become active under a condition precedent?
Only after the condition is fulfilled—before then, no party can enforce or be bound by its terms.
36
What is a condition subsequent in contract law?
A contractual term that provides for the termination of a contract upon the occurrence of a specified event.
37
How does a condition subsequent operate to discharge a contract?
The contract is in force until the condition occurs (e.g., giving notice), after which the contract is terminated and both parties are released from further obligations.
38
What is a common example of a condition subsequent in practice?
A notice clause allowing either party to terminate the contract by giving written notice within a specified period.
39
How do courts determine whether a clause is a condition precedent or condition subsequent?
By assessing whether the clause suspends the contract until an event occurs (condition precedent) or terminates it after an event (condition subsequent).
40
When does a breach of contract give rise to the right to terminate the contract?
Only in the case of a repudiatory breach—that is, a serious breach of a condition or a serious innominate term.
41
What is a repudiatory breach in contract law?
A breach of a condition or a serious innominate term that entitles the innocent party to terminate the contract and sue for damages
42
What must the innocent party do in response to a repudiatory breach to terminate the contract?
The innocent party must choose to terminate the contract; it is not automatic.
43
What is an anticipatory breach of contract?
When one party indicates before the performance date that they will not perform their contractual obligations, either through words or conduct.
44
What rights does the innocent party have in response to an anticipatory breach?
They can either terminate the contract immediately and sue for damages, or affirm the contract and wait for performance.
45
What is required to establish an anticipatory breach?
Clear words or conduct that would lead a reasonable person to conclude the other party does not intend to perform.
46
If an innocent party chooses to affirm a contract after an anticipatory breach, what must they be prepared to do?
They must be ready and willing to perform their own contractual obligations when the time for performance arrives.
47
What is the legal effect of terminating a contract due to repudiatory breach?
Termination ends all future (unperformed) obligations, but rights and obligations accrued before termination remain enforceable.
48
What can the innocent party claim upon termination for repudiatory breach?
They may claim damages for both the breach itself and for loss of the contract as a whole.
49
Why is terminating a commercial contract for repudiatory breach considered risky?
If the breach is later found to be non-repudiatory (e.g., a warranty breach), the terminating party may be liable for wrongful termination.
50
What is the legal consequence of a wrongful termination of contract?
: It may be treated as either a renunciation of future performance or a repudiatory breach by the terminating party, giving the other party the right to terminate and claim damages.
51
What is the “right of election” in the context of repudiatory breach?
It is the aggrieved party’s choice between (1) terminating the contract or (2) affirming it and continuing with performance.
52
What must the innocent party do to exercise the right of election?
They must be aware of the breach and the right to elect, and must clearly communicate their decision to the other party.
53
What are the requirements for affirming a contract after a repudiatory breach?
The aggrieved party must give a clear, unequivocal commitment to continuing with the contract.
54
What is the aggrieved party entitled to if they elect to affirm or terminate the contract?
In both cases, they are entitled to damages and must mitigate their loss (except in relation to debt claims or during the decision period to affirm).
55
What is the difference in available remedies between breach of warranty and repudiatory breach?
A breach of warranty gives rise to damages only, whereas a repudiatory breach gives rise to damages plus the right to affirm or terminate.
56
What key event triggers frustration in a contract?
A supervening event that makes performance impossible or radically different, beyond the control and assumption of risk by either party.
57
What three requirements must be satisfied for a contract to be discharged by frustration?
(1) Performance is impossible or radically different. (2) the event is beyond the assumed risks. (3) it is beyond the control of either party.
58
Why is frustration typically raised in legal proceedings?
As a defence to an allegation of breach, since frustration relieves both parties of future contractual obligations.
59
What is one way in which performance can be radically different, leading to frustration?
Impossibility, where the subject matter of the contract is partially or totally destroyed, making performance unachievable.
60
Can frustration still apply if the destroyed asset is not the subject matter of the contract?
Yes, if the destroyed asset is essential to performance, frustration may still discharge the contract.
61
What distinguishes a frustrating event from a breach of contract?
A frustrating event is unforeseen, not due to either party’s fault, and outside their control—unlike breach, which involves fault.
62
What is the legal effect of a contract being discharged by frustration?
The contract is automatically terminated, and neither party is liable for failure to perform obligations after the frustrating event
63
What is the second way in which contractual performance may be rendered impossible under the doctrine of frustration?
Through the unavailability of the subject matter required for performance
64
How can the unavailability of a specified individual lead to frustration of a contract?
If the contract depends on the personal performance of a specified individual who becomes ill or dies, making performance impossible.
65
In contracts for personal services, what type of event may frustrate the contract due to unavailability?
Illness or death of the specified performer, where the performance as intended can no longer occur.
66
Can a contract be frustrated if the subject matter is temporarily unavailable?
Yes—even temporary unavailability may frustrate the contract if it undermines the intended performance period.
67
What is a common commercial context where subject matter unavailability may lead to frustration?
In shipping contracts, where requisition or seizure of a vessel may prevent contractual obligations from being fulfilled.
68
What is the legal effect of frustration due to unavailability of the subject matter?
The contract is automatically discharged, and both parties are released from further obligations under it.
69
In what situation is a contract frustrated due to illegality or government action?
When performance becomes illegal due to a change in the law or government intervention.
70
How can a change in the law frustrate a contract?
If a new law makes performance of the contract illegal, the contract is frustrated and discharged.
71
In the context of frustration, what does government intervention refer to?
When the government takes action that prevents performance of a contract, making it legally or practically impossible to fulfill.
72
Why might a contractual delay clause not prevent frustration in the case of government intervention?
Because such clauses often cover temporary delays, not fundamental changes that make performance impossible or unlawful.
73
Can frustration still apply if the parties included general terms addressing delay?
Yes—if the delay results from government action that fundamentally changes the nature of the contract, frustration can still apply.
74
What is the legal effect when a contract is frustrated due to illegality or government action?
The contract is automatically discharged, and both parties are released from future obligations.
75
What must be shown for government intervention to amount to frustration?
That the intervention directly prevents performance, goes beyond normal risks, and is outside the parties’ control.
76
What is the fourth way in which performance of a contract can be rendered radically different under the doctrine of frustration?
Where the common purpose of the contract, shared by both parties, is frustrated by an intervening event.
77
What must be true for a contract to be frustrated by common purpose?
The shared purpose must have been central to both parties and must become impossible to achieve due to a supervening event.
78
Does the shared purpose of the contract need to be explicitly stated in the agreement for frustration by common purpose to apply?
No, but it must be objectively clear from the context that both parties understood and relied on that common purpose.
79
When will frustration by common purpose not apply?
When the contract can still be partially performed, or if the purpose was only important to one party, not shared by both.
80
What principle was established in frustration cases involving cancelled public events?
That frustration applies only if the event was foundational to both parties’ intentions, and its non-occurrence renders performance meaningless.
81
Can a contract be frustrated if only one party’s purpose is affected by an event?
No—frustration by common purpose requires that both parties’ purposes are defeated by the supervening event.
82
What is the legal effect of frustration due to a frustrated common purpose?
The contract is automatically discharged, and both parties are released from further obligations.
83
What distinguishes frustration by common purpose from frustration by impossibility?
Frustration by common purpose relates to the objective of the contract, while frustration by impossibility refers to the ability to perform.

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