Termination Flashcards
What is a repudiatory breach of contract?
You can terminate a contract if:
- There is a breach of condition
- Very serious breach of an innominate term
These are called **repudiatory breaches **
You can only terminate the contract if there are future obligations outstanding
If there is the potential to terminate, if C then affirms, this bars termination
- Repudiatory breach gives C the choice to end the contract
Broadly, what does a mean for a contract to be ‘frustrated?’
Where a contract is frustrated, it comes to an end as a matter of law
Three conditions to be satisfied:
- The change of circumstances/event must make performance impossible or radically different
- Without fault on the part of either party
- Unforeseen - Not within the contemplation of the parties
Where parties include a force majeure clause in a contract, this is subject to a reasonableness test and the doctrine of frustration doesn’t apply
When types of events make performance radically different, thus leading a contract to end through the doctrine of frustration?
Categories of frustrating event:
- Government intervention
- Unavailability of a specific person, vital to contract
- Illegality – if it becomes illegal, it is frustrated
- Impossibility
- Non-occurrence of a fundamental event
Can delay be a frustrating event?
Delay will only be frustration in rare circumstances. Consider:
- whether there are contract provisions for the consequences of delay;
- the likely length of delay relative to the duration of the contract;
- any time set in the contract for the obligations to be performed; and
- whether the performance resumed is radically different from the contract
What are the consequences of frustration?
Contract automatically comes to an end
- Both parties released from all future obligations
- Neither party is in breach of contract
- Parting alleging frustration is the one who would otherwise be in breach
With regards to money paid, money due, expenses and benefits
- At common law, all obligations up to point of frustration had to be fulfilled
- The Law Reform (Frustrated Contracts) Act changes the position
How does the Law Reform (Frustrated Contracts) Act deal with money paid and payable prior to the frustrating event?
S1(2) - if expenses incurred by the payee before the frustrating event:
- Money paid before the frustrating event can be recovered
- Money payable before the frustrating event need not be paid
However, court has wide discretion to allow payees to retain/claim sums out of money that had been paid or were payable before frustrating event
- Essentially, payee can keep or recover money towards expenses they incurred in performance of contract prior to frustrating event
- Payee will never get more than the expenses incurred
- Pot available to court is the total amount paid and payable before the frustrating event
How does the Law Reform (Frustrated Contracts) Act alter the position about money paid and payable prior the frustrating event, if a valuable benefit has been conferred?
S1(3) if a valuable benefit has been conferred:
- A just sum will be paid by the recipient of the benefit enjoyed before the frustrating event
- In determining what is a ‘just sum,’ the court will have regard to all circumstances, including expenses incurred by the benefited party and the effect the frustration has had on the benefit
- If the frustrating event wiped out the benefit, the just sum might be nothing
Give an example of the application of the LR (FC) Act
X pays £200 and is due to pay £400 on 2nd March
X doesn’t pay the £400 and boat destroyed on 3rd March
The most Y could be awarded is the £600 total due before frustrating event
But court may decide, in their discretion, that X gets their £200 back
What is the doctrine of complete performance?
The doctrine provides that, unless and until performance is precise and exact, a contractor is not entitled to anything
If performance isn’t precise, they aren’t entitled to price, because they are only entitled to price if performance is perfect
But they may be able to claim damages or a reasonable sum, if an exception applies
What is the ‘divisible contracts’ exception to the doctrine of complete performance?
Contract divided into discrete parts and a certain sum was payable on each part completion – can keep what you were paid for each completed bit
What is the ‘substantial performance’ exception to the doctrine of complete performance?
Contract completed, but there is a slight defect in performance
As long as the cost of rectifying defect is not more than 1/14th of the price, contract is likely to be seen as substantially performed
- Can keep everything minus cost of amending defect
What is the ‘wrongful prevention’ exception to the doctrine of complete performance?
If a contractor is wrongfully prevented from completing performance (where termination occurred for a minor breach instead of a serious breach), they can either claim damages or a reasonable sum
- Terminating because you’ve changed your mind would fall here
- Reasonable sum would be restitution
What is the ‘voluntary acceptance of part performance’ exception to the doctrine of complete performance?
Must have a genuine choice as to whether to accept part performance – abandoning construction of a conservatory halfway through leaves someone with no choice but to accept, so builder would get nothing
Builder leaves equipment in your house after renovation, and you complete a job using these; you are bound to pay a reasonable sum for these materials
