Termination by Agreement and Breach

Question 1

When can a contract be overall terminated?

Answer 1

• Agreement
• Subsequent Contract
• Breach of Condition
• Breach of Intermediate Term (extent)

Question 2

What does it mean to terminate something under an express and fixed term?

Answer 2

• Express = ‘if xxx occurs, then party is entitled to terminate contract’
• Fixed = deadline

Question 3

What are some features a ‘subsequent contract’ must have?

Answer 3

• Follow ordinary principles of contract formation
• MUST include ‘good consideration’ –> if contract is ‘executory,’ each party must provide consideration in agreeing to release other party’s obligations
• If contract has been fully executed by one party –> must have deed or ensure fresh consideration provided by the other party

Question 4

Which breaches result in the right to terminate a contract?

Answer 4

• Breach of condition
• Breach of Intermediate Term (significant one)
• Repudiation

Question 5

Which breaches result in the right to damages?

Answer 5

Condition
Intermediate Term
Repudiation
Warranties

Question 6

How do we determine if something is a ‘condition?’

Answer 6

1. Intention of the parties –> Use essentiality test from Luna Park v Tramways
   –>
   a) Consider nature of contract
   b) A particular term so significant that the other party would NOT have entered the contract unless reassurance was present
2. Express classification
3. Statutory Classification

Question 7

What is the classification of a term for it to be a warranty?

Answer 7

• Breaching the term does NOT significantly undermine the contract’s value to the other party, except where the contract or legislation specifies otherwise

Question 8

What are the choices when there is an election for termination?

Answer 8

1. Right to terminate and sue for damages
2. Affirm the contract and lose right to terminate (can’t get damages for loss of bargain but can get damages for particular breach)

Question 9

What if the contract is terminated mid contract?

Answer 9

Rights and obligations that accrued BEFORE termination are binding and enforceable
Future rights cease

Question 10

What is the significance of the right to terminate?

Answer 10

• Aggrieved party can get out of contract and avoid future obligations

Question 11

Decision tree to finding out if there is a right to terminate?

Answer 11

1. Identify the breach
2. Identify whether it is a: condition, intermediate term or warranty
3. Identify consequences of condition, intermediate term or warranty