TERMINATION OF CONTRACT

Question 1

Discharge of contract - performance

Answer 1

Complete and exact

Substantial - damages may be payable

Partial - only if contract is severable (employment)

**Party prevents performance - other party can sue for breach of contract and claim damages.

**Quantum Merit claim - ‘as much as he deserves’

Question 2

Discharge - by frustration

Answer 2

Impossible to perform through no fault of either party.

Terms:
- Possible when contract entered into
- ‘Force majeure’ clause allows to terminate contract
- Will not be discharged where alternative performance is more expensive / difficult.

Examples:
- Destruction of subject matter
- Personal incapacity to perform a contract of service
- Government legality
- Non-occurrence of the event (sole purpose of contract)

Question 3

The Law Reform (frustrated contracts)

Answer 3

Acts apply unless contract expressly states otherwise, consequences:
- Money paid before event must be repaid
- Sums due for contract are no longer payable
- If a COURT considers it ‘just’, a person may be able to reclaim expenses paid for frustrated event - need to be incurred within contract period.
- if a valuable benefit has been obtained by one party then COURT may decide that party has to pay the other party what is considers ‘just’.

Question 4

Breach of contract

Answer 4

Party not does perform contractual obligations unless discharged by frustration or some other lawful excuse.

Usually ends up with damages paid, sometimes repudiation.

Question 5

Breach of contract - lawful excuse

Answer 5

1. Performance has been rejected
2. Other part has made it impossible to perform
3. Parties in agreement permitted non-performance

Question 6

Breach of contract - repudiatory breach

Answer 6

‘Fundamentally important term’ or ‘depriving party of majority or whole of the benefit’ e.g. turning up with a bike instead of a car.

Question 7

Breach of contract - anticipatory breach

Answer 7

One part explicitly or implicitly in advance shows they have no intentions of fulfilling their contractual obligations.

Question 8

Breach of contact - remedies (repudiatory)

Answer 8

If innocent party treats contract as discharged, other party must be notified: e.g. refusal for further performance or current obligations

1. Not discharged from contractual obligations due at termination, but is discharged from future obligations.
2. Must not accept / pay for further performance
3. May be able to refuse for partial / shit performance (unless severable contract)
4. Reclaim money for shit performance
5. Claim damages from defaulter

Question 9

Breach of contract - injured party options (anticipatory)

Answer 9

1. Treat contact as discharged and sue immediately
2. Allow contact to continue until there is an actual breach then take action at that time

Question 10

Remedies for breach of contract - damages

Answer 10

Put a party in a position as if contract had been correctly performed.

2 factors:
Remoteness of damage
Measure of damages

Question 11

Remoteness of damage

Answer 11

HADLEY V BAXENDALE

Damages only awarded if can be ‘fairly and reasonably considered’ as either/ or:

1. Arising naturally (normal course of things)
2. Not ‘reasonably foreseeable’ at the time of the contract (e.g. may not be able to claim damages for some of it)

Question 12

Remoteness if damage - HAYLEY VS BAXENDALE

Answer 12

‘Didn’t arrive naturally’

CASE:
- C contracted D for transport of broken shaft to serve as a pattern for new shaft.
- D’s neglect meant delivery was delayed and the mill was out of action for longer than expected
- D was unaware of the mill being out of action during the shaft transportation

Decision: Loss of profits was not a usual consequence of delay in transport (arising naturally), D was unaware of out of action during this period (not reasonably foreseeable)

Question 13

Measure of damages

Answer 13

Expection interest - put person into position of if performed normally.

Reliance interest - Put the claimant in the position if he had not relied on the contract.

Question 14

Types of damages

Answer 14

Actual financial loss - always claim

Mental distress and loss of enjoyment - only claim when principle of the contract e.g. holiday

Question 15

Mitigation of loss

Answer 15

Claimant should take all reasonable steps to mitigate his loss

Burden of proof is on the DEFENDANT to prove the claimant failed to take reasonable steps to mitigate his loss.

Question 16

Liquidated damaged and penalty clause

Answer 16

Liquidated damages:
Pre estimate of damages written in contract
Must be a genuine pre estimate of loss

Penalty clause:
Where liquidated damages are excessive, penalty clause is not enforceable

Question 17

Liquidated damages and penalty clause - PARKING EYE LYD V BEAVIS

Answer 17

Case:
- Penalty charge if visitors stayed over 3 hours
- refused to pay penalty because it was a penalty

Decision: Decided it was more of a deterrent than a penalty and wasn’t excessive compared to other fines. There was a genuine interest to keep traffic flowing freely.

Question 18

Other remedies - specific performance

Answer 18

Court may in discretion order for specific performance e.g. sale of land / Royls Royce

Orders defendant to do his part of contract instead of ‘buy himself out’

1. Only when damages are not adequate
2. Not where it would require supervision e.g building contract
3. Not personal service contract e.g. employment

Question 19

Other remedies - injunction

Answer 19

Granted in courts discretion.

1. Mandatory injunction - take steps to undo something in breach of contract e.g demolish building in breach of contract.
2. Prohibitory injunction - defendant must observe a negative promise in contract e.g. don’t do something
3. Asset freezing injunction e.g. can’t dispose of assets

Question 20

Alternative dispute resolution

Answer 20

Dispute at any point in a procedure is resolved rather than go to court.

ADVANTAGES:
Expertise - choose skilled person.

Solutions - tailor needs to parties e.g. compensation calculated differently than in court, changing way part behaves, apology & explanation, rectify mistake.

Privacy - held in private.

Speed - quick

Cost - lower than court.

DISADVANTAGES:

Expertise - lacks legal authority, could still end up going to court.

Cost - takes a long time may end up going to court anyway.

Privacy - none (can choose public record or not)

Solutions - not legally enforceable so depends on willingness.

Speed - no timetable like court.

Question 21

Alternative dispute resolution - arbitration

Answer 21

Independent person chosen e.g lawyer.

Acts similar to a judge in court.

Arbitration agreement - parties must agree to submit process (usually at the beginning in contract), subject to contract law.
Sets out process, rights & obligations.

Disagreements to above will be settled in court (unless another way)

International agreements settled by UN Model of Law on Arbitration.

Question 22

Alternative dispute resolution - mediation and conciliation

Answer 22

Independent third party (same as arbitration)

Does NOT act like a judge, assist parties in coming up with their OWN solution.

Solutions and mediation agreements are not automatically legally binding.

Question 23

Exclusion clauses

Answer 23

Removes or restricts liability for negligence and breach of contract e.g. at your own risk.

Can be overturned

Question 24

Exclusion clauses - incorporation (case law)

Answer 24

Exclusion clause must be an integral part of the contract to be enforceable and depends on whether the document is signed or unsigned.

SIGNED > binding > if there is any ambiguity in the exclusion clause it will be interpreted against those seeking to rely on it.

UNSIGNED > before or as contract is entered into, communicated, more complicated the clause the more that should be done to communicate effectively > if there is any ambiguity in the exclusion clause it will be interpreted against those seeking to rely on it.

e.g on back of the door of hotel room was a notice saying all valuables should be handed into management for safekeeping

Theif broke into room and stole valuables.

Hotel disclaimed liability too late as wasn’t disclosed when contract was entered into e.g at time of booking room / at reception.

Question 25

Unfair contract terms act 1977 (business to business)

Answer 25

Restricts the effectiveness of exclusion clauses by declaring them void unless they pass a reasonableness test:

DOES NOT apply to insurance contracts or transfers of land.

DOES NOT apply to contracts between private individuals (they may restrict liability as much as like like)

KEY PROVISIONS:

Clause that attempts to exclude death and personal injury arising from negligence - VOID

Other loss e.g. property or damage arising from negligence - VOID unless can be shown it’s reasonable

Sales or HP, undertakings as to title of seller/ owner (sales of goods act 1979) - VOID

Question 26

Unfair contract terms act 1977 (business to business) - reasonableness

Answer 26

Term must be fair and reasonable having regard to all circumstances (which were or ought to be known)

Burden of proof - relies on the person seeking to rely on them.

Statutory guidelines:
Relative strength of business bargaining positions
If inducement was offered
If innocent party knew or should have known of the term
Whether insurance is in place to the party seeking to rely on it
Whether misrepresentations were made.

Question 27

Consumer rights Act 2015 (business to consumer)

Answer 27

E.g signs in car parks, contracts between customers and traders

Also applies to traders incidental to the activity e.g. import export business buying company car for personal use.

Clause which restricts liability for death or personal injury from negligence, or restricts consumer rights under the Act - VOID & UNENFORCEABLE

other clauses in the contract will only be void if FAIR however consumers may still rely on unfair clauses.

Ambiguity will be interpreted against the trader.

Question 28

Consumer rights act 2015 - fairness

Answer 28

Unfair if:
- Not in good faith
- Significant imbalance between parties rights and obligations to the detriment of the customer

Considerations:
- Terms should be clear and prominent
- Circumstances when contract was signed
- Nature of the contract

Examples
- Payment of disproportionate compensation by consumer (if fail to fufill obligations.
- Binding customers to terms they had no opportunity to read
- Allowing trader to change terms one sided with no valid reason
- Allowing trader to set price after consumer is bound to contract
- Forcing customer to comply with terms when trader hasn’t