TERMINATION OF CONTRACT Flashcards
Discharge of contract - performance
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’
Discharge - by frustration
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)
The Law Reform (frustrated contracts)
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’.
Breach of contract
Party not does perform contractual obligations unless discharged by frustration or some other lawful excuse.
Usually ends up with damages paid, sometimes repudiation.
Breach of contract - lawful excuse
- Performance has been rejected
- Other part has made it impossible to perform
- Parties in agreement permitted non-performance
Breach of contract - repudiatory breach
‘Fundamentally important term’ or ‘depriving party of majority or whole of the benefit’ e.g. turning up with a bike instead of a car.
Breach of contract - anticipatory breach
One part explicitly or implicitly in advance shows they have no intentions of fulfilling their contractual obligations.
Breach of contact - remedies (repudiatory)
If innocent party treats contract as discharged, other party must be notified: e.g. refusal for further performance or current obligations
- Not discharged from contractual obligations due at termination, but is discharged from future obligations.
- Must not accept / pay for further performance
- May be able to refuse for partial / shit performance (unless severable contract)
- Reclaim money for shit performance
- Claim damages from defaulter
Breach of contract - injured party options (anticipatory)
- Treat contact as discharged and sue immediately
- Allow contact to continue until there is an actual breach then take action at that time
Remedies for breach of contract - damages
Put a party in a position as if contract had been correctly performed.
2 factors:
Remoteness of damage
Measure of damages
Remoteness of damage
HADLEY V BAXENDALE
Damages only awarded if can be ‘fairly and reasonably considered’ as either/ or:
- Arising naturally (normal course of things)
- Not ‘reasonably foreseeable’ at the time of the contract (e.g. may not be able to claim damages for some of it)
Remoteness if damage - HAYLEY VS BAXENDALE
‘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)
Measure of damages
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.
Types of damages
Actual financial loss - always claim
Mental distress and loss of enjoyment - only claim when principle of the contract e.g. holiday
Mitigation of loss
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.
Liquidated damaged and penalty clause
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
Liquidated damages and penalty clause - PARKING EYE LYD V BEAVIS
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.
Other remedies - specific performance
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’
- Only when damages are not adequate
- Not where it would require supervision e.g building contract
- Not personal service contract e.g. employment
Other remedies - injunction
Granted in courts discretion.
- Mandatory injunction - take steps to undo something in breach of contract e.g demolish building in breach of contract.
- Prohibitory injunction - defendant must observe a negative promise in contract e.g. don’t do something
- Asset freezing injunction e.g. can’t dispose of assets
Alternative dispute resolution
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.
Alternative dispute resolution - arbitration
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.
Alternative dispute resolution - mediation and conciliation
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.
Exclusion clauses
Removes or restricts liability for negligence and breach of contract e.g. at your own risk.
Can be overturned
Exclusion clauses - incorporation (case law)
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.
