Termination Of Contract (C3)

Question 1

Q: What are the main ways a contract can be terminated?

Answer 1

A: By performance, frustration, or breach.

Question 2

Q: How is a contract discharged by performance?

Answer 2

A: When both parties fully meet their obligations. Minor, acceptable defects may allow for substantial performance, with payment minus repair costs.

Question 3

Q: What are divisible contracts and quantum meruit?

Answer 3

A: Divisible contracts allow parts of the contract to be discharged separately. Quantum meruit allows a party to claim payment for work done if prevented from completing the contract.

Question 4

Q: What is frustration in contract law?

Answer 4

A: When performance becomes impossible due to events beyond both parties’ control, discharging the contract.

Question 5

Q: What does the Law Reform (Frustrated Contracts) Act 1943 provide?

Answer 5

A: It allows for refunds, cancels unpaid amounts, and permits expense offsets after frustration.

Question 6

Q: What is an “actual breach” vs. “anticipatory breach” of contract?

Answer 6

A: Actual breach happens at performance date if one party fails. Anticipatory breach occurs if one party indicates before the performance date that they won’t fulfill the contract.

Question 7

Q: What is a repudiatory breach?

Answer 7

A: A serious breach allowing the injured party to end or affirm the contract and claim damages.

Question 8

Q: What are lawful excuses for a breach?

Answer 8

A: If the other party prevents performance or both agree to waive certain obligations.

Question 9

Q: What is Alternative Dispute Resolution (ADR), and what are its main methods?

Answer 9

A: ADR includes arbitration (binding decision by an arbitrator) and mediation and conciliation (non-binding third-party assistance).

Question 10

Q: What are the main pros and cons of Alternative Dispute Resolution (ADR)?

Answer 10

A: Pros: Often cheaper, faster, private, and expert-led. Cons: May lack binding authority, and non-binding decisions may need further litigation.

Question 11

Q: What is the purpose of damages in contract law?

Answer 11

A: To place parties in the position they would have been if the contract had been fulfilled.

Question 12

Q: What are unliquidated damages?

Answer 12

A: Court-determined damages when not specified in the contract.

Question 13

Q: What is “remoteness” in damages?

Answer 13

A: Limits damages to losses closely linked to the breach, excluding indirect losses.

Question 14

Q: What did Hadley v Baxendale establish?

Answer 14

A: Only foreseeable losses or natural consequences of breach are recoverable.

Question 15

Q: Can damages cover loss of enjoyment?

Answer 15

A: Rarely; only if “peace of mind” was a contract’s main purpose.

Question 16

Q: What does the “measure of damages” refer to?

Answer 16

A: The value needed to cover the claimant’s expected benefit from the contract.

Question 17

Q: What are reliance losses?

Answer 17

A: Compensation for expenses incurred by the claimant before the breach.

Question 18

Q: What are reliance losses?

Answer 18

A: Compensation for expenses incurred by the claimant before the breach.

Question 19

Q: What is mitigation of loss?

Answer 19

A: The claimant must reasonably minimize their losses.

Question 20

Q: What distinguishes liquidated damages from penalty clauses?

Answer 20

A: Liquidated damages are a fair pre-estimate; penalties are excessive and unenforceable.

Question 21

Q: What are equitable remedies, and when are they granted?

Answer 21

A: Discretionary remedies awarded when damages are inadequate; denied if claimant acted unfairly or delayed the case.

Question 22

Q: What are the main types of equitable remedies?

Answer 22

A: Specific performance and injunctions (mandatory, prohibitory, and asset-freezing).

Question 23

Q: When is specific performance used, and for what types of contracts?

Answer 23

A: Common in land sales, as each property is unique; rare for personal services due to enforceability issues.

Question 24

Q: What is a mandatory injunction?

Answer 24

A: An order requiring a party to undo an action done in breach of contract (e.g., demolishing an unauthorized building).

Question 25

Q: What does a prohibitory injunction prevent?

Answer 25

A: Prevents a party from breaching a negative promise, often used in restraint-of-trade cases.

Question 26

Q: When is an asset-freezing injunction used?

Answer 26

A: When there’s a risk the defendant might hide assets, if the claimant has a strong case.

Question 27

Q: What was held in Warner Bros v Nelson (1936) when Bette Davis breached her contract by acting for another company?

Answer 27

A: An injunction was granted to prevent her from working for the rival company, enforcing her contract’s exclusivity agreement.

Question 28

Q: What was held in ParkingEye Limited v Beavis (2015) when Mrs. Beavis overstayed in a car park with a posted £85 charge for exceeding two hours?

Answer 28

A: The court ruled the £85 charge was a deterrent, not a penalty, allowing ParkingEye to manage the car park effectively. Mrs. Beavis was required to pay the fee.

Question 29

Q: In Ford Motor Co (England) Ltd v Armstrong (1915), what was held regarding the enforceability of a £250 penalty clause in a contract where the defendant agreed not to sell Ford’s cars below the list price?

Answer 29

A: The court ruled that the £250 penalty for each breach was a penalty clause because it applied the same amount to multiple breaches, rendering it unenforceable.

Question 30

Q: In the case of Brace v Calder (1895), where an employee sued for wages after his partnership was dissolved five months into a two-year contract, what did the court hold regarding his claim for lost wages, particularly considering that he was offered identical employment with the new partnership but refused?

Answer 30

A: The court ruled that Brace had not mitigated his loss by declining the offer of identical employment with the new partnership, which meant he could only recover nominal damages.

Question 31

Q: In Anglia Television v Reed (1972), what was the outcome when Reed pulled out of his role in a TV play at the last moment, leading to the abandonment of the project and the incurrence of expenses by the claimants?

Answer 31

A: The court held that Reed was liable for the expenses incurred by Anglia Television in preparing for filming, but he was not liable for any projected profits, as it was impossible to determine whether the film would have succeeded or failed.

Question 32

Q: In Jarvis v Swan Tours (1973), what was the court’s decision regarding the damages awarded to Jarvis when the holiday he booked was significantly inferior to the brochure description?

Answer 32

A: The court held that the damages should be increased to compensate for the disappointment and distress experienced by Jarvis, as the principal purpose of the holiday was to provide pleasure, not just financial loss.

Question 33

Q: In the case of Victoria Laundries v Newman (1949), what was the court’s ruling regarding the claim for lost profits after a delay in the delivery of a boiler caused the loss of both normal trading profits and an extra-large profit from a government contract?

Answer 33

A: The court ruled that Victoria Laundries could claim for the loss of normal trading profit due to the delay in the boiler delivery. However, they could not claim for the lost profit from the government contract, as this contract had not been disclosed to the defendant, making it too remote to be compensable.

Question 34

Q: What was the court’s ruling in White & Carter (Councils) Ltd v McGregor (1961) when McGregor attempted to cancel a contract for advertisements on litter bins, and how did the court address the anticipatory breach?

Answer 34

A: The court ruled that White & Carter were entitled to continue with the contract despite McGregor’s request for cancellation. They were not obligated to accept the anticipatory breach and could claim the agreed price under the contract, reinforcing the principle that a party can choose to affirm a contract even when faced with a breach.

Question 35

Q: What was the court’s decision in Hochster v De La Tour (1853) regarding Hochster’s claim for payment after being informed that his services as a courier were no longer needed before the contract’s start date?

Answer 35

A: The court held that Hochster was entitled to claim payment as soon as he became aware of the anticipatory breach, establishing that a party can seek damages before the actual performance date if they are informed of the other party’s intention not to perform the contract.

Question 36

Q: What was the outcome in Planché v Colburn (1831) when the claimant, who had begun writing a book for a canceled series, sought payment for his work?

Answer 36

A: The court held that the claimant was entitled to half of the agreed price as reasonable compensation on a quantum meruit basis, recognizing his effort and research despite the cancellation of the series.

Question 37

Q: In the case of Hoenig v Isaacs (1952), what was the court’s ruling when the employer, dissatisfied with the decorating work done on his flat for a contracted price of £750, refused to pay the remaining balance after having already paid £400?

Answer 37

A: The court held that the employer was required to pay the outstanding amount, less the cost of remedying the minor defects in the decorator’s work, reinforcing the principle of substantial performance in contracts.

Question 38

Q: What was the court’s decision in Cutter v Powell (1795) regarding the claim for wages made by the widow of a sailor who died before completing a journey from Jamaica to the UK?

Answer 38

A: The court held that the widow was not entitled to any wages because her husband had not completed the journey, emphasizing the principle that there must be complete performance of a contract to claim payment.

Question 39

Q: What is an exclusion clause, and what is its main purpose?

Answer 39

A: An exclusion clause limits or excludes liability for breaches of contract.

Question 40

Q: How are exclusion clauses generally viewed by the courts?

Answer 40

A: Courts scrutinize these clauses to protect weaker parties but also allow freedom of contract.

Question 41

Q: What are the two main tests for an exclusion clause to be valid?

Answer 41

A: The clause must pass both common law tests and statutory rules.

Question 42

Q: Under common law, what are the two requirements for an exclusion clause to be enforceable?

Answer 42

A: The clause must be properly incorporated and clearly cover the loss suffered by the claimant.

Question 43

Q: How can an exclusion clause be incorporated into a contract?

Answer 43

A: By signature (claimant signs the document) or by notice (clause is clearly presented at or before the agreement).

Question 44

Q: How are ambiguous exclusion clauses interpreted by the courts?

Answer 44

A: They are interpreted against the party seeking to enforce them.

Question 45

Q: What does the Unfair Contract Terms Act 1977 (UCTA) say about liability for death or personal injury?

Answer 45

A: Exclusion clauses for death or personal injury due to negligence are void under UCTA.

Question 46

Q: When can exclusion clauses for negligence-related losses other than death or personal injury be enforced under UCTA?

Answer 46

A: They are enforceable only if they are reasonable.

Question 47

Q: What factors do courts consider to determine if an exclusion clause is reasonable under UCTA?

Answer 47

A: Factors include bargaining strength, awareness of the term, any inducements, and the ability to insure against liability.

Question 48

Q: What requirements does the Consumer Rights Act 2015 impose on exclusion clauses in business-to-consumer contracts?

Answer 48

A: Clauses must be fair, clearly stated, and prominent. Unfair terms are not binding on consumers.

Question 49

Q: How does the Consumer Rights Act 2015 assess if a clause is fair in a consumer contract?

Answer 49

A: The test is whether an average consumer, who is reasonably well-informed and observant, would be aware of the term and understand it.

Question 50

Q: In what situations under the Consumer Rights Act 2015 would an exclusion clause be automatically unenforceable?

Answer 50

A: If it restricts the consumer’s rights under the Consumer Rights Act, it is automatically unenforceable.