Termination of Contractual Obligations & Specific Remedies

Question 1

What is the difference between a condition and a warranty?

Answer 1

• Condition: A term of fundamental character that goes to the root of the contract, including or calling something a condition does not make it such, it depends on the intention of the contract as a whole (Schuler v Wickman)
• Warranty: Does not go to the root of the contract, cannot terminate the contract for breach only claim damages

Question 2

What is meant by an innominate term?

Answer 2

• Hong Kong Fir Shipping v Kawasaki, terms that are neither conditions or warranties but can act as either depending on the gravity of the breach
• Bunge Corp v Tradax, time clauses can only ever be conditions as allowing them to be innominate terms could lead to uncertainty in what delay would amount to a repudiatory breach

Question 3

When will a breach of an innominate term be repudiatory?

Answer 3

When it deprives the innocent party of ‘substantially the whole benefit which it was intended he should obtain’ (Hong Kong Fir Shipping)

Question 4

When does discharge of a contract occur?

Answer 4

• The breach itself does not bring about discharge of the contract, at the decision of the innocent party
• If the party takes too long in deciding it may be seen as affirming (Stocznia Gdanska v Latvian Shipping)
• The innocent party could decide to insist on performance of the contract

Question 5

What effect can termination or discharge of a contract have?

Answer 5

• Johnson v Agnew: Termination of a contract wipes away future obligations to perform, but leaves accured obligations intact
• Photo Production v Securior Transport: There is no doctrine of fundamental breach in English law. Therefore a breach that justifies termination does not automatically determine the contract. Whether an exclusion clause can apply is a matter of construction
• Geys v Societe Generale: A wrongful repudiation of an employment contract only terminates it if and when accepted by the innocent party

Question 6

What are two different types of specific remedies that can be granted?

Answer 6

• Action for the agreed sum
• Specific Performance

Question 7

What is meant by an action for the agreed sum?

Answer 7

• Claimant is entitled to the award of a sum that was agreed between him and the defendant in the contract
• S49 Sale of Goods Act 1979
• White & Carter v McGregor, where the contract is repudiated by the defendant, the claimant is entitled to hold the contract open to perform and be awarded the agreed sum due for that performance where possible. Cannot do this if the acts cannot be done without the other party
• Is the action necessary to protect the injured party and unlikely to cause undue hardship on the party in breach?

Question 8

How does specific performance operate?

Answer 8

• Will not be ordered where damages are adequate, and claimant must show they are not, usually where there is no satisfactory equivalent
• Beswick v Beswick, damages were an inadequate remedy. Defendant would be unjustly enriched by being able to retain the entire benefit of the promisee’s performance while performing only a small part of their promise
• Discretionary remedy, courts will consider if it causes severe hardship to the defendant and conduct of the claimant amongst other factors
• Cannot enforce contract of personal service
• Co-op Insurance Society v Argyll Stores, court will not order specific performance of an obligation to carry on business (see also s236 Trade Union & Labour Relations Act 1992)

Question 9

What remedies do consumers have under the Consumer Rights Act 2015?

Answer 9

• S19: Right to enforce terms
• S20-21: Right to reject / partial rejection
• S22-24: Specific rights in relation to goods
• S54-56: Specific rights in relation to services

Question 10

What is an injunction?

Answer 10

• Prohibitory restricts the defendant from committing a breach again, mandatory requires the breach to be undone
• Warner v Mendy, Injunction cannot be granted if its effect is to directly or indirectly compel the defendant to do their obligation under the contract
• Lumley v Wagner, while a positive obligation under a personal service contract cannot be enforced by specific performance, a negative obligation may be enforced by prohibitory injunction

Question 11

What does Tesco Stores v USDAW tell us about an injunction?

Answer 11

• The court will not order an injunction to restrain the termination of a contract where the effect is to compel performance
• Order cannot be made against the employee as no one can be forced to work
• An injunction can be granted against an employer to not terminate a contract of employment where damages would be inadequate and there was no breakdown in the employment relationship