Types of obligations

Question 1

Definition of obligation?

Answer 1

○ An obligation is a legal bond between two or more persons, or legal relationship between a creditor and debtor in respect of a specific performance.
○ Obligations concern rights and duties - the person making the performance has a duty, and the person receiving the performance has a right.
■ These are personal rights and duties, enforceable only against the other party to the contract

Question 2

Types of obligations: unilateral and reciprocal

Answer 2

Unilateral:
■ One party has an obligation, but the other party isn’t required to do anything in return, e.g. donation

Reciprocal:
one performance is owed in exchange for the other

Question 3

Simple and alternative

Answer 3

Simple:
■ Most obligations are simple in that the parties, when they conclude the contract, specify the exact performance to be made.

Alternative:
■ This is where the parties agree that someone can choose a performance from two or more specified alternatives (must be spelt out).
■ If the parties do not specify which party has the right to choose, the debtor will be given the choice.
■ Once the relevant party has chosen one of the performances, the obligation becomes a simple one; the debtor is then obliged to make the chosen performance

Question 4

Facultative and Generic

Answer 4

Facultative:
■ This specifies the performance owed by the debtor, but gives them the right to choose to make a different specified performance.
● E.g. the seller must deliver the cow called Annabel to the purchaser, but they may, if they wish, deliver Bluebell instead.
■ This looks like an alternative obligation, but the main difference lies in the enforceability - where a creditor to an alternative obligation may claim whichever of the specified performances has been chosen by the person entitled to make that choice, a creditor to a facultative obligation may only claim the first specified performance (Annabel) and never the other (Bluebell).

Generic:
■ Here, a party is allowed to choose a performance from a specified genus or “family” or performances
■ The parties must specify who is to make this choice, failing which the debtor will have the choice.

Question 5

Outcome of Bob’s shoe case?

Answer 5

○ In the present instance, the appellant’s counter-performance was divisible to such an extent that a specified quid pro quo could be allocated to each distinct performance
○ The fact that a separate part of the performance could be related to a corresponding part of the counter-performance shows that the parties probably intended performance, and indeed the contract itself, to be divisible

■ A useful test which can be applied in deciding whether a particular provision of a contract is subsidiary to the main purpose, and therefore severable from the rest, is to determine whether the parties would have entered into the contract without that provision.
■ The court found it was likely that the parties would have concluded the contract even if it had not provided for any such transportation

■ Thus, the court was of the opinion that performance was divisible

Question 5

Divisible vs indivisible performances: Bob’s Shoe Centre v Heneways Freight Services facts?

Answer 5

There was a contractual relationship between the parties that the respondent was obliged to effect customs clearance of the goods and convey them from the airport to the appellant’s place of business.

Goods were stolen: respondent wanted partial payment for performances rendered. Appelant said since full performance wasn’t rendered no payment can be made.