Unit 5: Discharge of a Contract by Performance and Breach Flashcards
Which one of the following is CORRECT?
A) S.13 of the Supply of Goods and Services Act 1982 is a condition
B) S.13 of the Supply of Goods and Services Act 1982 is an innominate term
C) S.13 of the Supply of Goods and Services Act 1982 is a warranty
CORRECT ANSWER B
s.13 of the Supply of Goods and Services Act 1982 is an innominate term.
Which one of the following is CORRECT?
A) If a condition is broken, the innocent party may be able to terminate the contract as well as sue for damages
B) If a warranty is broken, the innocent party may be able to terminate the contract as well as sue for damages
C) If a condition is broken and the innocent party terminates the contract, he cannot also sue for damages
D) If an innominate term is broken, the innocent party can sue for damages but cannot terminate the contract
CORRECT ANSWER A
B is not correct because if a warranty is broken the innocent party can sue for damages but cannot terminate the contract.
D is not correct because if an innominate term is broken the innocent party can terminate the contract if the effects of the breach are major.
Delia owns a restaurant. She enters into a contract with the celebrity chef Nigel Bites to work at her restaurant for the months of June and July. Nigel agrees not to work as a chef elsewhere during this period. On 1 May Nigel telephones Delia and says he will not be working for her as he has received a more lucrative offer to work as a chef elsewhere.
TRUE or FALSE:
Delia could obtain a decree of specific performance to compel Nigel to work for her during June and July.
FALSE
The court will not order specific performance of an employment contract.
Sportsgoods Ltd contracted to sell a consignment of tracksuits to Barnes plc for £10,000, payment to be within 10 days of delivery. Sportsgoods delivered the tracksuits a month ago. Barnes plc have not paid.
What is the most appropriate remedy for Sportsgoods Ltd?
A) Specific performance
B) Injunction
C) Damages
D) Action for the agreed sum.
CORRECT ANSWER D
Most appropriate remedy is an action for the agreed sum. Although Sportsgoods could sue for damages, it seems that their only loss is the amount that Barnes owes them and so an action for the agreed sum would be the best approach.
Tom employs Karen to paint his kitchen for £400, payment to be on completion. Karen starts work but then Tom tells her to stop as he has changed his mind.
Which one of the following statements is CORRECT?
A) Karen could sue Tom for the agreed sum of £400 because Tom wrongfully prevented her completing the work.
B) Karen could obtain a decree of specific performance to force Tom to allow her to finish the work
C) Karen could sue for damages or for a quantum meruit
D) Karen’s only claim is for damages for loss of profit
CORRECT ANSWER C
A is not correct as the duty to pay has not yet arisen ( payment was to be on completion).B is not correct as the court will not grant specific performance of a contract for services.
In April, Skytours Ltd agreed to employ Sue as a courier for 3 months starting on 1 June. In May Skytours told Sue that there had been a change of plan and her services would not be required.
Which one of the following is CORRECT?
A) Skytours is in breach of contract, but Sue must wait until 1 June before taking proceedings.
B) Skytours is in breach and Sue can terminate the contract and sue for damages immediately if she wishes.
C) Skytours cannot be in breach until 1 June as they may decide they need Sue as a courier after all.
CORRECT ANSWER B
Skytours have committed an anticipatory breach. This means that Sue can terminate immediately and sue for damages - she does not have to wait until 1 June.
Andrew engaged Sparrow Ltd, a firm of building contractors to repair a garden wall for £1,000 which he paid in advance. Sparrow Ltd was due to start work on 1 May. On 2 April Sparrow Ltd told Andrew that they would be unable to do the work. Andrew telephoned a few other contractors and found a firm who would repair the wall for £700 and start work on the 1 May.
What is the most appropriate remedy for Andrew?
A) Specific performance
B) Damages
C) Restitution - total failure of consideration
D) Restitution - quantum meruit
CORRECT ANSWER C
Most appropriate remedy for Andrew would be restitution on the basis that there has been a total failure of the consideration ie Andrew would get back his £1,000.
Delia owns a restaurant. She enters into a contract with the celebrity chef Nigel Bites to work at her restaurant for the month of June. Nigel agrees not to work as a chef elsewhere during this period. On 1 May Nigel telephones Delia and says he will not be working for her as he has received a more lucrative offer to work as a chef elsewhere.
TRUE or FALSE: Delia could probably obtain an injunction to prevent Nigel working as a chef elsewhere during the month of June.
TRUE
Injunctions have been awarded to enforce negative covenants in employment contracts and as the time limit is relatively short (1 month), and he is only prevented from working as a chef, the court would probably award an injunction in this case.
Stan agrees to build a conservatory for Jade, price £12,000, payable on completion. Stan does some of the work and then abandons the job. Jade gets another contractor to finish the work for £5,000.
Which one of the following is CORRECT?
A) Stan is entitled to some payment as he has substantially performed his obligations.
B) Stan is not entitled to any payment for the work done.
C) Stan is entitled to a reasonable sum for the work he has done as Jade has accepted his partial performance.
D) Stan is entitled to some payment for the work he has done, but the maximum amount he can receive is £7,000.
CORRECT ANSWER B
The doctrine of complete performance applies here – Stan has not performed his side of the contract properly and so is not entitled to payment. None of the exceptions apply here. Substantial performance does not apply as Stan has not finished the work. Jade has not voluntarily accepted Stan’s partial performance. Jade has not wrongfully prevented Stan performing the contract and the obligations are not divisible.
Which one of the following questions is WRONG?
A) Breach of an innominate term will only entitle the innocent party to terminate the contract if the breach had substantially deprived him of the whole benefit he expected to receive under the contract.
B) If an innocent party wrongly treats breach of an innominate term as repudiatory, the innocent party may be sued for breach of contract.
C) Where there is an anticipatory/repudiatory breach of an innominate term the innocent party must make an immediate decision whether to affirm the contract or to accept the breach as a present breach and terminate the contract.
D) Following a breach of contract the innocent party must take reasonable steps to mitigate loss: the burden of proof is on the defendant to show failure to mitigate.
CORRECT ANSWER C
The innocent party has a reasonable time within which to decide whether to affirm the contract or otherwise accept the breach as a present breach.
A builder made a contract with a client to refurbish the client’s offices at a total cost of £10,000 to be paid on completion. The builder abandoned the job half way through the work. None of the work has been completed to the client’s satisfaction. The client has found another builder to complete the work at a total cost of £8,000.
What damages can the client recover from the original builder?
A) None, as the new builder is able to complete the work at a lower cost and the client is not obliged to pay anything for the work done.
B) £8,000 damages, because this is the sum the new builder is charging.
C) £10,000 damages, because this is the sum the first builder was charging.
D) £2,000 damages, because the client is obliged to pay the first builder half of the cost that the new builder is charging (£4,000) as the first builder had done half the work. The total cost would therefore be £12,000 being £2,000 more than the original price.
E) £5,000 damages, because the client is obliged to pay the first builder half of the cost agreed under the first contract (£5,000) as the first builder had done half the work. The total cost would therefore be £13,000 being £5,000 more than the new price.
CORRECT ANSWER A
Damages are to put the injured party – the client – in the position as if the contract had been properly performed. Importantly damages can only be recovered if the injured party has suffered a loss. £8,000 (the sum the client will now have to pay) is lower than £10,000 (the sum the client would have had to pay had the original contract been properly performed). There is therefore no loss.
It should be noted that the original contract price of £10,000 was to be paid on completion and has not been paid. The client is released from any obligation to pay this when the first builder abandoned the job.
Options B and C are wrong as neither of these properly set out the loss suffered. Damages in this case would be calculated by reference to any amount that the client had to pay in excess of the original £10,000 contract price.
Options D and E are wrong in that the client does not have to pay the first builder anything. The first builder has abandoned the job without completing any part of it. The client has no choice but to accept the work done. This is a repudiatory breach by the builder. The client can terminate the contract, i.e. is released from any further obligation to pay the sum due on completion.
A client, a professional singer, signed a one-year contract with a record producing company (the ‘Company’) under which the client agreed not to work for any other record company during that time. However, the client has signed a contract with another company in breach of the restriction and the Company is seeking an injunction.
Which of the following statements best describes whether, or not, the Company’s action will succeed?
A) No: an injunction will not be ordered because it would have the effect of forcing the client to work for the Company.
B) No: damages would be adequate and it would be inequitable to grant an injunction.
C) No, because to order an injunction would be contrary to public policy as an undue restraint on earning a living.
D) Yes, because an injunction would not prevent the client from earning a living in any capacity other than as a singer.
E) Yes: as damages would be inadequate an injunction would be granted as of right to the Company.
CORRECT ANSWER D - Warner Bros Pictures v Nelson.
Statements A and C are wrong because an injunction would not stop the client earning a living in any capacity other than as a singer. The client could still work for example in retail.
Statement B is wrong as damages would not be adequate.
Statement E is wrong as injunctions are not granted as of right. They are a discretionary remedy.
A landlord, wanted to upgrade one of his rental properties. He entered into a contract with a bathroom fitter to remove the old bathroom fittings and to replace them with new sanitary ware. The contract price was £8,000. The landlord paid the builder £500 in advance and agreed to pay the balance on completion. The work was finished but the shower tray leaks (as it was not sealed properly) and so the shower cannot be used. The landlord is refusing to pay the balance of the contract price.
If the builder sued for breach of contract which of the following would be the most likely legal outcome?
A) The builder would be awarded £7,500 .
B) The builder would keep £500 but not be entitled to any more money.
C) The builder would be awarded £7,500 less the cost of properly sealing the shower tray.
D) The builder would have to forfeit £500 and not be entitled to any more money.
E) The builder would be awarded a reasonable sum in restitution for the work he had done.
CORRECT ANSWER C
There has been substantial performance as the work had been finished but appears to be only slightly defective.
The builder is not entitled to £7,500 as the work was not precise/exact (the doctrine of complete performance) and so A is wrong.
B is wrong. The builder would be entitled to keep £500 in restitution (as there’s not been a total failure of consideration) but would be entitled to more money due to having substantially performed the contract
D is wrong. The builder can keep £500 advance payment in restitution as there was not a total failure of consideration.
E is wrong –the builder is not entitled to a reasonable sum for what he did as there was no voluntary acceptance of part performance (Sumpter v Hedges).
A company has agreed to build a large greenhouse in a woman’s garden with a south-facing entrance. The total cost was £4,000, payment on completion. After the greenhouse has been built, the woman discovered that the door is facing north and the roof is not waterproof. It will cost £3,500 to put things right. The woman refuses to pay the company.
Which of the following best describes if the company is entitled to some payment?
A) The company is entitled to full payment as the greenhouse has been built.
B) The company is not entitled to full payment but they are entitled to some payment as the greenhouse has been built by them.
C) The company is not entitled to some payment as the work is seriously defective.
D) The company is entitled to full payment minus the cost of putting things right because it has substantially performed its obligations.
E) The company is entitled to some payment minus the cost of putting things right because it has substantially performed its obligations.
CORRECT ANSWER C
The work completed by the company is seriously defective and it will cost £3,500 to put it right compared to a contract price of £4,000. As a result, the contractor is not entitled to any money.
Options A and B therefore are wrong.
Options D and E are wrong. For substantial performance to apply the work has to be finished and only be slightly defective, which is not the case here on the facts.
A builder and a man enter into a contract for the builder to construct a garage for the man. The agreed price is £10,000 (being £1,000 to clear the site, £5,000 for building materials and £4,000 for labour) payable on completion of the work. The builder begins work by clearing the site. Before the builder commences construction of the garage he realises he has not charged enough for the work and will not be able to finish the job and make a profit. The builder asks the man for more money but the man refuses. The builder decides to abandon the job.
The builder sends an invoice to the man for £500 to cover the cost of clearing the site. The man refuses to pay the invoiced sum.
The man employs a new builder who completes the garage at an agreed price of £9,750. The builder commences legal action to claim the sum due under the invoice.
Will the man be liable to pay the £500?
A) Yes, because in providing his services the builder provided good consideration for the sum claimed under the invoice.
B) Yes, because the builder had finished the first stage of the job and is entitled to be paid for this work.
C) No, because the man will be entitled to damages due to the builder’s breach of contract and the man’s damages will exceed the invoiced sum.
D) Yes, because the man voluntarily accepted the work done to clear the site.
E) No, because the builder would only be entitled to payment when he completes the work.
CORRECT ANSWER E
The man promised to pay £10,000 on completion of the work. In a contract where the parties agree that the work must be done before the price falls due, the doctrine of complete performance provides that the builder will only be entitled to the price when performance is complete. As the builder did not complete the work then he is not entitled to any part of the contract price.
Options A and B are wrong because the man did not promise to pay £500 for the clearance of the site. He agreed to pay the full price when the job was complete.
The builder is in breach of contract but the man does not appear to have suffered any loss. He has paid £9,750 for his new garage. This is less than the sum he agreed to pay the builder. As the man has suffered no loss, Option C is wrong.
