week 6 Flashcards
What is breach of contract?
Breach occurs when one party to the contract fails to fulfil their obligations to perform, in whole or in part, their obligations under the contract.
What is the Scots law policy on breach of contract?
The policy of Scots law is to hold people to the bargains (ie contracts) they make.
What happens if a person does not honour a legally binding obligation?
If a person does not honour a legally binding obligation - be it a promise or a contractual obligation - then the counter party (the innocent party) has a range of options known as remedies.
What do the remedies available depend on?
Which remedies are available will depend on
1. the nature of the breach and
2. what the innocent party wishes to secure (performance or, ultimately, termination).
How may a contract be breached?
Usually refers to non-performance but can encompass other things:
- Partial performance
- Delayed performance
- Anticipatory non-performance
- Defective performance
What happens if:
P shows up, but completes only some of the work…
P installs a bath, but does not install the shower?
Part performance -
H has not received a bathroom completed in accordance with the agreed specification.
What happens if:
P shows up each day, but only stays for 10- to 20 minutes. A month passes, and the bathroom is still not completed…?
Delayed performance -
because the bathroom was not completed within the contractually stipulated period (of one week).
What happens if:
P installs the fittings (bath, shower etc), declares the job complete, but only cold water (not hot water) comes out of the taps or shower?
Inadequate performance
(eg the work has not been completed the the requisite standard express or implied)
…because a bath and shower should have both hot and cold water, and the workmanship is shoddy/ of unacceptable quality.
What happens if:
the day before P is due to start the job P rings up and advises H that they,(P), are not coming for a month…..
Anticipatory breach
…because P has indicated an intention not to fulfil the contract, or comply with the contractual obligations, in advance of those obligations falling due for performance.
Anticipatory breach
‘Profession by words or conduct either or unwillingness or of inability to perform is enough to constitute renunciation.’ (emphasis added) Edinburgh Grain Ltd Ltd v Marshall Food Group Ltd 1999 S.L.T. 15 per Lord Hamilton at 18.
Self help remedies
On remedies generally see Scottish Law Commission, Report on Review of Contract Law: Formation, Interpretation, Remedies for Breach and Penalty Clauses, March 2018 (SLC No. 252)
- Retention
- Rescission
- These are remedies that are exercisable without the assistance of the court.
- They are often defensive.
- They rely on:
Mutuality & Materiality
How to determine the appropriate remedy?
Determining what is the appropriate remedy (or remedies) will depend on several factors:
- The nature of the breach (materiality),
- What the innocent party wants to achieve (often in a pragmatic sense);
Remedies if the innocent party wants to compel the non-performing party to perform:
= retention or lien (IP withholds own performance), (self-help),
= specific implement to do a thing (a judicial remedy),
= action of payment, £ to be paid under contract (judicial remedy)
Remedies if the innocent party wants to be free of their own future obligations under the contract:
- To bring the contract to an end (without itself incurring any liability, but can only do so if CB in material breach):
= resile (n. recission) - To receive money compensation for non-performance:
= damages
What does retention consider?
Retention brings into consideration the concepts of “Mutuality” ,and of “Materiality”,
Retention or lien
Essentially, where the Innocent Party (IP) wishes:
a) the contract to subsist, but
b) to withhold its own performance of obligations (owed to CB), to try to compel the CB to perform.
then IP exercise retention (or lien)
Mutuality (clean hands)
“Insofar as remedies for breach are concerned, for a party to take The party seeking a remedy must show they [the IP] are not themselves in breach of their obligations. They can only insist on performance by other party if they have performed theirs”.
Graham & Co v United Turkey Red Co Ltd
Mutuality
Insofar as remedies for breach are concerned, for a party to take advantage of a ‘self-help’ remedy, that party must be able to demonstrate the fact of mutuality – that the obligations are ‘mutual’ or, in Erskine’s words, ‘the causes of one another’ (Erskine, Institutes, III, 3, 86)
Mutuality (interdependency)
In modern terms, Erskine’s description of contract terms being ‘the causes of one another’ is referred to as interdependency.
See McQueen & Thomson at para 6.9 (& cases therein).
How to assess whether retention or withholding of performance is available?
Conventionally this is done, by assessing the ‘interdependency’ of:
- the obligation breached (by the contract breaker(CB)); and
- the obligation, performance of which was withheld by the innocent party (IB).
- Or, by asking: were the 2 obligations ‘counterparties’ to one another?
What does the authoritative gloss confirm?
- That the law does not regard each and every obligation by one party as necessarily and invariably the counterpart of every obligation by the other.
- Rather, the party in breach cannot insist on the other party performing his obligations in relation to that part of the contract of which the first party is in breach
What to do instead of trying to identify which terms are interdependent?
Instead of trying to identify which terms are interdependent, ask if the Contract Breaker (CB) has failed to perform a “substantive obligation”.
