Breach and termination

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can a contract be terminated on grounds of breach of contract?
Only a breach of the contract constitutes a repudiatory breach, can the injured party terminate the contract.
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What is repudiatory breach?
Breach of a condition, Material breach of an innominate term, Renunciation
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What is a non-repudiatory breach?
Breach of a warranty, Immaterial breach of an innominate term
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What is a condition?
an important term in the contract, a breach of which creates a right to termination of the contract, regardless the consequence of the breach.
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How do you decide if a term is a condition?
The parties' agreement- express terms. Implied terms- implied in common law
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Express condition terms?
Parties are free to decide which terms are conditions
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What is an example?
I contract to buy timber from you, we agree a condition is that it must be 0.5 inches. But some delivered are 0.56. Though timbers are fit for purpose, I can still terminate contract and reject good and claim damages
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What case is an example of a breach of condition being right to termination regardless of consequences of breach
Arcos Ltd v Ronaasen [1993]
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Objective approach to the interpretation of a condition term
What a reasonable person would have intended the term to be. Even if the word 'condition' is in contract, it doesn't mean that it is a condition term in legal terms
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What is an example of this?
one term says 'it is a condition that you visit our customers each week' but another term says 'if one party commits a material breach and doesn't correct in 60 days' other party can terminate.
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you breach by failing to visit a customer. do you breach the condition term?
no, it is not a condition term. two terms must be read together from a reasonable person's perspective
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What case is this taken from?
Schuler v Wickman machine Tools Sale Ltd [1974] The term must be interpreted in an objective way. The use of word ‘condition’ does not necessarily mean that it is a condition term.
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What are examples of implied conditions in common law?
Bunge Corporation v Tradax Export SA [1980] The time of delivery is an implied condition in a commodity sales contract
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Implied conditions by statutes?
e.g. The Sale of Goods Act 1979 S14(2)- goods must be of satisfactory quality
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warranties
a less important term. A breach of warrenty only enables injured party to claim damages, not to terminate the contract
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How can you tell is a term is a warranty?
The parties' agreement- express warranty e.g. I install a boiler in your house and a 2 year warrenty of my service
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implied warranties
e.g. s12(2) of Sale of Goods Act 1979- the buyers enjoyment of free possession
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innominate terms
An innominate term is a term, the effect of a breach of which depends on the consequence of the breach.
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What does this mean?
If the breach is material – it deprives the injured party substantially the whole benefit from the contract, the injured party can terminate the contract.
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BUT
If the breach is immaterial – it does not deprive the injured party substantially the whole benefit from the contract, the injured party cannot terminate the contract.
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How do you decide if a term is an innominate term?
Express terms – contractual interpretation. Implied terms
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Express innominate terms: Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962]
Is the term on the seaworthiness a condition? The word condition is not used in the contract. The court interprets the term in an objective way, it is held that it is an innominate term
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What is Lord Diplock's test?
does the breach deprive the injured party of substantially the whole benefit from the contract? Yes, termination is allowed. No, termination is not allowed.
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Implied innominate terms
** 13-14 of the Supply of Goods and Services Act 1982. The provider of services must have reasonable skills and take due care when performing services.
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How to decide if a term is a condition, warranty or innominate term?
First, is there an implied term at common law or by statutes?
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Second, if it is an express term, Do the parties use the word, condition or warranty?
Yes, it will be interpreted in an objective way. the use of term, ‘condition’ does not necessarily mean that it is a condition term. (Schuler v Wickman Machine Tools Sale Ltd) No, it is more likely that the term is an innominate term.
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When can an injured party terminate the contract?
If the other party commits a repudiatory breach.
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What is a repudiatory breach?
A breach of a condition, A material breach of an innominate term – it deprived the injured party of substantially the whole benefit from the contract, Renunciation.
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a breach, however serious it is, doesn't automatically terminate a contract
it depends on the innocent party to decide whether to terminate the contract
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White & Carter Coucil Ltd McGregor (1962)
The rationale is to prevent breaching party from making a profit from his wrongdoing
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what is the second legal effect?
when contract is terminated, parties are released from future contractual obligations (Photo Productions Ltd Securicor Transport Ltd [1980])
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what is the third legal effect?
Termination normally doesn't have retrospective effecgts. It does not release the party from his obligations arising before termination (The Dominique [1989]) e.g. if you sing one song for my wife and then refuse to sing other two, I still have to pa
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pay you for the first song even if I choose to terminate the contract
in some cases, termination may have limited retrospective effects. When this happens, restitution ensures=- the parties return to each other the value they received from each other
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legal effect 4
the injured party can claim both termination and damages for breach of contract. e.g. after terminating contract with you for not singing songs, I can sue u for damages on grounds of breach of contract
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what is anticipatory breach?
a breach taking place before date of performance e.g. Hochester v De La Tour [1853]
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it normally takes form of 'renunciation'- a party declare to refuse performing his contractual obligation
e.g. i hire u to sing at wife's bday on wed. on tues you say i am boring and you won't do it, you commit anticipatory breach, which takes the form of renunciation. AP may take form of disablement- you deliberately get drunk on Wed
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The elective theory
The injured party has the choice to either: accept the anticipatory breach and terminate the contract immediately OR to affirm contract- wait until date of performance. if by date of performance, the party hasn't performed, anticipatory breach become
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becomes actual breach
But if injured party affirms the contract, the breaching party has an opportunity to cure his breach before the date of breach. This alleviates breach
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E.g. of elective theory: White and Carter v McGregor [1962]
we make a contract that u will put my advert on my product which u sell next month. I then commit anticipatory breach by saying i don't need you to do so. you ignore my request, going ahead with contract, and sue me for contract price.
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Other cards in this set

Card 2

Front

What is repudiatory breach?

Back

Breach of a condition, Material breach of an innominate term, Renunciation

Card 3

Front

What is a non-repudiatory breach?

Back

Preview of the front of card 3

Card 4

Front

What is a condition?

Back

Preview of the front of card 4

Card 5

Front

How do you decide if a term is a condition?

Back

Preview of the front of card 5
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