2) Contract Termination

How can a contract be discharged?
A contract is and agreement that gives rise to rights and obligations and it can be bought to an end through performance, frustration or break of contract.
1 of 66
1) When can a contract be discharged through performance?
1) Both parties perform their contractual obligations completely and exactly.
2 of 66
2) When can a contract be discharged through performance?
2) Substantial performance a party's contractual obligations but the other party will be entitled to redress for the part of the performance that did not completely and exactly match the contract terms.
3 of 66
3) When can a contract be discharged through performance?
3) Partial performance can not discharge the contract as a whole but most contracts are treated as severable. they consist of a number of obligations and can be severed or discharged through performance of only one part of those obligations.
4 of 66
Example of severable contract?
Employment contracts usually provide for payment each month and building contracts provide payment at various stages of the contractors progress - each of these payment dates represent severable points.
5 of 66
What happens when performance is prevented by the other party?
The contract is discharged and other party is discharged from their obligations and is entitled to sue for damages for breach of contract or bring quantum meruit action claim for the amount of work already completed.
6 of 66
When can a contract be discharged through frustration?
If after the contract is made performance of the contract is rendered impossible, for which neither party is responsible and for which the contract makes no provisions (no escape clauses or majeure clauses).
7 of 66
When is a contract not discharged through frustration?
Where another mode of performance is possible even if its expensive and difficult. Frustration occurs when the contract becomes fundamentally different from what was expected, it does not occur when assumptions are not proved correct.
8 of 66
What are frustrating events?
1) Destruction of the subject matter. 2) Personal incapacity to perform a contract of personal service. 3) Government intervention. 4) Non occurrence of an event which is the sole purpose of the contract (if expressly stated when forming contract)
9 of 66
1&2) What are the consequences of frustration according to The Law Reform (Frustrated Contracts) Act 1943? (express provision to the contrary will prevail)
1) Any sums due for payment cease to be payable. 2) If either party has obtained a valid benefit under the contract before it was discharged the court may order it to be repaid.
10 of 66
3&4) What are the consequences of frustration according to The Law Reform (Frustrated Contracts) Act 1943? (express provision to the contrary will prevail)
3) Any money paid under the contract before frustrating event will be repaid. 4) If a person has to repay money they can retain or recover expenses incurred provided they were incurred in the performance of a contract before frustration occurred.
11 of 66
When can a contract be discharged by breach of contract?
When one party fails to comply fully with all the terms of a contract and this fails to perform their contractual obligations sufficiently. All breaches entitle the injured party to seem damages.
12 of 66
When does a repudiatory breach (fundamental breach) occur?
When a fundamentally important term has been breached and the injured party has been deprived of substantially the whole benefit of the contract.
13 of 66
What happens repudiatory breach (fundamental breach) occurs?
The injured party is entitled to treat the contract as at its end thus discharging their own obligations in addition to seeking damages. They may elect to affirm the contract (continue with it).
14 of 66
When does a anticipatory breach occur?
When one party gives notice of their intention not to comply with contractual terms. Where one party renounces their contractual obligations explicitly or implicitly in advance by showing they have no intention to perform them.
15 of 66
What happens when a anticipatory breach occur?
The innocent party can allow the contract to continue until there is an actual breach and take action at that time or the innocent party may treat the contract as discharged immediately and sue for damages.
16 of 66
What happens when a anticipatory breach occur and the injured party allowed the contract to continue until the actually breach?
They may continue their preparation for performance and recover an agreed price for their services. Their duty to mitigate their losses does not arise until they accept the breach (then they must show these losses are caused by the breach).
17 of 66
1) What happens when a anticipatory breach occur and the injured party treats the contract as discharged immediately?
1) They must notify the other party by refusal to perform their own obligations or refuse to accept further performance. They can claim damages from the defaulter.
18 of 66
2) What happens when a anticipatory breach occur and the injured party treats the contract as discharged immediately?
2) They are discharged from further performance, need not accept nor pay for further performance, may be able to refuse to pay for partial or defective performance already received and reclaim money already paid in respect of defective performance.
19 of 66
What are the remedies for breach of contract?
Damages (common law), equitable damages (at judges discretion) include injuctions, specific performance and recession.
20 of 66
How can contractual disputes be resolved?
Contractual deputes may be resolved by civil litigation in the courts or by negotiation, arbitration, mediation, adjudication or expert determination.
21 of 66
What are damages?
Damages are awarded in respect for losses for a breach in contract. They may only be awarded if they considered not too remote and they should put the claimant in the position they would be in had the contract been performed (compensatory in nature)
22 of 66
1) When are damages awarded (remoteness of damages)?
Damages may only be warded in respect of losses which may be fairly abd reasonably considered as arising naturally from the breach of contract or reasonably foreseeable in the eyes of both parties at the time the contract was formed.
23 of 66
2) When are damages awarded (remoteness of damages)?
If the defendant can show that the chain of causation was broken & that the claimant had caused the loss the defendant will not be liable.If the claimant is unaware of the breach it is likely that only recklessness on their part would brake the chain
24 of 66
What happens if the losses are exceptional or abnormal and reasonably foreseeable?
The defendant will only be liable if they knew at the rime of the contract of the special circumstances from which the abnormal consequences could arise.
25 of 66
What is awarded for damages (measure of damages)?
Damages are said to compensatory in nature and should not put the claimant in a better position than they would have been on had the breach not happened at the contract has been performed.
26 of 66
What are damages awarded for?
Damages will be awarded be awarded for actual financial loss and rarely for mental distress where that is the main result of the breach.
27 of 66
Who is the burden of proof on to show that the claimant failed to take reasonable opportunity to mitigate their losse?
The burden of proof is on the defendant although it is a assumed the claimant will take all reasonable steps to mitigate their losses.
28 of 66
What is expectation interest?
The amount of damages that are needed to put the claimant in the position they would have been in had the breach not happened and the contract had been performed.
29 of 66
What is reliance interest?
Refers to the position the claimant would have been in had they not relied on that contract.
30 of 66
Usual reliance damages?
usually claim for wasted expenditure and the onus is on the defendant to show that the expenditure would not have been removed if the contract had been performed.
31 of 66
Reliance damages will usually not be awarded for..?
Reliance damages will not be awarded regardless of anticipated profit to be made by the claimant but would only be rewarded where their gross profit exceed their expenditure.
32 of 66
What are liquidated damages?
Damages parties include up front in their contract. They are a fixed sum or a formula for determining damages payable for a breach. They can not be penal in nature. The court will uphold them where they are felt to be a genuine pre estimate of loss.
33 of 66
What is a penalty clause?
A sum that arbitrary or excessive and does not protect the legitimate interest of the innocent party.
34 of 66
What are equitable remedies?
Remedies that the courts may in their discretion order. They include specific performance and injunctions.
35 of 66
What is a specific performance?
Is an equitable remedy which orders the defendant to perform their part of the contract instead of letting themselves buy themselves out of it by paying damages.
36 of 66
When are specific performances awarded?
It will only be awarded where the damages are not an adequate remedy> They are often granted in land disputes.
37 of 66
When are specific performances not awarded?
Specific performance will not be granted if it would require supervision or if the contract is for personal service, an employment contract for example.
38 of 66
What is an injunction?
When the courts direct a party to refrain from breaching their contractual obligations.
39 of 66
What is the purpose of an injunction?
The purpose of an injunction is enforce a negative restraint in a contract.
40 of 66
What is a mandatory injunction?
It is restorative in effect. It directs the defendant to take positive steps to undo something they have already done in breach of contract, for example demolishing a property they erected in breach of contract.
41 of 66
What is an asset freezing injunction?
An asset freezing injunction prevents the defendant from dealing with assets where the claimant can convince the court that they had a good case and that there is a danger of defendants assets being exported or dissipated.
42 of 66
What is a prohibitory injunction?
Prohibitory injunction requires the defendant to observe a negative promise in a contract. For example you may have a contract saying you cannot work for B (note that while specific performance cannot be granted an injunction can).
43 of 66
What is an exclusion clause?
Any clause in a contract that attempts to restrict or exclude the liability of one party for breach of contract and exclude a persons obligations to perform a contract.
44 of 66
Where is an exclusion clause common?
Very common in standard form contracts.
45 of 66
What is require of an exclusion clause for it to be valid?
The clause must be properly incorporated into the contract and reasonable per statute.
46 of 66
When is an exclusion clause properly incorporated?
The exclusion clause must be an integral part of the contract and it must be given at the time the contract was made (usually at the point of payment).
47 of 66
What if the document is not signed (in terms of exclusion clauses)?
If the document is not signed then it must be shown that the person whose rights were restricted was made sufficiently aware of it at the time of making the contract. Onerous terms must be highlighted.
48 of 66
What if the document is signed (in terms of exclusion clauses)?
If the document is signed it will be regarded as binding even if it has bit been read or the term is in small print (unless misleading).
49 of 66
What if the exclusion clause is actually in the nature of an unsigned receipt for payment or otherwise given after the contract is made?
Then it is not regarded as part of the contract and will not be effective.
50 of 66
What happens once the exclusion clause has been shown to be an incorporated term?
The courts will interpret any ambiguity in the clause against the person who relies on it. Basically the clause must cover the breach complained of.
51 of 66
What does The Unfair Contract Terms Act (UCTA) 1977 apply to?
It applies to clauses inserted into agreements between commercial concerns or businesses. It does not apply for insurance or land transfer contracts.
52 of 66
What does UCTA state about any clause or notice hat attempts to exclude or restrict liability for death or personal injury arising through negligence?
That the exclusion clause is void.
53 of 66
What does UCTA state about any clause or notice hat attempts to exclude or restrict liability for other loss or damage arising through negligence?
That the exclusion clause is void unless it can be shown to be reasonable.
54 of 66
What does UCTA state about a clause in contracts of sale or hire purchase that excludes or limits the liability for breach of obligations regarding title of the seller or owner implied by the Sale of Goods Act 1979?
That the exclusion clause is void.
55 of 66
Who is the burden of proving reasonableness on?
The burden lies on the person seeking to rely on the clause.
56 of 66
What does reasonability depend on (in terms of UCTA)?
Reasonability depends on the relative strength of the parties' bargaining positions, whether any inducement was offered and whether the innocent party knew or should have known of the term.
57 of 66
What happens where the parties are of equal bargaining strength?
The courts will be reluctant to hold the exclusion clause to be unfair or unreasonable and invalid.
58 of 66
What does Consumer Rights Act 2015 apply to?
Consumer Rights Act provides statutory control in respect of consumer contracts and consumer notices (such as signs in car parks). It provides terms in a contract between a business and a consumer will only be binding on the consumer if they are fair
59 of 66
When is a clause automatically unenforceable under The Consumer Rights Act 2015?
When the consumer contract or notices tries to limit liability for death or personal injury resulting from negligence. Nor can the clause restrict any of the consumers legal rights under the act.
60 of 66
When is a term unfair under The Consumer Rights Act 2015?
A term is unfair, contrary to the requirement of good faith, if it causes a significant imbalance in the parties rights and obligations under the contract to the detriment to the consumer.
61 of 66
What facts are considered to access if a term is fair under The Consumer Rights Act 2015?
1) Does it put the consumer at a disadvantage? 2) Relevant circumstances when the contract was signed. 3) The nature of the contract.
62 of 66
Under The Consumer Rights Act 2015 terms should be?
The terms should be cut in plain intelligible language and any relevant terms must be prominent.
63 of 66
What happens when a contractual term is open to different meanings?
Where a contractual term is open to different meanings, the meaning given to it will be the one which is most favourable to the consumer.
64 of 66
What happens when a business engages in an activity which is merely incidental to the business under The Consumer Rights Act 2015?
If it isn't an integral part of the business and isn't carried on with a degree of regularity then the activity will not be in the course of the business and will be acting as a consumer and the Consumer Rights Act apply.
65 of 66
Who do neither the 1977 nor 2015 Acts apply?
Neither apply to contracts between private persons, who may restrict liability as much as they wish.
66 of 66

Other cards in this set

Card 2

Front

1) When can a contract be discharged through performance?

Back

1) Both parties perform their contractual obligations completely and exactly.

Card 3

Front

2) When can a contract be discharged through performance?

Back

Preview of the front of card 3

Card 4

Front

3) When can a contract be discharged through performance?

Back

Preview of the front of card 4

Card 5

Front

Example of severable contract?

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Accounting resources:

See all Accounting resources »See all LAW resources »