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Law > Chapter 3 - Termination of contract > Flashcards

Chapter 3 - Termination of contract Flashcards

1
Q

How can a contract be discharged by frustration?

A

If performance or further performance is rendered impossible or futile

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2
Q

When is a contract deemed to be breached?

A

Failure to perform contractual obligations sufficiently, unless contract discharged by frustration or other lawful excuse

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3
Q

What are some examples of contracts have been frustrated?

A
  • Destruction of the subject matter
  • Personal incapacity to perform a contract of personal service
  • Government intervention
  • Non-occurrence of an event which is the sole purpose of the contract
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4
Q

What is the law reform (frustrated contracts) act 1943?

A

Act applies unless contract expressly provides otherwise

Consequences of frustration under the act are:
- Any money paid under the contract before the frustrating event is to be repaid.
- Any sums due for payment under the contract cease to be payable
- Recover of expenses incurred during performance of contract
- Repayment of valuable benefit

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5
Q

Where might a lawful excuse apply?

A

Where he has tendered performance but this has been rejected

Where the other party has made it impossible for him to perform

Where the parties have by agreement permitted non-performance.

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6
Q

What is a repudiatory (serious) breach?

A

Breach of a term regarded as a fundamentally important term

Breach deprives the injured party of substantially the whole benefit of the contract

Can be said to “go to the root of the contract”

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7
Q

What is an anticipatory breach?

A

Where one party renounces his contractual obligations explicitly or implicitly in advance

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8
Q

What happens if a breach is sufficiently serious?

A

Injured party may:
- Treat contract as discharged immediately and sue for damages
- Allow contract to run until an actual breach takes place

Innocent party may continue prep for performance and recover agreed price for services

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9
Q

What are the remedies for repudiatory breach?

A

If the innocent party elects to treat the contract as discharged, he must notify the other party of his decision. Following applies:

  • Not discharged from contractual obligations due at the time of termination, but he is discharged from his future or continuing contractual obligations and cannot be sued on them
  • Need not accept nor pay for further performance
  • May be able to refuse to pay for partial or defective performance already received, unless
    the contract is severable
  • Can reclaim money already paid in respect of defective performance
  • Can still claim damages from the defaulter.
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10
Q

What is the purpose of damages?

A

To put the parties in the position they would be in if the contract had been correctly performed.

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11
Q

What is the 2 part test that needs satisfying in order to claim damages?

A

Remoteness of damage

Measure of damages

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12
Q

What is remoteness of damage?

A

Damages may only be awarded in respect of those losses which may fairly and reasonably be considered as, either:
- naturally arising
- if the losses are not reasonably foreseeable

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13
Q

How are damages measured?

A

Expectation interest - to put the person in the position he would have been in if the contract had been performed

Reliance interest - to put the claimant in the position he would have been in if he had not relied on the contract

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14
Q

What are the different typesof damages?

A

Damages will be awarded for actual financial loss.

Mental distress and damages for loss of enjoyment may be recoverable where the principal purpose of the contract is the provision of enjoyment

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15
Q

What is mitigation of loss?

A

Assumed that the claimant will take all reasonable steps to reduce or mitigate losses

Not required to take discreditable/risky measures

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16
Q

What are liquidated damages?

A

Parties may include up-front in their contract a fixed sum or formula to determine the damages payable for a breach

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17
Q

What is a penalty cause?

A

Where the liquidated damages are excessive the penalty clause is not enforceable

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18
Q

What is an equitable remedy?

A

Court order of specific performance

Only awarded when damages are not an adequate remedy

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19
Q

What are the 3 types of injunction?

A

Mandatory - directs the defendant to take positive steps to undo something he has
already done in breach of contract

Prohibitory - requires the defendant to observe a negative promise in a contract

Asset freezing

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20
Q

What is an alternative dispute resolution (ADR)?

A

Any process other than use of court to resolve disputes

Key procedures are arbitration, mediation and conciliation.

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21
Q

How is arbitration dealt with?

A

Settles by an independent person, act in a similar way to a judge in a court case.

Parties must agree to submit to the process, usually an arbitration agreement which was created at the beginning of the relationship, contract present means contract laws apply

Arbitration agreement sets out what the process involves as well as rights and obligations of the parties

Disagreements to the agreement must be settled in court

International arbitration agreements are covered by a UN Model Law on Arbitration

22
Q

How is mediation and conciliation handled?

A

Independent 3rd party involved, doesn’t act like a judge, instead assist parties in coming up with their own solution

Solutions and mediation agreements are not automatically legally binding on the parties

23
Q

What are the advantages of ADR compared to litigation?

A

Expert of relevant field
Cheaper than court
Held in private
Can tailor to needs of the parties
Quicker than going to court

24
Q

What are the disadvantages of ADR compared to litigation?

A

Decision of an expert lacks legal authority
Disagreements could still go to court
Could run for a long time
No privacy
Not legally enforceable
No timescale

25
Q

What is an exclusion clause?

A

Any clause which purports to restrict or exclude liability for breach of contract or negligence

26
Q

How is the exclusion clause enforceable?

A

Must be an integral part of the contract, depends on whether doc is signed.

If signed:
- Term is binding
- Any ambiguity will be interpreted against the person who is seeking to rely on it

If not signed:
- Timing
- Communicated
- Any ambiguity will be interpreted against the person who is seeking to rely on it

27
Q

What is the Unfair Contract Terms Act (UCTA) 1977?

A

Makes legislative provision for exclusion clauses in certain contracts - can render such clauses void

Doesn’t apply to insurance contracts or contracts to transfer land.

Concerned with business liability only

A contract between a business and a consumer is covered by the Consumer Rights Act 2015

28
Q

What are the consequences of UCTA 1977?

A

Void if:
- Any clause or notice that attempts to exclude or restrict liability for death or personal injury arising from negligence
- In contracts of sale or hire purchase, a clause that purports to exclude or limit liability for breach of the undertakings as to title of the seller or owner, implied by the Sale of Goods Act 1979

Void unless it can be shown to be reasonable:
- Any clause that attempts to restrict liability for other loss or damage arising from negligence

29
Q

What is reasonableness?

A

Where the statutory test of reasonableness applies, the term must be fair and reasonable having regard to all the circumstances which were, or which ought to have been, known to the parties when the contract was made.

30
Q

What is the burden of proof in a reasonableness test?

A

Lies on the person seeking to rely on the clause.

Statutory guidlines have been included in UCTA to help in the determination of reasonableness

Courts also consider insurance and whether any misrepresentations were made

31
Q

What is the consumer rights act (CRA) 2015?

A

Provides statutory control in respect to consumer contracts and notices

Terms in contracts between businesses and consumers will only be binding if deemed fair

32
Q

How does CRA 2015 determine whether a term is fair?

A

Considers whether it can be deemed automatically unenforceable

Can’t restrict any of the consumers legal rights under CRA 2015

If clause does restrict, automatically unenforceable and void

33
Q

What are the requirements of the consumer rights act 2015?

A

Terms should be written in plain intelligible language and should be prominent

Circumstances when the contract was signed

The nature of the contract

34
Q

What is the normal method of discharge of a contract?

A

Performance

35
Q

Are complete and exact performance of all contract terms required?

A

Not necessarily

36
Q

What is generally sufficient discharge?

A

Substantial performance of a party’s contractual obligations

37
Q

How are most contracts treated?

A

Severable, may leave remaining obligations to be performed even after others have been discharged

38
Q

Is it sufficient discharge when one party prevents performance?

A

Yes

Otherwise other party is entitled to sue for damages for breach of contract or bring a quantum meruit action to claim for work already completed

39
Q

If it is impossible to perform a contract, is there a contract?

A

Usually not

40
Q

When does the duty to mitigate losses arise?

A

Doesn’t arise until an innocent party accepts the breach

Must show losses caused by the actual breach

41
Q

Do contractual disputes reach court?

A

No, usually resolved by:
- negotiation
- mediation/arbitration
- adjunction
- expert determination

42
Q

What happens if the defendant proves that chain of causation was broken by the claimant?

A

Defendant won’t be liable

43
Q

What happens if the losses are exceptional/abnormal and not reasonably forseeable?

A

Defendant will only be liable if they knew (at time of contract) of special circumstances behind the abnormal consequences

44
Q

When mitigating a loss, who does the burden of proof lie with?

A

Burden of proof is on the defendant to show that the claimant failed to take a reasonable opportunity of mitigation

45
Q

Do UCTA or Consumr rights act apply to private persons?

A

No

46
Q

What does CRA 2015 state about a term being unfair?

A

Term is unfair if, contrary to the requirement of good faith, it causes significant imbalance in the party’s rights and obligations under the contract to the detriment of the consumer

47
Q

How can an anticipatory breach be implied?

A

From conduct, need not be explicit

48
Q

If a contract is discharged, can the innocent party still claim damages?

A

Yes

49
Q

What does the UCTA 1977 only apply to?

A

Commercial contracts between businesses

50
Q

Is an apology a possible remedy under ADR?

A

Yes

Law (13 decks)

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