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Contract Law > Variations + some frustration > Flashcards

Variations + some frustration Flashcards

1
Q

When might obligations end by?

A

-Performance e.g time limit.
-Frustration, it becomes not possible or illegal to carry out the contract.
-Breach
-Agreement.

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2
Q

What renders a contract void?

A

Mistake

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3
Q

What is duress?

A

A form of pressure.
-Too much pressure can damage someone’s consent to contract. Or deny the party of a reasonable alternative.

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4
Q

What two ways can the pressure on both parties be evaluated?

A

1)The degree of wrongdoing involved (legitimacy of the pressure).
2)The effect it has on party autonomy (or genuine freedom of choice).

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4
Q

What happens when a party acts under duress?

A

It makes the contract voidable.

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5
Q

What test is used in economic duress?

A

A stricter test of causation whereby the threat must be a significant cause.

This involves showing that but for the threat the transaction would not have been entered into.

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6
Q

What is the use of security?

A

This reassures a lender that the debtor will repay the money in due course.

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7
Q

How are security rights taken?

A

Over the property of the debtor.

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8
Q

When can security rights be enforced?

A

If the debtor fails to repay the loan.

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9
Q

What is the discredited ‘overborne will’ theory?

A

The courts originally insisted that the pressure must overbear the will of the victim in duress for there to be no consent.

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10
Q

How was the ‘overborne will’ theory rectified in Pao On v Lau Yiu Long?

A

The Privy Council stated that duress must ‘amount to a coercion of will, which vitiates consent. That the it was not a voluntary act’.

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11
Q

What is best focused on instead of the ‘overborne will’ theory?

A

Focusing on the nature of the choice made and the extent to which it has been compromised, how reasonable the alternatives are.

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12
Q

What do the courts assess for the nature or effects of the pressure?

A

1) Legitimacy of the pressure.
2) Causative effect of the pressure.
3) Whether there was ‘no reasonable alternative’.

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13
Q

1) How is Williams v Roffey an example of what may be a more legitimate demand?

A

The main contractors offered to pay more rather than the sub-contractors demanding more.

Yet when even when circumstances change it is harsh to deny another party of their bargain.

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14
Q

1) When can there be illegitimate pressures?

A

When a party acts in bad faith by taking advantage of another part’s position.

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15
Q

1) What happened in Atlas Express Ltd v Kafco?

A

-Atlas Express waited until last minute at the height of the Christmas rush until it threatened to breach its contract.
-Kafco (basket-weavers) faced losing their lucrative pre-Christmas contract with Woolworths if they could not have their baskets delivered and so they were forced to agree to the demand.

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16
Q

1) Why did Atlas sue Kafco?

A

Kafco only paid what the bill would have been on the other contract.

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17
Q

1) Why did Atlas lose?

A

It was a case of economic duress, the degree Kafco would lose out would be greater.

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18
Q

1) What is the obvious problem with the ‘bad faith test’ and legitimacy test?

A

Where to draw the line.

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19
Q

1) What was Atlas v Kafco an example of?

A

Sometimes a party acts in ‘bad faith’ by taking advantage of the other party’s weak position.

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20
Q

1) What is Progress Bulk Carriers v Tube City IMS LLC, an example of?

A

The pressure need not come from a threat to breach the contract.

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21
Q

What happened in Progress Bulk v Tube City?

A

Tube City (shipowners) had already breached the charter contract and demanded Progress Bulk (charterer) to waive all its claims for damages before it provided another ship.

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22
Q

1) In Progress Bulk what was the decision?

A

Progress Bulk sued Tube City for economic duress.

-Progress Bulk won, the contract was voidabele for duress.

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23
Q

1) In Progress Bulk what was lawful and unlawful?

A

Asking for a waiver is lawful but Tube City’s prior breach of contract placed Progress Bulk in vulnerable position, amounting to illegitimate pressure.

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24
Q

2) For economic duress the threat to breach be?

A

A ‘significant cause’ in inducing the claimant to enter into the contract.

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25
Q

2) What happened in Huyton v Cremer?

A

Mance J explained that the victim must show that he or she would not have entered the transaction ‘but for’ the threat.

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26
Q

2) What happened in Morley v Royal Bank of Scotland?

A
  • The appellant’s claim of economic duress by the bank failed as the threats had not been the cause of entering the contract.
    • It was clear that the threats against him were ineffective as they were successfully resisted by him and the impugned agreement was closer to the one originally proposed by the appellant.
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27
Q

3) In Huyton v Cremer what did Mance J state was needed alongside the ‘but for’ test?

A

The victim must also show that there was ‘no reasonable alternative’.

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28
Q

3) In Pakistan International Airlines v Times Travel what did Lord Burrow state?

A

‘Three elements need to be established for … economic duress: an illegitimate threat; sufficient causation; and that the threatened party had no reasonable alternative to giving in to the threat’.

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29
Q

What is undue influence?

A

Undue influence inquiry identifies when some pressure becomes too much.

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30
Q

What was duress and undue influence initially?

A

Duress was a common law doctrine and undue influence the creation of equity.

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31
Q

What does both duress and undue influence show the courts’ aversion to?

A

The ‘puppet effect’ where one party makes the other do things that they would not otherwise do independently.

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32
Q

How would William v Baley decision differ today?

A

It was decided on the grounds of undue influence, but really the bank pressurised the father through an unspoken threat - it would be lawful act duress.

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33
Q

What is undue influence reserved for?

A

When too much influence arises from an existing relationship between the parties.

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34
Q

What two classes can undue influence be decided into?

A

1) Evidence of actual undue influence being exercised.
2) No direct evidence of undue influence but can be inferred based on the party’s relationship and the transaction.

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35
Q

For duress where is the influence derived from?

A

Pressure alone.

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36
Q

Where is undue influence derived from?

A

-An existing relationship of trust and confidence between two parties.
-Proof that excess influence was exercised in the relationship.
-Rebuttable presumption that too much influence was exercised and calls for an explanation.

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37
Q

What is becoming less common?

A

Actual undue influence which cannot be brought under economic duress.

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38
Q

What is presumed undue influence?

A

When a party will be unable to prove that undue influence was exercised over them, instead the courts can infer that one party has failed to safeguard the otehr party’s interest.

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39
Q

What facts do the courts look for to infer undue influence?

A
  • That the complainant reposed trust and confidence in the other party, or the other party
    acquired ascendancy over the complainant; and
    • A resulting transaction that is ‘not readily explicable by the relationship of the parties’ or which ‘calls for an explanation’.
      This can be rebutted by the defence.
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40
Q

For undue influence to be inferred what must the party do?

A

-Prove there was a relationship between them.
-A transaction calling for an explanation.

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41
Q

How can the defendant rebut the presumption of there being a relationship of trust and confidence and a transaction calling for an explanantion?

A

By showing that the party acted independently from any influence e.g had independent advice.
-Etridge showed this may tip the balance.

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42
Q

What will the court do if it finds a contract was the result of undue influence?

A

It will refuse to enforce it.

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43
Q

What will the court do if the undue influence is executed or partly performed?

A

It will undo it through the remedy of recission.

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44
Q

If a party is under undue influence from a third party, will this impact the contract?

A

The bank must have some knowledge about the third party’s actions of impropriety

45
Q

When does constructive notice apply?

A

When a party does not usually have notice of a particular event but the courts deem there was notice because the party was negligent.

46
Q

What is actual notice?

A

When the party is aware of the third party’s undue influence.

47
Q

What must the party do to prevent constructive notice?

A

Take reasonable steps when the facts suggest undue influence or irregularity.
-They could book a private meeting or rely on confirmation from a solicitor.

48
Q

What is procedural and substantive unfairness?

A
  • Assess the parties behaviour leading to the contract.
    • Not primarily concerned with the substance of the contract and whether it is fair because the parties have the freedom to what they contract to.
49
Q

What are unconscionable bargains?

A

Where the law is prepared to intervene primarily because of the unfairness of the transaction.

50
Q

What do unconscionable bargains consist of?

A

-One party is inherently at a disadvantage, exploited for it and there must also be ‘unconscionable conduct’.

51
Q

What are the three features of unconscionable bargains?

A

1) An unfair bargain.
2) A disadvantaged party with no independent advice.
3) An unconscionable conduct from another party.

52
Q

What are discharge of obligations?

A

Relates generally to the circumstances in which a contract has been brought to an end.
Where a contract is discharged each party is free of their contracting obligations.

53
Q

What are most contracts discharged by?

A

Primary obligations. Where both party’s have performed their obligations.
If one party has breached it, the other can claim damages unless the contract has been frustrated.
If non-performance amounts to a repudiatory breach (e.g breach of condition) they will be released from obligations.

54
Q

When is a contract discharged by agreement?

A

When both parties agree to end and release each other from contractual obligations.

55
Q

To be discharged through agreement what two things are required?

A

Accord= Agreement, freely given.

Satisfaction= Consideration

56
Q

What consideration is required for parties with continuing obligations?

A

The consideration will be both of them giving up their rights under the contract.

57
Q

When is consideration an issue?

A

When one party has fully performed their part of the contract and the other has not.
The non-performing party must provide consideration for it to be binding.

58
Q

What about if the agreement is made by deed?

A

No requirement to provide consideration.

59
Q

When is the contract frustrated?

A

When there is a change in circumstances after the contract was made.
This is relevant to performance and so radical that the performance is no longer what a party agreed to undertake.

60
Q

What does the change in circumstances make the contract?

A

Either:
1) Impossible to perform.
2) Deprives the contract of its commercial purpose without the parties being at fault for this.

61
Q

What is the result of frustration?

A

1) Each party is discharged of from future obligations under the contract.
2) Neither party may sue for breach.

62
Q

When is the change in circumstances only relevant?

A

When it changed circumstance increases the burden of performance.

63
Q

Whose judgement provides clarification about frustration?

A

The judgment of Lord Radcliffe in Davis Contractors v Fareham UDC.

64
Q

What did Lord Radcliffe stay?

A

‘Frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract’.

65
Q

What is the problems with Lord Radcliffe’s definition?

A

Since frustration discharges the contract, the relevant circumstances and their effects must be very serious to justify it.

66
Q

What are the circumstances where there were claims for frustration?

A

1) The physical impossibility of the contract.
2) Frustration of the purpose of the contract, performance is possible but pointless.

67
Q

What is an example of the contract being frustrated because it is physically impossible due to an unforeseen event?

A

Taylor v Caldwell

68
Q

What should be noted about physically impossible contracts?

A

The contract must be absolute - there must be performance or pay damages for non-performance. It is only in consequence of the unforeseen event that the performance of the contract is impossible.

69
Q

When is there a frustration of purpose?

A

When one can allege the existence of an implied term about the purpose of the contract, it is possible to conclude that frustration occurs where the performance of the contract is possible, but the purpose of the contract will no longer be possible to be met.

70
Q

What can be difficult about the purpose of the contract?

A

Identifying the purpose of the contract within the context of the agreement made between the parties can be difficult (see, for example, Krell v Henry and Herne Bay Steam Boat Co. v Hutton).

71
Q

What statute includes the remedy for frustration?

A

The Law Reform (Frustrated Contracts) Act 1943.

72
Q

What is the remedy for frustration?

A

Since non-performance is not a breach when the contract is found to be frustrated, the remedy found is one that simply dictates the discharge of any unperformed obligations and equal apportionment of loss between the parties.

The Act tries to do this drawing on the restitutionary remedies available in contract, the quasi-contractual remedies of recovery and quantum meruit

73
Q

Does a breach of contract automatically bring the primary obligations to an end?

A

Nope!

74
Q

When are the primary obligations brought to an end?

A

Subject to some exceptions, primary obligations are terminated only when the claimant elects to terminate them, with the power to elect termination arising from the breach in certain cases.

75
Q

What do all breaches give rise to?

A

A right to damages.

76
Q

What breach only creates the power for electing to terminate?

A

Breach of a condition.

77
Q

What breach only gives rise to damages?

A

Breach of warranty.

78
Q

What highlights the difficulty in distinguishing conditions and warranties?

A

The intermediate or innominate term.

79
Q

What happened in Acros v Ronaasen

A

The Court found that the buyers were entitled to reject the subject-matter of the contract because it was not in compliance with the terms agreed.
-The buyer has the right to demand goods to be of certain specifications and reject them if they do not meet those standards.

80
Q

Give a case example where the performance was partially evident?

A

Hoenig v Isaacs.

81
Q

What was held in Hoenig v Isaacs?

A

The extent to which the entire performance of a contract is a condition precedent to payment depends on the construction of the said promise.

82
Q

Give an example of when an innominate term is found?

A

Where the contract is for services in consideration of a lump sum payment upon completion, the Court found the promise to complete the work to be an innominate term.

In such cases, the person contracting with someone for the provision of a service cannot deprive the contractor of any payment because of defects found in the course of performing the service.

83
Q

What happens when the party does not elect to terminate after a breach of condition?

A

He may affirm the contract (treat the breach of condition as breach of warranty).
This means the primary obligations must be performed (with the claimant’s damages confined to damages for breach of warranty).

84
Q

What are the methods of variation?

A

-Agreement in another contract to vary the contract.
-Novation.
-Can be done by deed.
-Otherwise requires consideration.

85
Q

What is novation?

A

Completely replacing the old contract with a new one.

86
Q

What is required for novation?

A

Must be a valid contract.

87
Q

What are the methods of variation?

A

-Agreement in another contract to vary the contract.
-Novation
-Can be done by deed
-Otherwise requires consideration.

88
Q

What are the advantages of novation?

A

Not having to read two documents together, consideration ceases to be a problem because parties are giving up their existing rights under the original contract.

89
Q

What is meant by done by deed?

A

To execute a deed it must be in writing, this must be signed by the parties and a witness to the signing.
-Either state it is signed as a deed or must have a seal on it.
-Promissory estoppel
-Absent duress

90
Q

What does a deed not require to be enforceable?

A

Consideration.

91
Q

What is the limitation period in a deed for breach of contract action?

A

12 years, whereas only six for tort action.

92
Q

What is promissory estoppel?

A

Stops the person from going back to the original promise of paying the full debt. Acknowledges the common law rule will apply and intervenes to stop the person from going back to the promise when that action is inequitable. Can only be used as a defence for consideration going back to the original promise.

93
Q

What does privity of contract mean?

A

Only parties can vary the contract.

94
Q

What contracts require consideration?

A

Simple contracts and not specialists contracts.

95
Q

What is a contract of guarantee?

A

Where one party promises to indemnify another for the faults of another party. These must be fully in writing, otherwise are void. Do not have to be in deed.

96
Q

What is the doctrine of promissory estoppel?

A

Duress will invalidate a contract from the start, yet most commonly occurs in the context of variation.

97
Q

What are important facts surrounding promissory estoppel?

A
  • Gets around lack of consideration/formality.
    • Equitable doctrine.
    • Subject, therefore to equitable principles.
    • Rules of evidence.
    • Limitations on doctrine as a result of evidential or origin.
    • Shield, not a sword.
98
Q

What does promissory estoppel only apply to?

A

Varying existing contracts.

99
Q

How can full rights be reinstated?

A

By notice or become automatically reinstated by circumstances.

100
Q

What are the three types of duress?

A
  • Duress of the person.
    • Duress of goods
      Economic duress.
101
Q

What case for threat against the person?

A

Barton v Armstrong.

102
Q

What case for duress of goods?

A

The ‘Universe Sentinel’

103
Q

What case fore economic duress?

A

The Atlantic Baron and Atlas Express v Kafco.

104
Q

What must the threat be?

A

-Illegitimate.
-Must coerce the innocent party.

105
Q

What was clarified in Barton v Armstrong?

A

Only needs to be one factor affecting the decision – burden of proving that it was not a factor lies on the party making the threat.

106
Q

What is required to vary a simple contract?

A

Fresh consideration (Stilk v Myrick).

107
Q

What do deeds not need to be supported by?

A

Consideration.

108
Q

What can a deed only be modified by?

A

A deed, any novation of it must also be in a deed.

109
Q

What was stated in MWB Business Exchange Centres Ltd v. Rock Advertising Ltd?

A

If a written contract prescribes that it can only be varied in writing then that must usually be respected.

110
Q

What was stated in Central London Property Trust Ltd v. High Trees House Ltd?

A

Parties may, however, be held to waive or suspend their rights under an existing contract, through the equitable doctrine of promissory estoppel.

111
Q
A

Contract Law (13 decks)

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