CHAP 9: Termination and Enforcement of Contracts Flashcards Preview

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Flashcards in CHAP 9: Termination and Enforcement of Contracts Deck (14):
1

#CH9 List 4 Ways in which a contract can be brought to an end

Through PERFORMANCE: both parties complete their contractual obligations.
Through AGREEMENT: the parties are always FREE to voluntarily bring the contract to an end.
Through FRUSTRATION: When an important, unforeseen event occurs
Through BREACH: a serious breach can release the innocent party from continuing with the contract

2

#CH9: What is Termination through Performance?

1. Performance is complete when all implied and express promises have been fulfilled.
2. Does not necessarily mean the relationship ends.
3. Parties may continue to do business by means of new, continuing, and overlapping contracts

_ PERFORMANCE BY OTHERS
1. Law distinguishes between those who have the contractual obligation and those who may actually do the necessary work.
2. Vicarious performance – Performance of contractual obligations through others

3

#CH9: What is Termination by Agreement?

PARTIES may agree to:
1. enter into a whole new contract, known as novation
2. vary certain terms of the contract
3. end the contract
4. substitute a party – transferring one party’s rights and obligations to someone else; a limited form of novation

NOVATION: The substitution of parties in a contract or the replacement of one contract with another

4

#CH9: What is Transfer of Contractual Rights

ASSIGNMENT OF A CONTRACT: The transfer of a right by an assignor to an assignee
1. A creditor (the assignor): assign the right to collect to another person (the assignee) without the agreement of the debtor.
2. To be effective, the debtor must have notice of the assignment => she knows to pay the assignee rather than the creditor.

5

#CH9: What is Termination by Frustration?

FRUSTRATION
1. Termination of a contract by an UNEXPECTED event or change that makes performance functionally impossible or ILLEGAL
2. NEITHER side is liable to the other for breach.

MUST ESTABLISH THAT:
1. event was dramatic and unforeseen
2. neither party had assumed risk of the matter occurring
3. event arose without being either party’s fault
4. performance functionally impossible or illegal

6

#CH9: What is Enforcement of Contracts?

Non-performance of contractual obligations may result in breach of contract and a lawsuit.

BALANCE OF PROBABILITIES: Proof that there is a better than 50% chance that the circumstances of a contract are as the plaintiff contends

7

#CH9: What is Proving Breach of Contract?

PLAINTIFF MUST DEMONSTRATE BEYOND THE BALANCE OF PROBABILITIES THAT:
1. there is a contract between the parties
Only the parties to a contract can enforce the rights and obligations it contains (privity)

2. there is a breach of contract
The other party failed to keep a promise or term in the contract

3. there is an entitlement to a remedy
Plaintiff must demonstrate that he or she is entitled to the remedy claimed.

8

#CH9: Classification of the Breach

CONDITION – An important term, which, if breached, gives the innocent party the right to terminate the contract and claim damages

WARRANTY – A minor term, which, if breached, gives the innocent party the right to claim damages only

INNOMINATE TERM – A term that cannot easily be classified as either a condition or a warranty

FUNDAMENTAL BREACH – A breach of contract that affects the foundation of the contract. Such a breach may render the entire contract, including the exclusion clause, inoperative

ANTICIPATORY BREACH – A breach that occurs before the date for performance

9

#CH9: What are Defences?

EXEMPTION OR LIMITATION OF LIABILITY CLAUSE: Clause limiting or excluding liability for breach

10

#CH9: What is Entitlement to a Remedy?

DAMAGES: Monetary compensation for breach of contract or other actionable wrong

REMOTENESS PRINCIPLE: Defendant is responsible for reasonably foreseeable damages suffered by the plaintiff.
Pain, suffering, and emotional distress are not generally accepted as being a consequence of breach of contract.

11

#CH9: What are Restrictions on Damages?

TEST FOR REMOTENESS
1. Damages could have been anticipated.
2. Damages are reasonably foreseeable.

DUTY TO MITIGATE: The obligation to take reasonable steps to minimize the losses resulting from a breach of contract or other wrong

12

#CH9: What are Equitable Remedies?


Special remedies that may be available where damages are an inadequate remedy for breach of contract, for example, Specific Performance

SPECIFIC PERFORMANCE : Court order for the party who breached the contract to do exactly what the contract obligated him to do

INJUNCTION: Promise not to engage in specified activities

INTERLOCUTORY INJUNCTION: Order to refrain from doing something for a limited period of time

RESCISSION: To restore the parties to the situation they were in before the contract was formed

13

#CH9: What are Restitutionary Remedies?

UNJUST ENRICHMENT: Occurs when 1 party has undeservedly or unjustly secured a b/f at the other party’s EXP

RESTITUTIONARY QUANTUM MERUIT: An amt that is reasonable given the b/f the plaintiff has conferred

14

#CH9: How to manage risk?

1. There are several risks that a business faces when the time comes to perform a contract.
2. It may be that the business cannot perform at all or that when it does perform, it does so deficiently.
3/ A business can attend to these possibilities proactively or reactively.