Flashcards
(23 cards)
What are the four primary ways a contract can be discharged
- Performance
- Agreement
- Frustration
- Breach
What happens when a contract is discharged by performance?
Both parties have completed their contractual obligations, and the contract is considered complete
What is the difference between a severable contract and an entire contract?
Severable contract allows partial performance to be paid for separately
Entire contract requires full performance before payment is due
What is the doctrine of substantial performance?
If a party has substantially completed their obligations, they ay still be entitled to payment, minus deductions for minor breaches
What is the legal doctrine of frustration?
Contract is frustrated when an unforseen event occurs that makes performance impossible / radically different from what was agreed
Give 4 reasons which would cause a contract to be frustrated
- Destruction of subject matter
- Personal incapacity
- Government intervention
- Non-occurrence of a fundamental event
What are the 3 legal consequences of frustration under the Law Reform (Frustrated Contracts) Act 1943?
- Money already paid must be refunded.
- Sums due before frustration are no longer payable.
- Expenses incurred before frustration may be recovered if just and reasonable
What are the 2 types of breaches? Define both types of breach
- Actual breach – when a party fails to perform when due.
- Anticipatory breach – when a party declares in advance that they won’t perform
What can the innocent party do in an anticipatory breach?
- Accept the breach and sue immediately (Hochster v De La Tour)
- Wait until performance is due, then sue
What are the 4 main remedies for breach of contract? State what each type provides for the innocent party
- Damages - financial compensation
- Specific performance - court orders completion
- Injunction - prevents further breaches
- Rescission - cancels contract
What is the rule on remoteness of damage (Hadley v Baxendale)?
Damages are only recoverable if:
1. They arise naturally from the breach.
2. They were within the contemplation of both parties at contract formation
A company, GreenTech Ltd, enters into a contract with SolarGen Ltd to install solar panels for £500,000. The contract includes a force majeure clause excusing performance in case of unforeseen natural disasters.
Before installation begins, a new government regulation bans commercial solar panel installation in the area due to environmental concerns. GreenTech Ltd claims frustration, while SolarGen Ltd argues breach of contract.
Which of the following is the MOST accurate legal outcome?
A) The contract is frustrated because government intervention made performance illegal, discharging both parties from further obligations.
B) GreenTech Ltd is in breach because government regulation does not excuse non-performance unless explicitly stated in the contract.
C) SolarGen Ltd can demand full payment, as GreenTech Ltd assumed the risk of regulatory changes when signing the contract.
D) The force majeure clause applies, but frustration is still irrelevant because the ban only prevents installation, not the sale of solar panels.
A
- Frustration applies because supervening illegality (government regulation banning installation) makes performance impossible.
- Under Taylor v Caldwell (1863) and Denny, Mott & Dickinson Ltd v James B Fraser & Co Ltd (1944), contracts become void automatically if a new law makes them illegal.
- B is incorrect because frustration operates independently of explicit contract terms unless the risk was specifically allocated.
- C is incorrect as frustration means the contract is terminated, and payment is only recoverable under the Law Reform (Frustrated Contracts) Act 1943.
- D is incorrect because the force majeure clause only applies to natural disasters, and frustration still applies due to illegality.
Richard agrees to paint Sarah’s house for £5,000. He completes the entire job but uses slightly different shades of paint in two rooms. Sarah refuses to pay. Under the doctrine of substantial performance, what is Richard entitled to?
A) Nothing, because the contract required exact performance.
B) The full £5,000, since he completed the work.
C) A reasonable sum minus deductions for minor defects.
D) Only reimbursement for materials, since he did not perform precisely.
C – Substantial performance allows recovery minus deductions for minor breaches (Bolton v Mahadeva).
Leo agrees to supply 100 custom-made desks in batches of 20, payable upon delivery of each batch. After delivering 40 desks, the buyer refuses further payment. Can Leo enforce payment for the delivered desks?
A) No, because the contract is entire, and full performance is required.
B) Yes, because divisible contracts allow partial payment for completed parts.
C) No, because only full delivery entitles Leo to any payment.
D) Yes, but only if he proves frustration prevented further performance.
B – A divisible contract allows partial enforcement (Ritchie v Atkinson).
A musician rents a concert hall for a performance. A week before the event, an earthquake destroys the venue. The musician claims frustration. What is the correct legal outcome?
A) The contract is frustrated, as destruction of the venue makes performance impossible.
B) The musician must still pay unless the contract has a force majeure clause.
C) The venue owner must provide an alternative location or be liable for breach.
D) No frustration applies, as the musician can perform elsewhere.
A – Frustration occurs when the subject matter is destroyed (Taylor v Caldwell).
A company agrees to import a rare wood, but a new law bans its importation before delivery. What is the legal impact?
A) The contract is frustrated due to supervening illegality.
B) The contract continues, and the seller must find alternative materials.
C) The buyer can demand delivery, as the contract was valid when made.
D) The seller must refund the payment but still owes damages.
A – Supervening illegality frustrates the contract (Denny, Mott & Dickinson Ltd v James B Fraser & Co Ltd).
On May 1, a company contracts to supply machinery by July 1. On June 1, it notifies the buyer that it will not deliver. What are the buyer’s legal options?
A) Sue immediately or wait until July 1 to see if delivery happens.
B) Wait until July 1, as anticipatory breach is not actionable early.
C) Cancel the contract but cannot claim damages until July 1.
D) Demand immediate delivery, regardless of the supplier’s statement.
A – The buyer can sue immediately or wait (Hochster v De La Tour).
Which of the following would be considered a repudiatory breach?
A) A supplier delivers 1 day late, causing minor inconvenience.
B) A band cancels its headline concert performance at short notice.
C) A builder uses the wrong paint color on a house.
D) A hotel mistakenly double-books a room but offers a better alternative.
B – A repudiatory breach deprives the other party of the contract’s whole benefit (Poussard v Spiers)
In Hadley v Baxendale, why was the mill owner not awarded damages for lost profits?
A) The courier was unaware that late delivery would cause financial loss.
B) The contract explicitly excluded liability for delays.
C) The mill owner did not prove actual losses.
D) The contract was frustrated, so no damages applied.
A – Damages must be reasonably foreseeable at contract formation (Hadley v Baxendale).
In which case is specific performance the most appropriate remedy?
A) A famous singer refuses to perform after signing a contract.
B) A landlord refuses to transfer legal ownership after selling a house.
C) A supplier delays delivery of generic goods by a few weeks.
D) An employer wrongfully terminates an employee’s contract.
B – Specific performance is used for unique assets, such as land (Falcke v Gray).
Under the Law Reform (Frustrated Contracts) Act 1943, what happens to money paid before frustration?
A) It must be refunded, but reasonable expenses can be deducted.
B) It is forfeited, as frustration benefits both parties.
C) It remains payable in full, regardless of frustration.
D) It is divided equally between both parties.
A – Money paid before frustration must be refunded, minus just expenses.
A company contracts to supply steel, but a global shipping crisis delays transportation for six months. Does frustration apply?
A) No, because delays are temporary and do not make performance impossible.
B) Yes, because the delay is long and unexpected.
C) No, because the contract should have included a force majeure clause.
D) Yes, because frustration applies to all external events.
A – Frustration only applies if performance is impossible, not just delayed (Davis Contractors v Fareham).
