perforance and breach of contract

Question 1

breach of contract

Answer 1

a breach of committed when a party without lawful excuse fails or refuses to perform what is due to him under the contract

Question 2

where do obligations in a contract come from?

Answer 2

Express Terms: Production specification

Implied Terms: Contracts between trader and consumers: A term that the good are satisfactory

Question 3

Strict liability

Answer 3

default position in contract law - only have to prove that they didn’t do it

Question 4

fault-based liability

Answer 4

take ‘reasonable care’ or ‘use reasonable endeavours’

Question 5

what are the two basic remedies for breach of contract

Answer 5

damages and termination of contract

Question 6

damages

Answer 6

an award of monetary compensation and the objective is to put the innocent party in the position as if the contract had been performed.

Question 7

termination of contract

Answer 7

if the innocent party is entitled to terminate the contract because of a breach, they can effectively tear up the contract and refuse to perform or accept performance of future obligations. It is powerful and an advantageous remedy and it is used commercially

Question 8

Is an innocent party always entitled to terminate the contract

Answer 8

No

Question 9

condition precedent

Answer 9

something that must be done as a condition of the other party’s performance - something has to be performed before a contract price arises

Question 10

entire obligations rule

Answer 10

a party must perform his entire obligation before receiving payment

Question 11

severable obligations rule

Answer 11

party can receive payments at various stages of the contract

Question 12

Cutter v Powell

Answer 12

Mr Powell engaged Mr cutter as a second mate on a ship and the contract provided for a high level of pay if Mr Cutter continues and does his duty from the port of Jamaica to the port of Liverpool. Mr Cutter died and his widowed wife wanted to claim for a proportion of his wages under this contract.. Courts held that the obligation to pay the contract price had not arisen has he didn’t finish the performance.

Law Reform (frustrated contract) act 1943 - where non-performance arises due to frustration (like in Cutter v powell) the court may award a ‘just sum’ in respect to the valuable benefit.

Question 13

Taylor v Laird

Answer 13

Commander of ship hired for £50 a month, but he didn’t complete the voyage. Held that it was a severable obligation so he had to pay for the work he done

Question 14

substantial performance doctrine

Answer 14

mitigates the harshness of the entire obligations rule. If the work is done and is regarded fit for the purpose, then the party is obliged to receiving his contractual price

Question 15

Hoenig v Issacs

Answer 15

redecoration of flat for £750, minor defects totalling up to £55. Courts held that that the works were finished and the claimant was entitled to the full contract price, but defendant could set-off £55

Question 16

Bolton v Mahadeva

Answer 16

Installation of central heating system for £564. System had serious defects and unfit for purpose so the customer not obliged to pay the contract price.

Question 17

quantum merit

Answer 17

‘as much as it deserves’ - courts may award a sum of the benefit obtained by the other party if a contract has only been partly performed and the right to the price has not yet arisen. VERY RESTRICTIVE AND LIMITED

Question 18

Anticipatory breach

Answer 18

after a contract is made, but before it was meant to be performed. Breach before the works are meant to start

Question 19

White and Carter (Councils) v McGregor

Answer 19

McGregor’s agent entered into a contract for the advertising of McGregors business on local authority litter bins. Before the contract began, Mc found out and informed the council he did not want the contract. His actions amounted to an anticipatory breach of contract.
POLICY QUESTIONS: should this be actionable? some may argue that they should be held to the terms of the contract and it undermines contract sanctity. However the innocent party could obtain performance elsewhere

Question 20

what can an innocent party do when there is an anticipatory breach

Answer 20

They can accept it, regard the contract as terminated and sue for damages immediately. Honchster v De la Tour: the innocent party does not have to wait till the contract was about to begin

Question 21

what does the law allow the innocent party to do in the event of an anticipatory breach

Answer 21

The law allows the innocent party to affirm (continue with) the contract and claim the contract prices like in White and Carter v Mcgregor

Question 22

2 exceptions for when they can’t carry on the contract after an anticipatory breach

Answer 22

1. When the innocent’s party performance of the contract would require the other party to do something i.e. their co-operation
2. When the innocent party has no legitimate interest in performing the contract and damages would be an adequate remedy - Gator Shipping Corporation v Trans-Asiatic Oil Ltd SA and Occidental shipping establishment

Question 23

can every breach of contract entitle the innocent party to terminate the contract

Answer 23

no

Question 24

what happens when your entitled to terminate a contract

Answer 24

you can effectively tear up a contract and refuse to perform or accept performance of future obligations.

Question 25

How is termination different from rescission

Answer 25

rescission has the effect of unwinding the transaction from the beginning

Question 26

When do you have the right to terminate for breach

Answer 26

- When there's a breach of a condition, the innocent party is entitled to terminate the contract and claim damages. - When there's a serious breach of an innominate term, but breach must be sufficiently serious (accumulations of breaches)

Question 27

classification of terms

Answer 27

Conditions: the most important terms,'roots' or 'essence' of the contract warranties: less important term, and this breach would only entitle a party to claim for damages innominate terms: important principle, inbetween a condition or a warranty

Question 28

how do we identity what a contract term is?

Answer 28

objective intentions of the parties. From the interpretation of the contract you can infer what were meant to be warranties and conditions

Question 29

Lombard North Central plc v Butterworth

Answer 29

contract to rent a computer, which provided that timely payment of the rental 'shall be the essence of' the agreement. this was a condition of the contract and if the other party didn't meet the condition the owner was entitled to terminate the contract

Question 30

L Schuller AG v Wickman Machine Tool Sales Ltd

Answer 30

Schuler were manufactures of pannel presses and they entered into a distribution contract with Wickmman. A clause of the contract was that it was a 'condition' that Wickamn should visit certain major car manufacturers once a week. Another section of the contract provided how they breach can be remedied. Out of a large number of visits, Wickman missed a couple (trivial breach), and Schuler tried to terminate the contract for the breach of the condition. Lord Reid affirmed that the general principle is that parties can make conditional to the contract anything they like, even if it's trivial. -However the HL interpreted the clause in light of the whole contract to ascertain the parties objective intention: >there is more than one meaning to the word condition, it could be to simply denote a term of a contract >poorly drafted contract >they had a remedy for the breach, so the parties could not have intended that a breach could lead to a termination

Question 31

Rice v Great Yarmouth Borough Council

Answer 31

differents from the schuller case, had explicit termination clauses , which stated that a contract could only be terminated under serious breaches

Question 32

SALE OF GOODS ACT 1979, s.13

Answer 32

implied term that good will correspond to their description

Question 33

SALE OF GOODS ACT 1979, s.15A

Answer 33

'if the breach is so slight that it would be unreasonable for the buyer to reject the good, the breach may instead be treated as a breach of warranty'

Question 34

SALE OF GOOD ACTS 1979, s.11

Answer 34

Whether a term is interpreted as a condition, or a warranty depends in each case on the construction of the contract

Question 35

time clauses

Answer 35

time clauses are a type of term that specifies that something needs to be done by a certain time. TIME STIPULATIONS ARE OFTEN RECOGNISED AS CONDITIONS

Question 36

innominate terms

Answer 36

terms that are capable of being breaches in serious and trivial ways

Question 37

problems with the condition/warranty classification

Answer 37

- two-fold distinction between conditions is too rigid, doesn't reflect commercial reality - termination is a drastic remedy and not suitable for all breaches - innocent party may elect to terminate a contract because they can get a better deal elsewhere

Question 38

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

Answer 38

Charterers hired a ship for 24 months and the relevant terms of the contract was that the ship would be fully 'seaworthy'. The seaworthy clause was breached( ship was off hire for 5 weeks and with the prospect of a further 15 weeks) and the charterers purported to terminated the contract and claim damages. Ship owner tried to claim damages for charterers wrongful repudiation Court of Appeal reasoning: if a contract term is broad, like in this where there is serious and trivial breaches, then it is an innominate term. broad terms like this should not be classified by the courts Whether termination is appropriate should be assessed once the term has been breached: because if a term is interpreted as a condition, even though its trivial, it could lead to termination of the contract and this is contrary to commercial common sense. Termination should be last resort. If the term is interpreted as a warranty then no breach is capable of terminating the contract, even though it was so inefficient that it sank, which is contrary to commercial common sense Held: THE BREACHES DID NOT DEPRIVE THE CHARTERERS OF SUBSTANTIALLY THE WHOLE BENEFIT OF THE 2 YEAR CHARTER

Question 39

how to ascertain whether the innocent party can terminate the contract if it was an innominate term that was breached

Answer 39

the courts will look at the breach and the event caused by the breach, and only if the breach is sufficiently serious can the contract be lawfully terminated

Question 40

TEST FOR SUFFICIENTLY SERIOUS BREACH

Answer 40

- will it deprive the party of the whole benefit which was intended that he should from the contract? -will it make further commercial performance of the contract impossible? HIGHER MARKS!: > what is the benefit that the innocent party was to get under the contract? >what losses as the innocent party suffered as a result of the breach? >weigh the two against each other >how much would it cost to remedy the breaches and is the innocent party happy with this? > Is this breaching party likely to breach the contract further?

Question 41

Hansa Nord[1976] (Cehave NV c Bremer Handels GmbH)

Answer 41

Contract for the sale of pellets, term of the contract said that the shipment was 'to be made in good condition'. Parts of the good were not in good condition, but could all be used for original purpose. Buyer only wanted to get out the contract to take advantage of a huge drop in the market and buy them cheaper elsewhere, so it was held that he could not terminate the contract

Question 42

Grand China Logistics Holding (Group) Co Ltd v Spar Shipping AS

Answer 42

' The modern english law approach to the classification of contractual terms is that a term is innominate unless it's clear that it is intended to be a condition or a warranty'

Question 43

Debate on whether innominate terms are good

Answer 43

in favour : flexibility and remedy of injustice | against : 'remove certainty which is the most indispensable quality of mercantile contracts'

Question 44

How does a party end a contract?

Answer 44

the innocent party must elect to accept the other party's repudiatory breach and end the contract

Question 45

What is the right procedure to terminate a contract

Answer 45

the innocent party must communicate the decision to terminate the contract, either expressly or by inference by action. Silence does not amount to acceptance of breach - Vitol SA v Beta Renowable Group SA THE INNOCENT PARTY HAS A REASONABLE TIME TO DECIDE THE COURSE OF ACTION THEY WISH TO TAKE. ANY FURTHER DELAY MIGHT BE TREATED AS AFFIRMING THE CONTRACT