Termination Flashcards
Methods of discharge
- Frustration
- Agreement
- Expiry
- Performance
- Repudiatory Breach
When will performance discharge contract?
Performance of contractual obligations must be precise and exact (otherwise no entitlement to payment and no discharge)
Exceptions to rule of complete performance (i.e. worker is entitled to payment despite not performing all obligations)
- Divisible Obligations
- Substantial Performance
- Wrongful Prevention
- Voluntary Acceptance of part performance
Divisible Obligations
What
- Payments for each stage are agreed
Remedy
- Payment for each fully completed stage
Substantial Performance
When? Snagging issue only (cost of cure 0.07 total contract price)
Remedy? Entitled to receive entire sum - cost of cure
Wrongful prevention
When? Customer prevented Supplier from finishing even though no repudiatory breach
Remedy:
- Damages (Loss of profit (price - saved costs)); or
- Quantum meruit (reasonable sum in restitution)
Voluntary acceptance of part performance
When: customer accept part performance (genuine choice / not abandoned)
Remedy: Quantum meruit (reasonable sum in restitution so customer not unjustly enriched)
NOTE: if abandoned but C uses left over materials, C may ahve to pay for materials used
What is quantum meruit?
Reasonable sum assessed objectively (e.g. usual market price for goods / servicces provided)
Effect of termination
- C must pay charges due before termination
- Discharge from future perfromance
- Damages (e.g. loss of profit had contract been properly performend
What happens if A wrongly terminates contract?
A commits a repudiatory breach. B can terminate contract and is entitled to damages
When can a party terminate in advance?
D indicates they breach a condition or innominate term.
C can either affirm or terminate (if affirms, can claim sum for work done in a debt action)
NOTE: if only a minor breach, no right to terminate
Frustration Test
Supervening event or change in circumstances which:
1. occurs after contract formed
2. makes performance impossible or radically different
3. unforeseen (no force majerure)
4. beyond control (no fault / choice)
Example of frustation
- Gov intervention
- Unavailability of a specific person or object crucial to contract
- destruction of subject matter
- non-occurance of a fundamental event (joint-purpose of parties)
Effect of frustration
- Future performance = automatically terminated
- Money already paid (deposit / stage payment) = recover
- Money that should have been paid = need not be paid
- recover expenses (max = total sums paid and payable before frustration) - at court discretion
- if either party has received a benefit they may have to pay for the benefit BUT if the value of the benefit has been reduced to nil, they do not pay anything (e.g. house destroyed = worker not entitled to anything)
Force Majeure
Must be reasonable (UCTA)
If reasonable, frustration does not apply and the consequences in the clause will apply
