week 6 - contract law

Question 1

what is meant by the discharge of a contract?

Answer 1

when a contract comes to an end. all obligations under the contract finish + the parties are no longer bound in law.

Question 2

what are the 4 ways of discharging a contract?

Answer 2

• agreement
• performance
• frustration
• breach

Question 3

what does it mean by discharge by agreement?

Answer 3

where parties agree to bring a contract to an end before all obligations have been completed.
can be bilateral or unilateral
the consideration each party offers is releasing the other party from their obligations.

Question 4

what is a bilateral agreement to discharge?

Answer 4

where neither party has completed all their obligations.

Question 5

what is a unilateral agreement to discharge?

Answer 5

one party has performed all their obligations but the other party wishes to be released from their obligations before performing them.
can only be released if that party provides some consideration for the release.
agreement to be released = accord.
supply of consideration to be released = satisfaction.

Question 6

what is meant by discharge of frustration?

Answer 6

before the obligations have been completed an event may occur that makes the performance impossible.
both parties are discharged from carrying out any further obligations.

Question 7

what are some examples of frustrating events?

Answer 7

destruction of subject matter, government intervention, non occurrence of events central to the purpose of the contract, following illegality, personal incapacity.

Question 8

what is meant by discharge by breach?

Answer 8

where one party breaks one or more terms of the contract. this will only discharge the contract if its a condition or an innominate term that deprives the party of substantially the whole benefit of the contract.

Question 9

what are the 2 types of breach?

Answer 9

• actual breach
• anticipatory breach

Question 10

what is meant by an actual breach of a contract?

Answer 10

the innocent party can sue for breach + if the term broken is a condition it can also terminate the contract.

Question 11

when does a actual breach of a contract occur?

Answer 11

when the time of the performance of a contract is due + the contract has been breached.

Question 12

what is an anticipatory breach of a contract?

Answer 12

the innocent party may sue immediately or wait for the date of performance to pass.

Question 13

when does an anticipatory breach occur?

Answer 13

the time of the performance of the contract has passed + one party has indicated they do not intend to perform.

Question 14

what is meant by a discharge by performance?

Answer 14

ideal method, each party has done exactly what they have promised to do, contract ends as all obligations have been performed.

Question 15

what are the remedies for a breach of contract?

Answer 15

if contract is breached, the innocent party may claim for one or more remedies in court.
- damages
- quantum meruit
- specific performance

Question 16

what is quantum meruit?

Answer 16

a claim for work done, where completion has been prevented by another party.

Question 17

what is specific performance?

Answer 17

party is legally required to complete performance of contract.

Question 18

what is meant by damages?

Answer 18

monetary compensation aimed to put the parties into the position they would have been in had the breach not occurred.
most common remedy.
up to the court to decide the amount to grant unless already pre-estimated in the contract.

Question 19

what are the aims of damages?

Answer 19

to restore the innocent party to the same financial position they would have been in if the contract had been performed, NOT to punish the party who broke it.

Question 20

what is a nominal damage?

Answer 20

awarded when the innocent party has suffered no real loss.

Question 21

what is meant by remoteness of damage?

Answer 21

claims for damages are restricted to the recovery of losses that are not too remote. courts are to decide how far the liability of the defendant extends.

Question 22

what is an example of a care that laid out the test for remoteness of damage?

Answer 22

hadley v baxendale (1854)
Mill owner ordered a new shaft as the old one broke + no work could be done, the carrier was unaware the mill did not have a spare + was late delivering the new one.
The owner sued the carrier for loss of anticipated profits on the days it was late.

Question 23

what 2 elements can damages be awarded for?

Answer 23

• losses that arise naturally as a result of the breach (objective test).
• loss that both parties contemplated when the contract was made (subjective test).

Question 24

what occurs with the measure of damages?

Answer 24

if the contract was for the sale of goods, the damages are assessed according to the market rule (how much the goods cost on the open market).
if a breach results in lost opportunity, this can be recoverable if it can be quantified.

Question 25

what is an example of a case of a breach resulting in loss opportunity?

Answer 25

Joyce v bowman law (2010) When acting for the buyer of a house, the conveyor negligently failed to include a buyer’s option to purchase adjacent land for £20,000. Buyer claimed a loss of profit that could have been made on the land. Verdict: buyer was entitled to £37,700 damages from the lost chance to redevelop it.

Question 26

what does it mean by the cost of correcting the defect?

Answer 26

amount of damages that can be claimed.

Question 27

what happens when building contracts are breached?

Answer 27

courts may decide the cost of remedying the defects is disproportionate to the difference in value between what was supplied + ordered.

Question 28

what occurs with damages in building contracts?

Answer 28

in this case, courts will award damages to reflect loss of value. if there is no real loss in value, it will minimise the level of damage.

Question 29

what is an example of a case of building contracts being damaged/breached?

Answer 29

Ruxley electronics + construction ltd v forsyth (1995) Contract to build a swimming pool 7.5ft deep but when built the depth was 6.75ft deep. Estimated cost of restructuring the pool was £20,000. Verdict: as there was no difference in value between the pool contracted + the pool built, the client was only awarded £2,500 in damages for loss of amenity.

Question 30

what happens with a duty to mitigate?

Answer 30

claimants must take appropriate steps to minimise their losses. they can not claim damages for losses which could have been avoided (this does not include taking risky measures). it is for the defendant to prove that the claimant did not minimise their losses.

Question 31

what is an example of a case where a claimant had a duty to mitigate their losses?

Answer 31

Brace v calder (1895) Claimant had a fixed term employment contract with the defendant. With 2 years left of contract the defendants partnership dissolved leaving the claimant with no work. Claimant was offered a new contract with a new employer but refused, instead taking court action to claim loss of wages from the defendant. Verdict: the claimant had a duty to mitigate their loss which they didn't take by accepting new work, only nominal damages were awarded.

Question 32

what is meant by liquidated damages?

Answer 32

the amount of damages stated in a contract to be paid in the event of a breach of a contract.

Question 33

what is meant by a penalty clause?

Answer 33

the sum is excessive in relation to the loss incurred. if this is the case, the liquidated damages would not be enforceable by a court.

Question 34

what is an example of a case with a penalty clause?

Answer 34

Parking eye ltd v beavis (2015) Mr Beavis argued that the £85 fine received for parking beyond the time limit was a penalty clause due to its excessiveness. Decision: supreme court ruled in favour of the car park owners, reasoning being the amount was considered not to be extravagant or unconscionable.

Question 35

what statutes cover the sales of goods?

Answer 35

- consumer rights act 2015 - sale of goods act 1979

Question 36

what is the consumer rights act 2015?

Answer 36

applies to consumer contracts (between a trader + consumer) for the supply of goods, digital content or services from 1st october 2015 onwards.

Question 37

what is the sale of goods act 1979?

Answer 37

this covers all other contracts for the sale of goods.

Question 38

what occurs on contracts for sales of goods/sales contracts?

Answer 38

contract of sale: transfer of ownership in goods from seller to buyer is immediate. agreement to sell: future goods or unascertained goods.

Question 39

what is meant by implied terms, the right to sell?

Answer 39

seller has the right to sell the goods, the seller breaks this term if it transpired that the goods are stolen, as they do not have the right to transfer the goods.

Question 40

what does it mean by implied terms, sale by description?

Answer 40

where there is a reliance on a description, including sales where the goods are unseen + seen where the buyer is relying on a description of goods.

Question 41

what happens when clients rely on description?

Answer 41

when goods are sold as seen they are not sold under any description within the meaning of s13, it is up to the buyer to examine the goods carefully.

Question 42

what is an example of a case of not a sale by description?

Answer 42

Harlingen + leinster enterprises ltd v christopher hull fine art ltd (1991) Seller offered a painting, claimed to be by a well known painter but he made clear he was not an expert + buyer should examine it. Buyer inspected it + brought it, it turned out to be a forgery. Verdict: was not a sale by description as the buyer has not relied on the description.

Question 43

what is meant by implied terms, the goods are of satisfactory quality?

Answer 43

does not apply to private sales, including sale of second hand items + new. Buyer does not need to prove to the court how goods came to be under standard, only that they are not of sufficient quality.

Question 44

what is meant by satisfactory quality?

Answer 44

the quality is well in the eyes of the reasonable buyer.

Question 45

what are the SOGA considerations on satisfactory quality?

Answer 45

- fit for the purpose of that type of goods. - appearance + finish. - freedom from minor defects. - safety. - durability.

Question 46

what is the process of knowledge + examination?

Answer 46

if buyer has had any defects pointed out or has examined the goods before purchase, they might not have protection. Defects pointed out have to state specific flaws.Buyer under no obligation to examine goods but if they do + fail to spot an obvious defect, seller is not liable.

Question 47

what is expected from a buyer with instructions?

Answer 47

buyer is expected to follow these supplied with goods, seller will not be liable if they are not followed.

Question 48

what is expected from a buyer to take with precautions?

Answer 48

buyer is expected to take these normally but not have any special precautions.

Question 49

what is an example of a case where the goods are of satisfactory quality is not applicable?

Answer 49

Grant v australian knitting mills Grant brought an item of clothing containing excess of sulphite, he developed a rash + spent months in hospital. Defendant said that Grant would not have developed this if he had washed them before. Verdict: the clothes were not of satisfactory quality, it is not normal practice to do this.