contract 10 - dish charge

8/3/2019 Contract 10 - Dish Charge

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Legal Environment

Contract 10

Discharge of Contracts


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Learning Objectives

Quick Review

What is Discharge of Contracts?

Performance

Agreement

Frustration

Breach

Remedies for Breach of Contract


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Quick Review

A contract is a legally binding agreement

In order to create a valid contract, there

must be An offer

An acceptance

Consideration

Capacity to contract

Intention to create legal relations

There must also be no vitiating factors


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Discharge of Contracts

Now that we know how to create a contract,

we need to look at how a contract comes to

an endDischarge of a contract means that the

parties are released from their obligations in

the contract ie they no longer have to do what they agreed


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Discharge of Contracts (cont.)

A contract can be discharged in 4 ways

Performance

Agreement

Frustration

Breach


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Discharge by Performance

As you might expect, once the parties have

done what they promised to do then the

contract is dischargedThe parties no longer have any obligations

left

Performance is the most common way that acontract is discharged


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Discharge by Performance (cont.)

For example, a man entered into a contractto work on a boat which was making a

journey to the UKHe was to be paid when the boat arrived inthe UK

Unfortunately, he died before the boatarrived

The court held that his widow could notcollect his money because he did not

complete the contract


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Discharge by Performance (cont.)

Usually, the parties have to perform all oftheir obligations in the exact way stated in

the contractHowever, there are 4 exceptions to this

Where the contract is divisible

Where the contract can be completed by

substantial performance

Where performance has been prevented by theother party

Where partial performance has been acceptedby the other party


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Partial Performance Accepted

The contract can be discharged if one partyaccepts partial performance by the otherparty

Eg: Jim places an order with Fred for 12bottle of wine. However, Fred can onlysupply 10 bottles.

Jim could refuse to accept the 10 bottlesHowever, he could accept 10 bottles andreduce the price he pays

That would be accepting partialerformance b Fred


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Discharge by Agreement

A contract is an agreement

Therefore, the parties can make a new

agreement to end the contract

The contract itself may contain a clause

which states that the contract will end at a

certain time Eg lease


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Discharge by Agreement (cont.)

Or the contract may allow the parties to end

the contract on giving notice to the other

party Eg 1 months notice in contracts of

employment

If there is no clause in the contract thenanother contract is needed to end the first

contract


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Discharge by Agreement (cont.)

Where the contract is executory (ie a

promise for a promise) then it is enough

consideration if each party promises torelease the other

Where the contract is executed (ie where

one party has performed all or part of theirobligations) then the necessary

consideration is a new contract


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Discharge by Breach (cont.)

Discharge also occurs where one partycommits a serious breach

You will remember from an earlier classthat breach of a condition in a contract is aserious breach, whereas breach of awarranty is not

A breach can also be said to be serious ifserious consequences result from thatbreach


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Anticipatory Breach

Anticipatory breach is where one partyindicates that he will not perform his

obligations before the time he is due toperform them

This intention not to fulfill the obligationsmay be express or implied

Express anticipatory breach is where theparty actually states that they will notperform


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Anticipatory Breach (cont.)

Implied anticipatory breach is where a party

does something which makes performance

impossibleFor example, John agrees to sell his car to

Fred next Friday. However, on Monday, he

sells his car to Jim


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Remedies for Breach of Contract

Where one party breaches a contract then the other

party may

Claim damagesClaim payment for quantum meruit

Raise a court action for specific performance

Raise a court action for an injunctionRaise an action for the agreed contract price

Repudiate the contract


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Remedies (cont.)

The remedy which is available depends on

whether the breach is a breach of a

condition or breach of a warranty


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Damages

Damages can include compensation for

financial loss, personal injury or damage to

propertyHowever, the amount of damages paid is

only to compensate the party for loss

Damages are not intended as a punishment


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Damages (cont.)

A court will only award damages for losses whicharise naturally from the breach

Losses which are too remote from the breach willnot be covered

EG: Company A makes a contract with CompanyB to buy a machine. Company B delays indelivering the machine

Company A sues Company B for the loss of profitwhich they could have made if the machine hadbeen delivered on time


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Damages (cont.)

Company A also claims damages for a veryprofitable contract with Company X which

it was unable to make because it did nothave the machine

The court will award damages for the lossof the normal profit of Company A (ie their

first claim)However, the damages in respect of thecontract with Company X are too remote


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Damages (cont.)

It is reasonable to expect that Company B

would realise that delaying the delivery of

the machine could cause a loss of normalprofit for Company A

However, it is not reasonable to expect

Company B to know about the possiblecontract between Company A and Company

X


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Damages (cont.)

The party who suffers loss due to the breach

of contract must try to mitigate their loss

That is, they must take steps to try to reducetheir loss, or to stop it increasing

Eg: If the buyer refuses to accept the

sellers goods, the seller can claim damagesbut he must also try to sell his good to

another party and get the best price for them


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Quantum Meruit

Quantum meruit means that a party shouldbe paid as much as he has earned or

deservedEG: A company makes a contract with anauthor to write a book. Payment is to bemade when the book is finished.

However, the company decides not topublish the book before the author hasfinished writing it


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Quantum Meruit (cont.)

Under quantum meruit, the author could

claim payment for the research and writing

which he had done before the book wascancelled


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Specific Performance

Specific Performance is where the court

makes the party who is in breach of contract

carry out their obligationsUsually, this is only done where damages is

not a sufficient remedy


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Injunction

This is the opposite of specific performance

It is where a court orders one party not to

break the contractIt is often used to prevent people frombreaking contracts of personal service

Eg: an actress was prevented fromtravelling to England because she would beunable to work for the American moviecompany which she had a contract with


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Action for the Agreed Price

In some situations, a party may sue for

payment of the price agreed in the contract

rather than for damagesThis is the case with the Sale of Goods Act

1979


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Repudiation

Repudiation means that the party who is

not in breach does not have to perform his

obligations where the other party breaches acondition of the contract


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Summary

Discharge of a contract means that theparties are released from their obligations inthe contract

ie they no longer have to do what they agreed

A contract can be discharged in 4 ways

Performance

Agreement

Frustration

Breach


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Summary (cont.)

Where one party breaches a contract then the other

party may

Claim damagesClaim payment for quantum meruit

Raise a court action for specific performance

Raise a court action for an injunction

Raise an action for the agreed contract price

Repudiate the contract

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