Termination of Contracts: Breach, Frustration, and Mutual Agreement, Study notes of Law

Download Termination of Contracts: Breach, Frustration, and Mutual Agreement and more Study notes Law in PDF only on Docsity! Termination of contracts Where one party argues that the other party has breached the K, the other party may respond in a number of ways: • The other party may acknowledge the breach • The other party may dispute that the breach has occurred – argue erroneous interpretation of K obligations • Party in breach may argue that the contract was frustrated • Party may argue that enforceability of K is affected by vitiating factors Termination by subsequent agreement (mutual) à Express agreements • Can make new K, need four elements including consideration • If K is executory: both parties still have obligations to perform under K • If K is partly executed: one party has performed o Need to have accord and satisfaction o Purchase of a release from an obligation by other consideration § Accord: agreement by which the obligation is discharged § Satisfaction: consideration which makes that agreement operative McDermott v Black (1940) • B (purchaser) alleged he was induced by fraudulent misrepresentations made by M (vendor). B withdrew allegations on condition that M extend time to complete contract. B refused to complete on extended date so M rescinded contract. B then sued for deceit relying on misrepresentation he initially withdrew. • Dixon J: essence of a&s is acceptance by P of something in place of his cause of action…depending on his own consent or agreement o Accord executory (different from a&s): doesn’t extinguish old cause of action, doesn’t afford a new one either o Needs to be a promise for something, can't be a promise of performance • M successful because there was consideration passing between parties for second agreement • Key legal principle: if one party has partly executed K, the non-performing party can't give good consideration o Can't provide release as there's nothing to release them from (they’ve done their obligations) § But he can satisfy the requirement of satisfaction by promising to do something extra à Once that thing is done there is accord and satisfaction Termination for breach à Rights conferred by the common law • Aggrieved party can be entitled to terminate contract if other party breaches o Even if they decide not to terminate – can receive damages à What constitutes a breach of contract? • Party fails to perform at the time/to the standard required by the contract • Types of breach: 1. Failure to perform: occurs after time for performance has expired • No performance • Defective performance • Delayed performance 2. Anticipatory breach: occurs before performance is due • General rule: breach of K doesn’t require fault à When is there a right to terminate for breach at common law? • Depends on classification of the term breached 1. If term is a condition: aggrieved party will be entitled to terminate for any breach of that term by the other party regardless of gravity/consequences of breach, plus damages 2. If term is a warranty: aggrieved party won't be entitled to terminate merely by reason of breach of term by other party, although damages available o Usually only classified this where required by statute eg. Goods Act 3. If term is an intermediate or innominate term: aggrieved party’s right to terminate depends on gravity & consequences of breach of term o If serious: entitled to terminate à Termination for breach of a condition • General rule: if the breached term is a condition, aggrieved party will be entitled to terminate the K for any breach of that term, even if it was of little gravity/consequence (Arcos v Ronaasen) • In absence of classification by statute/express statement by parties, whether a term is a condition is determined by construction of contract • Test for whether a term should be construed as a ‘condition’ set out in Tramways Arcos Ltd v EA Ronaasen and Son [1933] • Contract for sale of wood staves to make barrels, described wood staves as ½ inch thick. Some of staves weren’t this thick, slightly more. Quality of wood was still fit for purpose. Buyer rejected goods as he could purchase them cheaper elsewhere • Held: purchasers were entitled to reject goods under s13 Goods Act as they weren’t as described (now law’s changed, s13 isn’t automatically a condition for non-consumer sales)