contract 14

Study online at quizlet.com/_6kwsy

Samerenko v Dawn Hill House Ltd [2011]: the Court of Appeal held that the failure to make a timely payment of a deposit in a contract for the sale of land amounted to a repudiatory breach of contract. 3 ways to discharge contract: 1. through performance or agreement:parties have fulfilled their contractual obligations and the contract is at an end; equally, they may enter a binding agreement to end their contract. 2. breach: one or more parties have not performed their contractual obligations and this non-performance arises through fault 3. frustration: contract is discharged by a supervening event which occurs without the fault of either party

2.

3.

cannot recover payment for the partial performance of an 'entire obligation' Cutter v Powell (1795).case, Cutter contracted with Powell to be the second mate on a ship bound from Jamaica to England. Seven weeks after he had commenced performance of this position, Cutter died. His widow sued Powell to recover payment for the period of time in which he had rendered his services.: payment was denied because the contract was not fully performed. There was no pay until the performance was complete

4.

cannot recover payment for the partial performance of an 'entire obligation' Sumpter v Hedges (1898). contract to build two houses and stables for Mr Hedges He did work valued and said he had to stop because he had no more money. He had already been paid part. Hedges finished the building, using materials which Sumpter had left behind. Sumpter sued for the outstanding money.: Sumpter v Hedges (1898).l found that Mr Sumpter had abandoned the building work and emphasised that this left Mr Hedges without any choice of whether to adopt the work. They held that Mr Hedges did have to pay for the building materials that he used, but did not need to reimburse Mr Sumpter for the half built structures. NOTE: no quantum meruit, cf Munro v Butt where there was quantum meruit because a new contract could be inferred to pay for work already done. also in Lysaght v Pearson where D finished uncomplete work and P did not expicitly state that he abandons contract only that he will if D does not pay.

5.

How is entire obligation mitigated?: court may interpret the contract not as being an entire contract, but as a contract which is made up of a series of 'entire obligations'. 2. courts will allow recovery where a party in breach has substantially performed his obligations (Hoenig v Isaacs (1952).) 3.innocent party may be liable to compensate the performer for a partial performance where the innocent party accepts the partial performance. party may be forced to accept artial performance Sumpter v Hedges (1898)

6.

Hoenig v Isaacs 1952 : Mr Hoenig was meant to decorate and furnish Mr Isaac's flat for 750. When the work was done, there were problems with a bookcase and wardrobe, which would cost 55 to fix. Mr Isaac refused to pay the 350 outstanding: raises the familiar question: Was entire performance a condition precedent to payment? That depends on the true construction of the contract. When a contract provides for a specific sum to be paid on completion of specified work, the Courts lean against a construction of the contract which would deprive the contractor of any payment at all simply because there are some defects or omissions. The promise to complete the work is therefore construed as a term of the contract, but not as a condition. It is not every breach of that term which absolves the employer from his promise to pay the price, but only a breach which goes to the root of the contract, such as an abandonment of the work when it is only half done.

7.

repudiatory breach: A repudiatory breach is said to occur when one party refuses to continue performing the contract or commits an act which prevents further performance.

8.

2 matters to consider for repudiatory breach: 1. standard of performance to be met in the contract. 2.type of term which has been breached. Standard of performance :different standards of performance: strict liability:either performance measures up to what is demanded by the contract or it does not. standard of reasonable care: imposes a duty on the party to use reasonable care and skill in the performance of her contractual obligations.

9.

10.

Strict liability : contracts for the supply of goods impose a strict standard of performance with regard to the quality and quantity of the goods to be supplied. Arcos v Ronaasen [1933]: Arcos v Ronaasen [1933] a contract to supply barrel staves which were half an inch (8/16th of an inch) thick was not performed when the staves supplied were of varying thickness from 7/16ths of an inch thick to 9/16ths of an inch thick. The fault of the party who supplies the goods is immaterial; that is to say, it does not matter that the barrel staves were the wrong thickness through no fault of his own. It may be that the party in breach exercised all reasonable care to ensure that the goods conformed to the standard required; she is, however, still in breach of contract. The liability is strict and fault need not be proved. A strict standard of performance may be imposed by the legislation - for example, the obligations imposed upon a seller of goods under the ss.13-15 Sale of Goods Act 1979 are strict.

11.

Reasonable care and skill: the fault of the party in breach is relevant. contracts for the supply of services require that the party exercise reasonable care and skill in the performance of her contractual obligations. Supply of Goods and Services Act 1982 requires a party to exercise reasonable care and skill in the supply of a service.: terms can be classified as conditions, warranties or intermediate/innominate terms. The classification of terms is particularly important in relation to a breach of contract because not all breaches give rise to a right to terminate the contract. Only the breach of a condition, or a sufficiently important intermediate/innominate term, gives rise to a right to terminate the contract.

12.

ex: contract for the purchase requires that it tenders payment of 10 million at 5:00 pm on 3 December at the offices of the vendor, Tighte Fist plc. On 3 December, Mountain Magic Ltd sends a representative with a cheque for payment to the offices of Tighte Fist plc. The representative leaves with plenty of time to reach his destination. Unfortunately, a bomb scare makes him late. Has a repudiatory breach of contract occurred? Would it have occurred if the representative reached the offices at 5:10 pm? Would the result have been any different if Mountain Magic Ltd had telephoned Tighte Fist plc to inform them of the effect of the bomb scare?: Terms as to time are generally construed as conditions; it is said that 'time is of the essence'. Additionally, liability for performance tends to be strict. The cause of the representative's lateness is, therefore, likely to be irrelevant (Union Eagle Ltd v Golden Achievement Ltd [1997] ). In the circumstances, Tighte Fist plc is entitled to terminate the contract for breach.

13.

Union Eagle Ltd v Golden Achievement Ltd [1997] Union Eagle paid 10% of the HK$4.2m price for a Hong Kong flat as a deposit. Time was said to be 'of the essence'. Completion was meant to be 5pm 30 September 1991, and clause 12 said failure to complete meant the deposit was forfeit and the agreement rescinded. They were 10 minutes late. Union Eagle sued for specific performance, arguing relying on such a legal right was unconscionable.: Union Eagle Ltd v Golden Achievement Ltd [1997] Privy Council terms should be enforced: in many forms of transaction it is of great importance that if something happens for which the contract has made express provision, the parties should know with certainty that the terms of the contract will be enforced. The existence of an undefined discretion to refuse to enforce the contract on the ground that this would be "unconscionable" is sufficient to create uncertainty. Even if it is most unlikely that a discretion to grant relief will be exercised, its mere existence enables litigation to be employed as a negotiating tactic. The realities of commercial life are that this may cause injustice which cannot be fully compensated by the ultimate decision in the case.

14.

A breach of contract does not automatically end a contract - no matter how severe the breach Decro-Wall SA v International Practitioners in Marketing [1971]: Decro-Wall SA v International Practitioners in Marketing "A breach of contract may be of such a nature as to amount to repudiation and give the innocent party the right to be relieved from any further performance of the contract or the breach may entitle the innocent party only to damages. How to ascertain? Primarily from the terms of the contract itself. The contract may state expressly or by necessary implication that the breach of one of its terms will go to the root of the contract and accordingly amount to repudiation. Where it does not do so, the courts must look at the practical results of the breach in order to decide whether or not it does go to the root of the contract." only future obligations are rescinded cf misrepresentation where all can be rescinded.

15.

T he innocent party must communicate to the party in breach that he has elected to terminate the contract:Vitol SA v Norelf Ltd (1996) Vitol sent a telex to Norelf saying it did not wish the contract to continue because it was not going to arrive on time. The ship was loaded, and it sailed on March 9. The price of the cargo fell. Neither side did anything further to perform the contract. Norelf sold the cargo at a loss, and then claimed damages from Vitol: Vitol SA v Norelf Ltd (1996) An aggrieved party could as a matter of law accept a repudiation of a contract merely by himself failing to perform the contract. Whether in any particular case he had done so must depend on the circumstances.

16.

breached contract has no future, but it does have a past. Those rights which have been unconditionally acquired are still binding. Heyman v Darwins 1942 and the decision in Johnson v Agnew [1980]: Heyman v Darwins Johnson v Agnew [1980

17.

Heyman v Darwins: contract contains arbitration clause. A dispute arose between the parties, and the appellants, having intimated to the respondents that their letters showed that they had repudiated the agreement, issued a writ against them, claiming a declaration that the respondents had repudiated the agreement and damages The appellants contended that, the respondents having repudiated the agreement as a whole and the appellants, by the issue of the writ, having accepted that repudiation, the contract had ceased to exist for all purposes, and the respondents could not afterwards rely on the arbitration clause:: Strictly speaking, to say that on acceptance of the renunciation of a contract the contract is rescinded is incorrect. In such a case the injured party may accept the renunciation as a breach going to the root of the whole of the consideration. By that acceptance he is discharged from further performance and may bring an action for damages, but the contract itself is not rescinded. The injured party may, therefore, rely on the contract.

18.

Johnson v Agnew [1980] the date for assessing damages. Lord Wilberforce decided that the date appropriate is the date of breach, or when a contracting party could reasonably be aware of a breach. 5 principles from Wilberforce buyer 2 times fails to complete purchase. seller forced into foreclosure.: 1 termination for breach of contract is "prospective", not "retrospective"; i.e. repudiatory breach of contract discharges both parties from future performance of their contractual obligations, but leaves their accrued rights intact (and themselves open to damages) 2 a claimant for specific performance does not forfeit his right to terminate the contract by accepting a defendant's repudiatory breach 3 when a specific performance decree is made, a court oversees performance, and it has the sole jurisdiction to determine whether that obligation can be discharged 4 common law damages are assessed at the date of the breach of the contract, though the court may fix another date if justice requires 5 the same principles for awarding common law damages applies to awarding equitable damages under s 50 Supreme Court Act 1981 In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would to me appear more logical and just rather than tie him to the date of the original breach, to assess damages as at the date when (otherwise than by his default) the contract is lost. Support for this approach is to be found in the cases.

19.

If an innocent party elects to terminate the contract for breach she is no longer bound to accept or make any performance under the contract. What happens if she does not elect to terminate the contract?: remains bound to her obligations. In addition, she cannot subsequently decide to 'return' to the earlier breach and then purport to accept it while the breach remains anticipatory: Stocznia Gdanska SA v Latvian Shipping Co (1997)

20.

Stocznia Gdanska SA v Latvian Shipping Co (1997): innocent party has a period of time in which to make up his mind, entitled to maintain contract in being for a moment while reserving right to treat it as repudiated if partner persists.: Stocznia Gdanska SA v Latvian Shipping Co (1997) In such cases it is sufficient for the injured party simply to make it clear that he is treating the contract as discharged

21.

In what circumstances will a party be held to have 'affirmed' a contract? To what extent is a party's election to terminate or to affirm constrained by considerations such as the reasonableness of his decision or conduct?: party is said to affirm the contract when he elects to carry on with the contract and not to terminate it because of the breach of the other party. To affirm the contract, the party must have knowledge of the facts giving rise to the right to elect. More recent cases appear to have further required that the innocent party also be aware of the right to elect: see Peyman v Lanjani (1985) and The Kanchenjunga (1990). While, in theory, the innocent party is free to decide whether to terminate the contract or to affirm it, his decision may in some circumstances be affected by the requirement that he mitigate his damages. It may be that the only way he can mitigate, or minimise, his damages is to affirm the contract. See

22. 23. 24.

Payzu Ltd v Saunders (1919).: Payzu Ltd v Saunders (1919). Peyman v Lanjani (1985): Peyman v Lanjani (1985) The Kanchenjunga (1990): The Kanchenjunga (1990)

25.

What is the importance to the innocent party of determining the nature of the term breached by the other party?: It is of critical importance for the innocent party to determine the nature of the term breached. Is the term a condition, warranty or intermediate/innominate term? If the term is a warranty, the innocent party is not entitled to terminate the contract; his remedy lies in damages. If the term is a condition, or a sufficiently serious breach of an intermediate/innominate term, then the innocent party is entitled to terminate the contract. One practical aspect of this important point is that if an innocent party 'elects' to terminate a contract and refuses to perform his further obligations where (because of the nature of the breach) he does not have that election, he is himself in breach of contract. Decro-Wall S.A. v International Practitioners in Marketing (1971).

26.

Decro-Wall S.A. v International Practitioners in Marketing (1971). terminate a contract and refuses to perform his further obligations where (because of the nature of the breach (warranty not condition) he does not have that election: Decro-Wall S.A. v International Practitioners in Marketing (1971).

27.

Anticipatory breach Universal Cargo Carriers Corp v Citati 1957 Hochster v De la Tour (1853) Affirmation: White and Carter (Councils) Ltd v McGregor (1962). Hounslow LBC v Twickenham Garden Developments Ltd (1971). Clea Shipping v Bulk Oil (1984)).: occurs when, before a performance is due, a party either renounces the contract or disables himself from performing it. can be either express or indicated by the conduct of the party involved. gives rise to an immediate right of action,to terminate if its prospective effects are such as to satisfy the requirement of substantial failure in performance.

28.

Universal Cargo Carriers Corp v Citati 1957: Universal Cargo Carriers Corp v Citati 1957 charterer was held to be in anticipatory breach of his obligation to provide a cargo at the time specified. The breach occurred because of the failure of a third party to provide him with the cargo.

29.

Hochster v De la Tour (1853). damages are determined and can be claimed at once, before the time is fixed for performance.: Hochster v De la Tour (1853).

30.

right to terminate, how is it determined by courts: The court examines the nature of the refusal to determine whether the injured party was reasonable in their opinion that the refusal was sufficiently clear and absolute to give them the right to terminate.

31.

Affirmation : White and Carter (Councils) Ltd v McGregor (1962). Hounslow LBC v Twickenham GardenDevelopments Ltd (1971): One of the effects of an anticipatory breach of contract is that the innocent party may elect to affirm the contract and continue with a performance that he knows is not wanted by the other party:

32.

White and Carter (Councils) Ltd v McGregor (1962) The defendant's sales manager entered a contract with the claimant for them to place adverts on the bins for a period of 3 years. if one of the payments was late the whole price became immediately due. The defendant had not authorised the sales manager to enter the contract and phoned the claimant on the same day as the contract had been made telling them that he did not want the advertising. The claimant ignored D D refused to pay the first instalment and the claimant submitted a bill for the full three years of advertising.: Anticipatory breach White and Carter (Councils) Ltd v McGregor (1962): HL held that the claimant was not obliged to accept the breach of contract and could continue with the contract. They were thus entitled to full payment for the three years advertising. NOTE: where HL, when the innocent party had no legitimate interest in performing the contract other than claiming damages, he ought not to saddle the other party with an additional burden

33.

Anticipatory breach innocent party (architect) cannot carry on with performance where he needs the co-operation of the party in breach: Hounslow LBC v Twickenham GardenDevelopments Ltd (1971): borough enters contract with construction workers, clause allows contractor to enter site. However borough/architect gives notice to end contract due failure to proceed with the work regularly and diligently. contractor continues. Court does NOT grant injunction to force contractor of premises since requires borough/architect to prove validity of the notices which depended on disputed matters of fact. Court requires a high degree of assurance before granting injunction.

34.

risks to innocent party with affirmation: Another effect of an anticipatory breach is that if the innocent party elects to affirm the contract, he runs the risk that the contract may later be discharged by frustration. In this event, he will not be able to claim for the earlier breach. Similarly, if the innocent party affirms the contract and subsequently breaches it himself, again, he will not be able to rely upon the other party's earlier breach of contract.

35.

Could the claimant insist on performing, after the defendant had repudiated the contract, if he knew that all his effort and expenditure would simply be wasted? Clea Shipping v Bulk Oil (1984): very risky since decisions in Clea Shipping v Bulk Oil (1984) and comments in white and carter indicate he would be saddling the defendant with an additional burden where there was no benefit to himself, the claimant.

36.

Clea Shipping v Bulk Oil (1984) D charters ship. the vessel suffered a serious engine breakdown. It was clear that the repairs would take many months. The charterers indicated that they had no further use for the vessel. The market had turned against them. Nevertheless the owners went ahead with the repairs at a high cost.: Clea Shipping v Bulk Oil (1984) the owners had no legitimate interest in pursuing their claim for hire.

37.

What are the risks involved in not accepting an anticipatory repudiation?: The risk in not accepting an anticipatory repudiation is that in so doing, the innocent party may forego all opportunity to claim damages in the event that the contract is later discharged by reason of his own breach or by frustration.