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University of Technology, Jamaica School of Business Administration Business Law Unit 2 - Law of Contract
University of Technology, Jamaica School of Business Administration Business Law Unit 2 - Law of Contract
University of Technology, Jamaica School of Business Administration Business Law Unit 2 - Law of Contract
Simple contracts
Speciality contracts
Intention to do business
Invitation to treat is not an intention to do business Fisher v Bell,
Pharmaceutical Society of Great Britain v Boots Cash Chemists, Patridge v
Crittenden
Fisher v Bell
(The restriction of offensive Weapons Act 1959 made it an offense to offer
for sale certain weapons including flick knives. A shopkeeper who
displayed these knives in his window was found not guilty of the offense,
since although he had displayed the goods, accepted buyers offers, and
sold the goods he had not offered them for sale, because goods on display
are not an offer to sell, they are an invitation to treat)
Pharmaceutical Society of Great Britain v Boots Cash Chemists
(Where by statue certain drugs had to be sold in the presence of a qualified
pharmacist. Boots operated a self-service shop, with a qualified pharmacist
present at the checkout, but not at the shelves on which the drugs were
displayed. The precise location of the place of sale was therefore relevant
to determine whether or not an offence had been committed. It was held
that the display was an invitation to treat, the customers tender of the
acceptance. The sale therefore took place at the check-out, and Boots
therefore did not commit an offence)
Patridge v Crittenden
(P placed an advertisement which read "Bramblefinch Cocks, Bramblefinch
Hens, 25 shillings each." The advertisement was placed in a general
classified section and did not use the words "offer for sale". He sold a bird
to a third party who opened its box in the presence of C, an RSPCA
inspector. From the bird's leg ring, it was apparent that the bird was a wild
bird and had not been bred in captivity. To offer such a bird for sale was an
offence under the Protection of Birds Act 1954. P was charged with that
offence, and convicted, but the conviction was quashed on appeal. The
advertisement was deemed to be an invitation to treat and not an offer for
sale. Therefore, the offence could not be demonstrated to have occurred. P
could have been charged with the offence of the completed sale, but the
prosecution had instead chosen to rely on the offence of "offering for sale"
and had then failed to establish that offence.)
Note Invitation to submit tenders are generally considered invitation to treat, although it may
also be considered an offer by the advertisers to consider any offer submitted to them.
(Blackpool v Blackpool Council)
Blackpool v Blackpool Council)
(BBC invited tenders to operate an airport, to be submitted by noon on a fixed
date. The plaintiffs tender was delivered by hand and put in the Town Hall letter
box at 11am. However, the tender was recorded as having been received late and
was not considered. The club sued for breach of an alleged warranty that a tender
received by the deadline would be considered. The judge awarded damages for
breach of contract and negligence. The council's appeal was dismissed by the
Court of Appeal.)
Termination of offers
Note - promise to keep the offer open for a certain time or to give someone the right of first
refusal will not be legally binding unless the offeree gave some payment to the offeror in return
for the promise. (Routledge v Grant)
(The defendant offered to lease the plaintiff's property with the plaintiff to give a
final answer on the matter within six weeks. Within six weeks, he withdrew his
offer, which the plaintiff then attempted to accept anyway. It was held that the
defendant could withdraw his offer at any time before acceptance, regardless of
the stipulated six weeks. Point of Law is that Revocation of an offer must be
communicated prior to acceptance.)
B. Acceptance
This is an agreement to be bound by all the terms of the offer. To be valid, an
acceptance must:
Be exactly on the same terms of the offer and must not be varied otherwise it would be
considered a counter offer Hyde v Wrench
(The defendant offered to sell his farm to the plaintiff for 1000 but, via an
agent, the plaintiff offered 950. The defendant agreed to consider the offer
but wrote and rejected it some days later. The plaintiff then sought to
purchase the farm at the original offer price; the defendant refused. The
court held that the counter-offer constituted rejection of the original offer,
from which no agreement could then arise. Point of Law is that a counteroffer is an implied rejection of an original offer, which cannot then
subsequently be accepted.)
Jones v Daniel
(D offered to buy J's property for 1,450. J wrote accepting but adding
terms to the contract not previously discussed. Held, the addition of the
terms amounted to a counter offer)
Powell v Lee
(P applied for the post of headmaster at a school and was shortlisted. The
six defendants were the managers of the school and selected P for the
post. L asked one manager, D, to telegraph another candidate, advising
him that he had not succeeded, but issued no instructions to contact P. D,
however, advised P that he had been selected. At a later date, the matter
was reconsidered and the other candidate was selected instead of P. P was
advised of this and sought damages for loss of earnings resulting from
breach of contract of employment. It was held that there had been no
authorised communication of acceptance to P and thus no contract had
been concluded. Point of Law being an authorised party must
communicate acceptance.)
Brogden v Metropolitan Railway
(P had supplied coal to the defendants for many years but without the
benefit of a formal written contract. It was decided to formalize matters and
the defendants sent a draft contract, which was amended by the plaintiff
before it was returned. Several clauses were added and the name of an
arbitrator was inserted. When the defendants received the amended draft, it
was simply filed away without further acceptance or correspondence. The
supply of coal continued, under the terms of the revised draft contract, as if
that revised document had been accepted. The parties then had a
disagreement and the plaintiffs refused to supply any more coal, asserting
that the railway company's lack of acceptance meant that there was no
binding contract. It was held that the revised terms had been accepted by
way of conduct and that a binding agreement existed.)
Entores v Miles Far East Corp.
(It follows that when acceptance is made by means of telephone, fax or
telefax the offeror must actually receive the acceptance. It has been argued
that this situation be treat as face to face where receipt only occurs when
the recipient reads of received the message.)
Note instantaneous communication and communication by post Adams v
Lindsell
(The offer and acceptance of a contract for the sale of wool were sent in the
post, but the offer letter was misdirected to the wrong county. The defendants
sold the wool to another party, as they did not receive a reply to their offer
until after they would have expected to receive it in the normal course of the
post. Acceptance of the offer had been sent by return of post by the plaintiffs;
the delay had been caused by the misdirection of the offer on the part of the
defendants. The plaintiffs sued for breach of contract. It was held that the offer
was effective, in this instance, once it had actually been received, and not at
the time it ought to have been received in the ordinary course of the post.
Point of Law being where acceptance is posted, it will be effective from the
moment of posting. Mistake by a party to an agreement (eg: the misdirection
of a letter) will be taken against the party making the mistake.)
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C. Consideration
Definition
In Dunlop v Selfridge, consideration was defined as the price one party pays for the
other partys act or promise.
Dunlop v Selfridge
(Dunlop sold its tires to a wholesaler on the condition that they were sold to
retailers who agreed to sell at the specified prices. Selfridge was one such retailer
and they sold at prices below the specified prices. There appeared to be no
privity of contract between Dunlop and Selfridge. The court also noted that there
was no consideration flowing from Dunlop to Selfridge so it was not possible for
Dunlop to enforce against Selfridge.)
According to the law of contract, any party who intends to enforce a promise given by
the other party must have given consideration for that promise.
Types
There two types of consideration, namely, executed and executory consideration.
Executed consideration may be defined as doing an act in return for a promise (an act
for a promise), whilst executory consideration is when a party makes a promise in return
for another promise (promise for promise).
Essential elements of consideration
For consideration to be valid, the following essential elements must be present:
1.
Consideration must not be past Re McArdle
(This case is the archetypal example of a past benefit being unacceptable as
Consideration in a Contract. The occupants of a house carried out certain
improvements during their tenancy, and were offered payment in recompense
by the owner. However, the owner died before doing so, and his
representatives refused to honour the promise. The courts supported the
owner's representatives, because the tenants had not provided good
consideration.)
Note that in this case the tenants' work was carried out at their own behest,
and not at the request of the owner. Had the owner explicitly requested the
tenants to do the work, and then offered payment, the court may have been
able to use the doctrine of ImplicitAssumpsit to incorporate the past work into
the agreement, and thereby deem it consideration.
Act done in response to a specific request and act done in a situation where payment is
normally expected would not be considered past consideration even though no specific
fee was agreed upon by the parties at the time the act was done Re Stewart v Casey
(Patents were granted to Stewart and another in respect of an invention
concerning appliances and vessels for transporting and storing
inflammable liquids. Stewart entered into an arrangement with Casey
whereby Casey was to introduce the patents. Casey spent two years
pushing the invention and then the joint owners of the patents rights
wrote to him as follows; in consideration of your services as the practical
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manager of the patents we whereby agree to you 1/3 share of the patents:.
Casey also received the letters patent. some time later Stewart died and
his executor claimed the letters patent from Casey, suggesting that he had
no interest in them because consideration for the promise to give him 1/3
share was past. It was held that the previous request to render the
services raised an implied promise to pay. The subsequent promise could
be regarded as fixing the value of the services so that Casey was entitled to
a 1/3 share of the patent rights.)
2. Consideration must move from promisee to the promisor (the party receiving the
promise is the promisee and the party making the promise is the promissor).
Note - most contracts are bilateral therefore, both parties would have to give
consideration for their promises to be binding.
3. Consideration must be sufficient but need not be adequate. This means that
what is given or promised as consideration must be something of legal value and
must not be illegal or contrary to public policy, however, it need not be something
of substantial value or something of the same value as the promise Alliance
Bank v Broome
(The defendant owed an unsecured debt to the plaintiffs. When the
plaintiffs asked for some security, the defendant promised to provide some
goods but never produced them. When the plaintiffs tried to enforce the
agreement for the security, the defendant argued that the plaintiffs had not
provided any consideration. It was held that normally in such a case, the
bank would promise not to enforce the debt, but this was not done here. By
not suing, however, the bank had shown forbearance and this was valid
consideration, so the agreement to provide security was binding.)
White v Bluett
(A son had not provided consideration (for his father's promise not to sue him on
a promissory note) by promising not to bore his father with complaints.)
Thomas v Thomas
(In this case the court reviewed an oral promise made by a man on his
death bed which ran contrary to the terms of his will. The executors gave
effect to those wishes by putting the spouse of the deceased plaintiff in
possession of the home. It was held that there was not valid consideration
to make the promise enforceable. They stated that "A pious respect for the
wishes of the testator does not in any way move from the plaintiff. Motive is
not the same thing as consideration. Consideration means something
which is of some value in the eye of the law, moving from the plaintiff.)
little value and were in fact thrown away. If the delivery of the wrappers
formed part of the consideration it could, presumably have formed the
whole of the consideration, so that a promise to deliver records for
wrappers alone would have been binding.)
Collins v Godefroy
(P was called by subpoena to give evidence in a case involving D. he
afterwards alleged that D had promised to pay him six guineas for his loss
of time. P failed in his action since he was bound by has to attend the trial
and he did not therefore do anything for D that he was not already bound to
do. P therefore had not provided any consideration.)
Stilk v Myrick.
(P was a seaman who had agreed to work throughout a voyage for $5 per
month. During the voyage two of the crew of eleven deserted and the
captain promised to divide their wages between the rests of the crew if they
would complete the voyage. On completion of the voyage P requested his
share and was refused. His legal action failed on the grounds that he was
already contractually bound to complete the voyage and did not therefore
provide any consideration for the promise of the deserter wages.)
4.
D.
In determining whether the parties intend legal consequences to follow their actions, the
courts usually make two general presumptions capable of being rebutted by specific
evidence to the contrary. These presumptions are:
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In a void contract, the defect is considered serious in the eyes of the law that the law
sees the contract as non-existent. Any property given or money paid will have to be
returned.
For a voidable contract, the defect is not considered so serious and therefore the
contract is not void, but, the aggrieved party has the option of canceling the contract
is he or she so desires.
An unenforceable contract is valid but not enforceable against a vulnerable party.
Contractual Incapacity
This renders the contract unenforceable against the vulnerable party.
1. Minors Contracts are generally unenforceable against a minor except the contract is for
the purchase of necessary items. Necessary items are items that are necessary for the
minors life style and social standing, items the minor requires at the time of sale and
delivery and of which the minor did not have adequate supply at the time of sale and
delivery Peters v Fleming
Peters v Fleming
(Held, an expensive gold watch chain was a necessary for a rich young
man. Firstly, he must show that they are capable of being necessaries.
Items of mere luxury, eg a racehorse can never be a necessaries, but it was
shown that a luxurious item of utility such as a gold watch maybe
necessary. The broad definition of necessaries was clearly not adopted for
the benefit of the minor, but to give protection to suppliers who gave credit
to young men from wealthy families.)
Nash v Inman.
(A tailor sued a minor for the price of clothes, including 11 waistcoats. His
action failed because he could not show that the minor was not already
adequately supplied. A minor is not liable if he has an adequate supply,
even if the supplier did not know this.)
2.
Vitiating factors
Vitiating factors may either render the contract void or voidable. Vitiating factors are:
misrepresentations, mistakes, undue influence and duress.
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Mistake
An operative mistake makes the contract void. Mistake may be:
Common mistake concerning the existence of the subject matter
Galloway v. Galloway
(A man and a woman made a separation agreement believing that
they were not married because unknown to them, at the time of their
marriage ceremony that the mans wife was still alive.
The
separation agreement was held to be void for mistake because the
mirage which was the basis of the agreement was void.)
Unilateral mistake by one party regarding the identity of the other party. A
contract will not be void for mistaken identity unless the claimant can
prove all of the following;
1. that the claimant intended to deal with some other person than the
contracting party Kings Norton Metal Co. v Edridge
(A rogue named Wallis ordered some goods on notepaper headed
Hallam & Co from kings Norton. The goods were paid by a cheque
drawn by Hallam & Co Kings Norton received another letter
purporting to come from Hallam & Co)
Merrett v Merrett
(Husband left home to live with another woman agreed in writing to
pay wife 40 month maintenance said if she used it to pay mortgage
he would sign house over to her when fully paid when fully paid, he
refused to sign over house. It was held that there was intention to
create legally binding agreement, reasoning that the agreement took
place in response to marital breakdown.)
2. that the other party was aware of the claimants mistake and
3. that when the contract was made the issue of identity was crucial
Phillips v Brooks
(A man entered the Ps shop and asked to see some pearls and some
rings. He selected pearls at the price of 2550 and a ring at the price
of 450 He produced a cheque book and wrote out a cheque for
3000 In signing it, he said: You see who I am, I am Sir George
Bullough, and he gave an address in St. Jamess Square. P knew
that there was such a person as Sir George Bullough, and finding on
reference to a directory that Sir George lived at the address
mentioned, he said, Would you like to take the articles with you? to
which the man replied: You had better have the cheque cleared first,
but I should like to take the ring as it is my wifes birthday tomorrow,
whereupon the plaintiff let him have the ring. The cheque was
dishonored, the person who gave it being in fact a fraudulent person
named North who was subsequently convicted of obtaining the ring
by false pretences. In the meantime, North, in the name of Firth, had
pledged the ring with the defendants who, bona fide and without
notice, advanced 350 upon it.)
Lewis v Avery Contrast
(P advertised his car for sale and was induced to accept a cheque
from a crook who said he was the famous actor Richard Green. The
cheque was dishonored. P then claimed the car from D who had
bought it in good faith from the crook. The claim failed because his
contract with the crook was not void for mistake, since the
presumption that he intended to contract with the person physically
before him had not been overcome. Ps mistake was as to the credit
worthiness of the other party and not as to his identity. the contract
between P and the crook was voidable, however, means valid until
avoided and P had not avoided by the time the crook sold the car to
D. the contact was therefore valid and the crook was able to pass
title to D.)
3.
Duress
Since the essence of a contract is that it is a voluntary agreement, evidence that
a party entered into an agreement by compulsion may make the contract
voidable. Duress is a common law doctrine whereby threats or use of violence to
force a party to enter into the makes the contract voidable Barton v
Armstrong.
(There was a dispute between two share holders in the same company (A
and B), including a threat by A to kill B. Later B purchased As shares on
terms that were very favorable to A. The contract was set aside on the
grounds of duress, even though there may have been other factors
inducing B to sell his shares.)
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4.
Undue influence
Where one party abuses his/her personal influence or authority over another to
make the other party enter into the contract, the transaction is voidable if the
influence is effective Williams v Bayley
Williams v Bayley
(A father agreed to mortgage his property to a bank if the bank would
return to him promissory notes on which his son had forged his signature.
The bank had hinted at prosecution and transportation of the son if the
father did not agree to execute the mortgage. The agreement to execute
the mortgage was set aside because undue influence had been proven.)
Tate v. Williamson.
(D became financed advised to an extravagant Oxford undergraduate. The
undergraduate sold his estate to D for about half its value and died of
alcoholism at the age 24. His executors were successful in having the sale
of the estate set aside.)
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Goldsworthy v Brickell
(The plaintiff had granted a tenancy of his substantial farm to the first
defendant, and made him a partner. The first defendant later bought out the
plaintiff who was in turn later reconciled with his only son who had
previously had some considerable involvement with the farm. The plaintiff
gave a general power to the son who now sought to set aside the
transactions as having been obtained by undue influence. Held: A
presumption of undue influence could be raised where the gift was so large
or improvident that it could not be accounted for from mere friendship.)
Re Craig
(C, an old man of 84 years whose wife had died, employed Mrs. M as
secretary/companion. From the beginning she occupied a position of trust,
and in addition to running the house she took a confidential part in running
C's affairs. In course of the six years for which she was employed he gave
her money to the extend of $30,000. An action was taken to set the gifts
aside. The action succeeded as it was held that the circumstance raised the
presumption of undue influence which Mrs. M had not failed to rebut.)
b)
c)
d)
e)
f)
g)
could have been civil, eg., in some traffic offences) a contract not to
pursue criminal proceedings, will not be illegal.
a)
b)
c)
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d)
Such a contract restricts one party to suffer some restriction in carrying out
his trade or profession, eg., where an employee agrees not to work for another
employer, or where buyers and sellers agree to regulate prices. A contract is restraint
of trade is prima facie void, but will be held valid if it is (a) reasonable as between the
parties, and the restraint is no more than necessary to protect the proper interests of
person whom it was designed to benefit and (b) not injurious to the public.
The question of whether a restraint is reasonable is decided by the judge.
Consequences of Contract against Public Policy
These contracts are not illegal in the full sense; instead they are void to the extent of the
public policy contravention. As a result, unlike in the case of illegal contracts, money
paid or property transferred is generally recoverable. The court will perform an act of
severance, i.e., separating the valid part of the contract from the void part.
Terms of Contract
A contract is made up of terms offered by one party and accepted by the other party.
Contracts usually consist of both express terms and implied terms.
Express terms - These are terms in the contract that have been specifically
communicated by a party to the contract. Communication may either be verbal or in
writing, and both parties know or should know that these terms exist.
Implied terms These terms are deemed to be part of the contract or are deemed to
apply to the contract. These terms may be implied by Statute, Custom or the Courts.
Terms implied by statute - Parliament for instance safeguards consumers by
implying certain terms into sale of goods contracts (see sections 13 to 16 of the Sale of
Goods Act).
Terms implied by custom In some trades it is customary for certain practices to
prevail in the performance of a contract, for example, the percentage of commission
charged for services rendered in a particular trade.
Terms implied by the courts The courts would sometimes imply terms into a
contract if it were so obvious that the parties can only be deemed to have intended it,
especially if the contract will not make any sense if the terms are not implied. For
example, it is implied that in a conduct for delivery of goods the customer is not
expected to go into the delivery truck and remove the goods himself.
Conditions, Warranties and Innominate terms
Implied and express terms may be further classified into conditions, warranties and
innominate terms.
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Conditions are the most important terms, which form the main structure of a contract.
These crucial terms must be pointed out to the other party before the formation of a
contract is completed. Breach of conditions gives the wronged party a right to cancel
the contract and claim compensation for any loss suffered.
Warranties are minor terms of the contract, which are ancillary rather than crucial or
important to the contract. A breach of warranty does not give the wronged party the
right to refuse to perform his side of the obligation but rather, he will be entitled to claim
compensation for any loss suffered as a result of the breach.
Example In a contract for the sale of a car, they year of manufacture, model and
engine capacity will be considered conditions, while things such as the car stereo,
window tint will be considered warranties. Innominate terms are broad terms in the
contract, which have not been categorized by the parties into conditions and warranties.
The court is given the task in situations of breach to determine whether such terms are
conditions or warranties. In order to make this decision the court takes various factors
into consideration, which include the intentions of the parties and the extent of damage
to the injured party. Poussared v Spiers, Bettni v Gye.
Poussared v Spiers
(The plaintiff had contracted with the defendants to sing in an opera they were
producing. Due to illness, she was unable to appear on the first night and some
nights thereafter. When Mme Poussard recovered, the defendants refused her
services as they had hired a replacement for the whole run of the opera. It was
held that after her failure to appear on the opening night had been a breach of a
condition and the defendant were at liberty to treat the contract as discharged.)
Bettni v Gye
(Bettini, an opera singer, was engaged by Gye to appear in a season of concerts.
He undertook to be in London at least six days before the first concert for the
purpose of rehearsals. He arrived three days late because of a temporary illness.
He gave no advance notice and Gye refused to accept his services. It was held
that the plaintiff had been engaged to perform for a 15-week season and the
failure to attend rehearsals could only affect a small part of this period. The
promise to appear for rehearsals was a less important term of the contract. The
defendant could claim compensation for a breach of warranty but he could not
repudiate Bettini's contract.)
2.
3.
That the more onerous the terms, the greater the degree of notice required Interfoto
Picture Library Ltd. V Stiletto Productions That customers are deemed to have
constructive notice of the content of any contractual documents they sign whether they
have read it or not LEstrange v Graucob
Customers cannot claim they misunderstood a clause unless the seller helped to cause
misunderstanding Curtis v Chemical Cleaning & Dyeing Co. An exclusion clause is
not effective if it is ambiguous; the courts may apply the contra proferentem rule to
restrict the effect of the exclusion clause Andrews v Singer
Usually, a party cannot exclude liability for a fundamental breach; however in some
circumstances, the court may allow the exclusion clause to protect the party in breach
Photo Production Ltd v Securior Transport Ltd
LEstrange v Graucob
(Mrs. L'Estrange owned a cafe. She ordered a cigarette machine from the
manufacturers which, it turned out, never worked properly. Although an implied
contract term in the sale of goods is that the goods will be suitable for the
purpose intended, the contract -- which Mrs. L'Estrange had signed -- did state
that the manufacturers disclaimed all liability regarding the malfunction of the
machine. It was held that Mrs. L'Estrange could not claim damages on the
grounds that she ``did not see'' the clause in the contract. There was no evidence
of fraud or misrepresentation that might have mitigated this judgement.)
Andrews v Singer
(The exclusion clause in a contract for the sale of a number of singer cars stated
that it related to new singer cars. One of the cars, which was a used car, was
defective and the purchasers claimed for the defect. The sellers claimed the
protection of the exclusion clause. Held: the exclusion clause would be read
strictly and so did not apply to used cars only new ones. An exemption clause
will not protect a third party who is not a party to the contract containing the
clause:)
Privity of Contract
Persons who are not parties to the contract cannot enforce the contract; neither can the
burdens of the contract be enforced against them. They are said not to be privy to the
contract or have privity of contract.
Tweddle v Atkinson, Dunlop Rubber Co. v Selfridge, Beswick v Beswick.
Tweddle v Atkinson
(Tweddle's father & Atkinson - Tweddle's father in law - contracted to contribute a
sum of money each to the support of Tweddle and his wife. Tweddle senior kept
up his part of the bargain, but Atkinson died before paying anything. Tweddle
sued the executors of Atkinson's estate. His suit was rejected because he himself
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was not party to the contract, even though it was for his benefit. It is not possible
to claim that there is an implicit contract between Tweddle (junior) and Atkinson,
because there is no consideration from Tweddle to Atkinson.)
Dunlop Rubber Co. v Selfridge
(An act or forbearance of one party, or the promise thereof is the price for which
the promise of the other is bought and the promise thus given postal regardless
of the fact that it was lost is the post.)
Beswick v Beswick
1.
2.
3.
4.
5.
6.
DISCHARGE OF CONTRACT
Method of Discharge
A party who is subject to the obligations of a contract may be discharged from those
obligations in any of the following ways:
(a)
Performance
(b)
Agreement
(c)
Breach
(d)
frustration
Exceptions include:(i)
(ii)
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(2)
Pynn v Campbell
(An agreement for the sale of a patent was drawn up and signed. It was
also agreed at the time that the written agreement was not to be binding
unless a third party approved of the invention. In an action on the
written agreement evidence was admitted to show that the third party
had not approved therefore the agreement was not effective.)
Condition Subsequent provides for the discharge of obligations outstanding under the
contract in the event of a specific occurrence.
Mutual Agreement Both parties can agree to accept something different where there
has been accord and satisfaction that the former obligation is discharged.
Where a contract is partially/wholly executed, discharge of such contract must be
supported by consideration or made under seal. The party to whom something is owed
may agree to accept something different in place of the former obligation; but where the
subsequent agreement by which one of the parties consent to accept something
different in place of the original obligation is under threat, the old obligation remains
undischarged.
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Discharge of Breach
Refusal or substantive failure by one party to perform his obligations, releases the other
party from his obligations and renders the party in default liable for breach of contract;
The general principle is that the breach must be a breach of condition of the contract
and not a breach of warranty. In the case of a Breach of Condition, the injured party
can treat the contract as being automatically discharged in which case he cannot also
sue for damages or breach of contract since he has indicated his willingness to regard
the contract as dead and has therefore waived his right to action for damages.
However, if he has incurred expenses on the contract he may bring a quasi contractual
quantum meruit action for compensation.
In the case of Breach of Warranty the injured party can sue for damages but must go on
with the contract he does not have the right to rescind or terminate the contract.
If a person chooses the latter course he keeps the contract alive and should
immediately commence action to enforce it, i.e., sue for damages or specific
performance.
Discharge by Acceptance of Breach
A breach does not, in itself discharge a contract but it may, in circumstances give the
innocent party the right to treat it as discharge if he so wishes. There are several forms
of breach of contract:
(1)
(2)
failure to perform the contract which is the most usual form - as where a
seller fails to deliver goods by the appointed time;
express repudiation where one party states he will not perform is part of the
contract.
(i)
Rochester v De LaTour
(In which the defendant agreed to utilize the services of a plaintiff as a
travel courier. A month later, the defendant wrote to the plaintiff stating
that the aforementioned services were no longer required. It was held
that this action constituted a breach of contract.)
(ii)
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(ii)
if plaintiff is a minor or of unsound mind at the time of the breach, the 6-year
period begins only when his disability ceases. Once begun it is not
subsequent disability;
if the defendant or his agent conceals the right of action by fraud, the 6 year
period begins only when plaintiff discovered or could by reasonable diligence,
have discovered the fraud.
(Case Applegate v Moss 1970)
(The defendant built a house under a contract specifying the design.
Contrary to the design no concrete raft foundation was installed.
This was discovered only eight years later, and eventually the house
was condemned. Held: The claim was not statute barred. The cause
of action arose only at the point where the defect became known or
reasonably could have become known to the claimant.)
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(iii)
(iv)
The doctrine of frustration may also not be applicable where express terms in a
contract cover the contingency complained of British Movie News v London
Cinema Ltd.
30