Mutuality and Materiality Essay PDF

Preview

Summary

Download Mutuality and Materiality Essay PDF

Description

Contract – Question 5 (Part C)

Contract law operates to enforce “pacta sunt servanda,” therefore, a breach of contract occurs by failing to perform an obligation under the contract as required, without legal justification. Liability for a breach of contract is strict under both English and Scots Law, however, the law provides remedies available to the innocent party to which the breach affected. There are two key principles which underpin many of these remedies and which may be available to the aggrieved parties; these are mutuality and materiality. The term ’mutuality’ refers to the idea of reciprocity of obligations, meaning that both sides of a contract must perform their side of the bargain ( McNeil v Aberdeen City Council ). In order to enact a remedy the contracting party must first show they themselves are not in breach of the contract and can only insist on performance by the other party if they themselves have fulfilled their side of the bargain (Graham & Co v United Turkey Red Co Ltd). This is one of the five main principles involved in the doctrine of Mutuality, the remaining are as follows: a party in breach of contract cannot enforce performance as seen in Turnbull v McLean & Co . Furthermore, an innocent party may withhold performance until the other party has performed the counter stipulations (Ramsay v Brand). Additionally, the operation of the principle can be affected by the express terms of the contract, which can either be expressly excluded or included. In Dominion Corporate Trustees v Debenhams Properties it was held that the breach was not severe enough to allow termination as it was seen that the parties could not have intended that the right to terminate would arise in the case of every breach. Lastly, a party may not be able to withhold performance for every trivial breach which can be seen in Blyth v The Scottish Liberal Club. However, there has been staunch criticism concerning the doctrine of mutuality, this is due to how a party in breach cannot sue to enforce a contract even where the other party breached their obligation first. The Scottish Law Commission recommended statutory reform to address this in their 2018 report, however it is yet to be implemented 1. Regarding the doctrine of materiality, this is the idea that the remedies available to a party in breach depend on the seriousness of said breach. For the contract to be rescinded it must be shown that the breach “goes to the root of the contract,” as said by Lord Dunedin in Ward v Waldon. A breach may be material or not, which is a question of fact and degree to be decided by the judges, the distinction between the two decides the relief which may be granted. When a material breach occurs, the innocent party can elect to rescind the contract, whereas if it is decided that the breach is not material, the innocent party is restricted to damages. However, if an innocent party wrongly treats a breach as material, the innocent party goes into breach of contract as seen in Ward. Where a breach goes to the core of a contract it is said that the party in breach has repudiated the contract, meaning that he refuses to perform his obligation to the contract, which gives the innocent party an option to rescind. Therefore, it is not possible for the party in breach to terminate the contract and force the innocent party to accept damages (AMA Ltd v Law). To conclude, the doctrine of mutuality determines that either both parties are bound by the contract or neither are bound. Whereas the doctrine of materiality is the measure of importance or seriousness of the breach, determining the remedies available to the innocent party.

1 Gillian Black, Woolman and Black on Contract, 6th edn...