Performance + breach of contract PDF

Preview

Summary

Download Performance + breach of contract PDF

Description

Performance of contract A. Order of Performance 1. Condition precedent ( one party performs first): employment contract: I have to work, then afterwards I’m being paid. Employee’s performance is a condition precedent to the employer’s obligation to pay. Must exist where simultaneous performance is impossible: one party has to go first. Court will look at which party is more likely to default after the other has performed o Promissory condition: one party promised to do something. The first promise must be met. 2. Concurrent conditions: both parties perform at the same time. Nobody trust the other side. Each party can withhold own performance until the other party has performed. Model example is a contract of sale: Sale of Goods Act 1979, s28: buyer’s obligations to pay and seller’s obligation to deliver= concurrent. Have to do it at the same time. The parties can agree otherwise: shop might give you credit, give goods and pay later. Internet = u pay first. But the standard that law envisions is concurrent. 3. Independent promises ( each party’s obligation completely independent of the other party’s obligation): When one party can’t refuse to perform their side of the bargain, claiming that the other hasn’t performed either. Each party can enforce the other’s promise although he has not performed himself. Courts are reluctant to recognize independent promises: Kingson v Preston 1773: landlord’s covenancee to repair premises is independent of the tenant’s obligation to pay the rent. Tenant complaint that premise had a defect, and landlord said not going to repair, cause you haven’t paid the rent. Court said these two obligations are independent of each other. One of the very few eg that courts have allowed independent promises to exist It matters because there’s a remedy: remedy that u don’t have to go to court for: right to withhold performance. Is one party obliged to go first? If yes, they can’t exercise withhold. B. Entire obligations rule -

When have you done enough: Exact match of promise: 90 widgets but u only gave 85, no performance, because 5 short. o Cutter v Powell (1795): seaman to be paid 30 guineas “ ten days after ship arrives at Liverpool.. provided he proceeds, continues and does his duty.. form hence to…Liverpool”. He died a few days before arrival in liverpool. H: Widow got nothing for his service. Contract frustrated, therefore I don’t have to pay. o Sumpter v Hedges (1898) C undertook to build 2 houses on D’s land for 565. C completed part ( worth 333), then stopped. D finished the buildings, using C’s material. H: C compensated for material, but not for work done. Can’t get a penny for your work, u ought to complete whole house. He got value for material, but no share for work he had put in. He promised to complete house but he didn’t.

-

Mitigating the Rule: Cutter v Powell shows unfair. So got mitigating the rule. Taking the sting out of it. 1. Severable obligations: eg. Employment contract. Taylor v Laird: contradict to Cutter ( where complete payment on end of journey), hired for 50 pounds a month ( beginning of instalment payment), he was paid for first 7 months, 8th month wasn’t paid, during 9th month he wrongfully left ship; he was allowed to claim wages for 8 th month because he had completed that instalment. Not every contract is severable: if I promise to give you painting and I deliver only half of painting, u don’t have to pay the half, coz doesn’t make sense. Need to look at the nature to see if there is severability. a. In building contract; yes, for progress payment. When roof on, u get another amount of money, etc. So depends on whether the party has created severability. If contract that says X amt of money for a house, then can’t artificially create severability. 2. Substantial performance: u have done most of what you have promised u would do. Hoenig v Isaacs: C to redecorate D’s flat for 750, payment was ‘net cash as the work proceeds, and balance on completion”. Some payment has been made throughout contract but some more money still due at the end. D refused to pay balance. H: C entitled to balance, minus deduction for cost of cure ( that D had to pay as well to bring work up to standard) 3. New Contract: Christy v Row: contract to carry coal to Hamburg, but delivery couldn’t take place because of war. The consignee ( recipient), now said oh can u deliver to Gluckstadt in Denmark instead. And later refused to pay, saying payment dependent on delivery to hamburg. Court said u have breached a new agreement. You voluntarily accepted performance to Gluckstadt, so u can’t complain now. a. Builder didn’t finish complete it can’t use voluntary acceptance. Because half built thing on your land. Doesn’t make sense. For building contract main way to mitigate to substantial rule.

C. Breach of Contract: A breach of contract is committed when a party without lawful excuse fails or refuses to perform what is due from him under the contract, or performs defectively or incapacitates himself from performing. Lawful excuse: frustration- exception to liability: death of performer, etc. -

Relevance of fault English contract law: Strict liability –doesn’t depend on the party’s fault. Not an excuse that my supplier was at fault. Unless it is impossible ( supplier is late= not an impossibility), I have to perform. o But not all contracts is strict liability. Doctor stomachache: can’t guarantee they can make u better: it’s just doctor’s best performance. Typically service contract: impose lesser level of liability. Perform with reasonable care. Only a failure to take such care would entitle the other party to claim for breach. Even tho desired result not achieved, as long as taken care and skill, no breach of contract. (Supply of Services AC t1982, s13: ‘ carry out the service with reasonable care and skill”)

-

Classification of terms: distinction in English law, recog that not every term in contract is of equal significance. Terms of contract are of diff varying level of importance for contract, therefore the breach of those diff terms, can trigger different legal responses. If the breach is very important, concerns a very fundamental term of contract, then the other party might want to distant themselves from the contract: say we don’ wish to have this anymore, because u breached the contrat in such a fundamental way, that we have lost interest.// breach concerns a minor obligation: the innocent party will never be entitled to terminate the contract: only limited to damages. Even if can terminate= can get damages. But damages= every contract. But right to terminate exist only for certain types of breaches, not for every breach. o Conditions: Core term of contract. Can terminate if there has been a breach. o Warranty: A much less important term of contract. Never entitles the other party to termination if there is breach. o Intermediate category between conditions and warranty: intermediate term: in case of breach of innominate term, wait and see what the consequences of the breach are. If the breach trigger serious consequences, we should regard it as a condition have been breached, and can terminate. On the other hand if the breach of innominate term trigger only trivial consequences, then innocent party won’t be entitled to terminate.

-

Meaning of condition: Here, we use it as a core term of contract. Term/ rep: if decided it’s a term, must ask what is the importance of this term to the contract: does it go to core of contract ( condition), or not (warranty)? o When is a term a condition? 3 ways to classify a term.  A statute can say that a certain term is a condition ( statutory classification)  Intention of the parties: an exercise of the court.  Express classification by the parties: o Statutory Classification: Sale of Goods Act 1979 a. Sale of Goods by Description: i. Arcos Ltd E A Ronaasen & Son 1933 : Timer described as ½ inch was 9/16 inch but useable for purpose. H: buyer could reject goods despite usefulness. Seller can’t get away with the slightly thicker timber. ii. Reardon Smith Line Ltd Hansen-Tangen: ship sold, was still being built, described as “Yard No. 34 at Osaka”. Met all descriptions of contract, but was built in Oshima at yard no. 004, otherwise in accordance with contract. H: that’s not part of description, just a label attached. H; subcharterer could not reject tanker, phrase “yard no 354 at osaka’ was no description but mere substitute for name. o Intention of the Parties: court has to decide what was the intention of parties when they made the contract. The court will regard as a condition a term the performance of which goes to the very root of the contract. But does not need to deprive innocent party of substantially the whole benefit of the contract.

o Express Classification: expressly stipulated that a certain term should be a condition. stipulation that certain breach entitles other party to terminate. Lambard North Central plc v Butterworth. Hire purchase prompt payment= condition of contract. Any failure to pay on time would entitle the hire purchase company to take back the hired object. Occasional reclassification by courts ( u describe as a condition, but ur true intention must’ve been for these to be innominate terms. Not entitled to terminate) o Rice v Great Yarmouth: term of contract that all obligations had to be discharged, and if contractor commits a breach of any of its oblig, authority may terminate the contractor’s employment. o Schuler v Wickman Machine. H: can’t do that. Principle was not entitled to terminate merely because distributor had failed to make one of more than 1,200 visits. -

Innominate terms: need to wait for breach to occur then determine outcome. o HongKong Fir Shipping Co Ltd v Kawasaki: before this only had condition and warranty. Ship chartered for 24 months to be ‘ in everyway fitted for ordinary cargo services’ and be sea worthy. Ship proved unseaworthy; repair would have been costly and taken several months, so can’t use for few months. But the real reason they wanted to terminate is because now they can hire for much cheaper. H: Charterer ( person who hired ship) was not entitled to terminate, seaworthiness of ship was not a condition but an innominate term. o Innominate Terms and sales  The Hansa Nord: even tho Sales of Goods Act… buyer had not been entitled to terminate: auction had shown that the pulp had substantially met his intentions. o When is a term innominate term?  The parties are free to define the nature of the terms in their contract  In the absence of a definition by the parties, the court applies judicial classification  In the absence of precedence, the courts are reluctant to exclude termination per se, ie. To classify a term as a warranty. o Choice Condition-innominate term  If in doubt go for intermediate term, then can take into account whether the innocent party was in fact deprived. Classification as innominate term prevents termination on technical grounds or for ulterior motives.  Classification of a term as a condition obviates the need to determine whether the breach is serious and substantial, and thus fosters certainty. This policy prevailed in Bunge v Tradax: courts stuck strictly to what parties had agreed. Delivery had to be made in June date chosen by buyer, and on a ship provided by buyer at a port to be selected by seller. However, buyer had to give at least 15

days notice of the ships’s readiness to load. Buyer gave notice 5 days too late. H: seller had been entitled to terminate. o Treitel summary 1. Time stipulations, if sufficiently precise, are usually classified as conditions 2. Other terms are usually classified as innominate terms, not conditions, unless - exact performance of the term is regarded as commercially vital, or - There is evidence that the parties intended the term to be a condition D. Termination for Breach -

Repudiation= breach of condition or serious breach of innominate term. Terminating contract for breach, should not be called rescission for breach. Rescission: works from beginning of contract: if rescind after misrep, law says there never was contract. Rescission has retrospective. Termination= there is a valid contract, until the moment it is terminated.

-

No Automatic Termination: choice of innocent party to say whether to continue with contract. I’m still going to use the car, I’m only going to claim damages.

-

Effects of the Decision: once the aggrieved party has either affirmed or terminated the contract, the decision cannot be revoked. o PRIMARY OBLIGATIONS: o ANCILLARY OBLIGATIONS: obligations not dealing with performance but with dispute resolution etc are normally intended to survive termination. o SECONDARY OBLIGATIONS: kick in because primary obli has come to an end, therefore need to pay damages.

E. Anticipatory Breach -

-

-

One party, before performance is due, declares intention not to perform. Bfore due date, no actual breach is possible. Tell u now, so law will take into account. Entitles innocent party to today, accept my repudiation, and therefore terminate the contract today. In case of termination, aggrieved party can claim damages at the date of termination: Hochster v De La Tour (1853) Hochster: D agreed to employ C from 1june for three months. 11 may: D told C he no longer needed him. 22 may: C brought action for breach of contract. Court said can bring proceedings before due date, C was entitled to bring action at that date. Would limit Hochster’s ability to look for employment if he had to wait. So makes economical sense to accept breach and continue with life. “C was entitled to bring action at that date: “If the plaintiff has no remedy for breach of contract unless he treats the contract as in force and acts upon it down to the 1st June 1852, it follows that, till then, he must enter into no employment ...” (Lord Campbell CJ) “ Objections and defence

o Quantification of damages difficult if performance due much later. o Acceleration of D’s obligation: D obliged earlier than stipulated o Problem with contingent obligations: -

A right to continue performance? o Aggrieved party may affirm the contract and demand performance at the time stipulated o Is aggrieved party entitled to render own performance even if they know that this performance is not wanted by other party? o White and Carter (Councils) ltd v McGregor (1962): D’s sales manager and C entered into contract under which C agreed to display D’s ads for 15 weeks. Later on the same day, D informed C that he did not want the contract. C displayed D’s ads for 156 weeks. H: C was entitled to the contract price.

-

Exceptions to continued performance: Aggrieved party is restricted to damages if: It cannot perform without cooperation by the party in breach; it has no legitimate interest in performing....