The law of contracts forms a substantial part of our various relationships that can have some sort of influence over us on an almost daily basis – even when there is no physical contract in front of us we may still be privy to some sort of contractual obligation. Alternatively, if you’re a fan of social theorists such as Jean-Jacques Rousseau, you may argue that we’re also bound by ‘the social contract’, but we digress.
Getting back to our original point, the law of contracts plays an enormous role in many of our interactions and for the most part, there may be no real concern in regards to the performance of a contract and an agreement will be completed accordingly. However, this does not mean that issues won’t arise within a contractual relationship, and there may be circumstances where you may need to discharge a contractwhich can be done by either one, or all of the parties to the agreement, and can be discharged by either: BY PERFORMANCE BY MUTUAL AGREEMENT BY SUPERVENING IMPOSSIBILITY BY OPERATION OF LAW.
BY LAPSE OF TIME BY LAPSE OF TIME BY PERFORMANCE Before exploring the general ways in which a contract can be discharged, the most obvious way in which acontract will come to an end, is when all parties fulfil their contractual obligations and the contract has been discharged via performance. Easy. Exceptions to performance Some people may be of the belief that performance of a contract includes the executing of every aspect of the contract of which the parties had agreed upon, and if performance of every part of the agreement has not been fulfilled, then the contract has not been fully performed.
The common law had subsequently recognised some exceptions to the general rule other than that performance of A contract must be exact and complete according to the Terms, with the exceptions being: Substantial performance; Acceptance of partial performance; Divisible contracts; The law does not concern itself with trivialities (de minimis non curat lex); The performance of the contract has been obstructed; Time for performance. Performance could either be ACTUAL PERFORMANCE (Section # 36) OR TENDER / OFFER OF PERFORMANCE (Section # 38) ACTUAL PERFORMANCE:
When all the obligations are fulfilled. Exceptions are the substantial performance meaning thereby that every part of the contract performed. TENDER / OFFER OF PERFORMANCE: Performance at time and place but other party does not accept. It is equivalent to actual performance. BY MUTUAL AGREEMENT There is nothing preventing parties to a contractual relationship to vary or discharge the agreement, and can do so in the following ways: NOVATION : Putting a new contract in place of the old one and can be done between the original contracting parties or different parties.
ALTERATION: Modification of contract with assent of both the parties. And can be done between the original contracting parties. RESCISSION / Mutual discharge: It is the abrogation of legal contract. It is where both parties agree to release one another from what was agreed upon before either party has performed any of the acts promised. It is effective from inception. There by restoring to a position if no contract had even been performed.
REMISSION is where the strict performance of the contract is no longer required, even though strict performance of the contractual agreement can still be claimed by one of the parties . It is accepting lesser than agreed by extending time or accept anyother satisfaction. WAIVER/ Release by one party: is where one party has completed their contractual promise, and agrees to release the other party from further performance of the contract. It is one sided concession by unilateral declaration of renunciation not by mutual agreement.
BY SUPERVENING IMPOSSIBILITY/By SUBSEQUENT IMPOSSIBILITY (Doctrine of frustation) What is impossible does not creat an ligation. Discharge of a contract by frustration There may be instances where performance of the contract is impossible and it isn’t the fault of any of the parties that there are no provisions dealing with a circumstance arisen, therefore, allowing the parties to be released from further performance of the contract. It could be of two types: PRECONTRACTUAL : It is initial impossibility. POST CONTRACTUAL: It is supervening.
Subsequent impossibility could arise because of following reasons. DISTRUCTION OF SUBJECT MATTER FAILURE OF PURPOSE DEATH / PERSONAL INCAPACITY CHANGE OF LAW DECLARACTION OF WAR There are three limitations to the doctrine of frustration: The frustrating event was not caused by either party to the contract; The frustrating event must not be one where it was reasonably foreseeable or contemplated by either party; the occurrence of the frustrating event was not caused by the party who is seeking to rely on frustration.
Under the common law, a contract which is frustrated automatically comes to an end, however, any liabilities prior to the frustrating event may still be enforceable – but in terms of future obligations (termination in futuro), the parties will be discharged BY OPERATION OF LAW When the agreement is materially altered by one of the parties without the consent of the other, in which case, the innocent party may be able to treat the agreement as discharged due to the conduct of the other party. INSOLVENCY Inability to meet financial obligations.
It arises when assets are less than liabilities. Assets may be liquidated to pay off outstanding debts. MERGER: Lesser agreement is merged into a greater agreement. That could be from simple to formal contract or deed, which become enforceable. MATERIAL ALTERATION:Addition or deletion of text from legal instrument that significantly changes its legal sense or effects, may thus validate it. BY LAPSE OF TIME :It is the periodic limitation as must perform within the specified time. If no action by promise with period limitation, deprived of remedy at law.
DISCHARGE BY ACCORD AND SATISFACTION: arises where one party is in breach of the contractual agreement and the other party agrees to release the party who is in breach by requiring performance of another promise, which would then mean that the previous agreement has been discharged by accord (the new promise) and satisfaction (performance). DEATH OF EITHER PARTY Another way, in which a contract can be discharged, especially if the agreement relates to personal services, is the death of either party for example, thereby, having the effect of discharging the agreement. BY BREACH OF CONTRACT.
Breach of contract can be either through actual breach or anticipatory breach. When a contract is discharged through a breach, usually means that one of the parties has either expressly or impliedly refused to perform their part of the contract. Actual breach: arises in circumstances where one party fails to perform their promise at the required time, or commits an actual breach of a condition of the contract (an essential term of the contract), and the breach of a condition will entitle the innocent party to terminate the contract and may allow the aggrieved party to claim damages. ON DUE DATE OF PERFORMANCE.
DURING THE COURSE OF PERFORMANCE Anticipatory breach: is when one party repudiates their obligation to perform a future promise and in such an instance, the innocent party may be entitled to terminate the contract and may bring an action fordamages, irrespective of whether the date for performance has not yet arrived. EXPRESSED BREACH IMPLIED BREACH CONTRACTUAL REMEDIES CLASSIFICATION OF REMEDIES Various remedies exist in contract law. These include: DAMAGES QUANTUM MERIUT Repudiation Rescission Specific performance Injunctions DAMAGES It is a legal remedy, an award to compensate the innocent party.
Placing the injured party in a position they would have been in, had the contract been performed. It could take various forms as: NOMINAL DAMAGES ORDINARY DAMAGES SPECIAL DAMAGES LIQUIDATED DAMAGES NOMINAL DAMAGES: In this case plaintiff injured but did not incure any financial or real world loss . Or if incurred any loss the loss is such as cannot be measured easily. ORDINARY DAMAGES:These are the reasonable foreseeable consequence estimated on the basis of circumstances prevailing at the date of contract. SPECIAL DAMAGES: Consequential damages of special circumstances which breaching party knew at the time of contract.
LIQUIDATED DAMAGES: It is a stipulation to establish predetermine sum that must be paid if parties fail. Restitutionary Awards There are two general categories of damages that may be awarded if a breach of contract claim is proved. They are: 1. Compensatory Damages. Compensatory damages (also called “actual damages”) cover the loss the nonbreaching party incurred as a result of the breach of contract. The amount awarded is intended to make good or replace the loss caused by the breach. There are two kinds of compensatory damages that the nonbreaching party may be entitled to recover: A.
General Damages: General damages cover the loss directly and necessarily incurred by the breach of contract. General damages are the most common type of damages awarded for breaches of contract. Example: Company A delivered the wrong kind of furniture to Company B. After discovering the mistake later in the day, Company B insisted that Company A pick up the wrong furniture and deliver the right furniture. Company A refused to pick up the furniture and said that it could not supply the right furniture because it was not in stock. Company B successfully sued for breach of contract. The general damages for this breach could include:
• refund of any amount Company B had prepaid for the furniture; plus • reimbursement of any expense Company B incurred in sending the furniture back to Company A; plus • payment for any increase in the cost Company B incurred in buying the right furniture, or its nearest equivalent, from another seller. B. Special Damages. Special damages (also called “consequential damages”) cover any loss incurred by the breach of contract because of special circumstances or conditions that are not ordinarily predictable. These are actual losses caused by the breach, but not in a direct and immediate way.
To obtain damages for this type of loss, the nonbreaching party must prove that the breaching party knew of the special circumstances or requirements at the time the contract was made. Example: In the scenario above, if Company A knew that Company B needed the new furniture on a particular day because its old furniture was going to be carted away the night before, the damages for breach of contract could include all of the damages awarded in the scenario above, plus: • payment for Company B’s expense in renting furniture until the right furniture arrived. 2. Punitive Damages.
Punitive damages (also called “exemplary damages”) are awarded to punish or make an example of a wrongdoer who has acted willfully, maliciously or fraudulently. Unlike compensatory damages that are intended to cover actual loss, punitive damages are intended to punish the wrongdoer for egregious behavior and to deter others from acting in a similar manner. Punitive damages are awarded in addition to compensatory damages. Punitive damages are rarely awarded for breach of contract. They arise more often in tort cases, to punish deliberate or reckless misconduct that results in personal harm.
CALCULATION OF COMPENSATORY DAMAGES The calculation of compensatory damages depends on the type of contract that was breached and the type of loss that was incurred. Some general guidelines are: Standard Measure: The standard measure of damages is an amount that would allow the nonbreaching party to buy a substitute for the benefit that would have been received if the contract had been performed. In cases where the cost of the substitute is speculative, the nonbreaching party may recover damages in the amount of the cost incurred in performing that party’s obligations under the contract.
Contracts for the Sale of Goods: The damages are measured by the difference between the contract price and the market price when the seller provides the goods, or when the buyer learns of the breach. QUANTUM MERIUT:When expressed contract is mutually modified by implied agreement or not completed. Derived from Latin which means “in proportion to the work done”. The injured party may claim payment in proportion to part performance. (or) Damages for the remaining unperformed part. Repudiation Rescission Specific performance:Equitable remedy by court in limited circumstances.
Injunctions: It is also equitable remedy . Order of the Court restraining a person from doing a particular act. It is a preventive relief. It is granted by court in cases where damages are not an adequate relief. Court restrains the guilty party from doing what he promised not to do. Example: A film actress agreed to act exclusively for B for a year and no one else. During the year she contracted to act for C. She could be restrained by injunction from acting. It could be of three types namely: INTERLOCUTORY (PERPETUAL): It is enforced before trial. PROHIBITORY: MENDATORY: