Topic 45 DISCHARGE OF CONTRACT

PRESENTED BY: ĐỖ THỊ ÁNH HỒNG DISCHARGE OF CONTRACT When obligations created by a contract comes to an end, contract said to be discharged or terminated https://www.ashurst.com/en/news-and-insights/legal-up dates/terminating-contracts-under-english-law/ http://e-lawresources.co.uk/Discharge-by-breach.php A contract may be discharged in any of the following ways: oBy performance oBy mutual agreement oBy breach of contract oBy impossibility of performance oBy operation of law Contracts are made for being performed But there are certain circumstances when one of the parties does not perform his part of the contract Non-performance is called “Breach” a breach of condition; a sufficiently serious breach of an intermediate or innominate term; or a refusal to perform/ renunciation Following are the types of Breaches: 1a Material breach (Eg Sales of Goods Act 1979 revised 04 May 2019, cases, Time of the essence) 1b Minor breach 2a Anticipatory breach (Fros vs Knight (1872) marriage) 2b Actual breach Following are the types of terms: 1a Express terms 1b Implied terms 2a Condition 2b Warranty 2c Innominate terms A condition is a promise or fact that forms the basis of the contract Conditions go to the heart of the contract and are one of the most important parts In the case of a breached condition, the innocent party is allowed to end the contract Poussard v Spiers (1876) X entered a contract to perform as an opera singer for three months She became ill five days before the opening night and was not able to perform the first four nights Z then replaced her with another opera singer Held: X was in breach of condition and Z was entitled to end the contract X missed the opening night which was the most important performance as all the critics and publicity would be based on this night Conditions can further be classified into; Condition precedent– this is a term pre-condition to the formation of a contract, i.e, a term that must be satisfied before the contract becomes operational (Eg Patent case) Condition subsequent– this is a condition whose occurrence may affect the rights of the parties already in a contract, For instance, a condition that the contract remains valid until a stated event occurs, occurrence of the stated event may bring the contract to an abrupt end You can tell if a term is a condition instead of a warranty if: It is referred to in the contract as a condition Both parties agree that the term should be a condition The nature of the contract or the actions of the parties suggest that both parties expect for the term to be a condition Case law shows that the term is a condition A warranty in a contract is considered to be less important than a condition If a term isn't a condition or an innominate term, it is a warranty In the case of a breached warranty, the innocent party can only receive damages They can not cancel the contract If the innocent party terminates the contract, they are at risk of being sued for unjustified contract termination http://zeritenetwork.com/conditionswarrantiesandinnominatet erms/ Bettini v Gye (1876) X  agreed by contract to perform as an opera singer for a three month period He became ill and missed days of rehearsals The employer sacked him and replaced him with another opera singer Held: X was in breach of warranty and therefore the employer was not entitled to end the contract Missing the rehearsals did not go to the root of the contract Sufficiently serious breach of an intermediate/innominate term A breach of an intermediate or innominate term, i.e neither a condition nor a warranty, only justifies termination if the breach is sufficiently serious It must "go to the root of the contract", "frustrate the commercial purpose" of the contract or "deprive the party not in default of substantially the whole benefit"3 of the contract In every case, the court will look at the nature and consequences of the breach to decide whether termination is justified 1. Hong Kong Fir Shipping Co Ltd -v- Kawasaki Kisen Kaisha Ltd [1962] QB 26  Where a contract is broken the injured party becomes entitled to one or more following remedies: Recession of the contract Suit for damag es Penalty Suit for specific performan ce Suit for injunctio n Damages means the money compensation allowed to an injured party for the loss or injury suffered by him by the breach of contract The objects or awarding damages is not punishment but compensation  Where a contract has been broken, the party who suffers by such breach is entitled to receive from the party who has broken the contract, compensation for any loss or damages caused to him thereby, which naturally arose from the usual course of things, or from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it 1. Hong Kong Fir Shipping Co Ltd -v- Kawasaki Kisen Kaisha Ltd [1962] QB 26.2. The amount of damages will obviously depend on a number of factors See Hadley -v- Baxendale [1854] Exch 341.3. Hong Kong Fir Shipping Co Ltd -v- Kawasaki Kisen Kaisha Ltd [1962] QB 26, at p.70.4. For example, in Dominion Corporate Trustees Ltd -v- Debenhams Properties Ltd [2010] EWHC 1193 (Ch), the Court interpreted what appeared to be a condition as an intermediate term where the remedy of termination seemed too drastic for what was a minor breach 5. In Union Eagle Ltd -v- Golden Achievement Ltd [1997] UKPC a delay of 10 minutes in payment of the purchase price resulted in termination of a contract to buy a flat and forfeiture of the deposit paid. 6. United Scientific Holdings Ltd –v- Burnley BC [1974] AC 904, at 943-944.7. Lombard North Central plc -vButterworth [1987] QB 527 CA.8. British and Commonwealth Holdings plc –v- Quadrex Holdings Inc [1989] WLR 723 9. The notice does not technically make the time stipulation a condition, but evidences the time by which it would be reasonable to require the obligation to be performed Failure to perform by this time can then be treated as an intention not to perform See United Scientific Holdings Ltd- -v Burnley BC [1974] AC 904.10. Universal Cargo Carriers Corp -v- Citati (No.1) [1957] QB 401, at 436.11. White and Carter (Councils) Ltd -v- McGregor [1962] AC 413 12. Matthews -v- Smallwood [1910] Ch 777 at 786 13. Peyman -v- Lanjani and Others [1985] Ch 457; Kendall -v- Hamilton (1878-79) App Cas 504 14. However, the nature of the contract may determine the length of time given to the innocent party If, for example, time is of the essence or the contract has been entered into in a volatile market, the time allowed is likely to be relatively short See Force India Formula One Team Ltd -v- Etihad Airways PJSC [2010] EWCA Civ 1051, [2010] All ER (D) 41 (Oct) at 122.15. See Stocznia Gdanska SA -v- Latvian Shipping Co (Repudiation) [2002] All ER (Comm) 768.16. Hain Steamship Co Ltd -v- Tate & Lyle [1936] All ER 597; Bentsen -v- Taylor Sons & Co [1893] QB 274 17. At common law contractual termination clauses not have to be reasonable but an attempt to exclude or limit liability for breaches of contract, or attempts to restrict the available remedies, may be caught by the Unfair Contract Terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1999 See Ashurst Quickguide: Limitation and Exclusion Clauses 18. Lombard North Central plc -v- Butterworth [1987] QB 527.19. Phones 4U Ltd (In Administration) –v- EE Ltd [2018] EWHC 49 (Comm).  20. Phones 4U Ltd (In Administration) –v- EE Ltd [2018] EWHC 49 (Comm) There the terms of the notice of termination, which referred only to the contractual right to terminate, precluded a claim for loss of bargain damages (estimated at over £200 million) 21. Shell Egypt West Manzala GMBH –v- Dana Gas Egypt Limited (formerly Centurion Petroleum Corporate) [2010] EWHC 465 (Comm), at 34.22. British Westinghouse Electric Co Ltd -v- Underground Electric Rys [1912] AC 673.23. Unless excluded – see The effect of contractual provisions.24. Ormes -v- Beadel (1860) De GF & J 333 25. Clough -v- L.&N.W Rly (1871) LR Ex.26.26. A false representation made by a party, either in the knowledge that the statement is false, or made recklessly as to its truth.27. TSB Bank -v- Camfield [1995] WLR 430.28. Smith New Court Securities Ltd -v- Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254.29. Doyle -v- Olby (Ironmongers) Ltd [1969] QB 158.30. In some situations of mistake the court may be willing to rectify the contract, i.e amend its terms to reflect the true agreement For more on the remedy of rectification, see the separate Ashurst Quickguide: Rectification of Contracts 31. Robson -v- Premier Oil and Pipe Line Co Ltd [1915] Ch 124.32. BP Exploration Co (Libya) Ltd -v- Hunt (No.2) [1976] WLR 788.33. J Lauritzen AS -vWijsmuller BV (The Super Servant Two) [1990] Lloyd's Rep 1, at p.8.34. Lynch -v- DPP of Northern Ireland [1975] AC 653 (a criminal case but the general principles apply to consent in the civil, contractual context) .. .DISCHARGE OF CONTRACT When obligations created by a contract comes to an end, contract said to be discharged or terminated https://www.ashurst.com/en/news-and-insights/legal-up... dates/terminating-contracts-under-english-law/ http://e-lawresources.co.uk /Discharge- by-breach.php A contract may be discharged in any of the following ways: oBy performance oBy mutual agreement oBy breach of. .. of contract oBy impossibility of performance oBy operation of law Contracts are made for being performed But there are certain circumstances when one of the parties does not perform his part of