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Lecture 9

LAW 122 Lecture 9: Contracts part 4

Law and Business
Course Code
LAW 122
Peter Wilson

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Nov. 20, 2019
Week 12 LAW122 Contracts part 3 (chapter 11 and 12)
Chapter 11 discharge and breach
- What are the alternative ways or scenarios by which parties to a contract are relieved
(discharged) from having to do anything more under the contract?
- Whereas certain ways or scenarios are amicable and non-controversial, others are
adversial and contentious
Discharge by performance
- Contract is discharged when a party is relieved of the need to fulfill any more promises
Performance parties have fulfilled or completed their contractual obligations
- Time of performance
o Time is not of the essence which means that a party is entitled to perform late even
if contracts sets a specific date
o Sometimes, time is of essence if expressed when contract was created (time is of
the essence clause)
o But party may also be liable for any loss incurred by the other party as a
consequence of late performance
o Performance within reasonable time may be inferred from circumstances of the
contract (ex. perishable goods)
- Tender of payment
o Debtor has primary obligation of locating the creditor and tendering (offering)
payment, even if not requested by creditor
o Method of tendering payment must be reasonable (cannot occur at inconvenient
time or inconvenient circumstances)
o Reasonable tender has to made only once
If creditor rejects, debtor still has to pay but now it is the creditor’s job to
get it
o Creditor is not entitled to interest on a late payment once reasonable tender was
made by debtor
o Debtor doesn’t have to tender payment if it obviously would be refused (made
clear that it won’t be accepted)

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Nov. 20, 2019
Ex. don’t pay me $1000 I won’t accept it
o Creditor may require payment by legal tender
Payment of bills and coins to a certain value (not acceptable to say pay
$1000 is loonies)
o Because of risks associated with money, it’s common to discharge contractual
debts by other means:
Debit cards
Credit cards
Payment by debit
- Plastic card that allows a person to debit or withdraw funds from bank account
- Funds are transferred electronically from bank account to merchant
o By swiping card through device and typing in PIN which tells the bank to
electronically transfer
o Bank will either authorize or reject request and send return message to merchant
Actual transfer of happens at end of the day through clearing and
settlement system
- Payment by debit is final and cannot be revoked or cancelled
- Most notable risk associated with debit cards is use of unauthorized person (thief)
- When you are held liable:
o Carelessly kept card and pin in the same wallet or drawer and then lost it
o Fail to promptly report loss of theft of card to bank
- When bank is liable:
o When you are not to blame for unauthorized use (ex. held to knifepoint to hand
over debit card and PIN)
Payment by credit
- Operates by allowing card holder to obtain credit or loan for the purpose of paying for
goods and services
- Merchant will electronically send details of purchase to card issuer (ex. VISA) who will
either accept or reject your request

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Nov. 20, 2019
- If request is accepted, card issuer will arrange for merchant to be paid
- Loan is repaid either completely with monthly credit card statement is received or over
time with interest charged to outstanding balance
- 3 credit card relationships:
o Cardholder and card issuer
Card issuer arranges credit by paying for goods and services on your
behalf while you promise to repay both value of each purchase and an
agreed-upon rate of interest
Also promise to keep card safe and file when lost or stolen
o Card issuer and merchant
Most merchants accept credit because of benefits (ex. increase of sales
because it’s another payment offer)
Merchant has to have agreement with card issuer
Once card issuer authorizes payment, it is obligated to transfer funds to
If cardholder cannot afford to purchase later on, loss falls on card
issuer, not merchant (get paid regardless)
o Cardholder and merchant
Once card issuer authorizes transaction, cardholder cannot revoke
payment if unhappy with goods or services (merchant is entitled to retain
payment by card issuer, and you remain indebted)
Cardholder’s only option is to sue merchant on underlying sales contract
- Risks associated is unauthorized use
- Liability is based on fault
o If you carelessly take care of it or fail to report if it was lost or stolen, then you are
o Card issuer can be liable for failing to monitor card use in order to detect
suspicious patterns
Payment by cheque
- Payment by cheque conditionally discharged contractual debt
- Cheque will discharge your debit to store unless something goes wrong
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