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MGMT 3320 (33)

Chapter 9

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University of Guelph
MGMT 3320
Joseph Radocchia

Chapter 9: Termination and Enforcement of Contracts Termination of Contracts: An overview  Through performance - when both parties fulfill their contractual obligations o Vicarious performance - performance of contractual obligations through others o If an "other" does not have privity of contract, they cannot sue or be sued on the contract, but there may be liability in tort  Through agreement - parties are free to voluntarily bring their contract to an end o End the contract, and one party could pay a sum to the other side as a settlement in exchange for agreeing to end the contract o Enter into a whole new contract (novation) o Vary certain terms of the contract o Substitute a party, where one party's rights and obligations are transferred to someone else  Assignment - when one party transfers a contractual right to someone else  Contract is entered between Creditor and Debtor  Creditor transfers contractual right to Assignee  Assignee gives Debtor notice, Debtor is obligated to pay Assignee  Through frustration - after the formation of the contract, an unforeseen event occurs that makes performance functionally impossible or illegal o Event must be dramatic and unforeseen o A matter that neither party has assumed the risk of occurring o Arose without being either party's fault o Makes performance functionally impossible or illegal o Force Majeure clause - parties contractually define in advance what events would frustrate the contract o Landmark Case: Taylor v. Caldwell  Taylor rented a music hall from Caldwell for 4 days for a series of concerts  Music hall was destroyed prior to the concerts in a fire  Taylor sued for his expenses related to advertising and other preparations  Court found that the contract was frustrated, Taylor's action failed  Through breach - when one party goes against the contract, the innocent party can be released from the contract if that is their wish o Less significant breaches entitle innocent party to damages only o Condition: an important term of the contract, that if breached, gives the innocent party the right to terminate the contract and claim damages o Warranty: a minor term, that if breached, gives the innocent party the right to claim damages only o Innominate term: a term that cannot be easily classified as either a condition or warranty o Fundamental breach: a breach that affects the foundation of the contract o Anticipatory breach: a breach that occurs before the date for performance  Actionable, because each party is entitled to a continuous expectation that the other will perform during the entire period of the contract Enforcement of Contracts  To succeed in its action for a breach of contract, the plaintiff must demonstrate, on a balance of probabilities (better than 50% chance), o Privity of contract - establish there is a contract between parties o Breach of contract - other party failed to keep terms of the contract o Entitlement to a remedy - plaintiff is deserving of the court's assistance  Damages - or monetary compensation - are awarded  Expectation damages - damages which provide the plaintiff with the monetary equivalent of contractual performance  Punitive damages - awarded to punish the defendant  Pecuniary damages -
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