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Lecture 6


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Philosophy 2080
James Hildebrand

Week 6 - Questions and Answers Chapters 12 and 13 (7 edition) th Chapters 13 and 14 (8 edition) Chapter 12 (7 edition) / Chapter 13(8 edition) (Please refer to the Week 6 Cothse Notth for the corresponding page numbers and questions for both the 7 and 8 editions.) Question: What is meant by “performance” with respect to contract law? Answer: Performance in contract law is the performance of one’s obligations exactly (or as close as possible where there is some ambiguity) as described or set out in the terms of the contract. The performance of one’s obligations ends further obligations or that party and is said to “discharge” the contract. Question: Distinguish performance from specific performance. Answer: Performance of a contract is the usual performing of one’s obligations pursuant to the terms of the contract, the completion of which end’s one’s obligations. Specific performance is a remedy, and is a court’s order compelling a party to fulfill its obligations in exactly the terms described in the contract, rather than the remedy of damages for breach of contract. For example, in a contract for transfer of land, the purchasing party may not be satisfied with receiving money to compensate him if the land in question is not transferred. As land is considered unique, the courts often consider that money damages are inadequate, and will compel specific performance, i.e. the transfer of land. This is a discretionary remedy, meaning the courts have to be convinced money will not suffice, and no other third party will be harmed by such an order. Question: Explain the nature and purpose of a force majeure clause in a contract. Illustrate your answer with an example. Answer: Force majeure clauses protect parties from being punished for matters beyond their control. If something happens that is not the fault of either party, including such a clause ensures the parties turned their minds to potential difficulties, and agreed they would not be bound or held responsible for matters outside their control. Question: Other than by performance, in what ways might a contract be discharged? Answer: Contracts may be discharged, i.e. parties’ obligations come to an end, by the following: - condition subsequent, as an express term of the contract, parties agree if a certain event takes place, the contract will end; - condition precedent, parties may agree that there is no contract unless a certain event takes place - external events: some event takes place to render the contract impossible to perform, such as an act of God, or a change in legislation, or destruction or disappearance of the subject matter of the contract; - as noted, the contract may be frustrated; - parties may expressly agree to end their obligations - one party’s breach may end the other’s obligations Question: Explain the effect of a condition precedent on the obligation of the parties to perform a contract subject to the condition. Answer: I take the simpler view, i.e. if the condition is not met; there is no contract, and therefore no obligation to perform. th th Cases 1, 3, 4 (7 edition) / Cases 7, 3, 4 (8 edition) Case 1 or 7 First of all, Taylor cannot say the contract is frustrated just because he has to perform at a loss. He would have to perform at a loss, or if he refused, Road Construction could hire another contractor, and sue Taylor for the difference in price should the other contractor charge more money than Taylor. Since the truck was destroyed by fire, assuming the fire is no one’s fault in particular, it is possible that Taylor could now say he was not bound, as his truck was destroyed by fire. It is possible; however, that this argument is not available, as usually it is the subject matter of the contract that must be destroyed, and not the means by which to perform the contract. Taylor is in the position that he may have to rent another truck and incur even more costs. In addition, he is likely insured, and if not he should be. If he has not insured his truck, then one can argue that the inability to perform the contract is due to a fault on the part of Taylor. In my view, the fire doesn’t change Taylor’s position all that much, and Road Construction is still in a position to hire someone else, and sue Taylor for the difference if that other gravel hauler truck driving type guy costs more money. Case 3 Gina changed her mind, too bad. Gill and Gina completed a contract, and the terms were specific. Gill arrived ready, willing, and able to close the transaction, in exactly the terms specified. As it is a contract for the sale of an interest in land, it is likely that Gill would obtain an order for specific performance. Case 4 This is a case where one must decide if the financing approval was a condition precedent, i.e. was the offer a conditional offer? If the offer to purchase the car was understood by both parties as being conditional on the obtaining of financing, then it would appear that Hansen would not be bound by the agreement, and would be entitled to a refund of his deposit. Should the offer not be a conditional one, then Hanson has likely incurred an obligation, and can be sued by Motor Sales Ltd.. It seems to be a question of fact, as to whether Hansen clearly explained to Motor Sales he would not enter into a contract without the financing. It appears he may just have told Motor Sales he would commit after speaking to his bank. If the latter is the case, Motor Sales has a good case against Hansen. The appropriate remedy is a suit for the purchase price, for which Motor Sales will have to provide the car if they recover. Alternatively, Motor Sales can sell the car to someone else, and recover the difference if the car sells for a lower price. They are obliged to make reasonable efforts to obtain fair market value. Chapter 13 (7 edition) / Chapter 14 (8 edition) Question: In a situation where a contract is expressly repudiated, what are the dangers associated with waiting until the time for performance to determine if a breach will actually occur? Answer: If one waits for the time for performance and some external event occurs making the contract impossible to perform, the right to sue for breach is lost. Question: How does the doctrine of substantial performance affect the rights of a party injured by repudiation when the contract is not fully performed? Answer: The doctrine of substantial performance obliges the injured or innocent party to pay, on a quantum meruit basis, for the
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