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Lecture 6

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Philosophy 2080
James Hildebrand

Week 6- Contract: Performance and Breach of Contract Chapters 12 and 13 (7th edition) Chapters 13 and 14 (8th edition) Chapter 12 (7th edition)/Chapter 13 (8th edition) - Performance of Contractual Obligations - generally parties must perform all terms of contract, otherwise = breach - eg in book * requested cans in cases of 30, some cans came in cases of 24 but same total number of cans, able to reject goods - when performance completed, discharged from further obligations - compare act performed with promise made to determine if compliance and discharged obligations Tender of performance is the tender of performance of an act Tender of payment: - performance of purchaser at time and place fixed for delivery under contract - must be in accordance with terms specified - no payment kind specified, legal tender must be accepted if in correct amount - unless contract says okay, seller may reject payment by personal cheque etc. - in general a seller is not obligated to provide change Blanco v Nugent page 201 (7th edition), page 221 (8th edition) - plaintiff alleged tender of payment, but had made tender of payment conditional on defendant's transfer of certain property to plaintiff, and also tendered greater amount and asked for change Q: why was this not a proper tender? 1 Some of the rules: - debtor tenders payment in correct amount at proper time and place, if creditor does not accept, debtor no longer liable for interest - debtor can then keep money until creditor later demands payment, - defend any attempts of creditor to seize assets etc., - debtor can pay into court, creditor usually penalized by costs award Contracts re land: - purchaser obligated to seek out seller on date of closing and tender payment according to terms of agreement - refusal of seller will support action for specific performance - the purchaser must prove it is ready willing and able to close to succeed in the action Tender of performance: - seller's tender is of performance, eg for delivery of goods, subject to terms in contract regarding time, place, condition and quantity etc., - buyer refuses to accept, seller has action for breach - land - remedy of specific performance - seller of land asking for specific performance must also show ready willing and able, attempted to transfer deed on closing date, and must show no good reason for refusal DISCHARGE OTHER THAN PERFORMANCE: Discharge -- means end of obligations- usually discharge is by performance Right to Terminate: - contract may include an option to terminate - usually either party to give notice to the other, often time-limited - contract may include term for compensation for party that has part performed - contract may provide term that allows termination with no liability 2 External Events Express terms: - contract discharged on occurrence of a particular event, occurrence called condition subsequent, i.e. party is bound to remove snow until the spring, force majeure - major force, act of God, war, insurrection, or something less traumatic, parties contemplate outside events prevent performance of contract, terms provide that interference rendering performance impossible will discharge parties from further obligations Implied Terms - sometimes, conditions subsequent are implied giving reference to customs of trade - eg., carriers may be exempted if goods damaged due to Act of God - liable to deliver, but not liable for damages - usually include express term anyway, not rely on implication Frustration: - an event or occurrence outside the control or fault of the parties renders the contract impossible to perform, agreement may be frustrated, thereby discharged - implied term that parties are excused if an essential part of subject matter of contract is destroyed - "where frustrating act is such that parties would have provided discharge in circumstances” - Sale of Goods Act, Act specifies if article destroyed prior to transfer of title, contract is void - contract for personal services, health problems prevent party from performance - land use / zoning example, parties contract for one party to construct particular building, zoning law changes, can't build, builder relieved from obligations, cannot lawfully perform 3 No frustration where: - reason for non-performance is that performance is simply more expensive than planned - no relief where impossibility of performance is due to some fault of the promisor in order to avoid contract Where frustration established: - contract frustrated and discharged as of time of occurrence, contract performance good to that point, - "out and out" payments are lost as already paid, - otherwise, payee lost a right to retain money paid if for performance of other party which now could not occur Frustrated Contracts Act: statutory help - law had been harsh and unsettled - legislation allows court to apportion the loss, recovery of deposits, and retention of funds to cover expenses - compensation where one party conferred benefit on the other party by part performance - party not received a benefit, nor paid a deposit is relieved of contract obligations Condition Precedent: - contract does not exist if condition does not occur - book considers above to be alternative analysis, book says, agreement defines condition, parties postpone performance, condition not met, parties are discharged, I prefer the alternate explanation, it is simpler - @ page 207 (7th edition), page 228-229 (8th edition) in Turney v Zhilka, "an external condition upon which the existence of the obligation depends" 4 Operation of Law: - law may change to render agreement unlawful, thereby performance impossible - eg. hostilities between countries - bankrupt, honest bankrupt discharged from debts Laches, unnecessary and undue delay to pursue defendant for breach will preclude bringing of suit, prevents a law suit for breach, does not void the agreement, makes it unenforceable - now provincial statute Limitations Act, sets the time limits for bringing actions, prevents judicial remedy  does not void contracts - under laches or limitations statute, contract may be revived by part performance Merger: - where original agreement is subsumed by a subsequent agreement Discharge by Agreement: Waiver: - each party agrees to abandon rights - where one party fully performs, termination to be in writing and under seal - this is because promise to relieve would be gratuitous, no consideration Novation: - mutual agreement to change terms or change parties - replaces agreement, discharges old obligations and replaces with new ones - different from merger, merger parties stay the same, same subject matter, usually formalizing former informal agreement 5 Material alteration of terms: - new agreement containing altered terms, on consent - new term must go to root of the contract in order to create new contract and discharge old one - changes must alter character of the agreement Substitute agreement: - parties may use substitute agreement in order to discharge former agreement - can discharge prior agreement even if substitute agreement in itself is unenforceable - this differs from previous eg.'s as no necessity for agreement to replace, its main effect is as an instrument of discharge Breach: - refusal to perform, party sues, court discharges obligations and replaces with judgment - court may also discharge injured party from obligations Farnel v Maine Outboard Centre Ltd. page 213 (7th edition), page 220 - 221 (8th edition) Facts: simple enough, you can rely on the author’s annotations prior to the case Held: Q: What is the simple issue the court is deciding? Q: What is the ratio or reason for the decision? My Note: it should be apparent that even though parties agree to certain things, it may require a court to interpret the meaning of certain terms where the parties are not clear enough when spelling out their respective obligations. 6 Discussion questions page 211 (7th edition): 1, 4, 7, 8, 10 Discussion questions page 233 (8th edition): 10, 4, 7, 8, 1 Case problems for discussion page 214 (7th edition): 1, 3, 4 Case problems for discussion page 233 (8th edition): 7, 3, 4 7 Chapter 13 (7th edition)/Chapter 14 (8th edition) - Breach of Contract BREACH OF CONTRACT: Simply put: when a party does not perform its obligations, that party is in breach of the contract. There are different kinds of breach, with different consequences. KINDS OF BREACH Express Repudiation: - express refusal, communicate or by conduct Anticipatory breach, breach occurs prior to date of performance - if breach is substantial: 2 options a) entitles other party to treat contract as at an end or : b) can treat contract as still existing, wait until date of performance, then sue for non-performance - if injured party does the latter, runs the risk of losing a cause of action if some intervening event frustrates contract - usually express repudiation entitles injured party to treat contract at an end, but not always Implied Repudiation: - difficult problem - determined by conduct, or implied by statements made prior to time of performance - tactical difficulties for the injured party - harder to establish breach by implication - breach of a continuing contract consists of consistently substandard performance over time
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