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BU231 Great Overall Review of Final Exam Material

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Valerie Irie

Law Review 1) Discharge of Contracts - the cancellation of the obligation of a contract (makes K null and inoperative) a) Discharge by Performance b) Discharge by Agreement c) Discharge by Frustration d) Discharge by Operation of Law a) Discharge by Performance - most common; both parties have performed their obligations under the contract satisfactorily Tender of Performance – one party may attempt to perform, but the other party refuses to accept the performance; the attempt to perform is called a tender of performance whether accepted or rejected b) Discharge by Agreement - parties agree not to proceed with the performance of a K already in existence Waiver – an agreement not to proceed with the performance of a K already in existence - can only occur when neither party has fully performed - parties may agree between themselves not to perform their contract and discharge it - consideration becomes an issue where one party has performed Substituted Agreement – out of court where one party offers to pay money in lieu of performance - could be novation where old K is discharged and a new K is entered in its place Contract could provide for its own dissolution: a) Condition Precedent - neither party can perform unless a certain future event occurs - not free to withdraw from their promises until the condition precedent becomes impossible to fulfill b) Condition Subsequent - an uncertain event that brings a promisor’s liability to an end if it happens - ex. an “act of god” – natural disaster – may be a condition subsequent if a shipment is destroyed c) Option to Terminate - allows for termination of the K on providing notice to the other party - K may have a term which gives one party or both the option of bringing the K to an end before its performance has been completed, usually by giving notice c) Discharge by Frustration Doctrine of Frustration - law excuses one party from performance when external causes have made performance radically different from that contemplated by the parties (ex. singer dies before a concert) - must be unforeseen, outside of parties control, occur AFTER the agreement was made, and make performance impossible/purposeless - if circumstances have changed and performance is now more difficult it is NOT frustration Self-Induced Frustration – a party wilfully disables itself from performing a K in order to claim that the contract has been frustrated - this is NOT frustration – it is a breach of K d) Discharge by Operation of Law - bankrupt debtors can be discharged from contractual liabilities 2) Breach of Contract - may discharge the contract, but not always - minor/major breaches Minor Breach: a breach of a non-essential term of the K or an essential term in a minor respect Major Breach: a breach of the whole K or an essential term; purpose of the K is defeated Condition – an essential term of the K Warranty – a non-essential term of the K - breach of a condition allows the non-breaching party to opt for discharge of the K and the breaching party remains bound - breach of a warranty, both parties remain bound to the K, but the non-breaching party can sue for damages where it has incurred a loss A breach occurs by: a) Express Repudiation - declaration of intention not to perform b) Rendering Performance impossible - self induced frustration c) Failure of Perform - can only happen when performance is due Doctrine of Substantial Performance – performance that does not comply in some minor way with the requirements of the contract - prevents the non-breaching party from avoiding their performance (must still pay if just a minor shipping error) Exemption Clauses – clause that exempts a party from liability for failing to perform some or all of its contractual obligations Defences to Exemption Clauses: - inadequate notice - misrepresentation 3) Remedies for Breach of Contract Types of Remedies: a) Damages - to place the injured party in their pre-contractual position - must be because of the breach; is the damage foreseeable? b) Equitable Remedies c) Quantum Meruit Mitigation – an injured party can recover only for the losses resulting from the breach that could not be reasonably avoided. Damage arising from breach of contract must flow naturally from the breach. Types of Damages: Expectation Damages Expected profits from time of K formation Opportunity Cost Lost chance of making a similar contract with a different promisor Consequential Damages Reasonably foreseeable damages from the breach - ie. failure to repair heating system could cancel a concert and also the repairman would be liable to damage to building if pipes were to freeze General Damages Unquantifiable (pain/suffering etc.) Reliance Damages Damages for wasted effort Liquidated Damages An amount agreed to be paid in damages by a party to a contract if it should commit a breach Nominal Damages If loss sustained is negligible Types of Equitable Remedies: (non-monetary remedies given when damages alone will not adequately compensate for a loss) a) Specific Performance - an order requiring a defendant to do a specific act (complete a transaction) - only for unique properties b) Injunctions - court order restraining a party from acting in a particular manner; such as committing a breach of K Quantum Meruit – the amount a person merits to be paid for goods or services provided to the person requesting them Rescission – setting aside K in order to put parties as close as possible to their pre-contractual positions An aggrieved party must choose between an action for damages to obtain the benefit of the contract and one for rescission (cannot have both). Rescission often applies when durable goods fail to perform as required. If rescission is used, they may be able to get more money from the opportunity cost than damages would provide. If you win your case, the parties become a judgement creditor and a judgement debtor. To enforce the judgement, the sheriff’s office could be used and a garnishment order could access bank accounts and wages. The payments are made to the Sheriff and the Sheriff distributes the money to creditors. Garnishee Order – an order requiring the debtor’s employer to retain a portion of the debtor’s wages each payday and surrender the sum to the creditor Levy Execution – seize and sell a debtor’s assets or arrange for a sale of his lands 4) Bailments - a transfer of possession of personal property without a transfer of ownership Bailor – owner of goods Bailee – party accepting possession of goods Standard of Care: Lowest – benefits the bailor Middle – bailment for value Highest – benefits the bailee Remedies: Liens – gives the right to keep the good in their possession Right of Sale – provides the bailee/lienholder the right to sell the goods to cover costs - only available by statute or by contract; not a common law right To obtain Right of Sale: a) Period of Time b) Notice c) Advertise Sale d) Public Auction Special Types of Bailment a) Storage and Safekeeping - storer can only obtain right to lien through statute or by contracting for the right b) Repairers - failure on the part of the repairer to perform is breach of contract (normal contract remedies apply) - common law right to lien; only a statutory right to sell if payments are 3 months past due c) Transportation - gratuitous carrier, private carrier, and common carrier (highest standard of care) - for common carrier: undertakes to indemnify shipper against loss regardless of fault - shipper must either demonstrate goods were delivered in good condition or the carrier failed to deliver goods/delivered them in bad condition Defences available to Common Carrier: (a carrier who publicly states they are transporting for reward) 1) An Act of God (but not fire) 2) Inherent vice in the goods 3) Default by shipper - if shipper defaults, common carrier has the right of lien by common law but a private carrier has no right of lien by common law or statute; can only obtain by K Innkeepers Innkeepers must keep the goods of patrons safe and have an additional duty to protect the goods from loss and theft. Must show the guest was negligent to avoid liability. They are entitled to common law right of lien but right to sell is statutory. Pledge/Pawn – a bailment of personal property as security for the repayment of a loan where possession passes to the bailee. Pledge: Creditor is the pledgee, and the borrower is the pledgor. Pledgee obtains a lien on property and right to sell to recover debt and costs. Surplus funds belong to the pledgor (borrower). Pawn: Pawnbroker obtains title to goods pledged. Must send notice of last opportunity to pledgor. Must advertise the final notice to pledgor in newspaper. However, pawnbroker then obtains absolute ownership over the goods. 5) Agency rd Agency Relationship - the agent acts on behalf of the principal to bring 3 parties into a contractual relationship with the principal Dependent Agent – an agent who acts exclusively for a single principal Independent Agent – an agent who carries on an independent business for several principals There is a contractual relationship between the principal and agent. There is a contractual relationship between the principal and 3 party contractor. There is no contractual relationship between the agent rd and the 3 party. Agency Agreement – the K between principal and agent whereby the agent undertakes to act on behalf of the principal - the K should set out limits to Agent’s authority (whether express or implied) Power of Attorney – a type of agency agreement authorizing the agent to sign documents on behalf of the principal (commonly used) Ratification – where an agent exceeds his/her authority, principal must ratify the contract - this will establish the contract as valid The breach of any term in the agency agreement gives the aggrieved party the usual remedies against the other for breach of contract. An agent owes a duty of care to her principal, even when she acts without payment. Because of the high degree of confidence and trust implicit in an agency relationship, the general rule is that an agent cannot delegate her duties without the principal’s agreement. A fiduciary relationships exists between principal and agent. The duty of good faith requires that an agent inform the principal of any information coming to her attention that might influence the principal’s decisions. If she has been authorized to buy property at a certain price and learns that it can be obtained for less, she is bound to inform the principal. If she buys at a lower price, she must pass the savings to the principal. Actual Authority – the authority given to the agent by the principal Apparent Authority – authority that is not real, but acquired from a past manner of transacting business rd - it is the authority that the 3 party is entitled to assume that the agent possesses - test: should the 3 party have been aware of the agent’s lack of authority or at least been suspicious? Is it reasonable to assume from the type of business that the agent is engaged in, that the agent had the authority in question? Holding Out – representing by words/conduct that a person is one’s agent or has a particular authority - making it look like they have authority Duties of agent to principal: - just like a K, binding on both parties - principal can sue for breach of K where agent acts outside authority - agent has the duty to keep principal informed (if anything occurs, principal should be aware) - duty of care: at minimum reasonable care, diligence and skill - standard of care depends on agent’s own knowledge and skill and the nature of the task - generally there is also a duty of personal performance; but can sometimes use a sub-agent - duty of good faith: fiduciary relationship – agent must put principal’s interests ahead of their own - agent must disclose all relevant information If an agent were to act for two principals: - there is a conflict of interest and a breach of duty of good faith - must obtain consent from both parties but it is never a wise decision Duties of principal to agent: - remuneration – obligation to pay as per contract (usually on commission) - expenses: implied term that the principal will cover the reasonable expenses of the agent when acting in his/her real authority Rights and Liabilities of Principal and Agent: Principal alone is liable - agent acting with real or apparent authority rd - agent must make clear to 3 party they are acting for a principal (even if an undisclosed principal) - payment or delivery must be made to the 3 party and not the agent Agent alone is liable - agent representing themselves to be the principal - the principal has no rights or liabilities under the K rd Either principal or agent is liable - agent didn’t disclose status as an agent; 3 party can sue either the agent or the principal - if agent is sued, the principal has no liability - if existence of principal becomes apparent, 3 party can have the action discontinued against the agent and brought against the principal instead Rights of the Undisclosed Principal: - right to enforce the K against 3 party wh
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