BU233 Study Guide - Fall 2018, Comprehensive Midterm Notes - Tort, Test Act, Exclusion Clause
BU233
MIDTERM EXAM
STUDY GUIDE
Fall 2018
BU231 Chapter 13 – Breach of Contract
Implications of Breach:
- A breach of any contract entitles the non-breaching party to damages but a serious
breach in contract may also result in discharge of a contract which releases the non-
breaching party from further performance if it becomes purposeless given the breach
- To discharge a contract, the breach must undermine the whole contract or a substantial
part of the contract; only then is the option to discharge the contract available
- Breach does not happen automatically; even when a breach is sufficient to discharge,
the non-breaching party must communicate that they are treating the contract as
discharged to the breaching party
Scenarios where breach is lost:
1. When the innocent party decides to proceed with the contract and accept benefits
under it, despite the breach
2. The innocent party may have received the benefit of the contract and not learned of the
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claiming damages remains available
Effect of Breach: MAY discharge the contract but not always
Minor Breach – a breach of a non-essential term of a contract or of an essential term in a minor
respect, both parties remain bound to the contract but the non-breaching party can sue for
the damages where it has incurred a loss
- Warranty – non-essential term in the contract
Major Breach – a breach of the whole contract or of an essential term so that the purpose of
the contract is defeated, allows for the non-breaching party to opt for discharge of the
contract while the breaching party remains bound
- Condition – an essential term of the contract
How does a breach occur?
- Express Repudiation – one of the contracting parties advises the other that it does not
intend to perform as promised
Options to non-breaching party:
o Terminate K but reserve the right to sue for damages
o Insist on performance and wait for non-performance
- Anticipatory Breach – an express repudiation that occurs before the time agreed for
performance
- Importance of Timing
o K formation – K is binding from that point
- One Party Renders Performance Impossible
o Self-induced frustration
o Contracts of personal performance (double-booking)
find more resources at oneclass.com
find more resources at oneclass.com
o Can be before or at time performance is due
- Failure of Performance
o Can only occur when performance is due
o Can be total or partial failure
o Can be grossly inadequate performance (poor work)
From the moment a contract is created, a promise is made and you can sue for damages any
time after the point of the contract creation as one party is relying on the other
Substantial Performance – performance that does not comply in some minor way with the
requirements of the contract, prevents the non-breaching party from avoiding his or her
performance
Quasi Contract – an obligation that may arise, not as a result of contractual relations but
because one party has received an unfair benefit at the expense of the other
Unjust Enrichment – an unfair benefit
Exemption Clause – a clause in a contract that exempts a party from liability for failing to
perform some or all of its contractual obligations
- Risk allocation
o Insurance
o Keeps costs low
o Problem: if using in SFC – inequality of bargaining power, puts risk on party not
willing or able to accept it
Defences:
- Inadequate notice
- Misrepresentation
- Non est factum
Ex. Tercon v British Columbia
Steps to Force an Exemption Clause:
1. Interpretation of Exemption Clauses – the court must assess the intentioned of the
parties by circumstances, if there is ambiguity, it must be interpreted against the
drawing party (one that prepared the agreement), if an exemption clause applies to the
breach that has occurred, the injured party has no remedy
2. Unconscionable Clauses – terms agreed to by the parties of unequal bargaining power
that give an unfair advantage to the powerful party over the weaker party, has both in-
equality in the process of creating the clause and an unfair outcome
3. Public Policy and Public Interest – even if the wording of the clause applies to the
situation and the clause was not unconscionable at the time of the contract formation, a
out a still efuse to efoe a eeptio lause if the ijued pat a poit to
some paramount consideration of public policy sufficient to override the public interest
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find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
To discharge a contract, the breach must undermine the whole contract or a substantial part of the contract; only then is the option to discharge the contract available. Breach does not happen automatically; even when a breach is sufficient to discharge, the non-breaching party must communicate that they are treating the contract as discharged to the breaching party. Effect of breach: may discharge the contract but not always. Warranty non-essential term in the contract. Condition an essential term of the contract. Express repudiation one of the contracting parties advises the other that it does not intend to perform as promised. Options to non-breaching party: terminate k but reserve the right to sue for damages. Anticipatory breach an express repudiation that occurs before the time agreed for performance. Importance of timing: k formation k is binding from that point. One party renders performance impossible: self-induced frustration, contracts of personal performance (double-booking, can be before or at time performance is due.
