AFM231 Chapter Notes - Chapter 9: Novation, Corporate Law, Punitive Damages
18 May 2018
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Chapter 9- termination and enforcement of contracts
Business law in practice
• Conlin agreed to build a dream house for Janet and Alphonso Owen, but failed to complete on time
and screwed up a see-through fire place that Janet really wanted and was promised
• The Owens found another expert Holmstead and Holmstead finished the job for them.
• Coli’s poor jo asted tie ad ade the Oe’s stressed ith oasioal depressio
Termination of Contracts: An Overview
• Can terminate a contract in many ways:
• Through performance: when both parties fulfill their agreement and walk away happy
• Through agreement: when parties agree to end their contract and walk away with
appropriate compensation to each other
• Through frustration: when an important, unforeseen event occurs- such as the destruction
of the subject matter of the contract or the death of one party
• Through breach: if the breach is serious, the innocent party has the right to end the
contract. Less serious will entitle them to damages and not walk away
Termination Through Performance
• E.g. a contract to buy and sell a house is performed when the purchase price is paid and title of the
property is transferred to the buyer
• Both parties may continue to do business with each other later
Performance by Others
• There may be another party to perform the obligations of the contractual parties such as employees
working for a company that entered a contract
• The employee itself, lacks privity of contract and therefore cannot be sued.
• It’s perissile to use eploees to iariousl perfor a otrat as log as there is’t a
expressed or implied term that says the contracting individual a’t ask other people to perform
their obligations
• Vicarious performance: performance of contractual obligations through others
• e.g. the la holds Coli resposile for his eploee’s iopetee
• known as vicarious liability discussed in later chapters
Termination by Agreement
By Agreement Between Parties
• if the parties find an agreement unfavorable, they may:
• enter into a whole new contract known as novation
• vary certain terms of the contract: the party benefiting from the variation must provide
consideration to the other side
• end the contract: both parties walk away or one party compensate the other for ending
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• substitute party: a new party is substituted in for an older party that wants to drop out the
contract. Conlin wants to ask another builder to come replace him but the Owens don`t
agree to this proposal, they can sue for breach if Conlin leaves
Transfer of Contractual Rights
• while contractual duties cannot be transferred to someone else without agreement by the other
side, contractual rights can be transferred without any such permission being required
• if Conlin cannot transfer to have another build to build the Owen`s home, he can transfer his
right to be paid for the building job to another builder
• assignment: the transfer of a right by an assignor to an assignee
• The assignor can assign the right to collect to the assignee without the agreement of the
debtor
• If the same debt is assigned to more than one assignee, the assignee who first notifies the debtor is
entitled to payment
• Creditor suh as Coli a sell rights for ash o ad let the assigee orry about collecting
from the Owens
• The assigee’s right to paet is o greater tha the right of the assigor.
• E.g. if Conlin breaches his contract with the Owens and becomes entitled to less than the full
otrat prie, Coli’s assigee is likeise entitled to less
Termination by Frustration
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