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Canada (161,878)
MGSC30H3 (57)
Jeff Rybak (14)

Legal Environment - Lecture 010

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Management (MGS)
Jeff Rybak

DISCHARGEAND BREACH 25 March 2014 (Chapter 11, p. 262-281) Some contracts come to an end when they are voided or rescinded. Most contracts are brought to an end through discharge.ISCHARGE is when the parties are relieved of the need to do anything more under the contract. Although there are various ways to bring a contract to an end, it is import to appreciate that a contract generally will not cease to exist merely because the parties largely ignore it. DISCHARGE BY PERFORMANCE PERFORMANCE is when the parties fulfill all the obligations contained in the contract. Difficult to determine whether proper performance has occurred. Possible for party to perform contractual obligation in more than one way (IE: Security company to check property between 2-4 times a night. As long as company performs 2x a night, not a breach if owner preferred 4x a night). Normally, a contract calls for performance in one particular way. As a general rule, parties must perform exactly as the contract requires. Any deviation from the terms of the contract, however small, is considered a breach, rather than performance, and will entitle the innocent party to a remedy. TIME OF PERFORMANCE TIME ISN OT OF THEE SSENCE means that a party is entitled to perform late even if the contract sets a specific date. If a party does perform late, it can be held liable for losses that the other party suffers as a result of the delay. If time is of the essence, late performance can be refused, and if that happens, contract will not be discharged by performance (party can insist upon timely performance by giving reasonable notice that performance must occur by specific date, can consider circumstance, subject matter – contract dealing with perishable goods, volatile market). TENDER OF P AYMENT Most contracts require a payment of money by at least one of the parties. Rules that govern payments: • Debtor has the primary obligation of locating the creditor and tendering (offering) payment, even if the creditor has not asked for it o Method of tendering payment must be reasonable o Cannot occur at inconvenient time or circumstance o Reasonable tender has to be made only once, if rejected, debtor still has to pay debt, but they can wait for creditor to come by o Interest does not accrue on a payment once a reasonable tender has been made, even if that tender is improperly rejected o If the case eventually goes to trial, a judge may punish a creditor who improperly rejected a reasonable tender by holding that party liable for the debtor’s cost of litigation • L EGAL TENDER is a payment of notes (bills) and coins to a certain value o Creditor does not have to accept payment by way of a cheque or electronic debit o Does not have to pay from disgruntled customer who tries to pay with an enormous bag of pennies o Does not have to make change – debtor must provide exactly the correct amount of money • Debtor does not have to actually tender payment if it would obviously be refused o If creditor indicates beforehand they intend to reject payment, debtor does not have to waste time on a useless gesture Advantages of discharge of a contractual debt by payment of money • Money is absolute • Money is an end itself, nothing more to do (unlike credit, debit or cheque) Disadvantages of discharge of a contractual debt by payment of money • If money is misplaced or stolen, owner cannot do anything about the loss (difficult to locate stolen cash; once money passes into hands of a bona fide purchaser for value, it is wiped clean) 4 common options to discharge contractual debt by other means: • D EBITC ARD is a plastic card that allows a person to debit, or withdraw, funds from a bank account o Payment by debit card is final o Once bank authorizes or refuses payment, system no longer plays any role in transaction that occurs between merchant and debit card holder o Cardholder cannot revoke or cancel the request for payment o As a general rule, cardholder is liable if cardholder is to blame (IE: Cardholder carelessly keeps card and a record of PIN in same wallet or desk drawer; fail to promptly report loss or theft of card to bank) o Bank bears the loss if cardholder is not to blame for unauthorized use (IE: Knifepoint to give up PIN) • C REDIT CARD operates by allowing the cardholder to obtain credit, or a loan, for the purpose of paying for goods and services o Ability to enjoy value now, pay later o 3 relationships involved (each one governed by contract)  Card Issuer and Cardholder • Long list of rights and obligations • Card issuer arranges credit by paying for goods or services on cardholder’s behalf • Cardholder promises to repay both value of purchase and agreed upon rate of interest, minimum each month, report within 24 hours for loss of card  Card Issuer and Merchant • Customer can pay for purchase with credit card only if merchant has an agreement with card issuer • By offering customers another payment option, merchant increases sales • Relieved of need to chase after customers for payments of goods and services • Once transaction is authorized, credit card company obligated to transfer funds to merchant (if cardholder cannot afford, loss falls on card issuer, merchant is paid in any event)  Cardholder and Merchant • Not affected by use of credit card • Once transaction has been authorized, cardholder cannot revoke payment if merchant’s goods or services turn out to be defective • Cardholder only option is to sue merchant on underlying sales contract • Cheques o Cheques conditionally discharges contractual debt (IE: Buying goods from store by cheque, cheque discharges debt to store unless something goes wrong – forged, stop payment order, account is overdrawn; store will then look for payment) • PayPal TENDER OF PERFORMANCE • SUBSTANTIAL PERFORMANCE generally satisfies the contract but is defective or incomplete in some minor way o Courts consider nature of defect, difference between contract price and cost of curing the defect o If contract is discharged by substantial performance, innocent party is not required to pay for work that was not done o Difficult issues may arise if builder leaves work site without providing at least substantial performance. 2 possibilities:  Parties used single contracts to deal with series of tasks (IE: Cut lawn 10 times for $100, performed 2 ti
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