Mos 2275 Chapter 9 Notes

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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B
Desmond Mc Keon

Chapter 9: Termination and Enforcement of Contracts Termination of Contract  Through performance: When both parties fulfill their contractual obligations to each other, they have performed the contract. This is generally the ideal conclusion to a contract.  Through agreement: Parties are always free to voluntarily bring their contract to an end. Both parties could agree to walk away from the agreement, or one party could pay a sum to the other side.  Through frustration: When an unforeseeable event occurs and the performance functionally impossible or illegal, it is brought to an end.  Through breach: A breach of contract, especially if serious, can release the innocent party from having to continue with the contract if that is his wish. Termination through Performance  A contract is performed when all of its implied and express promises have been fulfilled.  There is a legal difference between those who do the work, and those who are contracted. o It is permissible to use employees to vicariously perform o However, this is not permitted if the expressed or implied terms state otherwise Termination by Agreement  By agreement between the parties. The parties may then agree to: o Novation  Enter into a whole new contract  Enforceable only if both parties benefit from the new contract. o Vary certain terms of the contract  Traditionally, the party benefiting from the variation must provide consideration to the other. o End the contract  Both may agree to not enforce the rights or one party may pay the other to bring it to an end  Transfer of contractual rights o Assignment: The transfer of aright by an assignor to an assignee  Creditor: The person who is now or will be entitled to payment from a contract  Debtor: The person who is obligated to make the payments o All parties (the two original and the replacement) must agree to this arrangement o The creditor can assign the right to collect to another person without the agreement of a debtor. However, the debtor must be notified of the assignment. o If there is more than one assignee for a debt, the assignee who first notifies the debtor is entitled to it. The other assignees must sue the assignor for breach of contract and hope to get payment. Termination by Frustration  Frustration: Termination of a contract by an unexpected event that makes performance impossible or illegal  Both parties are excused from the contract and it comes to an end.  Difficult to prove. The party claiming frustration must establish that the event: o Was dramatic and unforeseen o Was a matter that neither parties had assumed the risk of occurring o Arose without being either party’s fault o Makes performance of a contract functionally impossible or illegal  Can be expressly dealt within the contract (force majeure). Allows termination or delaying of contract due to o Fire, flood, tornado, or other natural disasters o War, invasion, blockade, or other military actions o Strike, labour slowdown, walkout, or other labour problems o Inconvertibility of currency, hyperinflation, currency devaluation, or other monetary changes o Rationing of raw materials, denial of import or export licences  However, some circumstances that may appear to frustrate a contract do not amount to frustration in law.  Due to any further obligations coming to a cease, the consequences are often unsatisfactory, especially if neither party has performed nor the parties are returned their state before the contract. Enforcement of Contract  The plaintiff is obligated to demonstrated the balance of probabilities o Balance of probabilities: Proof that there is a better than 50% chance that the circumstances of the contract are as the plaintiff contends  Privity of contract: Plaintiff has to establish that there is a contract between the parties o Privity: Only those who are parties of the contract can enforce the rights and obligations it contains o A contract between a business and consumer has exclusion clauses protecting employees. o Regarding consumer purchases and insurances, statutes have modified the law to be exempt.  Breach of contract: Plaintiff must prove that the other party has failed to keep promises or terms of contract o Classification  Condition: A term that gives the innocent party right to terminate contract and claim damage  Warranty: A minor term that gives the innocent party the right to claim damages only  Innominate term: A term that cannot easily be classified as either a condition or a warranty  Parties may classify a term within the contract by setting out the consequences of the breach. o Exemption and limitation of liability clause  Fundamental breach: Breach of contract that affects the foundation of the contract
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