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:
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
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