Business Law Ch.9 Notes.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B
Philip King

Business Law Ch. 9 Notes Chapter 9 Termination of Contracts  Several ways in which it can be brought to an end (termination) o Through performance  When both parties fulfill their contractual obligations to each other, they have performed the contract o Through agreement  Parties are always free to voluntarily bring their contract to an end o Through frustration  Applies after the formation of the contract, an important, unforeseen event occurs  The event must make performance impossible or illegal o Through breach  Can release the innocent party from having to continue the contract if that is his wish Termination through Performance  Performance by others o The law easily distinguishes between those who have the contractual obligation to perform and those who may actually do the necessary work o An employee/agent lacks Privity of contract and therefore cannot sue or be sued on the contract, though there may be liability o Vicariously perform: performance by contractual obligations through others  As long as personal performance is not an express or implied term of the contract Termination by Agreement  Parties may decide to: o Enter into a whole new contract  Novation: the substitution of parties in a contract or the replacement of one contract with another o Vary certain terms of the contract o End the contract o Substitute a party  Transfer rights to someone else  An agree between the parties is almost always the best way of dealing with events that make the contract disadvantageous in some respect  Transfer of Contractual Rights o A party who wants to end their involvement in a particular contract has the option to transfer it to someone else in certain circumstances o This transfer does not terminate the contract but does have the effect of eliminating the transferor’s role in it o Assignment: the transfer of a right by an assignor to an assignee  The person who is not or will be entitled to payment from a contract is known as the creditor  The party who is obligated to make the payment is known as the debtor o The law of assignment of rights permits the creditor to assign the right to collect to another person without the agreement of the debtor  E.g. contractor sells rights to another contractor while working on a house for cash, but receives less and now the new contractor must collect from the home owners Termination by Frustration  Frustrated: termination of a contract by an unexpected event or change that makes performance functionally impossible or illegal  Both parties are excused from the contract and it comes to an end  No side is liable to the other for breach  Deals with events that occur after the contract has been formed  Event must be: o Dramatic and unforeseen o Was a matter that neither party had assumed the risk of occurring o Arose without being either party’s fault o Makes performance of the contract impossible or illegal  All of these elements must be demonstrated Enforcement of Contracts  To succeed in action for breach of contract, the plaintiff is obligated to demonstrate the following elements on the balance of probabilities: proof that there is a better than 50% chance that the circumstances of the contract are as the plaintiff contends o Privity of contract  There is a contract  The common law of Privity has been modified in two important cases: consumer purchases and insurance  Lack of Privity is no defence for consumers from manufacturers  Lack of Privity is no defence for consumers for life
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