Textbook Chapter 9.docx

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

Chapter 9 – Termination and Enforcement of Contracts The Termination of Contracts:An Overview  Several ways in which it can be brought to an end “termination”  Through performance  Through agreement  Through frustration  Through breach Termination through Performance  A contract is performed when all of its implied and express promises have been fulfilled  Performance by Others  If the employee/agent is not a party to the contract, they l契约ks privity of contract and therefore cannot sue or be sued on the contract  It is permissible to use employees to vicario代理地y a contract unless there is a specific clause about that  The law holds the employer responsible for his employees’ incompetence Termination by Agreement  Enter into an agreement that becomes unfavorable  Enter into a whole new contract – novation  Vary certain terms of the contract  The party benefiting from the variation must provide consideration to the other side  Exception : New Brunswick  End the contract  Substitute a party  Transfer of Contractual Rights  Contractual duties or obligations cannot be transferred without agreement  Contractual rights can be transferred without any permission  Credit债权人 – the person is entitled to be paid & debtor – who makes the payment  Assignment: the transfer of a right by an assignor(creditor) to assignee  First assignee gives notice to debtor – gets the money Termination by Frustration  Define: determinate the contract by an unexpected event or change that makes performance functionally impossible or illegal  Both parties are excused from the contract – end  Must establish the following elements  Was dramatic and unforeseen  Was a matter that neither party had assumed the risk of occurring  Arose without being either party’s fault  Makes performance of the contract functionally impossible or illegal  Force majeure – a clause in contract defining what events would frustrate the contract  Financially disadvantage & self-induced impossibility = frustration  Landmark Case – Taylor v Caldwell (1863) Factual Background: Taylor rented from Caldwell a music hall for four days to be used for a concert. The music hall was destroyed by a fire. Taylor sued for his expenses related to advertising and preparations Results: the contract had been frustrated, and Taylor’s action failed. Enforcement of Contracts  Plaintiff must demonstrate the “balance of probabilities”  Three things needed to be proven  Privity of contract – there is a contract between the parties  Breach of contract  Entitlement to a remedy  Privity of Contract  Only those who are parties to a contract can enforce the rights and obligations it contains  Sometimes, it’s unjust. The court have shown a willingness to allow a third party to rely on contractual clauses placed in the contract for their benefit  Case: London Drugs Ltd v Kuehne & Nagel Internation Ltd [1992] Factual Background: K$N stored a variety of merchandise for London Drugs. A term in the agreement limited K&Ns liability on any one item to $40. Owing to the negligence of two K&N employees, the transformer was dropped and London Drugs suffered over $33 000 damages. It brought an action for the full amount of damages against both the employees and K&N Results: the court applied the rule that employees are liable for torts they commit in the course of carrying out the services their employer has contracted to provide. They lacked privity to the contract to replay the limitation liability clause. The court adjusted the application of law: 1) Limitation of liability clause must, either expressly or impliedly, extend its benefit to the employees seeking rely on it 2) The employees seeking the benefit of limitation of liability clause must have been acting in the course of their employment when the loss occurred For this case, London Drug was entitled to recover only $40 from the employees  Statutory Modifications of the Doctrine  Modifications in two important areas  Consumer purchase Ex> Saskatchewan – a lack of privity is no defence to an action brought under the act for breach of warranty brought against a manufacturer  Insurance Ex> even through the beneficiary party lacks privity, he can still sue the insurer  Breach of Contract  Classification of the Breach  Condition  Define: an important term that, if breached, gives the innocent party the right to terminate the contract and claim damages  Warranty  Define: a minor term that, if breached, gives the innocent party the right to claim damages only  Innocent Terms  Define: a term that cannot easily be classified as either a condition or a warranty  The court must look at what has happened in light of the breach before deciding whether the innocent arty is entitled to repudiate the contract  Fundamental breach
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