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Chapter 9

Management and Organizational Studies 2275A/B Chapter Notes - Chapter 9: Consumer Protection, Fundamental Breach, Equitable Remedy

Management and Organizational Studies
Course Code
MOS 2275A/B
Susan Toth

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The End of the Contractual Relationship
I. Discharge by Performance
A contract is ended when both parties have satisfactorily completed their obligations
under the contract
In some cases, obligations are met at the same time, or one obligation has to be
completed before the other will be
Performance: Completion by both parties of the terms of the contract
There are two situations where something short of exact performance of the contract
will still be considered exact performance
Conditions: Major terms of a contact
Warranties: Minor terms of a contract
If a warranty is breached, the duty is still said to be performed, if a condition is
breached, the duty is not performed and the contract may be discharged and the other
party will be relieved of their obligations
Substantial Performance: The performance of a contract all but a minor,
inconsequential aspect of it (may include a minor breach of a condition)
1. Tender
Tender of Performance: An unsuccessful (because it is rejected or prevented by the
other party) attempt by one of the parties to contract to perform its obligations under
the contract
-If one party is ready, willing and able to perform, but the other party is not willing, the
party who is not willing is guilty of breach of contact
There are certain restrictions on how much you can pay in a business transaction
through coins
Both parties should clarify method of payment before the agree to the contract to
ensure that they are both on the same page
If not specified in the contract, tending of performance must be conducted whiting
reasonable business hours at the persons place of business
Sometimes, timing is a important factor within a contract, and sometimes it isnt, all
depends on the situation
II. Discharge by Breach
The failure of the breaching party to properly perform he agreed upon contract
Can take place in two ways:
A. Improper or incomplete performance of obligations
B. Refusal to perform
Breach by refusal to perform can also lead to discharge of the contract
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1. Conditions and Warranties
Conditions: Major terms of a contract
Warranties: Minor terms of a contract
-A breach of a warranty will not relieve the other party of the obligation to fulfill his side
of the agreement
If a warranty is broken then the party who fulfilled his obligation has the right to
sue for the costs it took to overcome the deficiency in the actions, if a condition
is broken, then the victim party will more than likely be relieved from their
obligations all together
- A minor breach of an important term (condition) will probably not result in the party
being relieved of duties
The victim of the breach can elect to treat the contract as binding even if a condition is
Courts have the ability to treat warranties as conditions if they feel it is important to the
2. Exemption Clause
An attempt to limit liability under an agreement (also called an exclusion or
exculpatory clause)
Used to enforce whatever the parties have freely bargained to do
If there is an ambiguous terms in this clause, it is interpreted by the courts in
the narrowest of meanings
If the clause is made public for all customers, then it must in plain sight so a
reasonable person would be able to see it
If the courts deem it not in plain sight, then they will not enforce it
3. Fundamental Breach
A breach of a fundamental aspect of the contract that is not covered by an exclusion
clause; a breach that goes to the very root of the contract
-Suggest the innocent parties was denied the benefit it had bargained for
If a exemption clause is in place but it is a fundamental breach in the contract,
then the clause will not be upheld in court
If the two parties are professionals, then an exemption clause may be enforced even if
it is a fundamental breach
The S.C.C has laid the doctrine of fundamental breach to rest
The Tercon decision focuses on:
A. Whether the clause applies to the breach
B. Whether the clause was unconscionable
C. Whether the public policy dictates that the clause be set aside
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