Textbook Notes (362,796)
Canada (158,054)
Business (2,364)
BU231 (315)

Textbook notes Ch 13.docx

7 Pages
Unlock Document

Wilfrid Laurier University
David Scallen

Chapter 13: Breach of Contract and Its Remedies To discharge a contract: the breach must undermine the whole contract or a fundamental term of the contract. The purpose of the contract must be defeated so that the performance by the non-breaching party is rendered pointless. If a contract is breached, the non-breaching party may lose this option in two ways: 1. Innocent party proceed with contract and accepts benefits, despite the breach 2. Innocent party may have received the benefit without knowing about the breach until end of this party’s performance Either way, claiming damage as a breach of contract action remains available If a major breach (essential terms) occurs, the breaching party is still bound by the contract, but the non-breaching may elect to discharge it. Minor breach: breach of minor terms in contract; warranty; non-essential terms Major breach: breach of major terms in contract; condition; essential terms Note* A minor term in a contract can be breached majorly; and a major term in a contract can be breached minorly. So, the first task of a breach is to determine the importance of the term. How Breach May Occur: • Expressly repudiating (rejecting) its obligations • Acting in a way that makes it impossible to perform promise • Failing to perform at all; or falling short of promise Express Repudiation : when one of the contracting parties advises the other that it does not intend to perform as it promised. If repudiation is of an essential term (or whole), the promisee is entitled to treat the contract as being immediately coming to an end  this means to find another party to perform, and to sue for whatever damage it sustains. • Before treating it as being terminated, promisee should notify the promisor that they are treating it that way and that they are going to sue for damages of the breach (common sense) • When express repudiation occurs before the time agreed for performance, it is anticipatory breach • Note that a contract exists and has legal effects from the time of its formation • Major breach may occur during performance; also frees the innocent party from further obligation • Sensibly, if a minor term is breached, the innocent party is not entitled to treat it as a discharged One party renders performance impossible : A deliberate or negligent act by the promisor that destroys the ability to fulfill its contractual promises. But it does not include involuntary responses to forces beyond control (weather…etc.) • Party may not have said it exactly, but has implied as much by conduct • May take place either before or during performance Failure of Performance • Only becomes apparent at the time set of performance • The extent of failure varies with remedies • Inadequate performance by the first party will trigger decision of whether the second party may discharge or not • It is a dilemma for the innocent party, whether to discharge or not because they don’t want to be wrongfully repudiated either So… In a contract where one party is to perform by instalments, the other may consider itself freed from liability only if it can offer convincing affirmative answers to both of these questions: a) Is there good reason to think that future performance will be equally defective? b) Is either the expected deficiency or the actual deficiency to date important relative to the whole performance promised? The Doctrine of Substantial Performance: promisor is entitled to enforce a contract when it has substantially performed, even though its performance does not comply in some minor way with the requirements of the contract. The promisor’s claim (for promise from opposing party) is, however, deducted by damages caused by its defective performance. • The effect of this doctrine is that a promisee cannot seize upon trivial failure of performance to avoid its own obligations • Ex. contractor where A fixes B’s car and B pays him with a blowjob for 10 min. If A fixes some of the car (not all), B cannot back out of her blowjob just because A didn’t fix the whole car. Mistakes in performance: • Over-performing for example • Quasi-contract: an obligation to perform not because of a contract, but by receiving unfair benefit (too good) • Unjust enrichment leads to restitution Exemption Clauses Their purpose: protect themselves from potential liability for breach of contract 1. Allocate the risks so parties know who should insure against what 2. Allow suppliers to charge lower prices (because they are guaranteed that they won’t have expenses coming from law-suits) 3. Even if sued, the exemption clause will usually offer a complete defence so that business can recover its legal costs 4. If the supplier is in the position of using a standard form contract, it will have distinct advantage over its customer and can design the clauses in its favor (ex. you can’t sue if the iPhone screen breaks) Exemption clauses usually work well when the bargaining power and knowledge of the law are relatively equal between two parties. Three circumstances when a court will refuse to apply an exemption clause: 1. When the clause does not apply to circumstances • Does the clause apply to the facts? Exemption clauses are typically written in very broad, flexible language • Any ambiguity must be interpreted against the drawing party (one that created) b/c that party had every chance to make the ambiguity clearer • The burden is on the drawing party to prove the actual cause of the loss is covered by the clause 2. When the clause was unconscionable at the time of contracting • The stronger party takes advantage of the weaker by extracting agreement to unconscionable terms • Courts will try to refuse protecting defendant when it is manifestly unfair unconscionable to give protection 3. When there is a strong public policy reason against enforcing it Types of Remedies a) General 1. Loss must flow from the breach 2. Mitigation of damage: if they mitigated, they will be compe
More Less

Related notes for BU231

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.