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contract law breach of contract notes
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part 2 , formation on agreement - Contract law (LAW1108)
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Summary Poole's Textbook on Contract Law - LAW1108
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Breach of Contract:A breach of contract will occur where:
without lawful excuse, a party either
1. fails or refuses to perform a performance obligation imposed on it under the terms of
the contract OR
2. performs that obligation defectively, in the sense of failing to meet the required
standard of performance.
Primary vs Secondary Obligations;
Primary obligations determine the performance due under the terms of the contract.
Any breach of a primary obligation triggers a secondary obligation to pay damages.
The key case is Photo Production v Securicor Transport Ltd 1980.
Strict vs Qualified Contractual Obligations;
If the obligation is strict, it must be completely and precisely performed or the
performing party will be in breach.
If the obligation is qualified, there is no obligation to achieve a stated result if the
performing party performs to the qualified standard of reasonable care and skill, there
will be no breach.
On proof of breach, you have a right to claim damages. But, unless the particular breach is a
repudiatory breach, the contract continues and future obligations must be performed.
If the breach is a repudiatory breach then, in addition to right to receive damages for the
breach, the injured party also has the option to either terminate the contract or affirm it.
Termination - discharges both parties from future performance under the terms of the
contract
Affirmation - means both parties must continue to perform all remaining obligations
under the contract.
Effect of termination;
where a breach is repudiatory and the non-breaching party elects to terminate, the
parties obligations are being discharged.
Discharge means the future performance of BOTH parties need not be performed
because the contract has been 'discharged'.
Discharge thus places a stop on performance of an otherwise valid contract.
Discharge of the contract can occur on repudiatory breach but requires the innocent
party to decide to terminate.
Discharge also happens automatically if the contract is frustrated for subsequent
impossibility. Where frustration occurs the discharge is automatic so no party action
is required.
, Discharge of a contract can be distinguished from instances when the contract is void
or the remedy of rescission is exercised (here the contract is deemed to be voidable).
In such circumstances, the contract is treated as being as if it had never been made.
When there is a breach - you need to consider whether it was a repudiatory breach.
Yes - non breaching party has a right to damages and to elect to either terminate or
affirm the contract
No - non breaching party has right to damages only
For the contract to be terminated, the innocent party must have 'accepted' the breach.
there must be some communication of acceptance of termination
Case example; Vitol v Norelf, The Santa Clara
Is it enough if the innocent party does not perform their own obligations under the contract?
In the case of Vitol v Norelf, The Santa Clara it stated yes, in some circumstances.
What amounts to a repudiatory breach?
if there is renunciation(the party says they are not going to perform their contractual
obligations) or incapacitation(the party cannot perform the obligation as a result of
their own actions).
there can also be a repudiatory breach by looking at the type of term or obligation that
has been breached. Breaches of certain types of conditions and terms are repudiatory
breaches.
There are 3 types of terms;
(1) Conditions - these go to the root of the contract, so the innocent party would always want
to terminate for their breach.
(2) Innominate Terms - this may or may not be repudiatory, this depends on the effects of the
breach.
(3) Warranties - these are less important terms which can be removed by payment of
damages.
What is meant by an 'innominate term'?
The case of Hong Kong Fir Shipping recognised an innominate term. In this case, it
was held that the seaworthiness obligation was not a condition of the contract because
it could not be broken in a number of different ways, they instead identified it as an
innominate term.
The case of Aerial Advertising v Batchelors Peas stated that the breach was
repudiatory.
In an essay question, you would identify which terms are conditions, be uncertain about the
innominate term concept and there would be dangers of wrongful repudiation.
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