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Performance & Breach of ContractContracts will be discharged in four general ways…
1. Through performance
2. By the agreement of the parties → puts parties in their original positions
3. By breach
4. By frustration → supervening event arises that doesn’t allow you to perform a
contract anymore
Intro to Breach
● Not every breach of contract allows you to end the contract
● Every breach will sound in damages, even if the breach is trivial
When examining…
Does this breach entitle me to terminate the contract or does it only sound in damages?
● Two sets of variables to examine
○ The classification of terms
○ The standard of performance of the term
Classification of terms
● English law divides them terms in
○ Major undertaking → discharges contract
○ Minor undertaking
● Common law divides two kinds of undertaking…
○ Warranties → term of lesser importance than condition, not to the root
of contract
■ Only sounds in damages
○ Condition → term that goes to the root of the contract
■ Allows you to claim damages + terminate contract
● Courts later settled on a third way in Hongkong Fir Shipping Co Ltd v Kawasaki Kisen
Kaisha Ltd → introduced Hong Kong terms (intermediate or innominate terms)
Decro Wall International SA v Practitioners in Marketing (1971)
● P (English firm) had the exclusive license to buy tiles from D (French)
● D would invoice bills and P was always late in paying (different cultural business
practices)
● D terminated the contract
● Courts held the timely payment of bills was only a warranty and was only a minor
undertaking
● Therefore D was in breach of contract of the condition to supply tiles
● D would have been able to receive damages but did not have the right faced with the
late payment to terminate the contract
Test of intention…
, ● If the intention is clearly expressed, and the parties clearly express a term to be a
condition, it will terminate a contract even though it may not appear to be a condition
looking at it
● If intention is not clearly expressed, the court will interpret of the contract to determine so
(1) Statute
● Sales of Good Act 1979 divides implied terms in warranties and conditions
○ s.13(1) → goods will correspond with description
○ s.13(1)a → such implied term is a condition
● Look at whether statute sets out a classification of a term
(2) Common usage of a term
The Mihalis Angelos (1971)
● There is still a large body of case law that stipulates that certain terms are conditions
and since the parties contract on this basis, the court will hold that it is a condition
Couchman v Hill [1947] → If courts determine a term is a condition in one case, in a
recurring case it might determine that same term is condition on that basis
(3) Construction of contract
Bunge v Tradex [1981]
● Recognising the modern approach and not being over-ready to construe terms as
conditions unless the contract clearly requires the court so to do,
● None the less the basic principles of construction for determining whether or not a
particular term is a condition remain as before, always bearing in mind on the one hand
the need for certainty and on the other the desirability of not, when legitimate, allowing
rescission where the breach complained of is highly technical and where damages
would clearly be an adequate remedy.
Bentsen v Taylor [1893]
● It is often very difficult to decide as a matter of construction whether not a term is a
condition but this difficulty does not prohibit the court from entertaining it
● Does it amount to a condition precedent or is it only a warranty?
● Is it a major undertaking
Schuler v Wickman Machine Tool Sales [1974] → our modern case dealing with
conditions as construction
● If the contract says “this is a condition…” and the person breaches it, what happens
● We use the word condition in different ways, sometimes it is a less stringent meaning
● Using of the word condition is a strong indication but it is not conclusive
● The fact that a particular construction leaves to an unreasonable result must be relevant
consideration
● The more unreasonable the more unlikely the term was a condition
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