pptweek 8_contract_8 1rightsand8 2remedies_W

1、DISCHARGE OF CONTRACTTASMANIAN SCHOOL OF BUSINESS AND ECONOMICSBFA141 Commercial TransactionsWeek 8 Law of Contracts: Rights and Remedies Textbook Chapters 20-21Topic objectivesOn completion of this Topic, you should be able to: recognise and explain the methods by which a contract is ended, includi

2、ng: By performance By agreement By frustration By operation of law By lapse of time at common law By virtue of a term in the contract breach By breach explain the doctrine of frustration and outline its effects on a contract2DischargeMethods of discharge(bringing a contract to an end)3METHODDETAILPe

3、rformance Actual Performanceo Other than the payment of money must correspond (Re Moore 1921; Shipton 1912) Part Performanceo Is the contract divisible? I By the payment of moneyo Attempted Performance (e.g. tender)o Conditional payments: chequeo Payment by post Substantial Performance: is the failu

4、re minor?Agreement Mutual Discharge (both parties abandon their rights) Release (or unilateral discharge) Waiver Substitution Accord and Satisfaction Conditions Precedent or SubsequentFrustrationUnforeseen event neither caused nor contemplated by the parties; unjust to hold the parties to their barg

5、ain Physical impossibility (destruction of subject matter or incapacity of party) Chapman 2004; Taylor 1863 Change in the law Horlock 1916 Non occurrence of an event Krell1903 State of affairs ceases to exist Codelfa 1982Effect: discharge as to the future contract voidOperation of law Bankruptcy Mer

6、ger Death Statute of LimitationsLapse of timee.g. Failure to exercise an optionBy virtue of a termCondition precedent or subsequentBreach Actual Breach (failure to perform) Anticipatory Breach (a threat not to perform) Foran1989Discharge by performanceTypes of performance5Discharge by performanceAct

7、ual performanceThe parties must carry out as closely as practicable the terms of the contract: Re Moore & Co Ltd and Landauer 1921 cans of fruit (some cases had 30 tins; some had 24 tins)but compare Shipton, Anderson & Co v Weil Brothers & Co 1912 insignificant shortfall in delivery (55 lbs in exces

8、s)67ss: n):Discharge by performancePartial performanceGenerally, payment does not automatically follow unl e the contract is divisible (a matter of constructio Cutter v Powell (1795) death during voyage: contract not completed not divisible; there has been free and willing acceptance of partial perf

9、ormance by the party receiving the benefit; there has been substantial performance and the cost of rectification is small:Hoenig v Isaacs 1952 redecorate flat; one party is prevented from more than partially performing the contract.7Discharge by agreementA contract created by agreement can be undone

10、 by agreement: Mutual Discharge where both parties abandon their original agreement while the contract is still executory e.g. sale of house both parties agree to cancel the contract; Release/unilateral discharge where one party has performed their obligations and releases the other from completing

11、performance of their obligation. Must have consideration or be in the form of a deed e.g. part payment of a debt; Waiver where one party leads the other party to reasonably believe that strict performance will not be insisted upon promissory estoppel; Substitution where the parties wish to continue

12、with a contractual relationship but on terms differing from those in the original agreement, a new agreement can be substituted;8Discharge by agreementA contract created by agreement can be undone by agreement: Accord and Satisfaction where one party has performed their obligations, and by agreement

13、 (accord), the defaulting party is relieved, of their obligations by doing something different (satisfaction) to that which they were bound to do under the original contract e.g. paying part of a debt earlier. Condition precedent where a term stops a contract coming into existence until the occurren

14、ce of some specified event. Condition subsequent where a term of the contract mustbe complied with after the contract is made or the other party can terminate for non-fulfilment.9Discharge by frustrationFrustration can only arise where: An unforeseen event outside the control of the parties has sign

15、ificantly changed the obligations of the parties; Neither party caused the supervening event; Neither party contemplated the supervening event; It would be unjust to hold the parties to their original contract: Chapman v Taylor & Ors;Vero Insurance Ltd v Taylor & Ors 2004 - builder incapacitated;Fru

16、stration = something external that has caused the contract to fail completelyAn exception to the rule of absolute liability10Discharge by frustrationCases involving this doctrine fall into five categories:1. Physical impossibility because of destruction of the subject matter: Taylor v Caldwell (1863

17、) concert hall destroyed;2. Physical impossibility under contract of personal services;3. Change in the law or interference by government rendering performance impossible: Horlock v Beal 1916 captureof a ship during WW1 claim for wages failed;4. Impossibility due to non-occurrence of event basic to

18、the contract: Krell v Henry 1903 hire of a room to watch procession which was postponed; but compareHearne Bay Steam Boat Co v Hutton 1903 hire of boat to view event that was cancelled; cruise to the area still possible;5. Where the particular state of affairs ceases to exist:Codelfa Construction Pt

19、y Ltd v State Rail Authority (NSW) (1982) impossible to carry out underground works due to injunction from affected residents11Discharge by frustrationThe effect of frustration is to discharge the contract but only as to the future:Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd 1943 con

20、tract for sale and delivery of machinery; frustrated by WW2. Claim for return of deposit failed total failure of considerationThis can have unfair results the frustrating event was war and the even though it was impossible to carry out the contract the manufacturer was left with worthless partly bui

21、lt machinery on its hands and had to return a deposit that had been paid.12tionw.e ofDischarge by frustrationThree states have modified the common law position: New South Wales: Frustrated Contracts Act 1978 adjusts the rights of the parties where a contract has been frustrated. South Australia: Fru

22、strated Contracts Act 1988 uses an equitable approach to try and ensure fairness. Victoria: Fair Trading Act 1999 (Vic)allows expenses incurred before frustration to be recovered.13Discharge by frustrationThe effect of frustration14Discharge by operation of lawDischarge by operation of law will occu

23、r when One of the parties is declared tobe bankrupt There is a material alteration to circumstances There is a merger of a simple contract into a formal contract (a deed) One of the parties who is to carry out personal services dies; Limitations legislation so provides15Discharge by lapse of timeAn

24、offer in the form of an op does not remain open for acceptance for an indefinite length of time at common laIt may cease to exist by laps time:Ballas v Theophilos (No 2) (1957) option to purchase share of deceased partner; no time limit specified; option exercised 16 months later.16Discharge by virt

25、ue of a term Terms may be included in the contract that have the effect of either: preventing the contract from coming intoforce (condition precedent); or bringing the contract to an end on the occurrence of a certain event (condition subsequent).17Discharge by breachWhere one party fails to perform

26、 their obligations as agreed, they are liable for breach of contract.Breach may be: Actual breach where a party fails to perform at the time required by the contract; or Anticipatory breach where a party threatens not to perform prior to the time required by the contract:Foran v Wight (1989) 2 days

27、before settlement of a sale of land P advised V that he would not be able to complete on the due date18DAMAGESDETAILPart 2Remedies for Breach of Contract Chapter 2119Topic objectivesOn completion of this Topic, you should be able to: list the remedies for breach of contract explain the remedies avai

28、lable to an injured party at common law explain the principles upon which damages are decided classify the types of damages describe situations where an equitable remedy may be used20Remedies for breach (a failure to carry outthetermsofthecontract)21DamagesMain purpose of damages is to enable the in

29、nocent party to receive monetary compensation.Damages are a common law remedy and awarded as of right.They are calculated on the basis of looking at what the position of the plaintiff would have been if the contract had been properly performed.22CONCEPTDefinitionA common law remedy to provide moneta

30、ry compensation to the injured party and to put that person in the same position as he/she had been as if the contract had been properly performed.Steps in determining damagesCausationo Is there a causal connection between the breach and the losssuffered?o If the causal chain has been broken P may n

31、ot be able to recover Alexander 1987Remotenesso Is the loss a reasonable and direct consequence of the breach of contract?o Hadley v Baxendale 1854: Losses arising from the breach in the ordinary course of things; or Losses from special circumstances where D knew of Ps needs Victoria Laundry 1949Amo

32、untDamages are for provable or economic loss ando Expectation losseso Reliance losses Amann Aviation 1991o Loss of a chanceo Anxiety and inconvenienceo Distress and disappointment Jarvis 1972o Frustrationo Discomforto Mental distress Baltic Shipping 1993MitigationP must take all reasonable steps to

33、mitigate or minimise loss and if not done may lead to a reduction in the damages awarded Burns 1986Types of damagesNominalInfringement of a right but not actual loss Charter 1957OrdinaryLoss suffered by P either general or special damages ExemplaryPunitive for non economic loss LiquidatedWhere P sue

34、s for a specified sum which must a genuine preestimate of the actual losses flowing from the breachUnliquidatedWhere assessment of damages is left to the court PenaltyA threat to ensure performance not enforceable as it is not a genuine preestimate of the loss flowing from the breach Dunlop 1915Dama

35、gesSteps in determining damages24DamagesCausationIs there a causal connection between the breach and the loss suffered?The plaintiff must show that the breach of contract by the defendant was the cause of the loss.25DamagesCausationThe plaintiff may not be able to recover if an additional factor unc

36、onnected with thedefendants breach breaks the causal chain between the defendants action and the plaintiffs loss or damage: Alexander v Cambridge Credit Corporation (in rec) (1987) loss caused not a negligent audit but by external environmental factors26DamagesRemotenessThe loss or injury must not b

37、e too remote.The court must consider whether the loss suffered by the injured party is a usual and reasonably direct consequence of the breach of contract, and this is a question of fact.27DamagesRemotenessHadley v Baxendale (1854) indicates two types of loss are recoverable: loss arising from the b

38、reach in the usual or normal course of things and which were reasonably contemplated by the parties; and loss arising from special or exceptional circumstances where it can be shown that the defendant had actual knowledge of the plaintiffs needs: Victoria Laundry (Windsor) Ltd v Newman Industries Lt

39、d (1949) Government contract for dyeing not known to supplier28DamagesAmount of damagesThe aim of damages is to put the injured party back as close to the position they would have been in had the breach never occurred.29DamagesAmount of damagesDamages are recoverable mainly for provable or economic

40、loss as well as: Expectation losses Reliance lossesCommonwealth of Australia v Amann Aviation Pty Ltd (1991) implied promise that a tanker existed at a specified location Loss of a chance (Amman Aviation) claim failed (too remote) Distress and disappointmentJarvis v Swan Tours (1972) failure to prov

41、ide attractions etc on a holiday tour Frustration Discomfort Mental distressBaltic Shipping Co Ltd v Dillon (1993) ship hit a rock and sank30DamagesMitigation of damagesThe plaintiff must take reasonable steps to minimiseor mitigate their loss.Failure to do so can result in a reduction of damages: B

42、urns v MAN Automotive (Aust) Pty Ltd (1986) used vehicle with knowledge of flawMitigation is a question of fact and the onus of proof is on the defendant.31Types of damagesThe type of damages that will be awarded will be determined by the seriousness of the breach and whether the contract has specif

43、ied the amount of damages to be paid in the event of breach.32Types of damagesNominal damages legal rights have been infringed but they have suffered no actual loss: Charter v Sullivan 1957Ordinary damages loss suffered by the plaintiff as a result of the breach and can be either general or special

44、damages.Exemplary damages punitive and may be awarded for non-economic loss; not normally available in contract.33Types of damagesLiquidated damages Awarded where a plaintiff is able to sue fora specified sum, which must be a genuine or bona fide pre-estimate of the actual lossthat will flow from th

45、e breach.Unliquidated damages Awarded where an injured party has nofixed sum in mind and leaves the court to decide the amount.34Types of damagesPenaltyA threat to ensure performance and not enforceable because they are not a genuine pre-estimate of the damage that will result from the breach: Dunlo

46、p Pneumatic Tyre Co v New Garage and Motor Co Ltd 1915e.g., this class action argues that some bank fees are penalties: .au/ bank-fees-class-action35Equitable remediesDiscretionary remedies at equity and only granted where damages are not an adequate remedy.36EQUITABLE

47、REMEDIES FOR BREACH OF CONTRACTREMEDYDETAILRescission Injured may either affirm the contract or terminate by clear words or conduct The injured party may also sue for damages The right to rescission may be lost if the injured party:o Continues with the transaction; oro Fails to act within a reasonab

48、le time; oro If an innocent third party acquires an interest in the subject matter (Phillipsv Brooks)RestitutionBased on the concept of unjust enrichment or quasicontract. The plaintiff must establish: The defendant has obtained a benefit or enrichment; The benefit was at the Plaintiffs expense; Tha

49、t it would be unjust for D to retain that benefit; and D has no defenceExamples: total failure of consideration (McCormack 1984); duress; mistake of law (David Securities 1992) Frequently a quantum meruit order is made Pavey 1987; Kane 2005.Specific PerformanceAremedycompellingperformancewherethecourtcansuperviseperformancebutnotincontracts forpersonal services J C