5 a law and ethics discharge of contract, remedies and injunctions

1. Law and Ethics
5. Discharge of Contract

2. Slides available on:
slideshare.net/msstephaniel
ord/presentations

3. Class
08.50 - 10.00 - discharge of contract
10.00 - 10.10 - break
10.10 - 10.50 - overview of contract law
10.50 - 11.00 - break
11.00 - 12.00 - begin employment law

4. At the end of this lecture you will be able to
● Identify the main methods of discharge.
● Understand what is meant by breach of contract.
● Discuss the available remedies.
● Distinguish between common law remedies and equitable
remedies.
● Identify the main types of equitable remedies

5. What is
discharge
of
contract?

6. 5 Methods of Discharge
1. Performance
2. Agreement
3. Notice
4. Breach of Contract
5. Operation of the Law including frustration
Some cases of discharge may give rise to claims for
compensation damages or other equitable remedy.

7. 1. Performance
Each party has
performed their
rights and
obligations.
They must be
performed precisely
and exactly as per
the terms.

8. CASE: Cutter v Powell 1795
Seaman employed on ship
travelling from Jamaica to
Liverpool died before the
ship docked. The Court held
the widow wasn’t entitled to
recover wages.
Contract required entire
performance, and he died
before completing the
journey.

9. 2. Agreement
Contract can be discharged by agreement -
bilateral or unilateral.
Bilateral - where both parties have not completed
obligations
Unilateral - where one party has completed but
other side dissatisfied.

10. Unilateral
Discharge
In unilateral
discharges, the party
who has failed to
comply with all their
obligations must give
fresh consideration
to the other party
for agreeing to
discharge the
contract early.

11. 3. Notice
Contract may contain clause
allowing one or both to bring
contract to an end by giving a
period of notice.
Legislation can also establish
notice periods or the court can
decide an appropriate period.

12. 4. Breach of
Contract
Where one party fails
to perform at least
one obligation
through:
- Non-performance
- Partial
performance
- Defective
performance

13. Breach doesn’t automatically discharge!
It will depend on how serious the breach is.
Remember the difference between a breach of warranty and a
breach of condition?
It will depend on whether it is a condition or a warranty.
Where it is less serious, the contract will continue but the
injured party will have a right to claim damages.

14. Can you
remember the
difference
between a
warranty and a
condition?

15. Difference
between
conditions and
warranties
A condition is always a
condition. E.g. the
bathroom exists
A warranty is always a
warranty. E.g. the colour
of the bathroom
Innominate term depends on
the consequence of the
breach.

17. CASE: Dundalk Shopping Centre v Roof
Spray Ltd 1979
In a serious breach, the injured party may
terminate.
Defendant roofer failed to seal a roof so
that it would be watertight in reasonable
time.
Fundamental breach
Plaintiff allowed to repudiate the contract

18. Repudiatory or Anticipatory Breaches
Repudiatory:
Where breach is serious
enough to warrant
repudiation.
Doesn’t give automatic
repudiation but injured
party has right to choose
whether to terminate the
contract.
Anticipatory:
Where a party tells another
person in advance of
commencing their
obligations under the
contract that they cannot
perform it.

19. 5. Operation of Law
Sometimes law will provide for discharge of contract.
For example where a person becomes ill or incapacitated.
Also in cases of insolvency or bankruptcy.
EG - where a company director is declared personally bankrupt
he is required by law to resign his position. Failure to do
so results in liability.

20. 6. Frustration
Contract can be discharged where action or event beyond the
parties control makes it impossible to complete the terms
agreed after the contract is agreed.
It must:
- Be an unforeseeable event
- Causes a radical change
- Make completion impossible
- Not be caused by either party

21. CASE: Maritime National Fish Ltd v Ocean
Trawlers 1935
NOT FRUSTRATION
Maritime owned 3 vessels and rented
another from Ocean. Applied for fishing
licenses but were only granted 3 and
claimed frustration because licence
issue beyond their control.
Court said that it wasn’t because they
made a decision not to register the 4th
vessel.

22. CASE: Mulligan v Browne 1977
Unforeseeable aspect v. important
Doctor’s employment contract
contingent on additional funding.
Hospital didn’t get money.
No job.
Court said this outcome had been
contemplated by the parties.

23. CASE: Davis Contractors v Fareham UDC 1956
Building contract agreed 8 months
for work
Took 22 due to materials shortage
and labour issues
Increased costs for contractor
who attempted to claim
frustration

24. “There must be as well
such a change in the
significance of the
obligation that the thing
undertaken would, if
performed, be a different
thing from that contracted
for.”

25. NOT FRUSTRATION:
1)Industrial disputes
2)labour/material shortage
3)Self-induced breach

26. Examples of Frustration of Contract

27. 1. Impossibility
Taylor v Caldwell (1863)
Contract frustrated due to
destruction of essential part of
contract or death of party. In
Taylor case, def rented a music hall
but it was destroyed by fire.
Plaintiff sued for breach but court
held no breach because it was
frustrated because of event beyond
control.

28. 2. Illegality or Government Intervention
Frustration if new law makes performance
illegal.
Avery v Bowden (1856)
Defendant chartered a ship and was contracted
to collect cargo from Odessa. On arrival the
cargo wasn’t ready. By the time it was, the
Crimean war had happened and it became
illegal to load in enemy port.

29. Fibrosa v Fairbairn Lawson Combe 1943
- Contract between an English firm and Polish firm deemed
frustrated when Poland was invaded by Germany and it
became illegal to deal with an enemy state.
Ross v Shaw 1917
- Contract to purchase yarn from a mill in Belgium was
deemed frustrated, as the yarn couldn’t be lawfully
obtained when Belgium was invaded by Germany.

31. 3. Non-Occurrence
Contract can be frustrated by non-
occurrence of an event, which was
sole reason for contract in first
place.
Krell v Henry 1903
Henry rented room to view coronation
paid £25 with promise of further £50
but it was postponed.
Court held frustration.

32. 4. Death or
Incapacity
Robinson v Davison 1871
Piano player contract
frustrated by serious
illness
Flynn v Great Northern
Railway Company 1953
Employment contract of van
driver frustrated by
illness

33. Legal Effect of Frustration
Under common law, discharge due to frustration ends contract.
Rights and obligations from before frustration remain but
anything from afterwards are extinguished.
Payments made from before cannot be recovered but payments
from after are no longer owed.
Rule now relaxed - payment recoverable if nothing received in
return.

35. Fibrosa v Fairbairn Lawson Combe 1943
Plaintiff ordered machinery at cost of £4800 and gave £1000
deposit. Balance was to be paid on delivery to Poland.
WWII made delivery impossible.
Defendants claimed contract was frustrated and monies paid
before event couldn’t be recovered.
Court said that as the defendants had done nothing in return
for the deposit, the plaintiff was entitled to money back.

36. Remedies

37. Remedies
When party breaches a contract, injured
party is entitled to remedy for loss or
damage.
Common law or equitable remedies.
Injured parties entitled to common law
remedy as a right where breach
established (damages).
Equitable remedies are discretionary

38. Quantum Meruit
Award
Award based on the amount a court
thinks ought to be awarded.
Distinct from what plaintiff
claims.
Most frequently applied common law
remedy.
“As much
as one
has
earned.”

39. Common Law
Remedies
Damages
They are compensation not punishment.
Purpose is to put party in position they would be had
contract actually been performed.

40. What damage can the injured party be
compensated for?
Doctrine of Remoteness of Damages
Parties can’t be compensated for all the loss as some will be
considered too remote from the breach.
Court will ask:
1) What damage arises naturally as a consequence?
2) What damages were within the contemplation of the
parties?

41. Victoria Laundry v Newman Industries
1949
- Plaintiffs operated laundry and
ordered a boiler from Newman ASAP.
6 month delay. During delay
plaintiffs had to turn down
lucrative contract.
- Plaintiffs sued for loss of profit.
- Court held defendants were liable
for normal losses but not lucrative
contract

42. Lee and Donoghue v Rowan 1981
- Defendants failed to finish a shed
for the plaintiffs to use as
storage for potatoes.
- Plaintiffs could not find another
shed to house potatoes.
- Court held natural losses included
cost of shed and transporting them
but could not be compensated for
whole crop.
- Failure to find storage was
reasonably contemplated

43. How much compensation should the injured party
receive?
Courts will calculate damages based on ‘expectation’ loss or
‘reliance’ loss.
Expectation loss is the loss the injured party was expected
to gain had contract been completed. Purpose to reinstate the
financial position.
Reliance loss is the money spent by the injured party as a
result of having entered the contract. Actual financial loss
experienced.

44. Hawkins v Rogers 1951
- Breach of contract
prevented a successful
racehorse from competing
in further races .
- Irish court estimated
probable loss by
examining the general
performance of the horse
in previous races and
awarded damages for
‘expectation loss’ based
on calculations.

45. Anglia Television Ltd v Reed
1972
- =Actor was contracted to
star in a tv programme
being made by plaintiffs
- Actor pulled out and
couldn’t be replaced so
film abandoned
- Court held plaintiffs
entitled to damages for
the amount spent prepping
for film
- Loss impossible to
calculate

46. Afton v Film Studios of
Ireland 1971
Irish court held that the
plaintiffs could not claim
for expectation loss when it
wasn’t clear whether the
film would have made a
profit or not

47. Limitations to the award of damages
Award for damages to the injured party can be reduced
where the injured party has failed to mitigate their
losses.
The injured party has duty to mitigate loss as much as
possible.
They only need to take reasonable steps following a
breach.
Failure = reduced losses.
Burden on defendant to prove the reasonable steps weren’t
taken.

49. Bord Iascaigh Mhara v
Scallon 1973
Owner of a ship could not
recover the value of the
damages that were caused by
persons who hired and
abandoned it.
Court said losses could have
been reduced if owners took
steps to rescue.

50. Equitable remedies
- Discretionary
- Only granted if
damages are unsuitable

51. Remedy: Specific Performance
If there’s a breach, court might order the party to perform
their specific obligations under the contract.
Empowers the Court to enforce the due performance of the
contract.
Courts will do this where damages are inadequate and where
the order would not cause undue hardship on party in breach.

52. Patel v Ali 1984
Sale of house
Vendor declared bankrupt,
wife gave birth, diagnosed
with cancer and had leg
amputated.
Relied on neighbours.
Purchaser sought SP but
court said it would cause
hardship amounting to
“injustice”

53. Court won’t grant specific performance….
A) Contracts for personal services (including employment
contracts or contracts to perform)
B) Contracts to advance money
C) Where the Court cannot supervise performance of a
contract
D) Where one party is an infant/minor
E) Where the contract is neither fair nor just - and where
the conduct of party seeking performance is questionable

54. Remedy: Injunctions

55. An injunction is
an order
instructing the
party to rectify the
effects of the
breach

56. Two types of injunctions
Mandatory Injunction
Order directing the party
to undertake a specific
course of action.
Prohibitory Injunction
Order directing the party
in breach restrain from
taking a specific course of
action

57. Lumley v Wagner 1852
Defendant agreed to sing at the
plaintiff’s theatre for a certain
period and not sing elsewhere, but
did anyway.
Court granted a prohibitory
injunction preventing plaintiff
working elsewhere but didn’t order
specific performance.

58. Remedy: Rescission
Applies where one party seeks to
have contract set aside.
Where this happens, any money
paid may be transferrable.
Damages can’t be claimed -
purpose is to return contracting
party to pre-contract position.

59. Remedy: Rectification
Where dispute arises pertaining
to terms the Court might opt to
“rectify” the terms.
Only permitted where party can
prove the contract wasn’t the
intention of parties.
Not where burdensome injury
will happen.

60. What is a burdensome injury?
EXAMPLE:
Where a contract made in Ireland
between two Irish individuals
inadvertently refers to $100,000 as
the consideration of the contract
instead of euros, a court may look
at this and “rectify” the contract
by replacing the $ with €.

61. Limits to action for breach
Statute of Limitations Act 1957
imposes time limits on right to sue
for breach.
Proceedings must be initiated 6
years from breach.

64. msstephanielord@yahoo.com