MISTAKE
Renders contract void |
Mistake about quality of goods does not render contract void. |
TYPE OF MISTAKE
Common Mistake: |
Both parties have same misapprehension |
E.g. At time of contracting, subject matter of contract isdestroyed |
Mutual Mistake: |
Both parties mistaken about different things.
Objective test - if contract would be inferred by words/conduct, it will still be binding |
E.g. A offers to sell one thing while B offers to buy another |
Unilateral Mistake: |
One party is mistaken and other party knows/is deemed to know |
E.g. Mistaken belief as to nature of a document (even where signed)
E.g. D's offer was not an accurate reflection of their true intention |
Unilateral Mistake of Identity: |
Only void in precise circumstances |
Seller must establish that identity rather than attributes was of vital importance |
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Distance selling - presumed that seller intended to deal with persons named in correspondence if they are an identifiable third party |
If the attributes of buyer influenced contract, can only be voidable for misrepresentation |
PRIVITY
No person can sue or be sued on a contract unless they are party to it |
EXCEPTIONS TO PRIVITY - CA 1999
Contract (Rights of Third Parties) Act 1999 |
Third party to a contract can enforce it in certain circumstances |
Contract still cannot be enforced against third party |
Contract can exclude this Act |
EXCEPTIONS TO PRIVITY - AGENCY
Where principal is named, agent is authorised and consideration has moved from principal, principal is party to contract, not agent |
E.g. Director signs lease on behalf of company, company is party to contract, not director |
EXCEPTIONS TO PRIVITY - ASSIGNMENT
Where A contracts with B and B assigns contract rights to C, C may sue A on their promise to B |
Permitted unless non-assignment clause or limitation clause restricts/excludes |
EXCEPTIONS TO PRIVITY - COLLATERAL
E.g. A employs B to paint house. Contract states A will specify paint to be used. C informs A their paint lasts 10 years so A instructs B to buy and use C's paint. Paint lasts only 1 year. A can sue C as A & C have communicated and there was consideration in C's warranty of 10 years to A and A's instruction to B to buy the paint. |
EXCEPTIONS TO PRIVITY - TORT
Where there is a duty of care owed to a third party, third party can sue in negligence (Donoghue v Stevenson) |
DISCHARGE BY PERFORMANCE
Expiry |
Contract will expire when completed on its own terms |
Entire Obligations |
Contractual obligations discharged by complete performance of obligations |
EXCEPTIONS TO ENTIRE OBLIGATIONS
Partial performance |
Innocent party may accept partial performance |
Performing party entitled to payment on quantum meruit basis |
Substantial performance |
If lack of performance doesn't go to root of contract, it will be substantially performed |
Performing party entitled to contract price subject to deduction to reflect 'cost' of remedy |
Divisible obligations |
Where contract is clearly intended to be divided into parts, e.g. salary |
Performing party entitled to payment for each part performed |
Wrongful prevention of performance |
One party performs part of agreement but is prevented from completing by some fault of the other party |
Performing party entitled to sue for damages for breach OR claim a quantum meruit |
LIQUIDATED DAMAGES CLAUSE
Clause which stipulates certain sum payable on particular breach of contract: EITHER |
A primary clause - part of the primary obligations furthering commercial objective of contract; OR |
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A secondary clause - obligation triggered by breach to compensate innocent party BUT does not impose disproportionate detriment to any legitimate interest of the innocent party in performing primary obligations |
Will NOT be a penalty if it protects a legitimate business interest and imposes a detriment which is not disproportionate to protect the legitimate interest |
Valid liquidated damages clause will be binding |
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DISCHARGE BY AGREEMENT
Subsequent binding contract |
Agreement that obligation will be released (accord) and consideration for the promise to release a party from obligations (satisfaction) required. |
Discharges the former obligations |
Operation of a term in the contract |
Condition precedent |
Where contract is suspended until a condition is satisfied |
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Condition subsequent |
Where contract is terminated and outstanding obligations discharged in the event of a specific occurrence, e.g. by notice |
DISCHARGE BY FRUSTRATION
Events might occur after the formation of the contract which render performance radically different from agreed to at the time of contracting |
Relieves parties from further obligations. Contract is brought to an end automatically: the parties have no choice in the matter |
Frustration: Common Purpose is Frustrated
Common purpose for entering contract can no longer occur due to supervening event |
E.g. renting out and agreeing to rent room for purpose of viewing a procession. If procession is cancelled, contract may be discharged by frustration |
Frustration: Performance is impossible
Due to partial/total destruction of some object necessary to performance of contract |
Due to destruction of asset not part of subject matter, but essential to performance |
Due to death/illness of one of the parties |
Due to unavailability, e.g. in shipping |
Frustration: Performance is illegal
A change in law or state intervention may render performance illegal |
LIMITATIONS ON FRUSTRATION
A frustrating event is not merely an increase in expense/onerousness |
A frustrating event is not something cause by the default of a party (i.e. self-induced) |
A frustrating event is not something which parties could have reasonably contemplated |
A frustrating event is not something provided for in the contract |
CONSEQUENCES OF FRUSTRATION
All future obligations automatically discharged by common law |
Money paid before frustrating event can be recovered |
Money that should have been paid no longer needs to be paid |
Expenses incurred by payee can be recovered:
- Expenses must be directly related to performance of contract to be recoverable
- Amount recoverable capped and cannot exceed:
1. Actual expenses incurred; AND
2. Amount paid/payable prior to frustrating event |
PARTICULAR TYPES OF LOSS
Mental distress |
Damages not awarded in relation to distress, anguish or annoyance caused by breach |
Damages awarded where major/whole object of contract was to provide pleasure, relaxation and peace of mind |
Loss of reputation |
Damages not awarded |
Limited exception where contract adversely affects future prospects if contract contained implied/express term not to (very rare) |
Loss of chance |
Damages not awarded if too speculative (instead, expectation interest) |
Recoverable if lost chance is quantifiable in monetary terms and there was a real and substantial chance |
Damages on behalf of another |
Damages not awarded on behalf of another/for losses suffered by another |
Exceptions relating to privity |
PENALTY CLAUSE
A liquidated damages clause which requires party to pay excessive sum such that it becomes penalty |
A secondary clause - imposes a disproportionate detriment to any legitimate interest of innocent party in performance of the primary obligation |
CAUSATION
C must establish that: |
(1) Breach by D objectively caused their loss(es) |
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(2) D should be held responsible for loss(es) which have objectively been caused by D's breach |
MITIGATION
Injured party should take objectively reasonable steps to minimise the effect of breach |
No obligation to mitigate but losses attributable to failure to mitigate are not recoverable |
No duty to mitigation a claim for payment of debt/liquidated damages (amount is payable as contractual right, not as damages) |
GUARANTEE
A promise by X to ensure that Y carries out its obligations, or a promise to fulfil those obligations itself if Y does not |
X's obligation is effectively defined by Y's obligation: so X cannot face any obligation that is greater than Y's obligation |
INDEMNITY
A promise by X to reimburse Z in the event that they suffer a stated loss |
Primary obligation: X's obligation is legally independent of Y's obligation, although what X has to pay will be affected by what Y pays |
E.g. Party X agrees to indemnify Party Z from any losses which arise from the failure to recover the sum loaned to Party Y |
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REMEDIES FOR BREACH
Compensate C for damage, loss or injury suffered as a result of D's breach |
Specific performance, injunction, damages |
Breach Damages: Expectation Interest
Cost of cure (most frequent): |
Cost of substitute/remedial work required to put C in position they would have been in had contract been properly performed
C must act reasonably |
Diminution in value: |
Calculated by reference to difference in value between performance received and performance promised |
Loss of amenity: |
Non-economic loss of pleasure |
Breach Damages: Reliance Interest
Puts C back in position they would have been if not for the contract |
Recover expenses which have been incurred in preparing for, or in part performance of, contract, which have been rendered pointless by breach |
Can only recover wasted expenditure, not all expenditure |
Limited to reliance if expectation damages are highly speculative |
Breach Damages: Restitution Interest
The interest C has in the restoration of benefits which D has acquired at C's expense |
Awarded in exceptional circumstances where other remedies are inadequate |
Breach Remedy: Specific Performance
Requires D to carry out its obligations under a positive term of the contract |
For this remedy, subject matter of contract must be unique/irreplaceable |
Will not be awarded if damages are an appropriate and adequate remedy |
Will not be awarded where it would cause undue hardship on D |
Will not be awarded for breach of contracts of employment |
Will not be awarded for breach of an obligation to perform a series of acts requiring constant supervision of court |
Will not be awarded for breach of a contract which is not binding on both parties |
Breach Remedy: Prohibitory Injunction
Restrains a party from breaching a negative term |
Will not be granted if damages are an appropriate and adequate remedy |
May be limited to what is considered reasonable in all circumstances of the case |
Only granted where 'just and convenient' |
REMEDIES UNDER CRA 2015
Remedies for consumer when implied terms of contracts between businesses and consumers are breached |
CRA Remedies: Contracts for Goods
CRA Remedies: Contracts for Services
CRA Remedies: Contracts for Digital Content
REMOTENESS
Loss must be of a type ordinarily and naturally arising from breach to be recoverable |
If loss is too unusual and far-reaching to satisfy the above, C must establish that D had sufficient actual knowledge of the particular and special circumstances to be aware of the risk to those losses |
(Losses must be a type arising naturally within the reasonable contemplation of both parties to be recoverable) |
DISCHARGE BY BREACH
Anticipatory Breach |
Party indicates it will not perform its contractual duties - it renounces the contract |
Innocent party has immediate right to 'accept' renunciation and treat contract as terminated. |
Repudiatory Breach |
Breach of warranty (or innominate term treated as such) |
Damages only |
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Breach of condition (or innominate term treated as such) |
Damages plus right of election |
Elect to terminate |
Notification required; must mitigate loss |
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Elect to affirm |
Contract remains; unequivocal commitment to continue; not (often) required to mitigate losses; need legitimate interest; C must not require D's cooperation |
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