Contract Law II

Contract Law IIContract Law II

Trinidad & Tobago Hospitality & Tourism InstituteTrinidad & Tobago Hospitality & Tourism InstituteHospitality Law & Insurance: BC 229Hospitality Law & Insurance: BC 229

Lecturer: Ms. V. MaharajLecturer: Ms. V. Maharaj

CapacityCapacity

The law presumes that everyone has the capacity The law presumes that everyone has the capacity to contract. Three classes of persons are to contract. Three classes of persons are subject to some degree of personal subject to some degree of personal contractual incapacity:-contractual incapacity:-

i.i. Mentally disordered persons;Mentally disordered persons;

ii. ii. Drunken persons; and Drunken persons; and

iii.iii. Minors.Minors.

It is also essential to examine the capacity of It is also essential to examine the capacity of corporations, when entering into contractual corporations, when entering into contractual relations.relations.

CapacityCapacity

Mentally Disordered PersonsMentally Disordered PersonsA contract made by a person of unsound mind is A contract made by a person of unsound mind is

not voidable at that person’s option if the other not voidable at that person’s option if the other Party to the contract believed at the time he Party to the contract believed at the time he made the contract that the person with whom he made the contract that the person with whom he was dealing was of sound mind. In order to avoid was dealing was of sound mind. In order to avoid a fair contract on the ground of insanity, the a fair contract on the ground of insanity, the mental capacity of the one must be known to the mental capacity of the one must be known to the other contracting Parties.other contracting Parties.

The general rule is that a mentally disordered The general rule is that a mentally disordered person is bound by his contract unless he can person is bound by his contract unless he can show that owing to his mental condition he did show that owing to his mental condition he did not understand what he was doing and further not understand what he was doing and further that the other Party was aware of his incapacity.that the other Party was aware of his incapacity.

CapacityCapacityThis rule was laid down in This rule was laid down in Imperial Loan Co. Ltd. V Imperial Loan Co. Ltd. V

Stone [1892] 1 Q.B. 599Stone [1892] 1 Q.B. 599

When a person enters into a contract, and afterwards alleges When a person enters into a contract, and afterwards alleges that he was so insane at the time that he did not know what that he was so insane at the time that he did not know what he was doing, and proves the allegation, the contract is as he was doing, and proves the allegation, the contract is as binding on him in every respect….as if he had been sane binding on him in every respect….as if he had been sane when he made it, unless he can prove further that the when he made it, unless he can prove further that the person with whom he contracted knew him to be so insane person with whom he contracted knew him to be so insane as not to be capable of understanding what he was about.as not to be capable of understanding what he was about.

The burden of proof in such a case must lie on the defendant. The burden of proof in such a case must lie on the defendant. A Defendant who seeks to avoid a contract on the ground of A Defendant who seeks to avoid a contract on the ground of his insanity, must plead and prove, not merely his his insanity, must plead and prove, not merely his incapacity, but also the Plaintiff’s knowledge of the fact, incapacity, but also the Plaintiff’s knowledge of the fact, and unless he proves these two things he cannot succeed.and unless he proves these two things he cannot succeed.

CapacityCapacity

MinorsMinorsA contract with a minor may be rendered enforceable A contract with a minor may be rendered enforceable

or void by the courts. The basic principle of law is or void by the courts. The basic principle of law is that a minor must be protected against his that a minor must be protected against his immaturity in his dealings with other persons. immaturity in his dealings with other persons.

If the entire contract or a particular tem of a contract If the entire contract or a particular tem of a contract is so unfair as to make the contract is so unfair as to make the contract disadvantageous to he minor t render the contract disadvantageous to he minor t render the contract unfair , the court will not enforce the contract. At unfair , the court will not enforce the contract. At the same time the policy of the law is to mitigate the same time the policy of the law is to mitigate some of the hardships that might be imposed on some of the hardships that might be imposed on persons dealing with a minor , so as to encourage persons dealing with a minor , so as to encourage them to enter into contracts that are for the them to enter into contracts that are for the minor’s benefit.minor’s benefit.

CapacityCapacity

There are however exceptions to this general There are however exceptions to this general rule:-rule:-

i.i. A contract to supply a minor with A contract to supply a minor with ‘necessaries’ is binding upon the minor where ‘necessaries’ is binding upon the minor where the contract as a while is for the benefit of the the contract as a while is for the benefit of the minor; where its terms are harsh or onerous it minor; where its terms are harsh or onerous it is not binding upon the minor.is not binding upon the minor.

i.i. Certain contracts with minors are not void but Certain contracts with minors are not void but are only voidable, i.e. the contract is valid and are only voidable, i.e. the contract is valid and binding upon the minor unless he repudiates binding upon the minor unless he repudiates liability before majority or within a reasonable liability before majority or within a reasonable time thereafter.time thereafter.

CapacityCapacity

Minors: NecessariesMinors: NecessariesWhere a minor enters into a contract with Where a minor enters into a contract with

another person, whereby that person sells or another person, whereby that person sells or supplies him with a necessary or necessaries, supplies him with a necessary or necessaries, the contract will bind the minor.the contract will bind the minor.

What constitutes necessaries will depend What constitutes necessaries will depend largely on the individual circumstances and largely on the individual circumstances and requirements of the minor. Generally requirements of the minor. Generally necessaries include food, drink, clothing, necessaries include food, drink, clothing, medical aid, board and lodging.medical aid, board and lodging.

CapacityCapacityDrunken PersonsDrunken PersonsThe test of incapacity by reason of drunkenness is whether The test of incapacity by reason of drunkenness is whether

the person alleged to be incapable was so drunk as not to the person alleged to be incapable was so drunk as not to understand what he was doing, and whether the other understand what he was doing, and whether the other Party knew of his condition.Party knew of his condition.

Barclays Bank plc v Schwartz (The Times, August 2, Barclays Bank plc v Schwartz (The Times, August 2, 1995)1995)

The reason for drunkenness of a Party to a contract affecting The reason for drunkenness of a Party to a contract affecting its validity is that like mental incapacity it deprives a its validity is that like mental incapacity it deprives a person not only of a full understanding of a transaction, person not only of a full understanding of a transaction, but also awareness that he does not understand it.but also awareness that he does not understand it.

A contract made in such circumstances is said to be voidable A contract made in such circumstances is said to be voidable at the drunken person’s option, and can accordingly be at the drunken person’s option, and can accordingly be ratified by him when sober.ratified by him when sober.

CapacityCapacity

CompaniesCompaniesA company is a legal person which is separate and A company is a legal person which is separate and

distinct from its shareholders. The capacity of the distinct from its shareholders. The capacity of the company is limited by the objects for which the company is limited by the objects for which the company is set up and which are contained in the company is set up and which are contained in the company’s memorandum of association.company’s memorandum of association.

If the company acts beyond its objects then it has If the company acts beyond its objects then it has acted beyond its capacity.acted beyond its capacity.

This provides protection for those who lend money to This provides protection for those who lend money to the company because they can infer from the the company because they can infer from the objects clause the extent of the company’s powers.objects clause the extent of the company’s powers.

Doctrine of Privity of Doctrine of Privity of ContractContract

The common law doctrine of privity means that a The common law doctrine of privity means that a person cannot acquire rights, or be subject to person cannot acquire rights, or be subject to liabilities, arising under a contract to which he is liabilities, arising under a contract to which he is not a Part.not a Part.

Only a person who is Party to a contract can sue on Only a person who is Party to a contract can sue on it. it.

Secondly, if a person with whom a contract has Secondly, if a person with whom a contract has been made is to be able to enforce it, been made is to be able to enforce it, consideration must be given by his to the consideration must be given by his to the promisor or to some other person at the promisor or to some other person at the promisor’s request.promisor’s request.

MistakeMistakeCommon Mistake Common Mistake

This occurs where the parties are agreed on the terms of the contract but have This occurs where the parties are agreed on the terms of the contract but have entered it under a shared and fundamental misapprehension as to the facts. entered it under a shared and fundamental misapprehension as to the facts.

Where the mistake is common, that is shared by both Parties, but the law may nullify Where the mistake is common, that is shared by both Parties, but the law may nullify this consent if the Parties are mistaken as to some fact or, possibly, point of law this consent if the Parties are mistaken as to some fact or, possibly, point of law which lies at the basis of the contract. This is usually referred to as “common which lies at the basis of the contract. This is usually referred to as “common mistake”.mistake”.

Gallaway v GallawayGallaway v GallawayFactsFactsA man and a woman entered into a separation agreement relating to their apparent A man and a woman entered into a separation agreement relating to their apparent status as husband and wife. Neither then knew that their marriage was null and void.status as husband and wife. Neither then knew that their marriage was null and void.

HeldHeldThe contract related to non-existent subject matter (the marriage) was void.The contract related to non-existent subject matter (the marriage) was void.

MistakeMistakeCommon mistakes are ones in which the partes, though genuinely Common mistakes are ones in which the partes, though genuinely

agreed, have both contracted in the mistaken belief that some agreed, have both contracted in the mistaken belief that some fact which lies at the root of the contract is true.fact which lies at the root of the contract is true.

The following elements must be present if common mistake is to The following elements must be present if common mistake is to avoid a contract:-avoid a contract:-

i.i. There must be a common assumption as to the existence of a There must be a common assumption as to the existence of a state of affairs;state of affairs;

ii.ii. There must be no warranty by either of the parties that the There must be no warranty by either of the parties that the state of affairs exists;state of affairs exists;

iii.iii. The non-existence of the state of affairs must not be The non-existence of the state of affairs must not be attributable to the fault of either party;attributable to the fault of either party;

iv.iv. The non-existence of the state of affairs must render The non-existence of the state of affairs must render performance of the contract impossible; and performance of the contract impossible; and

v.v. The state of affairs may be the existence, or a vital attribute, The state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which of the consideration to be provided or circumstances which must subsist if performance of the contractual venture is o be must subsist if performance of the contractual venture is o be possible.possible.

MistakeMistake

Non Est FactumNon Est Factum

The general rule is that a party of full age and The general rule is that a party of full age and understanding is normally bound by his understanding is normally bound by his signature to a document, whether he reads or signature to a document, whether he reads or understands it or not. If however, a Party has understands it or not. If however, a Party has been misled into executing a deed or signing been misled into executing a deed or signing a document essentially different from that a document essentially different from that which he intended to execute or sign, he can which he intended to execute or sign, he can plead plead non est factumnon est factum (not his deed) in a action (not his deed) in a action against him. The deed or writing is completely against him. The deed or writing is completely void in whosesoever hands it may come. void in whosesoever hands it may come.

MistakeMistake

It is invalid on the ground that the mind of the signor It is invalid on the ground that the mind of the signor did not accompany the signature; in other words, did not accompany the signature; in other words, that he never intended to sign, and in that he never intended to sign, and in contemplation of law never did sign the contract contemplation of law never did sign the contract to which his name is appended.to which his name is appended.

The defence of The defence of non est factumnon est factum is primarily important is primarily important in two situations:-in two situations:-

i.i. Where a Party has signed the supposed contract Where a Party has signed the supposed contract as a result of the fraud of a third party and the as a result of the fraud of a third party and the other party to it has no actual knowledge or other party to it has no actual knowledge or reason, to know of the fraud.reason, to know of the fraud.

ii.ii. Where the fraud has been committed by the Where the fraud has been committed by the other party to the alleged contract or deed and a other party to the alleged contract or deed and a third party has then relied on the document.third party has then relied on the document.

MisrepresentationMisrepresentation

A statement of fact which is untrue which is made by A statement of fact which is untrue which is made by one party to the other before the contract is made one party to the other before the contract is made in order to induce the latter to enter into the in order to induce the latter to enter into the contract.contract.

If a Party enters into a contract on the basis of If a Party enters into a contract on the basis of certain statements of fact which turn out to be certain statements of fact which turn out to be untrue, the court may be prepared to hold that the untrue, the court may be prepared to hold that the presence of such untrue statements of fact can presence of such untrue statements of fact can form the basis of relief for an aggrieved party.form the basis of relief for an aggrieved party.

The Courts are not impressed by statements that are The Courts are not impressed by statements that are mere puffs, opinions, beliefs, representations as to mere puffs, opinions, beliefs, representations as to the future of representations with regards to the the future of representations with regards to the law.law.

TYPES OF MISREPRESENTATIONTYPES OF MISREPRESENTATIONFraudulentFraudulentA statement made with knowledge that its untrue, or without A statement made with knowledge that its untrue, or without

believing it to be true. In a case of believing it to be true. In a case of fraudulent fraudulent misrepresentationmisrepresentation the party misled may, under common law, the party misled may, under common law, rescind (to make void) the contract, i.e refuse to perform his part rescind (to make void) the contract, i.e refuse to perform his part under it. under it.

NegligentNegligent A statement made in the belief that it is true without reasonable A statement made in the belief that it is true without reasonable

grounds for that belief. In case of grounds for that belief. In case of negligent misrepresentationnegligent misrepresentation, , to gain a remedy, the plaintiff must show that the to gain a remedy, the plaintiff must show that the misrepresentation was in breach of a duty of care, which arose out misrepresentation was in breach of a duty of care, which arose out of a special relationshipof a special relationship

InnocentInnocentA statement made in the belief that it is true and with reasonable A statement made in the belief that it is true and with reasonable

grounds for that belief. In the case of grounds for that belief. In the case of innocent innocent misrepresentation,misrepresentation, the party misled may also rescind the the party misled may also rescind the contract and refuse to perform his part of it. contract and refuse to perform his part of it.

Discharge of ContractDischarge of Contract

Discharge By AgreementDischarge By AgreementRelease by DeedRelease by DeedWhere only one Party has fully Where only one Party has fully

performed his obligations under the performed his obligations under the Contract and the other Party still has Contract and the other Party still has some obligations still outstanding, the some obligations still outstanding, the contract may be discharged, at any contract may be discharged, at any time before breach, by release by deed. time before breach, by release by deed. The employment of a Deed dispenses The employment of a Deed dispenses with the necessity for consideration.with the necessity for consideration.


Accord and SatisfactionAccord and Satisfaction

Accord and satisfaction is the purchase of a release Accord and satisfaction is the purchase of a release from an obligation by means of valuable from an obligation by means of valuable consideration. consideration.

The accord is the agreement by which the The accord is the agreement by which the obligation is discharged. The satisfaction is the obligation is discharged. The satisfaction is the consideration which makes the agreement consideration which makes the agreement operative. Even if the satisfaction accepted is operative. Even if the satisfaction accepted is much less in value than the debt, it will much less in value than the debt, it will constitute a good discharge, since the courts will constitute a good discharge, since the courts will not inquire into the adequacy of consideration.not inquire into the adequacy of consideration.

Discharge of ContractDischarge of ContractRecissionRecission

Where neither Party has performed the whole of Where neither Party has performed the whole of his obligations under the contract, it may be his obligations under the contract, it may be rescinded by mutual agreement express or rescinded by mutual agreement express or implied. A contract which is rescinded by implied. A contract which is rescinded by agreement is completely discharged and cannot agreement is completely discharged and cannot be revived. be revived.

Recission by AbandonmentRecission by AbandonmentIt is open for the court to infer that the Parties It is open for the court to infer that the Parties

have mutually agreed to abandon their contract have mutually agreed to abandon their contract where the contract has been followed by a long where the contract has been followed by a long period of delay or inactivity on both sides. period of delay or inactivity on both sides.


Waiver or ForbearanceWaiver or Forbearance

Where one Party voluntarily agrees to a request Where one Party voluntarily agrees to a request by the other that he should forbear to insist on by the other that he should forbear to insist on the mode of performance fixed by the the mode of performance fixed by the contract, the court may hold that he has contract, the court may hold that he has waived his right to require that the contract waived his right to require that the contract be performed in this respect according to its be performed in this respect according to its original terms.original terms.

A waiver may be oral, written or inferred from A waiver may be oral, written or inferred from conduct.conduct.


Provision For Discharge In The Contract ItselfProvision For Discharge In The Contract Itself

Express ProvisionExpress Provision

The Parties may expressly provide in their contract that either one The Parties may expressly provide in their contract that either one of them is to have an option to terminate the contract. This of them is to have an option to terminate the contract. This right of termination may be exercisable upon a breach of right of termination may be exercisable upon a breach of contract by the other Party, or upon the occurrence or non-contract by the other Party, or upon the occurrence or non-occurrence of a specified event.occurrence of a specified event.

Notice

Where the terms of the contract expressly or impliedly provide that the right of termination is to be exercised only upon notice given to the other Party, it is clear that notice must be given for the contract to be terminated pursuant to that provision. Any notice must be sufficiently clear and unambiguous in its terms to constitute a valid notice.

FrustrationFrustration

National Carriers Ltd v Panalpina (Northern) Ltd. [1981]A.C. 675

A contract may be discharged on the ground of A contract may be discharged on the ground of frustration when something occurs after the frustration when something occurs after the formation of the contract which renders it physically formation of the contract which renders it physically or commercially impossible to fulfil the contract or or commercially impossible to fulfil the contract or transforms the obligation to perform into a radically transforms the obligation to perform into a radically different obligation from that undertaken at the different obligation from that undertaken at the moment of entry into the contract. moment of entry into the contract.

In such case the law declares both parties to be discharged from further performance.

FrustrationFrustrationJ. Laurtizen AS v Wijsmuller BV (The Super Servant Two) 1990 J. Laurtizen AS v Wijsmuller BV (The Super Servant Two) 1990

This case lays our five propositions which describe the essence of the This case lays our five propositions which describe the essence of the doctrine:-doctrine:-

1.1. The doctrine of frustration has evolved “to give effect to the The doctrine of frustration has evolved “to give effect to the demands of justice, to achieve a just and reasonable result, to do demands of justice, to achieve a just and reasonable result, to do what is reasonable and fair, as an expedient to escape from what is reasonable and fair, as an expedient to escape from injustice where such would result from enforcement of a contract in injustice where such would result from enforcement of a contract in its literal terms after a significant change in circumstances.its literal terms after a significant change in circumstances.

2.2. Frustration operates to “kill the contract and discharge the parties Frustration operates to “kill the contract and discharge the parties from further liability under it”, therefore it cannot be lightly from further liability under it”, therefore it cannot be lightly invoked but must be kept within narrow limits and ought not be invoked but must be kept within narrow limits and ought not be extended.extended.

3.3. Frustration brings a contract to an end automaticallyFrustration brings a contract to an end automatically4.4. The essence of frustration is that it should not be due to the act or The essence of frustration is that it should not be due to the act or

election of the party seeking to rely on it and it must be some election of the party seeking to rely on it and it must be some outside even or extraneous change of situationoutside even or extraneous change of situation

5.5. A frustrating event must take place without blame or fault on the A frustrating event must take place without blame or fault on the part of the party seeking to rely on it.part of the party seeking to rely on it.

FrustrationFrustrationTaylor v Caldwell (1863)Taylor v Caldwell (1863)

FactsFactsA hall was let for a series of contracts on specified dates. A hall was let for a series of contracts on specified dates.

Before the date of the first contract the hall was Before the date of the first contract the hall was destroyed by fire. The concert organizer sued the destroyed by fire. The concert organizer sued the owner of the hall for damages for failure to let him owner of the hall for damages for failure to let him have the use of the hall as agreed.have the use of the hall as agreed.

HeldHeldThe destruction of the subject matter rendered the The destruction of the subject matter rendered the

contract impossible to perform and discharge the contract impossible to perform and discharge the contract. contract.

This case was the origin of the doctrine of frustration.This case was the origin of the doctrine of frustration.

FrustrationFrustrationA contract is not discharged by frustration in the A contract is not discharged by frustration in the

following circumstances:-following circumstances:-

If an alternative mode of performance is still If an alternative mode of performance is still possible.possible.

If one party has accepted the risk that he will be If one party has accepted the risk that he will be able to perform regardless of the circumstances able to perform regardless of the circumstances there will be no frustrationthere will be no frustration

If one party was responsible for the event which If one party was responsible for the event which makes performance impossible, he cannot claim makes performance impossible, he cannot claim frustration and the other party can sue for frustration and the other party can sue for breaking of contract.breaking of contract.

DuressDuressA person who has been induced to enter into a contract by duress, is A person who has been induced to enter into a contract by duress, is

entitled to avoid it at common law. Examples of duress include:-entitled to avoid it at common law. Examples of duress include:-

A threat of physically harming someone or his close family;A threat of physically harming someone or his close family;

A threat to harm goods;A threat to harm goods;

A threat of unlawful imprisonment can also count as duress;A threat of unlawful imprisonment can also count as duress;

Cunning v Ince [1847] Cunning v Ince [1847] FactsFactsAn elderly lady was induced to make a settlement of her property An elderly lady was induced to make a settlement of her property

in favour in favour of a relative by a threat of unlawful imprisonment in a mental of a relative by a threat of unlawful imprisonment in a mental

home.home.

HeldHeldThe settlement would be set aside on account of duress.The settlement would be set aside on account of duress.

Undue InfluenceUndue Influence

Whereas duress is forcing someone to make a Whereas duress is forcing someone to make a contract, undue influence involves pressuring or contract, undue influence involves pressuring or influencing someone in such a way, that he or influencing someone in such a way, that he or she does not make a free choice.she does not make a free choice.

Relationships where undue influence is presumed Relationships where undue influence is presumed are:-are:-

Lawyer and ClientLawyer and Client Doctor and PatientDoctor and Patient Parent and ChildParent and Child Religious adviser and discipleReligious adviser and disciple Trustee and Beneficiary under the Trust.Trustee and Beneficiary under the Trust.

IllegalityIllegality The courts will not enforce a contract which is illegal The courts will not enforce a contract which is illegal

or contrary to public policy. This is done for three or contrary to public policy. This is done for three main reasons:-main reasons:-

The court cannot be called upon to aid a willing The court cannot be called upon to aid a willing party to an illegal contract or to a contract which is party to an illegal contract or to a contract which is contrary to public policy;contrary to public policy;

Justice would be tainted and the dignity of the court Justice would be tainted and the dignity of the court offended by intervention on behalf of the claimants; offended by intervention on behalf of the claimants; andand

A refusal to grant relief will make entry into illegal A refusal to grant relief will make entry into illegal contracts and hazardous enterprise and will thus contracts and hazardous enterprise and will thus deter people from entering into such contracts.deter people from entering into such contracts.

IllegalityIllegality

Pearce v Brooks [1866] LR 1 Ex. 213Pearce v Brooks [1866] LR 1 Ex. 213

The claimants were coachbuilders who hired out The claimants were coachbuilders who hired out an ornamental carriage to the defendant. The an ornamental carriage to the defendant. The defendant was a prostitute and she planned to defendant was a prostitute and she planned to use the carriage to attract her customers. This use the carriage to attract her customers. This fact was known to the claimants. The fact was known to the claimants. The defendant returned the carriage in a damaged defendant returned the carriage in a damaged condition, having paid only the second condition, having paid only the second installment on it. The claimants action for installment on it. The claimants action for damages for breach of contract failed. The damages for breach of contract failed. The contract was illegal and could not be enforced.contract was illegal and could not be enforced.


Contracts may be illegal due to the following Contracts may be illegal due to the following reasons:-reasons:-

i.i. It is expressly or impliedly prohibited by It is expressly or impliedly prohibited by statute;statute;

ii.ii. It is contrary to public policy, e.g. contracts It is contrary to public policy, e.g. contracts to commit a crime, contracts which are to commit a crime, contracts which are contrary to good morals;contrary to good morals;

iii.iii. Contracts which are prejudicial to family life Contracts which are prejudicial to family life and the institution of marriage, e.g. a and the institution of marriage, e.g. a contract which restrains a person from contract which restrains a person from marrying;marrying;


i.i. Contracts which are prejudicial to public Contracts which are prejudicial to public relations, e.g. a contract to facilitate the relations, e.g. a contract to facilitate the forcible overthrow of a friendly country;forcible overthrow of a friendly country;

ii.ii. Contracts which are prejudicial to the Contracts which are prejudicial to the administration of justice, e.g. a contract administration of justice, e.g. a contract under which a party promises to give false under which a party promises to give false evidence in criminal proceedings; evidence in criminal proceedings;

iii.iii. Contracts in restraint of trade whereby one Contracts in restraint of trade whereby one party agrees to restrict his freedom trade or party agrees to restrict his freedom trade or his freedom to conduct his profession or his freedom to conduct his profession or business in a particular region/locality for a business in a particular region/locality for a specified period of time.specified period of time.

Breach of ContractBreach of Contract

A breach of contract is committed A breach of contract is committed when a Party without lawful excuse when a Party without lawful excuse fails or refuses to perform what is fails or refuses to perform what is due from him under the contract, or due from him under the contract, or performs defectively or incapacitates performs defectively or incapacitates himself from performing.himself from performing.

Breach of ContractBreach of ContractA breach of contract gives various options to the innocent A breach of contract gives various options to the innocent

party. The extent of these options depends upon the party. The extent of these options depends upon the seriousness of the breach. seriousness of the breach.

DamagesDamages – as compensation for loss caused by the breach. – as compensation for loss caused by the breach.

Action for the priceAction for the price – here the breach is failure to pay. – here the breach is failure to pay.

Quantum meruitQuantum meruit – payment for the value of what he has – payment for the value of what he has done.done.

Specific performanceSpecific performance – court order to the defendant to – court order to the defendant to perform the contract.perform the contract.

Injunction Injunction – a court order for the other party to observe – a court order for the other party to observe negative restrictions.negative restrictions.

Remedies for BreachRemedies for Breach

DamagesDamagesEvery breach of a valid and enforceable Every breach of a valid and enforceable

contract gives to the innocent Party a contract gives to the innocent Party a right to recover damages in respect of right to recover damages in respect of loss suffered as a result of the breach.loss suffered as a result of the breach.

The aim of an award of damages is to The aim of an award of damages is to compensate the claimant for the loss compensate the claimant for the loss which he has suffered as a result of the which he has suffered as a result of the defendant’s breach of contract.defendant’s breach of contract.

Remedies for BreachRemedies for Breach DamagesDamages

Robinson v Harman [1848] Robinson v Harman [1848] The rule of law is that where a party sustains loss by reason of a The rule of law is that where a party sustains loss by reason of a

breach of contract, he is, so far as money can do it, to be breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if placed in the same situation, with respect to damages, as if the contract had been performed.the contract had been performed.

Thus to be able to claim for damages, the loss must be Thus to be able to claim for damages, the loss must be something which is a natural consequence of the breach of something which is a natural consequence of the breach of which both parties contemplated might happen, at the time which both parties contemplated might happen, at the time they made the contract.they made the contract.

Damages are to be assessed as at the date of breach. But where Damages are to be assessed as at the date of breach. But where the claimant is unaware of the breach, damages will the claimant is unaware of the breach, damages will generally be assessed as at the date on which the claimant generally be assessed as at the date on which the claimant could, with reasonable diligence, have discovered the breach.could, with reasonable diligence, have discovered the breach.

Remedies for BreachRemedies for BreachSpecific PerformanceSpecific Performance

The court may in its discretion order the defendant to The court may in its discretion order the defendant to perform his part of the contract instead of letting him perform his part of the contract instead of letting him buy himself out of it by paying damages for breach. buy himself out of it by paying damages for breach.

Specific performance (which is an equitable remedy to Specific performance (which is an equitable remedy to be granted at the discretion of the court) will only be be granted at the discretion of the court) will only be ordered in a case where the common law remedy of ordered in a case where the common law remedy of damages is inadequate). damages is inadequate).

The Court orders performance to take place although at The Court orders performance to take place although at a later point in time than originally agreed. a later point in time than originally agreed.

Action for PriceAction for Price

If the breach of contract arises out of one If the breach of contract arises out of one party’s failure to pay the contractually party’s failure to pay the contractually agreed price due under the contract, agreed price due under the contract, the creditor should bring an action to the creditor should bring an action to recover that sum.recover that sum.

Quantum MeruitQuantum Meruit

The phrase ‘quantum meruit’ literally means ‘how much it is The phrase ‘quantum meruit’ literally means ‘how much it is worth’. It is a measure of the value of contractual work worth’. It is a measure of the value of contractual work which has been performed.which has been performed.

De Bernardy v Harding (1853)De Bernardy v Harding (1853)FactsFactsDB agreed to advertise and sell tickets for H who was DB agreed to advertise and sell tickets for H who was

erecting stands for erecting stands for spectators to view the funeral of the Duke of Wellington. H spectators to view the funeral of the Duke of Wellington. H

cancelled the cancelled the arrangement with DB without justification.arrangement with DB without justification.

HeldHeldDB might recover from H the value of services rendered.DB might recover from H the value of services rendered.

EENDND OF OF LLECTUREECTURE

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AATTENTIONTTENTION

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Contract Law II