Contract (Discharge & Remedies)

Contract

What does “discharge of a contract” mean ?

Termination of the rights and obligations of the parties under a valid contact

What are the 4 ways a contract may be discharged ?

• By performance

• Agreement

• Frustration

• Breach

What is "discharge by performance” ?

When performance is completed exactly as intended by the terms of the contract

What is “discharge by agreement” ?

When both parties mutually decide to end or change the contact.

What are the main ways a contract can be discharged by agreement? (4)

• Conditions in the contract

• Waiver

• Release

• Novation

Explain “conditions in the contract” - in discharge by agreement

Conditions within the contract itself that set out how the contract can end

Explain “waiver” - in discharge by agreement

One party in a contract voluntarily agrees not to enforce part of the contract.

eg. → Jackson lends Tina €30 for gas and she is to pay that money back by Friday. Friday comes around and Jackson tells Tina its okay, that she doesn’t have to pay him back what was initially owed to him

Explain “release” - in discharge by agreement

One party frees the other from their obligations. → eg homeowner granting tenant freedom to leave early before the end of the lease

Explain “novation” - discharge by agreement

When the old contract is replaced with a new one, often with a new party involved. → eg. A tenant wants to move out so they recommend a new tenant to replace them, the contract gets replaced to bind the new tenant

What is “discharge by frustration” ?

When an unforeseen event occurs, making it unjust to insist the contact be performed as initially intended.

Name circumstances where frustration may arise - and their examples (4)

• Destruction of subject matter (Taylor v Caldwell, 1863)

• Death / personal incapacity (Sheperd & Co Ltd v Jerrom, 1986)

• Government intervention (Ross v Shaw, 1917)

• Non-occurrence of fundamental event (Krell v Henry, 1903)

Explain the (Taylor v Caldwell, 1863) case example

Taylor agreed to rent Caldwell’s music hall for a concert but the hall caught on fire before the event could even happen, therefore Caldwell couldn’t be held liable for not completing the contract as initially agreed.

If subject matter is destroyed without fault, the contract is discharged

Explain the (Sheperd & Co Ltd v Jerrom, 1986) case example

Jerrom was an apprentice with Shepherd & Co Ltd, but was given a detention in a youth custody centre, therefore Jerrom wasn't held liable for not performing his end of the contract due to his imprisonment

Explain the (Ross & Shaw, 1917) case example

Shaw agreed to deliver foreign goods to Ross, but the origin of the goods later became enemy territory during the wartime therefore trading was made illegal. The contract was discharged and Shaw couldn't be held liable for non-compliance.

Explain the (Krell v Henry, 1903) case example

Henri agreed to rent rooms from Krell to watch King Edward VII's coronation, but the King fell ill. Though the rooms where still technically available, the contract got discharged because the main reason for the initial agreement got destroyed.

What is discharge by breach ?

When one party fails to perform their obligations under the contract. It gives the innocent party the right to terminate or affirm the contract

Remedies of breach of contract ? (5)

• Damages

• Rescission

• Specific performance

• Injunction

• Quantum meruit

What is the time limit for applying for remedies under the statue of limitations ?

6 years from the date of breach

What is the purpose of “damages” ?

To put the injured party in the same position as if the contract had been performed.

What happens if a breach of warranty occurs ?

Only damages are available; if no loss is suffered, nominal damages are awarded.

What happens if a breach of condition occurs ?

The contract may be treated as discharged and damages claimed for losses.

What are liquidated damages ?

Pre-agreed sums payable on breach

What are unliquidated damages ?

Damages assessed by the court

Name a case relevant to assessment of damages (and explain the case)

• Victoria Laundries v Newman Industries (1949)

→ Victoria laundry bought a boiler from Newman Industries but the delivery was delayed. This caused Victoria laundry to face loss in profits and also miss out on lucrative government contracts. The court held Newman liable for ordinary profits (which were foreseeable) but not for the government contracts (As they were too remote and not within Newman's knowledge)

What is “rescission” ?

Is an equitable remedy of “undoing” a contract so that it is treated as if it never existed. allowing both parties to return to the position they were in before the contract was made

What is “specific performance” ?

Court order remedy that forces a party to carry out their end of the contract, suitable for cases where the subject matter is unique, but its not for personal service

Types of injunctions ? (3)

• Mandatory

• Prohibitory

• Interlocutory

When will injunctions NOT be used ?

Where damages provide an adequate remedy

→ If the harm can be fairly compensated with money, the court won’t issue an injunction.

What is quantum meruit?

Claim for “as much as deserved”. It allows someone to claim reasonable payment for work or services provided, even if there is no valid contract or the contract doesn’t specify a price

A case example for quantum meruit

• Folens v Minister for Education (1984).

→ Folens was working on a project to produce an Irish encyclopedia for children that was to be funded by the department of education. In preparation for the work, Folens spent money as a way to get ahead, but, unfortunately the initially anticipated contract with the Department of Education didn’t fall through. The court stated that Folens should still be compensated for the work already done to prevent unjust enrichment

What is the duty to mitigate losses?

Injured party must take steps to reduce/minimise loss rather than let damages accrue (pile up).

A case example under “the duty to mitigate losses”

• Bord Iascaigh Mhara (BIM) v Scallan (1973).

BIM rented a fishing vessel to Scallan under a hire - purchase agreement (with the option to own it once the instalments are fully paid off). Overtime, Scallan stopped paying instalments and neglected upkeep. The court held him liable for arrears (unpaid installments) and damages, as poor maintenance worsened the loss.