Discharge by BREACH & agreement

Discharge by Agreement

Definition (AO1)

An agreed discharge will be binding if it contains the same ingredients that make a contract binding when it was formed:

• Offer

• Acceptance

• Consideration

• Legal intent.

Consideration must be fresh i.e. both giving up right to compel each other to perform

Discharge of Contract

Definition (AO1)

Termination:

• Contract no longer has effect

• Parties have no further rights / obligations under contract

• Parties cannot be liable on contract.

Breach

Definition (AO1)

• When a party without lawful excuse fails or refuses to perform what is due to him under the contract OR

• performs defectively OR

• Incapacitates himself from performing

Breach of contract
Definition (AO1)

Failure to perform contract in accordance with its terms

Breach may be:

• Actual - breach occurs on or after date for performance

  OR

• Anticipatory - Breach occurs before date for performance

All breaches of contract give right to a claim for damages but only some breaches (conditions) give innocent party right to terminate.

Repudiatory breach

Definition (AO1)

Both parties discharged from obligations after breach

(Wrongful termination of contract = breach of contract)

Repudiatory breach of contract gives innocent party right to terminate from a:

1. Breach of condition

2. Breach of innominate term with serious consequences - “substantially deprives other party of whole benefit of contract”

3. Anticipatory Breach

Where CP1 comits a repudiatory breach of contract CP2 has choice to:

• Affirm contract

  OR

• Terminate contract (and claim damages)

How should innocent party protect themselves -

Ways (AO1)

1. Affirmation - Innocent party:

   • Knows of breach

   • Knows of right to terminate

   • Clearly shows to party in breach, intention to continue with Contract.

2. Termination - Innocent party makes clear to party in breach that he is terminating the contract.

Breach of a condition
Definition (AO1)

Condition:

• Major term of contract

• Identified at date of contract

• Parties know that breach will give right to terminate

Where a condition is breached:

• Innocent party may terminate the contract

• Both parties discharged from further obligations

  AND

• May claim damages for breach

Breach of a condition
Case (AO3)

(Poussard v Spiers & Pond)

Breach of a condition - Time clauses
Definition (AO1)

Contract terms relating to date / time for performances, may be conditions IF:
Contract expressly states ‘time is of the essence’ - links with performance and indicate importance of time and if there has been a history of delay

• Final date set and not completed

SO

• Time clauses are not conditions

  UNLESS

• expressly stated

So a breach of time clause does not give right to terminate

Breach of inominate term with serious consequences

Definition (AO1)

Where CP1 is in breach of an innominate term AND consequences of breach are serious enough to deprive CP2 of substantially the whole benefit of the contract - CP2 has the right to terminate the contract

Right to terminate is determined at the date of breach - just like a breach of condition

Breach of inominate term with serious consequences

Case (AO2)

(Hong Kong Fir)

Repudiation / Anticipatory breach

Definition (AO1)

Where CP1 indicates (by words or conduct), that he intends to not perform futer obligations:

• Condition

• Innominate term with serious consequences

CP2 has right to terminate the contract (and claim damages)

CP2 can choose to terminate:

• At date of anticipatory breach OR

• At date of performance - can result in greater loss

If CP2 sues immediately then can claim to put back in pre-contractual position or choose to repudiate the contract.

Innocent party must reasonable steps to mitigate loss.

Repudiation / Anticipatory breach

Case (AO3)

(Hochster v de la Tour)

D agreed to employ C from June 1st as a courier on a tour due to start on June 1st. D notified C that he would not employ him.

C was able to sue immediately and did not have to wait until the actual breach.

C could claim for damages for money he would have received had the contract been fulfilled.