Chapter 12 & 13 - Discharge of Contracts and Damages

What does 'discharge of a contract' mean?

To end or cancel the obligation of a contract.

What are the five ways a contract can be discharged?

Performance/completion, by agreement, frustration, by operation of law, or by breach.

What happens during the performance or completion stage of a contract?

Both parties perform their respective obligations under the contract.

What is 'discharge by agreement'?

Parties mutually agree not to proceed with the performance of the existing contract.

What is required for a waiver to be binding when one party has performed?

It must be under seal, as there is no consideration for the party that has already performed.

What is 'accord and satisfaction'?

A compromise where one party accepts less than full payment in exchange for discharging the original obligation.

Provide an example of 'accord and satisfaction'.

A farmer offers Viterra grade #2 wheat at a lesser price instead of grade #1 wheat, and Viterra accepts.

What is a 'condition precedent' in a contract?

An event that must occur before a party's obligations under the contract are activated.

Give an example of a condition precedent.

Roughriders will host the 2020 Grey Cup if the CFL decides they will host it.

What is a 'condition subsequent'?

A future event that will end the contract or the parties' obligations under it.

Provide an example of a condition subsequent.

A morality clause in a professional athlete's contract that ends the contract if they breach it.

What is an 'option to terminate' in a contract?

A provision allowing one or both parties to terminate the agreement before completion.

What is 'discharge by frustration'?

When an event makes the performance of the contract impossible, impracticable, or radically different.

What are some examples of frustration?

Physical destruction of the subject matter of the contract or frustration of a common business venture.

What is 'self-induced frustration'?

When a party purposely makes performance of the contract impossible and cannot claim frustration.

Can a party claim frustration if they caused the frustrating event?

No, they cannot rely on the doctrine of frustration.

What happens if a contract does not specify what occurs if a condition is not fulfilled?

The contract may be discharged due to frustration.

What is the expectation regarding contracts in society?

Parties are expected to be bound by contracts and honor their obligations.

What is the significance of risk allocation in contracts regarding frustration?

If the risk is foreseen and allocated in the contract, frustration does not apply.

What happens if a contract is silent on natural disasters?

Frustration may apply if the contract cannot be fulfilled due to such an event.

What is an example of self-induced frustration involving a contractor?

A contractor sells their only dump truck and then claims frustration when unable to perform.

In the context of frustration, what does 'radically different' mean?

The circumstances of performance have changed so significantly that it differs from what was originally agreed.

What is the outcome if a party fails to fulfill their obligations due to a pandemic?

The contract may be considered frustrated if the pandemic prevents performance.

What is the legal implication of a party not fulfilling a contract due to a snowstorm?

If the party had a reasonable expectation to fulfill the contract, frustration may not apply.

What happens to a contract when a party goes into bankruptcy?

The obligations are terminated by operation of law, and debts are paid proportionally with other creditors' claims.

What is the Limitations Act in relation to debt?

It states that if a debt is neglected by the creditor for a long time (2 years in Sask), the creditor cannot enforce the debt.

What distinguishes a major breach from a minor breach of contract?

A major breach discharges the contract at the option of the non-breaching party, while a minor breach allows the contract to continue but entitles the non-breaching party to damages.

What must the non-breaching party do if a major breach occurs?

They must communicate their option to discharge the contract to the breaching party.

What happens if the non-breaching party accepts benefits under a breached contract?

They lose the ability to treat the contract as discharged.

What is the purpose of remedies in contract law?

To put the parties as close as possible to the position they would have been in had the contract been completed.

What is the duty to mitigate in contract law?

The non-breaching party must minimize potential losses and cannot claim damages that could have been reasonably avoided.

What is 'restitutio in integrum'?

Monetary compensation intended to fully compensate the injured party for damages suffered.

What are liquidated damages?

Agreed-upon damages specified in a contract, which must be a pre-estimate of damages arising from a breach.

What is quantum meruit?

A legal principle that allows for reasonable compensation for work already completed when a contract is terminated.

What is specific performance in contract law?

A court order requiring a party to fulfill their contractual obligations, applicable only to unique subject matters.

What is an injunction?

A court order restraining a party from acting in a specific manner, often involving a negative covenant.

What is the significance of the Hadley v. Baxendale case?

It established that a defendant is liable for losses that were foreseeable at the time of the contract.

What is the assessment of damages based on?

Damages are assessed at the time of the breach and must flow naturally from the breach.

What constitutes a minor breach in a contract?

An instance where a party fails to meet a term of the contract without undermining the entire agreement.

What is the outcome if a vendor is late in providing possession of a home?

It is considered a minor breach, allowing the contract to continue with a claim for damages.

What happens if a party breaches a contract for a unique item?

The court may grant specific performance to compel the breaching party to fulfill the contract.

What is the economic rationale for breaching a contract?

If breaching leads to higher profits after accounting for damages, it may be advantageous to breach.

What are equitable remedies?

Remedies awarded at the court's discretion when monetary compensation is inadequate.

What is an example of a situation where an injunction may be applied?

Preventing a former CEO from working for a competitor after termination.

What are the damages in a scenario where a manufacturer has a contract but is offered a better deal?

The damages would be the difference in profit after accounting for the loss incurred by breaching the original contract.

What is the significance of the deposit in a residential house purchase?

It serves as liquidated damages, pre-estimating the vendor's losses if the buyer breaches the contract.