SQE1 Contract Law: Termination, Frustration, and Performance

This set covers the SQE1 syllabus regarding the termination of contracts through breach, frustration, and performance, including statutory rules under LR(FC)A 1943 and UCTA 1977.

Repudiatory Breaches

Breaches that allow the non-defaulting party to treat the contract as having brought to an end, arising from a breach of condition or a very serious breach of an innominate term.

Affirmation

When an innocent party chooses to treat a contract as ongoing following a breach, which then serves as a bar to terminating the contract later.

Termination for Future Performance

The legal effect of a discharged contract where parties are excused from future contractual obligations, but are not discharged from obligations that have already been performed.

Doctrine of Frustration

A rule where a contract is automatically brought to an end because an unforeseen event beyond the parties' control makes performance impossible or radically different.

Government Intervention

A category of frustration where state action renders the performance of a contract radically different or impossible.

Destruction of the Subject Matter

An event that frustrates a contract because the specific thing essential to the performance (e.g., a building for hire) is accidentally destroyed.

Force Majeure Clause

An express provision in a contract to excuse parties from performance in the event of exceptional circumstances, which excludes the doctrine of frustration.

Self-induced Frustration

A situation where the supervening event arises because of the fault or choice of the party alleging frustration, preventing that party from successfully pleading frustration.

Law Reform (Frustrated Contracts) Act 1943

The statute that governs the distribution of losses and recovery of money or expenses following a frustrating event.

Section 1(2) LR(FC)A 1943

Provides that money paid before a frustrating event can be recovered, money payable need not be paid, and the court may allow a payee to recover expenses out of the total sums paid or payable.

Section 1(3) LR(FC)A 1943

Allows a court to order a 'just sum' to be paid by a recipient who has conferred a valuable benefit on the other party before the frustrating event.

Doctrine of Complete Performance

The general rule that performance of contractual obligations must be precise and exact to entitle a party to payment.

Divisible Obligations

Contractual obligations where parties agree to specific payments for each distinct part or stage, treated like separate contracts for the purposes of payment.

Substantial Performance

An exception to the doctrine of complete performance where a party is entitled to the contract price less the cost of rectifying minor defects, typically applicable if rectification costs do not exceed $\frac{1}{14}$ of the price.

Wrongful Prevention

When a party is improperly stopped from completing their contractual obligations, entitling them to damages or a reasonable sum in restitution.

Voluntary Acceptance of Part Performance

Occurs when a party has a genuine choice whether to accept partial performance; if they accept, the supplier is entitled to a reasonable sum for what they have done.

Section 3 UCTA 1977

The statutory provision requiring force majeure clauses to satisfy the reasonableness test to be upheld in contracts.

Section 13 SGSA 1982

The implied term in business-to-business contracts that service or work will be carried out with reasonable care and skill, classed as an innominate term.