UNIT FIVE - Contract Law

discharge of a contract

What is the Doctrine of Complete Performance, and which case illustrates it?

Unless performance is complete and perfect, the contractor is entitled to nothing (Cutter v Powell)

One party only has to perform when the other has fully performed. In Cutter v Powell, the sailor died before completing the voyage, so his widow received nothing. The higher wage reflected that risk.

If a contractor was paid in advance but did not complete the work, when must the advance be repaid?

Only where there has been a total failure of consideration

If the contractor has done something (no total failure of consideration), prima facie they keep the advance in restitution, though some may be forfeited in a damages claim. If they have done nothing, or what they did is useless, it must be repaid.

Which are the four exceptions to the Doctrine of Complete Performance?

Divisible obligations, substantial performance, wrongful prevention, voluntary acceptance of part performance

Substantial performance: what is the contractor entitled to, and which case?

The contract price minus the cost of remedying the defects (Hoenig v Isaacs)

Voluntary acceptance of part performance: what must be true for the contractor to claim a reasonable sum?

The innocent party had a genuine choice whether to accept the partial work. Sumpter v Hedges [1898] confirms acceptance must be voluntary.

What are the divisible obligations (divisible contracts) exception?

The contract is split into distinct stages and the contractor is paid for each stage once completed

Where the parties have agreed payment for a distinct part or stage of the work, the contractor can recover for each part completed.

What is wrongful prevention as an exception to complete performance?

The contractor is stopped from finishing because of the paying party's wrongful act, so some payment is recoverable

What is the remedy for breach of a condition?

The right to terminate future performance, plus damages

What is the remedy for breach of a warranty?

Damages only, however serious the breach

How do courts decide whether a term is a condition or a warranty?

By asking whether a reasonable person would think the parties intended it to be a condition or warranty (objective test)

Schuler v Wickman Machine Tool Sales [1974]: what does it establish?

Labelling a term a 'condition' does not guarantee the court will treat it as one if the result would be unreasonable

What are innominate (intermediate) terms, and which case recognised them?

Terms that are neither conditions nor warranties; the seriousness of the breach decides whether termination is allowed (Hong Kong Fir v Kawasaki)

Which statutory terms are expressly classed as conditions?

Terms implied by ss 13 and 14 of the Sale of Goods Act 1979 (and ss 9–11 CRA 2015 for consumers)

• Before goods are accepted, a buyer can reject them and terminate.

What does s 13 of the Supply of Goods and Services Act 1982 imply into service contracts, and how is the term classified?

Reasonable care and skill; an innominate term, so only a really serious breach allows termination

What options does the innocent party have after a repudiatory breach?

Affirm the contract or terminate it; damages remain available either way

They must decide within a reasonable time. Termination normally must be communicated to the other party. If they wrongly terminate (the breach wasn't serious enough), they themselves are in breach.

What is an anticipatory breach and what can the innocent party do?

The breaching party warns in advance they won't perform; the innocent party can terminate and sue immediately, or wait and hope they perform

When will a court refuse specific performance?

When damages are adequate, constant supervision would be needed, it's a services contract, or it wouldn't be just and equitable

Specific performance is an equitable, discretionary remedy and failure to comply is contempt of court. For example, a buyer cannot get it if substitute goods can be bought. The same restrictions apply to injunctions.

Warner Brothers v Nelson [1937]: what does it show about injunctions?

An injunction may not force someone to work for the employer but can stop them working for others, for a reasonable period

What are total failure of consideration, quantum meruit, and British Steel v Cleveland Bridge in the context of restitution?

Nothing of value was done; a reasonable sum for work done; no contract was ever formed but restitution was still available

How do damages, restitution, and restitutionary damages differ?

Damages look at the claimant's loss; restitution looks at the defendant's gain; restitutionary damages strip profits only in exceptional cases

What is the difference between a guarantee and an indemnity?

A guarantee is secondary (guarantor pays if the debtor doesn't) and must be evidenced in writing; an indemnity is a primary obligation and needs no writing