Discharge/Frustration

Question 1

entire obligations rule

Answer 1

An obligation is discharged by complete performance of the obligation. Until the obligation is completely performed, the performing party is not entitled to payment

Question 2

Outcome of frustration

Answer 2

discharges all FUTURE obligations

Question 3

Defence to allegation of failure to perform

Answer 3

Tender of performance

Question 4

How can the promisor successfully put forward the defence of tender of performance?

Answer 4

the promisor must show that they unconditionally offered to perform their obligations in accordance with the terms of the contract, but that the promisee refused to accept such performance

Question 5

condition precedent

Answer 5

a condition in a contract that must be fulfilled before the contract itself or certain contractual rights or obligations become binding

Question 6

How does a condition precedent operate?

Answer 6

a condition precedent suspends the contract or specific right or obligation until the condition is satisfied

Question 7

How does a condition subsequent precedent operate?

Answer 7

A condition subsequent provides for the termination of the contract and the discharge of obligations outstanding under the contract, in the event of a specified occurrence

Question 8

repudiatory breach

Answer 8

a breach of a major term of a contract that goes to the root of the contract and deprives the non-breaching party of substantially the whole benefit of the contract

Question 9

Is a non-breaching party obliged to terminate upon a repudiatory breach?

Answer 9

No, it has a choice to affirm or terminate

Question 10

anticipatory breach

Answer 10

Where a party indicates they will not perform their contractual obligations in advance of the date for performance

Question 11

What rights does the innocent party have if presented with an anticipatory breach?

Answer 11

the innocent party has an immediate right to ‘accept’ and to treat the contract as terminated (Hochster v De la Tour)

Question 12

If a party wants to rely on an anticipatory repudiatory breach to terminate the contract, what will it need to demonstrate?

Answer 12

that if the breach occurred at the time performance was due, it would have been repudiatory

Question 13

Is a breach of warranty repudiatory?

Answer 13

NO

Question 14

Is a breach of condition repudiatory?

Answer 14

YES

Question 15

When will a breach of an innominate term be repudiatory?

Answer 15

if its effect goes to the root of the contract

Question 16

Risk of wrongful termination

Answer 16

If a court later finds that the breach was of a warranty, not a condition, A’s wrongful notice will be regarded as a ‘renunciation’ of future performance of the contract and/or a serious breach of contract and may be accepted by the other party, B (the original contract breaker), as repudiating the contract.

Question 17

How do commercial contracts mitigate the risk of wrongful termination?

Answer 17

the commercial parties will explicitly agree a list of breaches, which will give rise to a right to terminate

Question 18

2 important limitations on the innocent party’s right to affirm the contract in response to a repudiatory breach

Answer 18

The cooperation of the breaching party is required for continued performance of the contract - Hounslow London Borough Council v Twickenham Garden Developments Ltd.

The innocent party has no ‘legitimate interest, financial or otherwise’ in affirming the contract and continuing with performance - The Dynamic

Question 19

discharge by frustration

Answer 19

concerns events that take place after formation of the contract and which render the performance radically different from that which was agreed on

Question 20

Why might performance be radically different?

Answer 20

Performance is impossible, illegal or the common purpose of the contract is frustrated

Question 21

What is the essential factor for satisfying Frustration of purpose?

Answer 21

it must be the joint / common purpose of the parties

Question 22

doctrine of frustration must be applied within

Answer 22

very narrow limits

Question 23

Frustration will fail if it was

Answer 23

self-induced

Question 24

the less foreseeable an event… the more likely…

Answer 24

it will lead to frustration

Question 25

If you could have foreseen an event, but failed to make provision for it in your contract, the doctrine of frustration will be

Answer 25

less likely to apply

Question 26

the key test for foreseeable events

Answer 26

whether the event would have informed the manner in which the parties assessed the risk of entering into the contract

Question 27

The inclusion of a force majeure clause enables the parties to

Answer 27

allocate risks in relation to Acts of God, terrorism etc. at the outset and may allow for the continuance of the contractual relationship in circumstances that would otherwise amount to frustration of the contract

Question 28

a contract is not frustrated because it has become more

Answer 28

expensive or onerous to perform

Question 29

Rule from Gamerco SA on burden of proof for person seeking to retain/recover expenses after frustration

Answer 29

Burden of proof is on the payee to show that it is 'just' for him to retain or recover expenses (Gamerco SA)

Question 30

A party who has gained a valuable benefit under the contract before the frustrating event may be required to pay a just sum for it. How will the court assess this?

Answer 30

The court will: 1) identify and value the benefit conferred, and; 2) make an assessment of the just sum that should be awarded.

Question 31

The amount awarded cannot exceed the value of the

Answer 31

benefit obtained

Question 32

Consequence where the value of the benefit has been reduced to nil by the frustrating event

Answer 32

the provider of the 'benefit' has no claim

Question 33

What are the rights of the innocent party when faced with a repudiatory breach?

Answer 33

innocent party has the right of election between terminating and affirming the contract and the right to claim damages

Question 34

What discretion does the court have under Law Reform (Frustrated Contracts) Act 1943?

Answer 34

to order such retention or recovery of money as it thinks just in all the circumstances to account for expenses incurred by the payee

Question 35

Likely outcome if the innocent party wants to enforce the contract after frustration?

Answer 35

If the contract is not fulfilled, the innocent party is entitled to reasonable expenses incurred prior to the frustrating event not exceeding the initial deposit.

Question 36

Where a contract depends on the sole purpose of a certain event happening, and the event is cancelled, does the contract go ahead?

Answer 36

No, the contract is discharged