Lecture note 8 on Business Law
Lecture note 8 on Business Law
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This 28 page Class Notes was uploaded by Jade Notetaker on Saturday October 10, 2015. The Class Notes belongs to at Nanyang Polytechnic taught by in Fall 2014. Since its upload, it has received 37 views. For similar materials see Business Law in Business at Nanyang Polytechnic.
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Date Created: 10/10/15
Business Law BMO742 AY 2014 Semester 1 Lecture 8 Discharge of Contract La 1 MN YA MG PE39EL WTEEHMIINE 39 ntract Contracts may be discharged brought to an end in four ways Discharge by agreement Discharge by performance Discharge by breach Discharge by frustration iSChf e by A reement Discharge by Agreement Both parties agree to excuse the other from performance Consideration Each party s promise to excuse the other from performance Example Adarn contracts With SBS to hire a bus on May 1 Before May 1 he changes his plans and agrees With SBS to cancel his booking Can Adarn do so Discharge by Performance Each party has done what they promised they would do Contract comes to an end I However performance must be precise and exact 9 Otherwise party may sometimes not be entitled to payment Ecep ons Apportionment Act Principle of Substantial Performance Prevention of Performance Acceptance of Partial Performance I Severable or Divisible Contracts A p rt i o n nt Act Applies to certain periodical payments such as salary rent Such payments are deemed to accrue on a daily basis eg Employee who works for only 15 days entitled to be paid for 15 days work even though his contract says he is paid monthly Princile of Substantial Performance Applies when party has Hoenig V IsaaCS done most or all of what Decorator engag d t0 is required under the decorate and fohlSh flat contract for 750 BUT th Job was completed but ere are mlmor wardrobe door was faulty defects or omrssrons 1 bookshelf was too short Party entitled to contract Minor defects would cost price LESS sum for 55 to correct correcting defects Was decorator entitled to the contract price everable or Divisible Contracts Entire Contract Party not entitled to be paid unless he completes all that is required eg Cutter v Powell Severable or Divisible Contract Contract made up of smaller separate transactions Party entitled to be paid so long as he finishes one part of the contract Example Builder agrees to build a house for 250000 Contract states Builder to be paid 100000 when foundations completed To be Paid 100000 when main building structure completed To be paid 50000 when roof completed Must builder complete entire house before he is entitled to payment Anticipatory Breach One party indicates that he no longer wishes to perform the contract BEFORE the date for performance has arrived Anticipatory Breach Anticipatory Breach X indicates that he no longer intends to carry Y treats the contract as discharged Y can claim compensation at once No need to wait for date when performance is due out the contract Y treats contract as ongoing and insists on performance on the due date Y must carry out his part ofthe contract If contract is subsequently frustrated Y has no remedy nticipatory Breach 1 January X signs contract with Woodlands FC to play in new season which starts on 1 March 1 February X informs Woodlands FC that he will not play in the new season as he has an offer from Liverpool FC in UK 2 February Woodlands FC informs X that he must turn up for the new season on 1 March 15 February X dies from a sudden unexpected heart attack CAN WOODLANDS FC SUE X FOR BREACH OF CONTRACT I Frustration After a contract is formed an unforseeable event which is beyond the control of the parties occurs And either 39 Contract becomes impossible to perform OR I Contract becomes illegal to perform OR I Performance of the contract becomes radically different from What was originally envisaged I Effect of frustration I Contract is discharged Parties cannot be sued for not carrying out the contract Frustratin at Cmmn Law Destruction of the subject matter of the contract Taylor V Caldwell 1863 I Contract for the hire of a music hall for concert Fire destroyed the hall before the first day of the concert I Was the contract frustrated Frutratin at Cmmn Law Serious illness or incapacity of a party to a contract for the provision of personal serVices Condor V Barron Knights Ltd Contract of employment of a drummer by a band to play 7 nights a week Drummer developed illness could only play for 4 nights a week Why was the contract frustrated Frustration at Common Law Governmental Acquisition A change in the law making the contract illegal Singapore Woodcraft Manufacturing Ltd V Mok Ah czamlkow Ltd V ROhmPBX Sai Polish company 10 yam agmammt to use contracted to sell beet su ar prem1ses 1n return for g payment Of 1500 a month I Before delivery could be made Polish overnment Government took possess1on g of premises under the law banned all Sugar 6XPOITS Why was tha contract I Contract frustrated frustrated Situations Which D Nt Amount to Frustration In some situations even though circumstances have changed affected party must still carry out the contract 9 otherwise he can be sued for breach Examples Where a contract subsequently becomes more difficult or expensive to perform Davis Contractors V Fareham UDC I Self Induced Frustration ie Contract cannot be carried out because of the conduct of one of the parties The Super Servant Two The Suer Servant Two o D owner of 2 ships 551 552 Contract for D to transport P s drilling rig using either 551 or 552 D decides to use 552 to transport P s rig SSl already being used for contracts with other customers Is the contract between P and D frustrated Effects of Frustration Effects of frustration l 2 3 Contract is discharged comes to an end Parties released from all future obligations Obligation already due before frustration still has to be performed Obligations relating to the payment of money Effects of frustration are stated in the Frustrated Contracts Act FCA I Under the FCAz Any money paid before the contract is frustrated can generally be recovered I Example X pays Y a deposit of 500 under a contract to rent a music hall Before the rental commences the music hall is destroyed in a fire X can get back his deposit I Under the FCA Any money payable under the contract at the time of frustration no longer has to be paid I Example I Contract requires X to pay an up front 10 deposit but he has not paid it yet at the time of the frustration X need not pay it anymore Effects f Frustration Under the FCA If expenses have been incurred in performing the contract the person incurring the expenses may be allowed to retain or recover his expenses Example B engages A to build a house and pays a deposit of 5000 A incurs expenses of 5000 paying for materials and starts work Halfway through the structure is destroyed by fire A can keep the deposit of 5000 Effects f Frustration Under the FCA If a person obtains a valuable benefit before frustration the court may require him to pay a reasonable sum for the benefit he received Example A rents a music hall from B for 10 days for 1000 After using the hall for rehearsals for 3 days the hall is destroyed by fire A must pay B a reasonable sum 300 since he has received a valuable benefit ie use of the hall for 3 days Frce Majeure Clauses What happens to the contract should certain events occur eg war riots natural disasters labour and raw material shortages Useful to have allows parties to treat contract as discharged in situations that would not be considered frustration under common law Coverage of force majeure clause up to parties to negotiate Parties can even choose to suspend the contract for a period oftime first Frce Majeure Clauses Force Majeure Neither party to this contract shall be liable for failing to perform the contract iftheir failure is a result of an event of force majeure which is defined as labour disputes raw material shortages and acts ofGod Should such an event occur performance ofthe contract will be suspended for 14 days fthe event continues after 14 days the contract shall be deemed to be discharged Shem fume majeure Pulau Buka Sitil stabiiiises w Hiram EH armam Ehaill has mrlimnradl Hairliialr India trial it has dammed lama majeune an same Inf its musinmers in a statamnt Irglgaaad an Emmy Frame majeure is a mmnnm ange in i 1fE tE h t ham digs ile liability wiiian n m event m u mumumslanme beynnrd the mime p nmum 7 Shall l1 EHII39I M39lE EEJI39IiEl39 manila Epi rl that it has damaged I W5 the demramn farm majiaum uni same if its camera in a pr statement mails ih l Eh il i3 U EhiE t manager can Sunday 51r PHDTIE JTEE FANG QMEI EII TIIE lg its matum s and WISHES Hi nil gmup 39um agream mt j Explainad Mr Vi l i hiumi managing Haulianit all Energy mugulmn y Fewin and GEM Mr LEE Tau Vang chainingquot Eff Shall Enmpamias in Eilr li ir in a mass l marl We un mn thatme mjaum has been deal md um E l lE Inf um nusmtumem We mn nu In he in dis uaainns nunquot uuslnmara tn addrass their supplyr m pmdunt needs and in minimise any putantia l imp in mam lll Change in Circumstances Summary Event Beyond Parties Control occurs Does the event amount to Yes frustration at common law Contract is Discharged No Is there a force majeure clause which covers the event Yes Contract is discharged suspended depending on what the force No majeure clause says Affected party must still carry out the contract THE END
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