Lecture on Contract Termination, Breach, and Remedy

Introduction

• Focus on termination, breach, and remedy in contracts.
• Previous lecture covered different ways contracts can terminate.

Termination of Contracts

• Amicable Termination: e.g., employment contract ends after the specified time.
• Performance-based Termination:
  • Entire Performance: Both parties fulfill contractual obligations.

Establishing Breach

• Judge assesses breach by examining:
  • Contract terms and obligations.
  • Actual performance vs obligations.
• Seriousness of Breach
  • Payment depends on contractual fulfillment.
  • Doctrine of Substantial Performance: Possible payment despite breach if contract isn't entirely performed.

Legal Excuses for Breach

• Lawful excuses: frustration, mutual mistake, prevention by either party, innocent misrepresentation.
  • Example: Japanese bank case (contract over non-existent machine).

Types of Contract Breaches

• Condition: Fundamental term breach allows contract repudiation and damages.
• Warranty: Less serious breach; allows for damages but not termination.
• Unnamed Terms: Implied terms under acts like the Supply of Goods and Services Act.

Damages in Breach of Contract

• Purpose: Compensation, not punishment.
• Types:
  • Liquidated Damages: Pre-agreed sum for breach.
  • Compensatory Damages: Loss that naturally arises from breach.
• Key Cases:
  • Hadley v. Baxendale: Two-limbed test for damages; causation in fact and law.
  • Victoria Laundries Case: Loss of expected profit due to breach.

Quantum and Heads of Damages

• Compensatory vs liquidated damages.
• Factors courts consider: expectation, reliance loss, inconvenience, distress.
• Case Examples:
  • St Albans DC v. International Computers: Unreasonable exclusion clause.
  • Ruxley Electronics: Expectation vs cost to cure; House of Lords' decision.

Equitable Remedies

• Discretionary Nature: e.g., injunctions and specific performance.
• Limitations: Specific performance not granted if damages are adequate.

Right to Terminate

• Only for fundamental breaches, conditions, and frustrating events.
• Courts assess seriousness and contractual terms.

Privity of Contract

• Only parties involved have rights unless exceptions apply:
  • Contracts (Rights of Third Parties) Act 1999: Named beneficiaries can sue.
  • Case Examples:
    • Tweddle v. Atkinson: Privity rule exception post-1919.
    • Jackson v. Horizon Holidays: Compensation for family disappointment.

Court and Damages

• Court Role: Award damages and discretionary remedies.
• Agreed Damages by Parties: Liquidated damages and penalty clauses.

Duration of Liability

• Limitation for Claims:
  • Simple contracts: 6 years.
  • Specialty contracts: 12 years.
  • Long stop: 15 years.
  • Exceptions for concealed breaches, minors, and mental health issues.

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This concludes the lecture on contract termination, breach, and remedy.