Contract law Lectures: Breach of Contract

Discharge of contractual obligations
How can parties to a contract be discharges from those obligations?
-Performance of the obligations;
Discharges when you perform it, or if the other party fails to perform their part of the contract.
-Breach of obligations
-Agreement to discharge/ variation of contract;
Vary the original contract by agreement or agree with the other side that you don’t have to perform it.
-Frustration of contract
Impossible to keep promise. Victims of frustration are discharges from their obligations (i.e. concert hall burns down).

Performance must generally be precise and exact

Moor & Landaeur (1921)
Two commercial parties entered into an agreement to sell tinned fruit. To be packed into cases of 30 tins each –shipped to the contractor.
Commercial buyer seeking a way of out of the contract. Found out that they had been packed in cases of 24 tins, not 30. Refused to pay for the tins or to accept the goods. Other company tried to sue for breach of contract. They failed.
(Although H of L now recognises it would probably make a different decision now a days).

Arcos v Ronaasen (1933)
Similar case- timber dealer. 5 % of the goods did not quite match specified criteria. Seller lost out.
House of Lords would not rule the same on this case. Opens up a chance for those who want to abandon their contractual commitments due to market changes which have suddenly made the deal less lucrative.

(both cases now turn on s.13 of the Sale of Goods Act 1979 – but now see s.15A)
If the failure is so slight than it would not be reasonable to reject them, you cannot leave the contract.

Partial provision of services
If the contract or obligation is ‘entire’, performance must be complete to discharge.
-This applies to goods and services
Cutter v Powell (1795)
Contract drawn up between master of a merchant ship and the 2nd mate. 4 pounds a month wage. Cutter would receive 30 guineas upon arrival at Liverpool after the return voyage. However, he died on route 10 days before the ship arrived. His wife tried to sue for the arrears owed. But the court ruled that the contract was only valid upon performance of the whole agreement.

Divisible Contracts or Obligations
Compensation can be recovered for partial performance if it can be argued that the contract was divisble into sections (an argument that failed in Bolton v Mahadeva (1972).
-Defendant installed central heating system. However, boiler produced fumes and the radiators he did install were fairly ineffective.
Plumber had agreed ti a lump sum payemtn of £560. The total cost of repairs to the system would be £174. Owners refued to pay him. Plumber sued for his wages.
Court said that half-installing the system did not count as a central heating system. He had not fulfilled his part of the contract and so therefore would not be paid.

Non-performance due to promise
Promisor will be able to claim on quantum merit basis

Equityà in some cases, someone who has not performed their contract will (when it is seen to be fair) be able to claim something in recognition of what they have done. ‘Usually the person sueing the other party is trying to fulfil the contract, but is being prevented from doing so’.

Planch v Colburn (1831)
Publisher agreed to publish a book. An author agreed to write this book. However, the publisher went bust and the author stopped writing. He couldn’t sue for breach of contract because he himself had stopped fulfilling his side of the contract.

Acceptance of Partial Performance
May have the effect of discharging further obligations,
This will not apply where the acceptor has no real choice.

Sumpter v Hedges (1898)
Builder agreed to build two houses. Lump sum payment. Halfway through he ran out of funds and walked away. Builder wanted money for partial performance. Houses useless because they were only half-completed. Man decided to complete the work himself. Since the builder had been the cause of the problem in the first place, the Court did not feel he should benefit from this. However, he did receive some compensation for the material used to build his part of house.

Time of Performance
Time is not generally ‘of the essence’ unless the contract makes it so
(c.f. s.10 of the SGA 1979).
Bunge Corp. v Tradax
H of L’s decision. Buyer and seller/ 50,000 tons of Soya bean meak. CIF contract (so the buyers had to tell the sellers what ship was to be sued and to designate the port). Buyers had to give at least a 15 day notice. Howver, they only gave an 11 day notice and so the sellers refused to go through with the contract. Other party sued for breach of contact. H of L said that the 15 day notice period in the contract was an essential element in the agreement.

Time may become of the essence by giving notice.
-If there is an expressed declaration, the time clause will have been built in.

Rickards v Oppenheim (1950)
Domestic consumer ordering a car to be manufactured. Not date stipulate. After many months, the consumer wrote to the manufacturer to say the if he did not receive the car within a month, he would repudiate the contract. Consumer introduced time change and builder agreed. However no car was delivered so the consumer walked away from the contract.

Discharge by Breach
Only ‘repudiatory’ breaches lead to discharge.
The effect is not automatic, but depends on the acceptance of the breach as repudiatory by the innocent party.
Gunton v London Borough of Richmond (1980)
If you are the victim of a failure of the other party, you are entitled to walk away. But it is not compulsory.

Classification of Terms
‘Conditions’ and ‘warranties’.
-Breach of condition is repudiatory;
-Breach of warranty allows only damages to be recovered.
c.f. Bettini v Gye (1876) with Poussard v Spiers (1876)

Labelling of Terms by the Parties
Indicative – but no conclusive
Schuler AG v Wickman Tols Sales Ltd (1873)
Intermediate terms
Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha (1962)
Whether the breach is repudiatory will depend on whether its consequences deprive the other party of ‘substantially the whole benefit’ of the contract.

Instalment Contracts
The effect of the breach will largely depend on its extent
s.31 SGA 1979 and c.f.
anticipate the likelihood of the breach will be repeated. Look at which proportion the goods the breach is in.
- Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd (1934)
100 tons of rag block was supposed to be delivered at 5 tons a week. Broken just once and the buyer wanted to repudiate the contract. Seller said that it only failed on one shipment and would compensate the buyer for this mishap.
Court ruled that the buyer had over reacted and the contract was still intact.

- RA Munro & Co Ltd v Meyer (1930)
If you have an obligation, you have to perform these obligation.
We will deliever 10,000 tons of x by 10 month time period.

Types of Breach
-Repudiatory breach Rigby v Ferodo Ltd (1987)
-Anticipatory breach
Hochster v De La Tour (1853)
White & Carter (Councils) v McGregor (1962)
Right of election
-Vitol SA v Noreif Ltd (1996)

Discharge of Contract by Agreement/Variation
Illustration- the contract of employment.
-Hawker Siddley v Rump (1979) I.R.L.R. 425
-Jones v Associated Tunnelling (1981) I.R.L.R. 477
distinguish a change in the terms of the agreement from a change in which an agreed role or task is to be performed.
Cresswell v Inland Revenue (1984) I.R.L.R. 190
Group of clerical tax coders did their work the traditional way using calculators and paper. Inland Revenue wanted to introduce computer software.
Workers refused to use the new system. Inland revenue locked them out. Workers claimed that wanted to fulfil their obligations. Inland revenue said that they would be doing so, but in a different way. Workers said that this was not part of the agreement.
à judgement – now employees have a an implied term in their contracts that they will adapt to new technology.

Unilateral Changes
However, unilateral changes to the “core elements of a job amount to a breach of contract.
-Burdett-Coutts v Herts. C.C. (1984)
Dinner ladies in schools having their rates of pay cut in their contracts. ‘If you turn up to work it is a sign of acceptance’ argument never works.-Rigby v Ferodo Ltd (1987)