Carrying out the Contract

Chapter 17

Carrying out the Contract

From chapter 17, we know that once the 5 essential elements are in place and the parties have agreed, a binding contract exists.

But how to do contracts come to an end?

Discharging a Contract

Once a contract exists, each party has rights and responsibilities. When each side has carried out those responsibilities and the contract is carried out as planned, the contract is discharged.

3 Ways to Discharge a Contract

Performance Mutual Agreement Impossibility of Performance

Performance

Fulfilling the obligations of your contract.

Most common way to discharge a contract.

Example:

A painting company completes their job and you pay them the agreed upon amount.

Mutual Agreement

All parties of a contract agree to cancel it.

Might cancel one contract by agreeing on a new contract.

Example:

You are selling your car and already have a contract. But then you remember that you have winter tires and agree to add that in.

Impossibility of Performance

Parties of a contract are excused from performing because of events that make it impossible have occurred after the agreement had been made.

Example:

An outdoor concert is cancelled because of a rainstorm.

Breach of Contract

Opposite of specific performance. Occurs when one party doesn’t finish

its obligations. Breach of condition-important part of the

contract is breached. Breach of warranty-a small part of the

contract is breached.

Substantial Performance

Protects the other side (the person who was breached is protected but the law looks at both sides)

Rule of substantial performance protects a party who has fulfilled most of the contracts but not all of the contract.

Remedies for Breach of Contract

Damages Specific Performance Injunctions Rescission

Damages

Damages are awarded to compensate the injured party for any losses.

The intention is not to punish the party that breached the contract but to place the injured party in the same position as if the contract had been completed.

Damages continued…

Mitigation of Loss The courts expect that a person who is injured by a breach of contract to take “reasonable steps” to reduce or prevent any losses that may occur. Liquidated Damages Many contracts include liquidated damages. This is the sum of money that the parties agree to in advance to settle any breach of contract that might occur.

Specific Performance

For a breach of contract, usually damages ($) is enough, but what if it isn’t?

Specific performance The precise terms of the original contract must be honoured. *likely be awarded if the breach involves a one of a kind item **but is not available if the courts would have to supervise the carrying out of the order

Injunctions

Opposite of specific performance. It requires the defendant not to do

something.

Example: Non-competition clause- stops trade or employment to limit competition

*reasonable

Rescisson

Rescission returns the parties to their original positions before the contract was formed.

Privity of Contract

In order for an injured party to win a breach of contract, they have to prove privity of contract.

They have to prove that they had a contractual relationship with the defendant.

Limitations of Actions

Injured party has the right to take court action after they have had a breach of contract.

However, the Statute of Limitations states that there are some time limits.

If you don’t do anything within that time, the court will no longer help you enforce it.

Sale of Goods Legislation

Sale of Goods Act

1st legislation to regulate the sale of goods was the 1893 Sale of Goods Act passed by the British Parliament. .

Very specific area of contract law that deals with how sellers transfer the ownership of goods (present or future) to the buyer for monetary consideration.

Sales of Goods Act continued…

Barter transactions do not use money so its not covered by this act.

“Goods” only refers to personal property, such as furniture, clothing, appliances and other movable possessions.

Title, Delivery and Payment

Title The owner of goods has title of the

goods. Most written contracts state when

title passes to the buyer. This matters because the owner

ends up with the loss if the goods are lost, stolen, damaged or destroyed.

Title, Delivery and Payment continued…

Delivery Is the transfer of ownership from

seller to buyer; usually takes place at the sellers place of business.

Title, Delivery and Payment continued…

Payment Most contracts state the time and

method of payment. Sale of Goods legislation states that payment should be made at the time of delivery.

Express Conditions & Express Warranties

Express condition Clearly outlined in the contract and is an

important part of the contract. Express warranties (guarantees) Specific promises that

manufacturers/retailers make to consumers about their products/services: a) Performanceb) Quality c) Condition

Express Conditions & Express Warranties continued…

When a contract has an express warranties (guarantees) any verbal promises the seller makes will not be binding

Exception: If a buyer makes a purchase based only on the advice/information of the seller, those verbal promises can be binding.

Secret Warranties

Specific promise that goods or services will meet certain standards (warranties) that sellers communicate to dealers but not to buyers.

Implied Conditions/Implied Warranties

Promises in law that sellers make to buyers through implication or suggestion.

They include 3 basic promises.

Basic Promises

1. Seller has title to the goods and therefore has the right to sell them.

2. Articles will be of good quality and fit for the buyers use (merchantable quality).

3. The goods a buyer receives are the same as the samples/descriptions provided by the seller.

If they are not the same, the buyer can return them and rescind the contract but it has to be done quickly.

Done notes for today!