Contract Law: Breach Revision Pack

7/28/2019 Contract Law: Breach Revision Pack

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BreachEnglish Contract Law

Komilla Chadhawww.musingswithkomilla.blogspot.com Spring 2013

Komilla Chadha [email protected] www.musingswithkomilla.blogspot.com 1
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Breach

What is a breach?

A breach is were a party fails to perform its contractual

obligations.

This can occur in three ways:

1.Failure to perform an obligation

2.Failure to match a quality of performance required bycontract

3.Repudiating obligations unlawfully

Discharge by performance

The general rule is that a contract cannot be

discharges, unless the obligations have been performed as

stated in the contract.

This is made clear in Bolton v Mahadeva 1972,the

defendant contracted the plaintiff to implement a heating

system. However, the system implemented did not heat the

house and gave out toxic fumes and so the defendant

refused to pay. The courts held that the defendant did not

have to pay as the contract was not specifically

performed.

However, this needs to be differentiated to situations

where there has been a substantial, but not exact,

performance. This is because in these scenarios the other

party has to still fulfill their obligations.

For example, in Hoeing v Isaacs 1952, the plaintiffagreed to decorate and furnish the defendants flat. The

defendant however only paid part of the price as their


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were minor defects in the work. The courts ruled that the

defendant had to pay the remaining amount minus the cost

of remedy of the defects. The breach here was not

sufficient to discharge the whole contract, it merely

enabled damages to be issued.

Furthermore, if there has been a partial performance and

the promisee has the option and accepts it, they will be

bound to pay a reasonable price for what they receive.

Classifications of breach

When a breach occurs you dont discharge a party of their

obligations but rather replace them with secondary

obligations e.g. to pay damages. This was explained by

Lord Diplock in Photo Productions Limited v Securicor

Transport ltd 1980.

He said there are two exceptions to this rule and that

is;

Fundamental breach - if a party breaches a

fundamental term, depriving the other party of a

major benefit as expected under the contract, then

the whole contract is breached.

Breach of a condition - Where the term is so central

to the contract that the failure to perform makes in

meaningless.

This distinction is important because exclusion and

limited liability clauses cannot be replied on where a

fundamental breach has occurred.

The right of an injured party to carry out the contract

after the repudiary breach is also not absolute. For

example in White & Carter Ltd v McGregor 1962, the

plaintiff entered into an advertising contract with the

defendant, but on the same day the defendant cancelled the


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contract, The plaintiff refused to accept this and

continued on advertising and then sued the defendant for

all the money due in the contract.Here it was accepted

that it was acceptable for the plaintiff to have affirmed

the contract but it was held that the right was subject tolimitations. Do note that there has to be a legitimate

interest for this person other than claiming damages to

affirm the contract see Clea Shipping Corporation v Bulk

Oil International Ltd 1984.

The different types of breach

1. Breach of a term

Could be any type of term including a minor breach of an

innominate term or a warranty

An action for damages is always available, and this is

the only remedy for a breach of warranty.

Where a breach does not amount to a substantial failure

of performance, the injured party does not usually have a

right to treat the contract as discharged e.g. in Bettini

v Gye 1976, in this case the plaintiff was an opera singer

who had a contract to perform in this show and should

arrive six days before for rehearsals. He only arrived

three days before because of illness and the defendant

repudiated the contract. This was wrongful according to

the courts as he could still fulfill a substantial amount

of his contract.

2.Breach of a condition

Can be expressed by the parties or implied from fact or

law.

To produce a full range of remedies it must, however,

conform to the proper description of a condition, see

Schuler v Wickman Machine Tool Sales Ltd. Just using the

word condition is insufficient. In this case, the

contract stated it was a condition to visit six motor


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manufacturers at least once a week, this term being

breached could not repudiate the contract as this was not

a condition, central to the contract.

For example, in The Mihalis Angekis 1970 case, the date

that a ship which was going to be chartered was no longer

possible and this was a breach of a condition because it

was central to enacting the contract.

It might also include an innominate term where breach

was sufficiently serious to warrant repudiation by the

other party, see The Hong Kong Fir case 1962. This is

because in this case the innominate term deprived the

injured party of substantially the whole benefit of the

contract and thus was allowed to treat the contract like

it had been repudiated.

Whether a term is a condition or not depends upon the

intention of the parties involved, for example, in Bunge

Corporation v Tradax Export 1981, a term stated that

15days notice had to be given for the ship to be loaded.

This was held to be a condition as the surrounding

circumstances and intention would show that too.

In this case the innocent party can sue for damages and/

or repudiate.

3.Anticipatory breach

What is anticipatory breach?

Video version: http://www.youtube.com/watch?v=D_lyTklLaLY

This occurs if one party notifies the other party of

intention to breach the contract.

For example, Hochester v De La Tour 1853 (http://

www.youtube.com/watch?v=He9w62ePgHY&list=UU-

rlFDi-6V6kAc6ILyX8ggg&index=1). In this case the defendant

employed the plaintiff to work starting in a month. Before
http://www.youtube.com/watch?v=He9w62ePgHY&list=UU-rlFDi-6V6kAc6ILyX8ggg&index=1http://www.youtube.com/watch?v=He9w62ePgHY&list=UU-rlFDi-6V6kAc6ILyX8ggg&index=1http://www.youtube.com/watch?v=He9w62ePgHY&list=UU-rlFDi-6V6kAc6ILyX8ggg&index=1http://www.youtube.com/watch?v=D_lyTklLaLYhttp://www.youtube.com/watch?v=He9w62ePgHY&list=UU-rlFDi-6V6kAc6ILyX8ggg&index=1http://www.youtube.com/watch?v=He9w62ePgHY&list=UU-rlFDi-6V6kAc6ILyX8ggg&index=1http://www.youtube.com/watch?v=He9w62ePgHY&list=UU-rlFDi-6V6kAc6ILyX8ggg&index=1http://www.youtube.com/watch?v=He9w62ePgHY&list=UU-rlFDi-6V6kAc6ILyX8ggg&index=1http://www.youtube.com/watch?v=He9w62ePgHY&list=UU-rlFDi-6V6kAc6ILyX8ggg&index=1http://www.youtube.com/watch?v=He9w62ePgHY&list=UU-rlFDi-6V6kAc6ILyX8ggg&index=1http://www.youtube.com/watch?v=D_lyTklLaLYhttp://www.youtube.com/watch?v=D_lyTklLaLY


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he started work the defendant terminated the contract, the

plaintiff argued there had been a breach. The courts

agreed there had been a breach and the plaintiff could

claim damages immediately.

The remedy that an anticipatory breach fruits is

dependent on on what type of term we are discussing; so

the breach of a condition will yield the repudiation of

the contract and the breach of a warranty or an innominate

term will tend to yield damages.

With anticipatory breach the key feature is that the are

communicated to the other party either expressly or

impliedly.

By communicating the innocent party has a chance to seek

performance elsewhere and could reduce the liability of

the party in breach. It is beneficial for both parties.

Express communication tend to be easier to deal with.

Where it is implied it is more complex. The remedies tend

to be more fact sensitive.

How can the innocent party respond?

Video at: http://www.youtube.com/watch?v=GRoOW8SqdqA

Sometimes you will hear critics of the law argue that

the law surrounding anticipatory breach favors the

innocent party and this is because the innocent party has

a choice and the power to decide what happens once the

anticipatory breach is made. They can either accept the

reputation or affirm the contract.

They is that the innocent party has to stick to the

decision they have made or else there is a potential they

themselves will find themselves in breach.

If they chose to accept the breach then they can claim

damages.
http://www.youtube.com/watch?v=GRoOW8SqdqAhttp://www.youtube.com/watch?v=GRoOW8SqdqA


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However should they choose to affirm the contract then

they cannot reply on anticipatory breach. This means that

they have to make sure they fulfill all of their

obligation or they run the risk of being in breach, The

Simona 1989(http://youtu.be/_ONrQWllmO0).

The White & Carter Ltd v McGregor Case 1962

Video At: http://www.youtube.com/watch?v=cydDVvB1rt8

Facts

Thus case concerns an advertising contract between the

plaintiffs who sold advertising space on litterbins and

the defendant, a party looking to advertise.

The day the contract was drawn up, the defendant

cancelled the contract.

The plaintiffs chose to affirm the contract and went a

head with the advertising for the three years and then

looked to sue the defendant for the contractual price.

It made sense for them to pick this option that should

they have accepted the breach there would be no losses at

the time so would only be able to claim nominal damages

Judgement

They were allowed to claim the contractual price as the

anticipatory breach was of a condition so it was a major

breach even though contract was waste of time and money.

Further it should be noted, that it was highlighted that

there was no obligation to mitigate losses when it comes

to anticipatory breach and you cant force the innocent

party to accept the repudiation.
http://www.youtube.com/watch?v=cydDVvB1rt8http://www.youtube.com/watch?v=cydDVvB1rt8http://youtu.be/_ONrQWllmO0http://youtu.be/_ONrQWllmO0


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Points

Does this make commercial sense?

Lord Reids limitation on affirming contracts

Videohttp://www.youtube.com/watch?v=JDFzbkEs-fY

Although White & Carter Ltd were allowed to claim thecontractual price, there is a limitation on to what extentall other innocent parties can follow suit.

Lord Reid argues that there has to be a legitimateinterest in the performance of the contract other than toclaim the contractual price should they chose to affirmthe contract.

For example, in The Alaskan Trader 1984, it was foundthat the innocent party wholly unreasonably refused toaccept the defendants repudiation. A ship they had hiredfor 24 months was put in repairs after 12 months and theyhad said anyway that they had no further use for the ship

and so they could only claim damages not the contractualhire price.
http://www.youtube.com/watch?v=JDFzbkEs-fYhttp://www.youtube.com/watch?v=JDFzbkEs-fY

Documents

Contract Law: Breach Revision Pack