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BAEB 301 : BASIC LAW FOR E-BUSINESS

CHAPTER 4: CONTRACT DEFECTS &

DISCHARGE AND REMEDIES OF CONTRACT


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Chapter 4: Contract Defects & Discharge And Remedies of Contract

Topic Outlines

4.1 Voidable Contracts

4.1.1 Contract Defects Causing a Contract to be Voidable

4.1.2 The Effects of a Voidable Contract

4.2 Void Contracts

4.2.1 Contract Defects Causing a Contract to be Void

4.3 Discharge of Contract by Performance

4.3.1 Types of Performance

4.3.2 Remedy Where There is Substantial Performance(Minor Breach)

4.3.3 Remedy Where There is Incomplete Performance

(Serious Breach)


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Topic Outlines

4.4 Discharge of Contract by Breach

4.4.1 Legal Remedy Following A Breach of Contract

4.5 Damages As A Remedy for Breach of Contract

4.6 Equitable Remedies Following a Breach of Contract

4.6.1 Types of Equitable Remedies


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Learning Outcomes

At the end of this chapter, students should be able to:

Understand the rules concerning enforceability of conventional contracts

affected by defects such misrepresentation, mistake, duress and undue

influence and illegality

Understand the rules concerning the discharge of conventional contracts byperformance, by agreement of the contracting parties, by impossibility of

events and by breach and apply to online contracts.

Understanding the rules concerning remedies, common law and equitable,

following a breach of contract and apply such conventional rules to an

online contract.

Topics


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Topics


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1. Duress

2. undue influence

3. Innocent misrepresentation - a

false statement of facts whichthe speaker sincerely believes

is true but turns out to be

wrong. Keeping silent where

there is a duty to disclose

facts to correct ones

misunderstanding of the facts,

may be misrepresentation.

4.1.1 Contract Defects Causing a Contract to be Voidable

Topics


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1. S. 19 (2) The innocent party can

insist on the contract being

performed and that he shall be put

in the position in which he would

have been if the representation hadbeen true.

2. S. 65 the innocent party, if he

chooses to rescind the contract,

must restore any benefit to theother party if he has received such

benefit.

Topics

4.1.2 The Effects of Voidable Contracts


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4.2 Void Contract

Topics


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4.2 Void Contracts

1. Both parties made a common mistake of a

fact essential to the agreement by both

parties. See. S.21

2. Both parties made a mutual mistake as to

the subject matter of the contract. E.g Sitithought she was buying Balas hotel in

Melaka whereas Bala thought he was

selling his hotel in Seremban.

3. The contract is with a minor/mentallyunsound person.

Topics

4.2.1 Contract Defects Causing a Contract to be Void


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4.2 Void Contract

4. The contract terms are vague and

uncertain/imprecise.

5. The contract terms are vague and

uncertain/imprecise.6. Both parties made a common mistake as

to the existence of the subject matter of

the contract. E.g. Ali and Alia entered

into an agreement to buy Alis grand

piano. Unknown to both of them thegrand piano was already sold to another.

7. The contract is without consideration

Topics

4.2.1 Contract Defects causing a Contract to be Void


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4.2 Void Contract

8. The contract is discharged due to an

impossibility.

9. One contracting party makes a mistake

as to the identity of the other contracting party, whose identity is an

essential term of the contract

Topics

4.2.1 Contract Defects causing a Contract to be Void


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4.3 Discharge of Contract By Performance

1. A contract is discharged by

performance when both

contracting parties have carried

out what they are supposed todo under the contract.

2. As a general rule, performance

must be strictly in

accordance with the terms of

the contract unless the partieshave agreed otherwise.

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3. It is a BreachBreach ofof contractcontract if a

contracting party fails to

perform an absolute duty owed

under a contract.

Topics


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CompleteComplete

SubstantialSubstantial

InferiorInferior

There are threelevels of

performance of a

contract:

4.3.1 Types of Performance

Topics


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Type of

Performance

Legal Consequence

Complete

Performance

The contract is discharged.

Substantial

Performance (minor

breach)

The non-breaching party may recover damages

caused by the breach.

Inferior Performance

(serious breach)

The non-breaching party may either:

(1) Rescind the contract and recover restitution, or

(2) Affirm the contract and recover damages.


4.3.1 Legal Consequence Following Each Type of Performance

Topics


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CONTRACT

Party A Breaches the Contract

(Substantial Performance)

Party B may:

1. Recover damages

Contracting Party A

(Breaching Party)

Contracting Party B

(Non-breaching Party)

4.3.2 Remedy Where There Has Been Substantial Performance (Minor Breach)

4.3 Discharge of Contract by Performance

Topics


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CONTRACT

Party A Breaches the Contract

(Incomplete Performance)

Party B may:

1. Recover damages

or

2. Rescind the contract

Contracting Party A

(Breaching Party)

Contracting Party B

(Non-breaching Party)

4. is r f tr t rf r4.3.3 Remedy Where there is Incomplete Performance (Serious Breach)

Topics


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4.4 Discharge of Contract by Breach

1. Breach of contract simplymeans one contracting party

simply refuses to perform the

contract.

2.

Breach of contract can occurat the time for performance

of the contract (ACTUAL

BREACH) or at a future time

before the date is due for

performance of the contract.(ANTICIPATORY BREACH)

Topics


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4.4 Discharge of Contract reach4.4.1 Legal Remedy Following a Breach of Contract

Topics


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4.5 Damages as A Remedy For Breach of Contract

Topics

1. Damages: S. 74 of theContracts Act 1950 provides for

the right to compensation. It

reads as follows:

A person who rightly rescinds a

contract is entitled to

compensation for any damage

which he has sustained through

the non-fulfillment of the

contract.2. Damages are awarded to

compensate the Innocent party

for losses which he can prove.


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Topics

3. Damages are awarded tocompensate the innocent party

for losses which are not too

remote.

4. Losses are not too remote if

they are natural losses and

special losses which were

known by the defaulting party to

result if he breached the

contract.


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Topics

5. Damages are awarded tocompensate the innocent party

for losses which he could not

avoid despite having taken

reasonable steps to reduce the

losses suffered by him to thebreach of contract.


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4.6 Equitable Remedies Following A Breach

Topics

1. Equitable remedies are available ifthere has been a breach of contract

that cannot be adequately

compensated by an award of

damages.2. There are two types of equitable

remedies:

(i) Specific Performance

(ii) Injunction


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4.6 Equitable Remedies Following A Breach

Type of Equitable

Remedy

Description

Specific Performance Court orders the breaching party to perform

the acts promised in the contract.

The subject matter of the contract must be

unique.

Injunction Court order that prohibits a party from

breaching the contract.Available in contract actions only in limited

circumstances

4.6.1 Types of Equitable Remedies

Topics

Documents

e-business law chpter_04