Browse

This chapter focuses on breach of condition. The first situation in which termination will be available is where the other party has broken a ‘condition’. A condition is a stipulation in a contract, be it a contract of sale or some other contract, the breach of which gives rise to the right to ‘treat the contract as repudiated’. When is a term a ‘condition’? A term can be made a condition either by express stipulation or by implication. The chapter then distinguishes condition from various other concepts with which it may appear to have similarities, but which work in different ways. It also looks at time stipulations and the divergent approaches of the common law and equity to time stipulations.

This chapter examines the significance of breach of contract. A party seeking to exercise the right to terminate for breach of contract must prove that the other party has broken the contract in the first place. Proving that a breach of contract has occurred involves three basic elements: (1) the party in question must have been under a contractual obligation; (2) they must have failed to perform that obligation; and (3) there must be no lawful excuse for that failure. All of these elements involve complex issues of law. Where a breach of contract has occurred, there are various remedies that may be available to the injured party. They will in all cases be entitled as of right to an award of damages, though if the breach has caused no loss these will only be nominal.

This chapter focuses on the situation where the innocent party with an option to terminate the contract instead decides to affirm it. What are the obligations of the innocent party in that situation and what are its rights? In particular, what remedies may the innocent party be entitled to in the event that it decides in effect to carry on with the contract? Broadly speaking, the innocent party affirming the contract would be required to continue performing its own primary obligations under the contract and would be entitled to sue for damages for losses caused by the other party's breach. However, the remedy of greater significance by far usually concerns the other party's continuing obligations, which the innocent party might be able to seek to enforce through an action for an agreed sum (the price) if they were money obligations or an order for specific performance if they involved non-monetary acts of performance.

This chapter focuses on damages on termination for breach of contract. Though there may be other measures used, ‘loss of bargain’ damages is the normal rule in cases of termination. The purpose of loss of bargain damages is to give the injured party the market value of the benefit of which he has been deprived through the breach. The phrase ‘loss of bargain’ can be used in two different senses. The first, and more general sense, is to denote the loss suffered by the claimant through being deprived of the benefit of the promise broken. However, the term is also used more precisely to denote the loss of the benefits of future performance of obligations released following discharge or termination. The chapter then examines when such damages are available following termination and how loss of bargain damages are calculated in such cases. Though most cases of termination will lead to loss of bargain damages, there may be situations where this is not an appropriate measure. These situations include the recovery of reliance loss and the recovery for non-pecuniary losses.

This chapter examines discharge of primary obligations, considering Lord Diplock's classic analysis of the termination process. The first and most important consequence of termination is that both parties are, as a general rule, discharged from their outstanding primary obligations under the contract. This applies both to the innocent party and to the party in default. Though Lord Diplock speaks in terms of the primary obligations of both parties being discharged in so far as they are not already performed at the time of termination, this is not always the case. On the contrary, such obligations can still remain binding in so far as they have already accrued. Given that most the cases on this point concern obligations to pay money, the issue here is the extent to which either party can sue for the relevant sum as a liquidated debt despite termination having taken place. The chapter then looks at the effect of termination on ‘ancillary’ terms, most notably dispute resolution clauses and clauses excluding or limiting the liability of one or other of the parties.

This chapter discusses express rights of termination. It is not always easy for a party to know for certain whether they are entitled to terminate or not. This is particularly so where the right in question depends on proof of fundamental breach or repudiation. For this reason, parties to a contract frequently, in the interests of certainty, make express provision for this by agreeing in advance that one or both of them may terminate if certain conditions are met. Such express rights of termination can depend on a wide variety of contingencies, but very frequently these will include a breach by the other party. Where this is the case, it is often difficult to distinguish termination under the express right from termination under the general law, particularly where the latter involves termination for breach of condition. The chapter then assesses four key issues with regard to express rights of this sort, most notably: (1) the relationship between express rights of termination and conditions at common law; (2) the requirements for the exercise of such rights; (3) the effect of termination under such a right; and (4) the problem of concurrent rights of termination.

This chapter explores the doctrine of fundamental breach, and considers the leading decision of the Court of Appeal in The Hongkong Fir. It examines the scope of the fundamental breach principle in two contexts, the first being its relationship to the classification of contractual terms, and the second its application to past and future events. The chapter also assesses the types of fundamental breach. There are a number of concepts akin to fundamental breach that overlap with it to a greater or lesser extent, but which need to be distinguished from it. These concepts include breach of condition; the doctrine of frustration; the doctrine of substantial performance; and the doctrine whereby time may be made of the essence by notice. When is a breach fundamental? The chapter studies a number of key factors which can provide useful guidance for the courts in approaching this question.

This chapter explains how English law got to the point it is at now where it treats breach of condition and fundamental breach as the grounds on which a contract may be terminated. It differentiates between conditions and warranties. Breach of condition is where a contractual term of sufficient importance to justify the non-breaching party terminating the contract is breached. Breach of warranty is where the non-breaching party is only permitted an action for damages. The chapter then assesses the concepts of frustration and frustrating breach, and traces the history of the development of the law on frustration. A contract is frustrated when some unforeseeable supervening event occurs that without the fault of either party essentially destroys the bargain they have made. Where a contract is frustrated, both parties are released from their obligations of future performance.

This chapter discusses the nature of termination for breach. Termination for breach can be seen both as a process and as a remedy. Traditionally, the topic has been dealt with under the broader umbrella of ‘discharge’, alongside such topics as performance, frustration, and agreement. Problems arise, however, when the notion of discharge is pressed too far; in particular, the idea of the contract ‘coming to an end’ can be a misleading one, and has given rise to various errors and misconceptions. For this and other reasons, more emphasis is now given to termination in the context of remedies. Termination can be one of the most useful weapons in the armoury for the victim of a breach of contract, not least because, unlike many other remedies, it does not require recourse to the courts. However, this notion of termination as a remedy should not obscure the close relationship between termination and the other modes of discharge, most notably frustration. The chapter then looks at the problems in this area of the law, including problems of terminology, the different ways in which common law and equity have approached the question, and the relationship between discharge and damages. It also considers the most important aspects of the right to terminate, including the right to refuse performance.

This chapter assesses what termination is, how it should be described, and what it involves. The concept of termination is not easy to define, not least because of the inconsistent terminology used by the courts and by commentators, and also because of the overlap existing between termination itself and other concepts that are akin to it. Termination is one way in which a party to a contract is relieved of his undertaking to do that which he has agreed to do but has not yet done. There are three key factors distinguishing termination from other types of discharge, the first being that it requires proof of a serious breach by the party in default, the second being that it normally occurs only at the option of the innocent party, and the third that it leaves the party in default liable in damages. Though termination is traditionally described as involving the termination of the contract as a whole, it is perfectly possible for a contract to be terminated in part. The chapter then looks at the requirement of election in termination for breach. It also considers how the right to terminate may be limited.

This chapter studies repudiation and anticipatory breach. The essence of repudiation is the absence of readiness and willingness by the defaulting party to perform their obligations under the contract. Though the word ‘repudiation’ suggests an unwillingness or refusal to perform, it can also include the situation in which the defaulting party, though perfectly willing to perform when the time comes, is incapable of doing so. The chapter then looks at modes of repudiation. The two key questions in deciding whether repudiation has taken place are: (1) the ratio quantitatively which the breach bears to the contract as a whole, and (2) the degree of probability or improbability that such a breach will be repeated. The chapter also considers the law regarding the issue of notices making time of the essence.

This chapter assesses several inter-connected instances where the non-breaching party in a contract terminated for the other's breach might seek restitutionary relief under the law of unjust enrichment as opposed to damages for breach of contract. For claims where the claimant seeks to recover benefits transferred under a contract now terminated, it is still conventional to distinguish between claims for restitution of money benefits and claims for non-money benefits. The chapter also differentiates restitution for breach of contract from restitution following breach of contract. It then turns to situations where the party that committed the breach is seeking restitution of money and non-money benefits transferred under the contract. The first question to be addressed is why that breach does not of itself bar any restitutionary claim.