Rules on Terminating a Contract

The contract was defective: it had a defect from the outset, a vitiating factor, making it either void or voidable; or
1. Defective Contracts: Vitiating factors:
  1. 1. Misrepresentation: A representation induces the contract but is not a term of the contract; it does not form part of the contract
    1. Innocent misrepresentation
      1. In equity: the innocent party can rescind the contract, whatever the state of mind, which will restore both parties to the pre-contractual position.
    2. Negligent misrepresentation
      1. Legislation: allows damages for a negligent misrepresentation and damages instead of rescission for an innocent misrepresentation
    3. Fraudulent Misrepresentation
      1. In tort: damages for a fraudulent misrepresentation in the tort of deceit and for a negligent misstatement in the tort of negligence. There are no damages for an innocent misrepresentation.
  2. 2. Duress: where a person enters into a contract because of violence or threats of violence. Undue influence: improper pressure is put on someone to enter into a contract. For example, where there is a fiduciary relationship.
  3. 3. Mistakes
    1. Non est factum: (for written contracts only) there is a mistake as to the nature of the document
    2. Mistaken identity: one party is mistaken as to the identity of the other party.
    3. Common mistake: both parties are mistaken about the same thing.
    4. Mutual mistake: the parties have misunderstood each other. As they are at cross purposes, there was never any real agreement.
  4. 4. Illegality: these are contracts for criminal purposes, or prohibited by statute, or against public policy or morality.
  5. 5. Contracts in restraint of trade: any contract that restricts trade is prima facie void unless it is reasonable between the parties and not against the public interest.
The contract was a valid contract: it is terminated by performance, breach, agreement or frustration.
1. Discharge brings a valid contract to an end.
  1. Discharge by performance
    1. Performance: discharge by performance is the aim of a contract. Both parties have done what was agreed. But that performance must be complete, exact and precisely what was agreed.
      1. substantial performance; -
      2. contract is divisible rather than entire
  2. Discharge by agreement
    1. The contract ends automatically, or There is bilateral discharge where both parties have not performed and exchange promises not to enforce the original contract, or Unilateral discharge, where one party has performed, then discharge requires accord and satisfaction (i.e. agreement and consideration).
  3. Discharge by breach
    1. Fundamental breach by condition
    2. Repudiation
    3. Anticipatory breach: Refusal to perform announced before the date due for performance
  4. Discharge by frustration
    1. Destruction of the subject matter of the contract:
    2. Inability to achieve the main object:
    3. Changes in the law or governmental actions.
    4. Death or permanent illness of a party
Remedies
1. Common Law
  1. Remoteness of Damage
    1. Damage must be "proximate"
      1. the harm suffered must arise naturally from the nature of the contract
      2. any indirect harm could be reasonably foreseen by the contract breaker because at the time of the contract he was aware of special circumstances which would lead to additional loss
  2. Stipulated damages
    1. Rather than leave it to the court to decide, a contractual clause may stipulate the amount of damages to be paid in the event of breach
      1. Liquidated damages clause: a proper, genuine estimate of the potential losses
      2. Penalty clause: to punish the other party for breach. In principle this is unenforceable
2. Equity
  1. Quantum Meruit: "as much as he deserves"
    1. Available where the other party voluntarily accepted partial performance;
    2. Available where one party prevented the other party from completing performance.
  2. Specific Performance: An order to make a party perform his contractual obligations. (the court must be able to supervise performance.
  3. Injunction
    1. Prohibitary: porhibiting somebody from doing something
    2. Mandatory: requiring someody to do something

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Rules on Terminating a Contract

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