Chapter 3: Termination of contract

In all cases where a party to a contract fails to perform their contractual obligations, they will be liable for breach of contract.

• TRUE

• FALSE

Provided a party to a contract substantially performs their contractual obligations, that is a sufficient discharge of the contract and the other party has no remedy for those parts of the contract which were not performed.

• TRUE

• FALSE

Esther agreed to bake and freeze 100 birthday cakes for her friend Jannie, who was planning to open a small cake shop, at a total price of £200. When Esther had frozen 60 cakes, she learned that Jannie had been unable to secure a shop lease. She telephoned Jannie to confirm that she had baked 60 cakes and was all ready to bake the last 40, but Jannie said she had decided to go back to teaching instead. Which of the following best describes the legal position?

• Esther has no cause of action against Jannie because she could have avoided any loss by waiting until Jannie had secured the lease.

• Esther has no cause of action against Jannie because she can still use or sell the cakes, so she has not suffered any loss.

• Esther can recover the agreed sum of £200 from Jannie because she would have been entitled to this sum had Jannie not been in breach of contract

• Jannie is in breach of contract and Esther can sue for damages or bring a quantum meruit claim for £120 in respect of the 60 cakes already prepared.

Marco employed Joleen to build him a sailing boat. He specified that he wanted the hull to be painted 'Moisture Blue' and that the tow straps should be webbed nylon. The agreed contract price was £5,000, payable on delivery of the boat. When Joleen delivered the boat, Marco discovered that Joleen had actually used 'Sky Blue' paint and that the tow straps were made from a different material. Apart from these points, Marco was pleased with Joleen's work. Which of the following best describes the legal position?

• Joleen has substantially performed her contractual obligations and is entitled to receive the contract price.

• The contract has been sufficiently discharged and Marco must pay Joleen the agreed contract price.

• Joleen is entitled to receive the contract price less a sum in respect of those obligations that were not properly performed.

• Joleen has not performed her contractual obligation properly and is therefore not entitled to receive any payment until she rectifies the outstanding defects.

Jemima arranged a weekend holiday with Hassle Free Holidays Ltd, booking the Riverside Hotel and paying a deposit in advance. The night before she was due to travel, the Riverside Hotel was burned down and Hassle Free Holidays Ltd claimed that it could keep her deposit but was under no further obligation to Jemima because the contract had been discharged by frustration.

Has the contract been discharged by frustration?

• YES

• NO

Jemima arranged a weekend holiday with Hassle Free Holidays Ltd, booking the Riverside Hotel and paying a deposit in advance. The night before she was due to travel, the Riverside Hotel was burned down and Hassle Free Holidays Ltd claimed that it could keep her deposit but was under no further obligation to Jemima because the contract had been discharged by frustration.

As a general rule, where a contract is discharged by frustration, should any deposit received be repaid?

• YES

• NO

When a contract is discharged by frustration:

Will the provisions of the Law Reform (Frustrated Contracts) Act 1943 override any express contractual terms which cover the event that has occurred?

• YES

• NO

When a contract is discharged by frustration:

If a party has received some valuable benefit (other than money) under a contract before it is frustrated, can they be required to pay a sum in respect of that benefit to the other party?

• YES

• NO

Where a party is in breach of contract, the other party may choose either to treat the contract as discharged (and sue for damages) or to affirm the contract.

• TRUE

• FALSE

Where a party causes an anticipatory breach of a contract, ie, they indicate in advance that they have no intention of performing the contract, the other party may continue to incur costs in performing the contract and take action against the party in breach.

• TRUE

• FALSE