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3 - Law of contract (part 2) (Assignnment (Insurance contracts (Assignment…
3 - Law of contract (part 2)
Discharge of contracts
Performance
Duty to perform
Doing anything different to what was agreed is a breach
Not a defence that breach wasn't their fault
Can be excused if there is a clause in the contract
No breach where partial performance is accepted by the other party
Time for performance
Failure to meet timeframe set out in contract is a breach
'Time is of essence' can be implied
e.g. delivery of wedding dress
Must be within reasonable time if no timeframe specified
Contract is performed when each party has carried out their side of the bargain
Failure to do so is breach of contract
Breach of contract
Failure to perform
Failure to perform side of agreement whether inadequately or at all
Anticipatory breach
Party may indicate they cannot fulfil contract
Before date for performance has arrived
Effects of breach
Will always give injured party a right to claim damages
No more if breach of warranty
Can terminate contract if breach of condition
Frustration
Non-occurrence of event
If an event on which the contract depends doesn't happen
Commercial purpose of contract
If fundamental duties involved are entirely different from that envisaged
Destruction of necessary element
Destruction of building which was due to be used as part of a contract
Death or incapacity
Can no longer perform personal services
Change in law or operation of law
Outbreak of war can make performance of an existing chartering agreement illegal
Effects
Frustration automatically brings the contract to an end
Law attempts to put parties back where they were before agreement was made
Contract can become impossible to complete
Discharge
Discharge by agreement
Further agreement can be made by parties to release each other from their obligations
Known as waiver
Has to be consideration in order for it to be binding
Can be subistuted by new ontract ('novation')
Discharge of money debts
Can't be discharged by sum smaller than debt
Unless change in time or mode of payment or something extra is added
Discharge by operation of law
Can be discharged by operation of law itself, e.g. merger, death or bankruptcy
Remedies in contract
Termination
Injured party can terminated contract if breach i sufficiently serious
Can...
Refuse further performance from other party (repudiation)
Claim for restoration of situation prior to contract
Refuse to perform own obligations
Courts tend to prefer to award damages
Damages
Mitigation of loss
Injured party is under obligation to mitigate loss and cannot claim for damages which could have been reasonably avoided
Liquidated damages and penalties
Specified penalties in the contract for non-fulfilment
Measuring the loss
Buyer's compensation will usually depend on cost of substitute goods
Basis of damages can also be the cost of remedying defective performance
Remoteness of damage and causation
Damages will not be awarded for losses that are too remote from the contract
Types of loss
Courts recognise various types of losses including personal injury, property damage, and financial loss
Specific performance and injunctions
The court may...
Order defendant to fulfil promise to claimant
Forbid defendant from doing something they promised no to do
Equitable remedies which won't be used if award of damages is sufficient
Prohibitory injunction
Injunction to prevent e.g. setting up of rival company
Mandatory injunction
Requiring defendant to do something to end state of affairs
e.g. demolish a structure
Other remedies for breach of contract
Claim for return of money or property (restitution)
Person may bring action on
'quantum meruit'
'As much as they have deserved'
Action for an agreed sum (common law remedy) when one party has broken undertaking to pay sum of money
Limitation of actions
Claims for breach of contract are governed by the
Limitation Act (1980)
Limitation periods
3 years for claim for personal injury
12 years for action on speciality contract (deed)
6 years in action on simple contract
When time begins to run
Limitation period begins on date action accrues
Usually date of breach of contract
Claims for specific performance, injunction or other equitable remedies
Limitation rules do not apply, in general, to claims for equitable remedies
Specified time
Contracting parties often include express term that claim for breach of contract may only be made within specified time
Can often be months rather than years for non-consumer contracts
Courts will generally look to uphold
Privity of contract
Contracts (Rights of Third Parties) Act (1999)
Provides that a third party can enforce a contractual term if...
The contract provides they may do so
The contract purports to confer a benefit on the third party
They are identified in the contract by name or they belong to a general class of persons identified in the contract
Some contracts excluded from the Act, including bills of exchange and contracts of employment
Insurance contracts often confer a benefit to those other than the policyholder and therefore they often exclude the operation of the Act
A doctrine which restricts the rights and duties created by a contract to the persons who originally made it
Duties cannot be imposed onto a third party
Strict application of doctrine would often hinder sensible business arrangements
Exceptions have been established as a result
Assignnment
Rights which cannot be assigned
Those where it would be considered unreasonable to expect a party to perform obligations to anyone other than other party originally contracted
Insurance contracts of 'personal character'
Terms differ depending on individual
Transfer of obligations
A person cannot transfer their obligations under a contract without the consent of the other party and assignee
Novation
A owes B £100 and B owes C £100
Debt between A and B cancelled
A now owes C £100
Party can delegate contractual responsibilities to another without assigning, i.e sub-contracting
Original contracting party will still be liable for any breach
Transfer of rights
Statutory assignment under
Law of Property Act (1925)
Assignment transfer underlying legal right to the assignee
Such an assignment must be...
absolute
in writing
expressly made
Equitable assignment
Assignment can still happen if above criteria aren't met
Two main ways...
Assignor informs the assignee they transfer the chose to them
Assignor instructs the debtor to discharge the obligation to the assignee
A contractual right is a 'chose (thing) in action' and is intangible
A 'chose in possession' is a tangible asset which can be seized and controlled
Insurance contracts
Assignment of the benefit of the contract
Right to recover money under an insurance contract can be assigned to another person
Contract remains same, merely assignor states that proceeds of valid claims should go to the assignee
Law of Property Act (1925)
Consent of insurer isn't necessary
Can take place before or after loss
Notice must be given to insurer
Assignee doesn't need to have insurable interest in subject matter
Assignment of the contract itself
Property and Liability policies cannot be transferred as they are of a personal nature
Policy can exceptionally state that assignment is permitted
Must take place at the time when property is sold
Assignment of the subject matter
Policyholder may sell their house or car
Policy not automatically assigned
Subject matter disposed of and policy comes to an end
Assignment of life policies
Life policies are freely assignable because, provided the identity of the life insured doesn't change, there is no change in risk
Types of assignment
Equitable
Policy simply handed to another
Statutory assignment
Under
Policies of Assurance Act (1867)
An original party to the contract may look to transfer (assign) their rights to another party who then stands in their place
Fairly frequent in some insurance contracts
Life insurance
Policies of Assurance Act (1867)
Marine insurance
Marine Insurance Act (1906)