Transcript Contracts 5 final

Fraud, Discharge, Remedies
fraud
• Fraud omnia vitiate – fraud vitiates everything
• Must be specifically pleaded and strictly
proven
• It can be presumed when consideration is
woefully and shockingly inadequate
• Can be rebutted by evidence
• Makes a contract voidable – party must act
timeously upon discovering it
Discharge of Contractual
obligations and Remedies
• Where a party is freed from performing his
obligations under a contract
• Hence there are no outstanding obligations
under the contract.
• There are 4 ways in which a contract can be
discharged or terminated:
•
•
•
•
Discharge by agreement
Discharge by performance
Discharge by frustration
Discharge by breach
Discharge by Agreement
• Contracts may be discharged/terminated by
agreement just as they are created by agreement
• This may be provided for by a termination clause
in the contract
• If the performance of the obligations under the
contract are in the future and neither party has
performed his obligations then the parties may
agree that each be released from his obligations
• Can also apply where parties are replacing an
existing contract with a new one, or varying the
terms of an existing one
• Fish & Meat Co Ltd v Ichnusa Ltd – pg 98
• Novation – agreement to substitute one of the
parties or the terms of the contract.
• Obligations under the old contract are
discharged.
– Japan Motors v Randolph Motors – pg 99
• To successfully plead it:
– Intention to substitute, which may be by words or
conduct. Conduct must be clear and unambiguous
– There must, in fact, be a substitution of the old
with the new
– Mutual consent – express or by conduct
Discharge by Performance
• Performance is where one or both parties have fulfilled
their obligations under the contract in accordance with the
terms of the contract.
• General rule is that performance must be exact and
complete. Partial performance is no performance. E.g.:
– Goods to be supplied under a contract must be of the right kind
and of the right quantity. If it is not, the goods could be rejected
– Money to be paid in cash must be in cash and not cheque. It will
only be exact when the cheque is honoured
• The effect of this (exact and complete performance) is to
discharge a party/parties from any or further obligations
under the contract
• Time
– Generally time is not an issue unless the parties
expressly state so,
– Or where the nature of the contract makes time of
the essence, e.g., the supply of perishable goods
• Exceptions
– If the contract can be divided into several parts, complete
performance of each part constitutes performance in
respect of those parts, but the obligation to perform the
rest remains.
– Where party who is to benefit accepts part performance
– Where the party who is to benefit prevents the other party
from performing his obligations
– Where there is substantial performance of the entire
obligation, this can arise in situations where hardship
would be occasioned otherwise. E.g., a carpenter
contracted to produce 4 chairs, but who is able to produce
3. He will be paid for the 3 and discharged.
Discharge by Frustration
• Frustration is where the performance of
obligations under the contract becomes
impossible as a result of events beyond the
power and control of either party
• Effect is to discharge the parties from the
contract. No legal action can be taken against
either.
• Frustration can occur in the following ways:
– Death of a party to the contract
– Destruction of the subject matter, Taylor v. Caldwell:
a contract to hire a hall for a musical show was
frustrated because the hall was destroyed by fire
through no the fault of the owner.
– non occurrence of an event – where the performance
is dependent on an event, Krell v. Henry: held that a
contract to hire a room overlooking the proposed
route of the coronation procession of King Edward VII
was frustrated when the procession was cancelled
due to the king’s illness. Purpose of the contract was
to view the coronation, not just to hire a room.
• Commercial purpose defeated
• Government intervention, e.g. compulsory
acquisition, change in law has made
performance illegal
• Where frustration will not apply:
– Self induced events – Afrifa v Class Peters – pg 102
– Where parties foresaw the frustration and made
provision for it
Effects of frustration under the
Contracts Act
• All monies paid would be recovered, and all
monies payable would cease to be payable
• Where a party has incurred expenses, he may
be allowed to recover or retain
• If there is part performance, courts may sever
parts of the contract as if it were a separate
contract
Discharge by Breach
• Where a party, without lawful reasons, and
without consent of the other party fails to
perform his side of the contract
• Types of breach:
– Total failure to perform
– Anticipatory – where before the date of
performance, party indicates his intention not to
perform
– Incomplete or defective performance
• Effects of Breach:
– Not all breaches will warrant discharge from the
contract. Mostly fundamental and serious
conditions will lead to a discharge
– Where the other party has put himself in a
position which makes it impossible to perform
then the innocent party may be discharged and
may sue for damages
Exercise
• Red Army is a carpenter. He contracted with Early Steps
Pre-School to construct tables and chairs for use of the
toddlers of the school. Under the contract, he was to
build a 100 chairs and tables over a period of 7 days. At
a point when RA had constructed 80 chairs and 83
tables, he received an urgent message from his village
that his relative had passed away. As the oldest son, he
immediately left for the village, after advising the
school proprietor of his predicament. He did not return
till two weeks later and was told that someone else
had completed the contract and the school intends to
sue him for breach. Advise the parties?
break
Remedies for breach of contract
• Once a breach has occurred, the innocent
party may seek redress in accordance with the
terms of the contract.
• This may be by initiating a court action or
arbitration.
• There are several means of redress:
– Damages
– Specific performance
– Injunction
– Rescission
– Rectification
Damages
• Awarded to compensate the innocent party
for the breach
• basis is to put the injured party in a position
he would have been in, as far as money can, if
the other party had performed his obligations
• Case: Juxon-Smith v KLM Dutch Airlines- 110
• Losses which are remote or cannot reasonably
be linked to the breach cannot be paid for.
• Damages may be general or special
– General flows from the breach
– Special – liquidated, verifiable and provable sums,
e.g., lost income, expenses incurred etc
• In determining damages, the court considers
two things
– Remoteness
– Measure of damages
Remoteness of damages
• Damages must not be remote – they must be
proximate to the breach
• Hadley v Baxendale – 111
• 2 tests established under this case:
– Do the damages arise naturally from the breach?
– Was it in the reasonable contemplation of both
parties as being a probable result of the breach?
• If the answer is yes, then damage is not
remote and therefore recoverable
• Horne v Midland Railway – 115
• Note also page 116 on the essential principles
Measure of damages
• This is the computation of how much money
must be paid by the party in breach to the
party suffering from the breach.
• Arkoful v State Fishing Corp – 117
• Note: An aggrieved party is required to
mitigate his damages by taking reasonable
steps
• Attitsogbe v Posts and Telecommunications 118
• Societe Generale de Compensation v
Ackerman – 118
– Loss incurred
– Wages due and payable
– Value of any other benefit [one] is entitled to
• Kisco Products (Gh) Ltd v Delmas America
America Africa lines -119 to 120
Quantum Meruit
• An equitable remedy meaning “how much it is
worth”.
• Absent express terms the courts will assess an
amount which is fair and reasonable
• Skanska v Klimatechnik Engineering Ltd –
“reasonable, ..just right; not too little or too
much”
• Applies where
– Party is precluded from completing a contract
– No concluded contract
• 122
Money had and Received
• Frafra v Boakye – 123
• An order compelling a defendant to refund
monies paid by or on behalf of the plaintiff to
the defendant, the ground being that the
defendant has not at all performed his
contractual obligations.
Specific Performance
• An equitable and discretionary remedy
• It is not automatically available to a party who
prays for it
• An order of the court directing a party to
perform his contractual obligations
• It will be available if damages will be
inadequate, where the subject matter is of
special interest and value to the plaintiff,
where time is of the essence etc
• The one seeking the remedy must come with clean
hands and must not himself be tainted by fraud or
crookedness.
• IBM World Trade Corporation v Hasnem Enterprises
Ltd – 127
• Addo v Ghana Co-operative Marketing Association Ltd
• Koglex v Field – “the relief of SP lies whenever
agreement between parties have got to a stage that it
would amount to fraud on the part of the other party
to refuse to perform his side of the bargain”
• Redco Ltd v Sarpong – 129
• Where a third party has provided valuable
consideration, and acquired an interest in the
subject matter, and has no notice of the rights
and interests of the plaintiff, then SP would
not lie, but rather damages
• Basare v Sakyi & Another - 131
Summary
• The courts will therefore consider the following
for the grant of SP:
–
–
–
–
–
–
–
–
Whether there is a contract
Where damages will not be an adequate remedy
Where the subject matter is unique and special
Whether time is of the essence
Part performance and clean hands
Is Remedy sought in a timely manner
Where conduct of Plaintiff makes it fair and equitable
Whether there is a bona fide purchaser for value
without notice of any prior interest
Injunction
• An equitable remedy directed at a party to
refrain from doing a specified Act
• Fish & Meat Co Ltd v Ichnusa Ltd - 132
Rescission
• Remedy granted to one party to set aside a
contract
on
grounds
of
fraud,
misrepresentation, mistake.
• Car & Universal Finance Co. Ltd v Caldwell –
135
• SA Turqui & Bros v Lamptey – 136
• Restoration of both parties to their original
positions must be possible for this remedy to
lie
Rectification
• An equitable remedy where the court corrects or
amends an error in a written contract to bring it
into conformity with the actual agreement
reached between the parties
• it ensures that the written contract is in
consonance with the oral or prior agreement
• It is to restore the instrument to the true
intention of the parties
• Walker Property Investment (Brighton) Ltd v
Walker - 137
Questions?