Discharge of Contracts Overview
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Questions and Answers

What does the term 'discharge by performance' mean in the context of contracts?

  • The end of a contract due to mutual agreement.
  • Termination of the contract through legal action.
  • Satisfactory execution of all contractual obligations. (correct)
  • Cancellation of a contract due to unforeseen circumstances.

    • Which clause is designed to protect against losses that may arise after a contract has been completed?

  • Indemnification Provision (correct)
  • Limitation of Liability Clause
  • Force Majeure Clause
  • Survival Clause

    • What type of discharge occurs when parties agree to end their contractual obligations?

  • Discharge by Agreement (correct)
  • Discharge by Breach
  • Discharge by Frustration
  • Discharge by Law

    • Which type of clause limits the amount or types of damages a party may be liable for?

    <p>Limitation of Liability Clause</p> Signup and view all the answers

    What is the primary legal consequence of a breach of contract?

    <p>Court-imposed damages to the injured party.</p> Signup and view all the answers

    What constitutes failure to perform in a contract?

    <p>Partial or total inadequacy in performance</p> Signup and view all the answers

    What is meant by the doctrine of substantial performance?

    <p>Slight non-compliance with contractual terms</p> Signup and view all the answers

    Which type of damages focuses on the profits expected at the time of contract formation?

    <p>Expectation Damages</p> Signup and view all the answers

    What is a key characteristic of liquidated damages?

    <p>They are fixed amounts agreed upon in advance</p> Signup and view all the answers

    What do equitable remedies focus on?

    <p>Requiring a specific act to be completed</p> Signup and view all the answers

    In the context of breach mitigation, what is expected from the non-breaching party?

    <p>To take reasonable steps to minimize losses</p> Signup and view all the answers

    How does cost of performance differ from economic loss in damage calculations?

    <p>Cost of performance covers the actual expense incurred</p> Signup and view all the answers

    Which of the following is NOT a type of equitable remedy?

    <p>Expectation Damages</p> Signup and view all the answers

    What defines reliance damages?

    <p>Damages for wasted efforts incurred during contract performance</p> Signup and view all the answers

    What is the primary focus of consequential losses in breach of contract cases?

    <p>Indirect damages reasonably foreseeable from the breach</p> Signup and view all the answers

    Which scenario describes a substituted agreement?

    <p>Parties terminate the old contract and create a new one with updated terms.</p> Signup and view all the answers

    What is a key requirement for a contract to be discharged by frustration?

    <p>The frustrating event was unforeseen and outside both parties' control.</p> Signup and view all the answers

    What type of clause exempts a party from liability for non-performance?

    <p>Exemption clause</p> Signup and view all the answers

    What typically occurs in a breach of warranty?

    <p>The non-breaching party remains bound to the contract but can claim damages.</p> Signup and view all the answers

    Which of the following defines a 'condition' in a contract?

    <p>An essential term that, if breached, permits termination and damages.</p> Signup and view all the answers

    What constitutes an express repudiation of a contract?

    <p>One party informs the other of their intention not to perform.</p> Signup and view all the answers

    What is the primary consequence of a major breach of contract?

    <p>It discharges the non-breaching party from obligations.</p> Signup and view all the answers

    What happens when a contract contains a condition subsequent?

    <p>A specified event will result in termination if it occurs.</p> Signup and view all the answers

    In the context of a contract, what does the 'Frustrated Contracts Act' ensure?

    <p>Fair outcomes are provided when frustration makes performance impossible.</p> Signup and view all the answers

    Which of the following best describes the term 'waiver' in contract law?

    <p>It is an agreement to ignore a breach of contract.</p> Signup and view all the answers

    What is a consequence of bankruptcy under the Bankruptcy and Insolvency Act?

    <p>Pending collection actions are temporarily halted.</p> Signup and view all the answers

    What is the purpose of a 'time is of the essence' clause in a contract?

    <p>It emphasizes the importance of timely performance, making delays a breach.</p> Signup and view all the answers

    Which of the following would NOT be a requirement for a discharge by agreement?

    <p>The contract must have been fully performed by both parties.</p> Signup and view all the answers

    What is a defining characteristic of a major breach of contract?

    <p>A failure that defeats the overall purpose of the contract.</p> Signup and view all the answers

    What is a judgment in legal terms?

    <p>A court order requiring one party to pay damages or perform an action</p> Signup and view all the answers

    Which step is NOT part of enforcing a judgment?

    <p>Negotiating a settlement with the debtor</p> Signup and view all the answers

    What is the purpose of a garnishee order?

    <p>To require a debtor's employer to withhold wages</p> Signup and view all the answers

    In which scenario does an agent alone become liable?

    <p>When they misrepresent themselves as the principal</p> Signup and view all the answers

    Which of the following is a method to create an agency relationship?

    <p>Implied authority</p> Signup and view all the answers

    What happens if a debtor fails to attend an examination?

    <p>It is considered contempt of court</p> Signup and view all the answers

    What does the principal's duty of good faith require?

    <p>To maintain transparency and trust in dealings</p> Signup and view all the answers

    When is a principal liable for the contracts made by their agent?

    <p>When the agent acts with real or apparent authority</p> Signup and view all the answers

    What is required for ratification to occur?

    <p>The principal must have full knowledge of the act and its legality</p> Signup and view all the answers

    Which of the following is NOT a duty of the agent to the principal?

    <p>Duty to negotiate on behalf of the principal</p> Signup and view all the answers

    What defines apparent authority in an agency relationship?

    <p>A third party reasonably believes the agent to have authority based on the principal's actions</p> Signup and view all the answers

    Which of the following describes an undisclosed principal?

    <p>A principal whose identity is not revealed during the agency act</p> Signup and view all the answers

    What liability does a principal have in joint/several torts committed by an agent?

    <p>Jointly liable with the agent for acts within real authority</p> Signup and view all the answers

    What is the role of the mortgagee in a chattel mortgage?

    <p>The mortgagee is the creditor holding the mortgage against the personal property.</p> Signup and view all the answers

    Which of the following is NOT a necessary step in the PPSA process?

    <p>Approval by a government agency</p> Signup and view all the answers

    How can a creditor perfect their security interest?

    <p>Through registration under the PPSA and taking possession of the asset.</p> Signup and view all the answers

    What is a floating charge?

    <p>A mortgage on all of the assets of a corporation except those already charged.</p> Signup and view all the answers

    What does the Purchase Money Security Interest (PMSI) allow a creditor?

    <p>To have priority over other perfected security interests for assets purchased with the loan.</p> Signup and view all the answers

    What must happen for a debtor's property to be subject to a security interest?

    <p>The security interest must be created and attached.</p> Signup and view all the answers

    What is the primary effect of registering a security interest?

    <p>It protects the creditor's interest from competing claims.</p> Signup and view all the answers

    Which of the following describes 'after-acquired property'?

    <p>It includes assets not specifically included in the mortgage agreement.</p> Signup and view all the answers

    In the case of competing interests, which factor determines priority?

    <p>The timing of perfection or registration of the security interest.</p> Signup and view all the answers

    How does the PPSA impact third-party purchasers?

    <p>It requires all security interests to be publicly registered.</p> Signup and view all the answers

    What is the consequence if an agent commits fraudulent misrepresentation?

    <p>The contract is cancelled and the third party can sue.</p> Signup and view all the answers

    Under what condition can a third party sue for breach of warranty of authority?

    <p>If the agent has no real or apparent authority and there was never a contract.</p> Signup and view all the answers

    Which of the following is NOT a reason for the termination of an agency relationship?

    <p>Lack of notice from one party.</p> Signup and view all the answers

    What is the primary duty of a franchisor under the Arthur Wishart Act?

    <p>To provide franchisees with a right to disclosure.</p> Signup and view all the answers

    What is the liability of an employer under vicarious liability?

    <p>For actions committed within the scope of employment.</p> Signup and view all the answers

    What represents negligent hiring?

    <p>Not performing adequate background checks before hiring.</p> Signup and view all the answers

    In terms of duty, what must an employee do when instructed by an employer?

    <p>Obey only reasonable and lawful instructions.</p> Signup and view all the answers

    Which aspect of an employment contract is NOT strictly mandatory for employers?

    <p>Payment of overtime regardless of role.</p> Signup and view all the answers

    What is a primary function of the franchise agreement?

    <p>Outlining the conduct of business.</p> Signup and view all the answers

    If an agent innocently exceeds their authority, what is the result?

    <p>No contract is formed.</p> Signup and view all the answers

    What is required for a wrongful referral claim to be valid?

    <p>Misleading information must be provided in the referral.</p> Signup and view all the answers

    Which of the following is an obligation of an employer regarding payment to their employees?

    <p>Pay at least the minimum wage.</p> Signup and view all the answers

    What does the term 'vicarious performance' mean in contract liability?

    <p>A third party performs on behalf of the promisor, but the promisor remains responsible.</p> Signup and view all the answers

    What is the primary condition under which an employer can terminate employment immediately without notice?

    <p>The employee's conduct constitutes a breach of the contract.</p> Signup and view all the answers

    What triggers automatic termination of an agent's authority?

    <p>Completion of the specified task or project.</p> Signup and view all the answers

    Which factor is NOT typically considered when determining a reasonable notice period?

    <p>Employee's age</p> Signup and view all the answers

    Which situation would likely justify a dismissal for cause?

    <p>The employee has committed a crime.</p> Signup and view all the answers

    What must a plaintiff demonstrate to mitigate their damages after wrongful dismissal?

    <p>They must attempt to find comparable employment.</p> Signup and view all the answers

    What is considered constructive dismissal?

    <p>The employer changes the employment terms drastically.</p> Signup and view all the answers

    What is one of the main remedies sought by employees in cases of wrongful dismissal?

    <p>Reinstatement</p> Signup and view all the answers

    Which type of damages are awarded to employees for mental anguish in wrongful dismissal cases?

    <p>All of the above</p> Signup and view all the answers

    What condition allows an employer to use payment in lieu of notice?

    <p>The employer is choosing to terminate immediately.</p> Signup and view all the answers

    Which of the following is a key characteristic of secured transactions?

    <p>The lender acquires a security interest in collateral.</p> Signup and view all the answers

    What is a characteristic of a bailee in a bailment relationship?

    <p>The bailee must take care of the bailor’s goods.</p> Signup and view all the answers

    Which type of creditor does not require a judgment to act on collateral?

    <p>Secured Creditor</p> Signup and view all the answers

    Which type of damage is specifically related to the employer acting in bad faith during wrongful dismissal?

    <p>Punitive damages</p> Signup and view all the answers

    What must employers provide to employees to avoid wrongful dismissal claims?

    <p>Adequate notice or payment in lieu of notice</p> Signup and view all the answers

    Which options define personal property in contrast to real property?

    <p>Items not permanently fixed to land</p> Signup and view all the answers

    Study Notes

    Discharge of Contracts

    • Discharge is the termination of contractual obligations, ending a party's responsibility.
    • Contracts can be discharged by: performance, agreement, frustration, or operation of law. Breach of contract is a specific discharge where damages are awarded.

    Discharge by Performance

    • Both parties fulfill their obligations satisfactorily.
    • Unsatisfactory performance does not discharge the contract.
    • Even after primary obligations are fulfilled, the contract might survive (remain effective and enforceable) if conditions in the agreement remain critical after completion.

    Survival of Performance

    • Indemnification Provisions: A clause requiring one party (indemnifier) to compensate the other (indemnitee) for losses occurring after the contract's completion.
    • Limitation of Liability Clauses: Clauses capping liability, often specifying a monetary limit or excluding certain damages.
    • Survival Clauses: Contract terms remaining enforceable after completion, often protecting ongoing interests (e.g., protecting trade secrets or liabilities).

    Discharge by Agreement

    • Both parties agree not to proceed with the contract.

    Types of Agreement Discharge

    • Waiver: An agreement to not proceed with a contract, only when neither party has fully performed.
    • Substituted Agreement: Parties replace the original contract with a new one (e.g., settlement/accord and satisfaction, novation, material changes in terms).

    Discharge by Frustration

    • Excuses parties from performance due to unforeseen external events that make performance radically different from what was intended.
    • Frustration discharges the contract at the moment the event occurs.
    • Applies to cases where neither or one party(ies) were/was partially performing.

    Requirements for Frustration

    • Unforeseen event.
    • Event outside both parties' control.
    • Event occurred after the agreement.
    • Event renders performance impossible, purposeless, or fundamentally different.

    Frustrated Contracts Act

    • Governs consequences of frustrated contracts, ensuring fairness.
    • Determines whether funds paid or due can be retained/recovered.

    Discharge by Operation of Law

    • Bankruptcy and Insolvency Act: Applies to individuals or businesses unable to repay debts, stopping most collection actions.
    • Limitations Act: Sets time limits for enforcing contractual rights. Exceeding the limits bars legal action, effectively discharging the obligation.

    Breach of Contract

    • Occurs when one party fails to comply with contract terms.
    • All breach of contracts allow the non-breaching party to sue for damages.

    Exemption Clauses

    • Clauses exempting parties from liability for non-performance.
    • Not always enforceable (factors like inadequate notice, contra proferentem principle, misrepresentation, and non est factum)

    Condition vs. Warranty

    • Condition: Essential term; breach allows discharge and damages.
    • Warranty: Non-essential term; breach allows damages but not discharge.

    Time is of the Essence Clauses

    • Emphasizes deadlines. Any delay in completion is considered a breach.

    Remedies for Breach of Contract

    • Damages: Monetary compensation for losses caused by the breach.

    • Liquidated damages: Agreed-upon amounts paid in case of breach.

    • Nominal damages: Nominal damages awarded where losses are negligible.

    • Equitable Remedies: Include specific performance (compelling a party to perform a specific act) and injunctions (preventing a party from acting).

    • Quantum Meruit: Reasonable compensation for services rendered.

    Types of Damages

    • Expectation: Profits lost due to breach + opportunity cost
    • Consequential: Foreseeable damages flowing from breach
    • General: Non-quantifiable damages (e.g., lost reputation)
    • Reliance: Damages for wasted efforts in preparation.

    Mitigation & Causation

    • Mitigation: Aggrieved party's actions to minimize losses after a breach.
    • Causation: Direct link between breach and damages claimed.

    Enforcing a Judgment

    • Judgement: Court order requiring one party to pay the other damages or complete a required action.
    • Execution/Garnishment/Examination: Processes for enforcing judgments (seizing assets, deducting wages, and examining the debtor's finances).

    Agency & Franchising

    • Agency Agreement: Principal and agent contract, defining the agent's authority.

    • Agency Relationship Creation: Implied relationship, ratification, and apparent/ostensible authority.

    • Duties of Agent to Principal: Compliance, care, good faith.

    • Duties of Principal to Agent: Remuneration and expenses.

    • Liability of Principal(s) and Agent(s) to Third Parties: Determines liability based on agency authority (reals or apparent authority), whether the agent disclosed their status.

    • Undisclosed Principal: Principal seeking to enforce contract where the agent did not disclose the principal.

    • Liability for Torts: Principal & agent liability for torts within authority.

    • Breach of Warranty of Authority: Liability for falsely claiming authority.

    • Terminating Agency Relationship: End of contract, accomplishment of purpose, notice, death, or bankruptcy.

    • Franchising: Contractual relationship between franchisor (e.g., company) and franchisee (e.g., business owner).

    • Arthur Wishart Act: Governs franchise relationships, including disclosure, fair dealing, and associating rights.

    Employment Law

    • Employee vs. Independent Contractor: Primarily based on the risk of profit/loss in the work.
    • Torts of Employer: Vicarious liability (employer liable for employee's torts within the scope of employment), negligent hiring, wrongful referral.
    • Contract Liability: Vicarious performance (employer liable for employee action on their behalf).
    • Employee Duties: Obedience, skill, good faith.
    • Employer Duties: Payment of wages, benefits, and compliance with labor laws.
    • Termination: Notice, payment in lieu of notice, and dismissal for cause.
    • Constructive Dismissal: Employer significantly alters terms making the position unsuitable.
    • Wrongful Dismissal: Lack of proper cause or notice, failure to follow rules.
    • Damages: Mitigation, reinstatement.

    Secured Transactions

    • Bailment: Transferring personal property without transferring ownership.
    • Secured Transaction: Loan with security interest in collateral (e.g., mortgage).
    • Personal Property vs. Real Property: Secured transaction differs by the type of property.
    • Creating Security Interests: Agreement establishing creditor’s security rights in collateral.
    • Types of Security Contracts: Conditional sales, chattel mortgages, pledges, assignment of book debts, floating charges.
    • PPSA: Provincial law regulating security interests.
    • Priority of Competing Interests: Determining priority among different secured creditors.
    • Effect on Third Parties: Impact on purchasers of collateral.

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    Description

    Explore the concept of discharge in contracts, focusing on how contractual obligations can be terminated through various means. Learn about discharge by performance, survival of performance, and key provisions like indemnification and limitation of liability.

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