6.3 divisible contracts (slides).pptx

Principles of Business Law TOPIC 6: PERFORMANCE AND BREACH DIVISIBLE CONTRACTS Performance of divisible contracts  What appears to be a single contract may, in fact, be treated by the courts as a series of divisible contracts.  Example:  A agrees to purchase 50 t-shirts a wee...

Principles of Business Law TOPIC 6: PERFORMANCE AND BREACH DIVISIBLE CONTRACTS Performance of divisible contracts  What appears to be a single contract may, in fact, be treated by the courts as a series of divisible contracts.  Example:  A agrees to purchase 50 t-shirts a week from B, for one year. The record this agreement in a single document.  The agreement is likely to be viewed as 50 separate contracts, each requiring the delivery of 50 t-shirts.  A breach of one of the divisible contracts does not involve a breach of the remaining divisible contracts, which remain valid and enforceable.  That is, if B did not deliver 50 t-shirts one week, there would be no breach of the remaining 49 contracts. Divisible contracts: Phillips v Ellinson Bros Pty Ltd FPBCL p 405-6 Facts  P was employed as a manager by EB for two years.  P was contracted to work full-time (160 hours a month) but reduced his work to 60 hours per month (the employment contract was not varied, but P was paid only for 60 hours).  The employment contract provided that at the end of the two-year period, P was entitled to a percentage of profits made by the company during that two-year period.  At the end of the two-year period, P claimed the profit-share payment.  EB argued that P was not entitled the payment as he had not performed the terms of the contract (ie he had not worked 160 hours per month). Divisible contracts: Phillips v Ellinson Bros (ctd) Issue  Was P entitled to claim the profit-share payment?  Was there  a single (indivisible) contract (which had not been fully performed)  or two or more divisible contracts (one of which had been fully performed)? Decision  P was not entitled to claim payment – he had not fully performed his contractual obligations. Reason  The contract was a single, indivisible contract.  P had breached the indivisible contract and thus was not entitled to enforce the profit-share provision. Divisible contracts: Government of Newfoundland v The Newfoundland Railway Co FPBCL p 358 Facts  GoN contracted with NRC for NRC to construct a railway.  GoN agreed to grant NRC 25,000 acres of land for each five-mile section constructed.  The project came to an end after only seven sections had been built. Issue  Was NRC entitled to 25,000 acres of land for each of the 7 sections completed even though the complete railway would no longer be built? Divisible contracts: Government of Newfoundland v The Newfoundland Railway Co (ctd) Decision  The company was entitled to the grants as payment for the seven sections completed. Reason  The contract was divisible.  The parties had in fact reached a series of agreements, each relating to the completion of one section.  The grants of land were dependent only on the completion of each section.