Week 3 Business and Corporate Law PDF

BUSINESS AND CORPORATE LAW WEEK 3: BREACH OF CONTRACT AND REMEDIES FOR BREACH OF CONTRACT Breach of contract At the end of this lesson, the student should be able to: 1. Describe the meaning and types of breach of contract 2. Explain the remedies for breach of contract 3. D...

BUSINESS AND CORPORATE LAW WEEK 3: BREACH OF CONTRACT AND REMEDIES FOR BREACH OF CONTRACT Breach of contract At the end of this lesson, the student should be able to: 1. Describe the meaning and types of breach of contract 2. Explain the remedies for breach of contract 3. Describe the ways in which a contract may come to an end Contract: Breach Breach of contract (Failure or default to discharge a part of or the entire obligations of a party) Actual breach: Time has arrived but no performance. Victim may accept the breach/repudiation and sue for damages or reject the breach/affirm the contract and sue for specific performance Anticipatory breach: Time for performance has not arrived but a party expressly or by necessary implication indicates their unwillingness to render performance. The party can sue for damages only Remedies for breach of contract Remedy (Redress) : Specific performance; damages; interdict; cancellation/rescission 1. Specific performance: An equitable remedy that directs the defaulting party to discharge his obligations under the contract. Payment of money as an obligation is damages The rules/requirements of specific performance: -Performance must be possible: Shakinovsky v Lawson & Smulowitz -The subject matter should not as a rule be the rendering of services of a personal nature, e.g., an employee should not be forced to work. It would be impossible for the court to enforce performance Contract: Specific performance -No hardship to the public/community: Haynes v King Williamstown Municipality -It is a discretionary remedy: The court may refuse the order even if the requirements are met, e.g., a seller who refuses to transfer his only piece of land in which he lives with his family. -Generally, damages (money) should not be adequate and therefore specific performance. Note: If a party’s obligation is to pay a sum of money to the other party but he is in default and the court orders the defaulting party to pay, the remedy is not specific Contract: Remedies cont. 2. Damages: Monetary compensation equivalent to the loss. The three categories of damages: (i) Compensatory damages: Damages that restore the loss incurred by the claimant/plaintiff, e.g., the cost of replacing a defective part of a newly-installed machine. The loss may be intangible, and the claimant sues for general damages, e.g., for bodily injury or emotional distress. If the claim is successful, the court assesses/quantifies damages in the event the parties do not agree on the quantum.  Contract: Remedies cont. Parties may agree before the breach on the amount of compensation. These are liquidated damages, e.g. P1000 for every day the mini-bus is not repaired as agreed. Special damages are damages that can be easily determined, e.g., medical expenses Nominal damages Minimal compensation because although the defendant is to blame, there is no injury or loss to the claimant. Could be as little as P100.  Remedies for breach of contract (ii) Consequential damages Damages arising from breach but exceed the actual loss, e.g., loss of profits from a poorly repaired laundry machine. The loss must be fair and reasonably foreseeable by the defendant. No compensation if the loss is remote: Victoria Laundry v Newman (iii) Punitive/exemplary damages Awarded by the court as punishment for outrageous breach of contract or other unlawful or extremely unreasonable conduct e.g. relentless defamation  Contract: Remedies cont. (3) Interdict (Injunction in English law) Two types: (i) Restraining/prohibitory interdict: Compels a party not to act contrary to the contract, e.g., not to sell the land to any other person. (ii) Mandatory interdict Compels a party to undo the breach. It restores a party to its original position, e.g., return of unlawfully repossessed car by a bank Rules/requirements of interdict : -a clear right (show factual ) -The right is infringed upon or about to be -Apprehension of irreparable harm (cannot be adequately compensated by damages),e.g., reputation damage -The balance of convenience: Claimant must prove he’ll be more inconvenienced that the defendant if the order is not granted favours the granting of the remedy (clai  Contract: Remedies cont. (4) Rescission: -To rescind means that the contract comes to an end/cancellation -Parties may agree on the kind of event that will cause cancellation, for example, late/non- payment of school fees, rent, etc.. -A contract may also be rescinded if it’s made from misrepresentation, duress or undue influence: These factors make a contract voidable. It is valid but it can be set aside if the claimant so chooses. -Damages are awarded in addition to rescission, e.g. for lost time etc.  Contract: Ending a contract Ending a contract Discharge: Performance of reciprocal obligations. In such a case, the parties are discharged from their rights and obligations. Termination: -Breach: actual or anticipatory (see breach of contract) -Prescription: Prescription Act: The Act terminates rights due expiry of time (out of time/time barred) within which rights should be enforced in court, e.g., oral agreement: 3 years to sue from the time of breach -Set-off: liquidated claims that are mature/due extinguish each other  Ending a contract cont. -Merger: debtor and creditor become one -Agreement: To end the contract -Insolvency: Cannot pursue the insolvent (so to him the contract is no more); creditors to pursue the trustee or the liquidator -Death: contract of a personal nature e.g., employment -Supervening Impossibility of performance/frustration/force majeure: Event beyond the control of a party e.g., border closure by the State or natural causes (floods etc.) THANKS