Breach of Contract

Notes:Contract Notescontractnotesmhage-1.doc

Warranty or Condition as a breach of contract

 

A breach of contract occurs when one party to the contract fails or states that he will fail to perform part or all of his side of the bargain.

 

The law decides whether a breach of contract is serious enough by deciding which type of term in the contract has been broken. A term in a contract is known as either a condition or a warranty.

 

A term which can be either a condition or a warranty depending on the nature of the failure is known as an innominate term.

 

If the breach has serious consequences for the innocent party the C will have the choice of ending or continuing with the contract, as well as claiming damages. This would be regarded as a breach of a condition of the contract. A condition is a term of the contract that goes to the heart of the contract. For example, if I rent a car, one term of the contract that will be a condition is that the car will actually go and stop. If it does not, then clearly I would want to end the contract and either rent a different car or go elsewhere. The failure to provide a car that goes and stops would be a breach of condition of a contract and I would be entitled to treat the contract as ended.

Where the breach is only trivial, the innocent party must continue with the contract, although he can claim damages for any losses. This is a warranty. A warranty is a term that if broken if it is broken, loss will result, but the main purpose of the contract will still be achieved. For example, If I rent a car and the rental company offers me one which has a CD changer if the CD changer does not work I will still have a useable car, but would expect to pay less and to be compensated for any CD of mine that I loaded that could not be recovered from the broken changer. This would be a warranty and I would have to continue with the contract, but would expect compensation for my lost CD and perhaps very minor compensation for the car not having a CD changer.

 

Actual breach and anticipatory breach of a contract.

 

Breach of contract can occur in two ways: actual breach and anticipatory breach. Actual breach occurs either through poor performance of the contract, where there is performance of the contract but the work is done badly or the goods are substandard, or by non-performance where the work is not done or the goods is not provided at all. For actual breach it will depend on whether the breach is a condition or a warranty as to what the C can claim as damages. You must refer to the notes on condition and warranty.

 

Anticipatory breach occurs where one party to the contract states or otherwise indicates that there will not be performance of the contract. This is usually that goods or services will not be provided

 

If an actual or anticipatory breach of contract takes place the person affected can start legal action under the contract.

Issue

Case Name

Facts

Legal point

Condition

Actual Breach

Poussard v Spiers and Pond

Opera singer made a contract to sing in an opera. She failed to attend the first six performances and was replaced for the entire run of the opera. She could only be replaced if her failure to attend was a breach of condition.

Poussard’s inability to sing the lead role in an opera for the first six days of performances was a breach of condition. The opera promoter was therefore able to end the contract and replace the singer.

Warranty

Actual Breach

Bettini v Gye

An opera singer made a contract to perform from March to July and was also required to attend six days before performances for rehearsals. He failed to attend the first two days of rehearsals. The promoters wanted to replace the singer for the actual performances but could only do this if the rehearsals were a condition of the contract.

This was considered to be a warranty as it was only for part of the rehearsal, not the performances, so the singer could not be replaced without the opera company breaking their contract.

Type of Breach

Case Name

Facts

Legal point

Anticipatory breach

of a condition

Hochster v De La Tour

A tour guide was told that his services would not be required despite the contract for him to work in two months' time.

The court decided this was anticipatory breach as the tour guide’s contract had not ended. Here the guide has a choice: he could wait and see if the guide work was in fact wanted after all on the due dates, or treat the contract as ended and take immediate legal action to recover damages for his loses.

Anticipatory of

a condition

Avery v Bowden 1855

A case involving an agreement to supply a cargo for a ship at a port in Russia. The claimant was advised that the cargo would not be supplied.

The court decided this was anticipatory breach. However as the C decided the wait until the end of the agreement expired before claiming damages the Crimean war with Russia then made the contract unenforceable.

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