Law Reform (Frustrated Contracts) Act 1943

Statute intervened to remedy the potential injustice of the common law with the introduction of Law Reform Act 1943. The position is now as follows:

• any money paid is recoverable;

• any money due to be paid ceases to be payable;

• the parties may be permitted, at the discretion of the court, to retain expenses incurred from any money received; or to recover those expenses from money due to be paid before the frustrating event. If no money was paid, or was due to be paid, before the event, then nothing can be retained or recovered; and

• a party who has received valuable benefit from the other’s performance before the frustrating event may have to pay for that benefit.

The Act does not apply to contracts of insurance, contracts for the carriage of goods by sea and contracts covered by s 7 of the SoGA 1979

DISCHARGE BY BREACH

Breach of a contract occurs where one of the parties to the agreement fails to comply, either completely or satisfactorily, with their obligations under it. A breach of contract may occur in three ways:

• where a party, prior to the time of performance, states that they will not fulfil their contractual obligation;

• where a party fails to perform their contractual obligation; or

• where a party performs their obligation in a defective manner.

 Effect of breach

Any breach will result in the innocent party being able to sue for damages. In addition, however, some breaches will permit the innocent party to treat the contract as having been discharged. In this situation, they can refuse either to perform their part of the contract or to accept further performance from the party in breach. The right to treat a contract as discharged arises in the following instances:

• where the other party has repudiated the contract before performance is due, or before they have completed performance; and

• where the other party has committed a fundamental breach of contract. As has already been pointed out in Chapter 7, above, there are two methods of determining whether a breach is fundamental or not: the first is by relying on the distinction between conditions and warranties; the other is by relying on the seriousness of the consequences that flow from the breach.

 REMEDIES FOR BREACH OF CONTRACT

The principal remedies for breach of contract are:

• damages;

• quantum meruit;

• specific performance;

• injunction;

• action for the agreed contract price; and

• repudiation.

Which of these remedies is available for a particular breach depends on issues such as whether the breach is of a condition or a warranty

 DAMAGES

According to Lord Diplock in Photo Productions Ltd v Securicor Transport Ltd  Every failure to perform a primary obligation is a breach of contract. The secondary obligation on the part of the contract breaker to which it gives rise by implication of the common law is to pay monetary compensation to the other party for the loss sustained by him in consequence of the breach.Such monetary compensation for breach of contract is referred to as ‘damages’. The estimation of what damages are to be paid by a party in breach of contract can be divided into two parts: remoteness and measure.