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Unformatted text preview: C HAPTER 9 T ERMINATION AND E NFORCEMENT OF C ONTRACTS Objectives After studying this chapter, you should have an understanding of: the termination of a contract by performance the termination of a contract by agreement the termination of a contract by frustration the methods of enforcing contracts the concept of privity remedies for breach of contract Learning Outcomes Understand that the optimum position for the parties is when a contract is terminated through performance or agreement (pages 195 198) Understand the limited application of the doctrine of frustration to terminate an agreement (pages 198) Understand the concept of privity of contract as it relates to exclusion clauses (pages 201) Understand the significance of the difference between a breach of a condition and a breach of a warranty (pages 203) Understand the general principles on the recovery of damages (pages 206-208) Understand when a court will grant an equitable remedy (pages 210) Chapter Summary Most contracts end when the parties perform their obligations as promised. Such performance may be completed by the parties or by their employees and agents. Rights under a contract may be transferred or assigned to another party. Of course a contract can also come to an end if both parties agree to terminate before completion. In rare situations, a contract is not terminated by agreement or performance, but by frustration, where an unexpected event makes performance of the contract impossible or illegal. The most difficult position for a business is when one party fails to perform the contract as promised. This breach of contract can result in a lawsuit. To succeed with an action for breach of contract, the innocent party must prove that there is privity of contract, breach of contract and entitlement to a remedy. If the breach is of a major term in the contract, the innocent party may sue for damages and as well, choose to treat its obligations under the contract as ended. For breach of a minor term of the contract, the innocent party is entitled to damages only. The purpose of the damage award is to put the innocent party in the position it would have been had the contract been properly performed, provided that the party in breach could 2008 BY N ELSON , A DIVISION OF T HOMSON C ANADA L TD . PART 2: CONTRACTS reasonably anticipate such losses. If the contract contains an exclusion clause, this will reduce or eliminate the damage award that would otherwise be payable. Damages can also be reduced if the innocent party fails to mitigate his losses, or take reasonable steps to reduce his losses. In situations where damages is not an adequate remedy the court may exercise its discretion to grant an equitable remedy, such as an order for specific performance, injunction, or rescission....
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This note was uploaded on 06/04/2009 for the course BUSINESS LAW380 taught by Professor Davidmariofarmani during the Fall '08 term at Seneca.
- Fall '08
- Business Law