4. Consequences of the Contract

4. Consequences of the Contract - Consequences of the...

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Consequences of the Contract Discharge of Contract – 11 th pg. 252-261 THE WAYS IN WHICH A CONTRACT MAY BE DISCHARGED Discharge a contract - cancel the obligation of a contract; make an agreement or contract null and inoperative Four ways in which a contract may be discharged: 1) performance, 2) agreement, 3) frustration, 4) operation of law DISCHARGE BY PERFORMANCE The Nature of Discharge by Performance Contract ends when parties have performed their respective obligations To be fully discharged, both parties must complete performance Bilateral contract has 3 stages: 1) neither party performs, 2) only one perform 3) both perform, resulting in contract discharged by performance Performance can take several forms: services, goods delivered, cash, or combo Tender of Performance One party may attempt to perform, while other party refuses to accept Tender of performance – an attempt by one party to perform according to the terms of the contract (whether accepted or rejected) The party who performed may immediately sue for breach of contract Debtor who makes unsuccessful but reasonable attempts to pay is free from liability for interest Debtor pays by Legal tender – bank of Canada note and silver coins to the limit of $10 If creditor refuses legal tender, action to recover the money is their own expense DISCHARGE BY AGREEMENT Waiver Parties may agree b/w themselves not to perform their contract Waiver – an agreement not to proceed with the performance of a contract already in existence Automatic consideration of waiver if neither party performed fully If one party fully performed, they have no consideration for giving a waiver of the other party’s duty to perform. To be binding, promise to release the other party should be under seal Party who fails to perform without a waiver by the other commits a breach
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Substituted Agreement Material alteration of the terms – parties goes to the root of the contract, discharge their original contract and replace with a new one Accord and satisfaction – a compromise between contracting parties to substitute a new contractual obligation and release a party from the existing one Novation – replacement of one of the parties discharges the original contract and substitutes a new one (e.g: taking over a business and taking on its liabilities) A Contract Provides for Its Own Dissolution Before agreeing to a contract, one party expresses concern about a possible event affecting its ability or willingness to perform If other parties agree, express term created to allow for this event occurring Condition precedent – future or uncertain event that must have occurred before the promisor’s liability is established. Oral understanding or written contract. Condition subsequent
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4. Consequences of the Contract - Consequences of the...

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