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How well did you answer the questions? Score your responses against the answer guidance here.
In brackets is the number of marks each answer is worth. There is a maximum of 19 points available.
1. Distinguish strict contractual obligations and qualified contractual obligations and give an example of each. (4)
Answer guidance:
(a) Strict contractual obligations
(i) Are absolute and must be properly and precisely performed or the party owing that obligation will be in breach. No excuse (subject only to de minimis). (1)
(ii) Examples are most provisions of the sale and supply legislation e.g. s.12(1) SGA 1979 or delivery obligation. (1)
(b) Qualified contractual obligations
(i) Duty is to take reasonable care and exercise reasonable skill. No obligation to achieve a particular result and only need to perform to this qualified standard. (1)
(ii) Examples = Liverpool C.C. v Irwin or s.13 SGSA 1982 (contract for supply of service – carry out service with reasonable care and skill). (1)
2. What are the legal consequences of a breach of contract? (2)
Answer guidance:
(a) Damages as of right. (1)
(b) But contract remains in existence and both must perform future obligations unless it is a repudiatory breach of contract. If it is a repudiatory breach, then the injured party has the option of terminating the contract (i.e. both parties’ future obligations under the contract) or affirming, in addition to claiming damages. (1)
3. What constitutes a repudiatory breach of contract? (2)
Answer guidance:
(a) Breach of a condition. (1)
(b) Breach of a non-condition (you may use innominate term here if you wish) and the effects of the breach are so serious that they deprive the injured party of substantially the whole benefit which it was intended it should obtain under the contract (i.e. Hong Kong Fir test is satisfied). (1)
You may also have mentioned renunciation and/or incapacitation.
4. Is a term a condition where the parties classify it as such? (2)
Answer guidance:
No, not necessarily. It depends upon the nature of that term in relation to the contract as a whole. (1) Schuler v Wickman. (1)
5. What is the significance of s.15A Sale of Goods Act 1979 (as inserted by the Sale and Supply of Goods Act 1994)? (2)
Answer guidance:
S.15A SGA 1979 modifies the normal remedy in the case of breaches of ss.13-15 “conditions” (1) so that although statute classifies these terms as conditions, where
(a) the actual breach is so slight that it would be unreasonable for the buyer to reject (terminate); and
(b) the context is B2B,
only the remedy of damages may be available. (1)
6. What are the advantages and disadvantages of using the effects of the breach test to determine the right to terminate the contract? (3)
Answer guidance:
Advantage: Flexibility and prevents injured party using a minor breach of “condition” to allow it to escape from a bad bargain. Weir ([1976] CLJ 33) refers to this as “repressing sharp practice”. Instead, the right to terminate will depend upon the consequences of the particular breach. (1)
Disadvantages:
(i) Causes uncertainty (promotes inefficiency). (1)
(ii) Risk to injured party if it makes the wrong decision about the breach being repudiatory and it is later decided that it is not repudiatory. Injured party will be in wrongful repudiation and will be liable, notwithstanding that the original breach was by the guilty party. Therefore, Weir argues that this approach “rewards incompetence” (by the guilty party). (1)
7. What is the case authority for the fact that if the innocent party chooses to affirm the contract following an anticipatory repudiatory breach, it can continue to perform the contract and claim the contract price? (1)
Answer guidance:
White & Carter (Councils) Ltd v McGregor HL 3:2. (1)
8. What are the limitations on the availability of the principle mentioned in question 7? (3)
Answer guidance:
Lord Reid’s (1) limitations:
(a) Innocent party must be able to continue with its performance without the co-operation (active or passive) of the guilty party (Hounslow LBC v Twickenham Garden Developments), at least where the performance obligation is entire (Ministry of Sound (Ireland) Ltd v World Online Ltd), i.e. there is no obligation to payment without that performance (1); and
(b) Innocent party must have a legitimate interest (financial or otherwise) in performing the contract rather than claiming damages (Ocean Marine Navigation v Koch Carbon, The Dynamic). (1)
(The second limitation is a limitation on the innocent party’s right to affirm following an anticipatory repudiatory breach whereas the first limitation relates to the ability to be able to claim the contract price.)
Points scored [maximum of 19] =