2fraud Fraud omnia vitiate – fraud vitiates everything Must be specifically pleaded and strictly provenIt can be presumed when consideration is woefully and shockingly inadequateCan be rebutted by evidenceMakes a contract voidable – party must act timeously upon discovering it
3Discharge of Contractual obligations and Remedies
4Where a party is freed from performing his obligations under a contract Hence there are no outstanding obligations under the contract.There are 4 ways in which a contract can be discharged or terminated:
5Discharge by agreement Discharge by performanceDischarge by frustrationDischarge by breach
6Discharge by Agreement Contracts may be discharged/terminated by agreement just as they are created by agreementThis may be provided for by a termination clause in the contractIf the performance of the obligations under the contract are in the future and neither party has performed his obligations then the parties may agree that each be released from his obligationsCan also apply where parties are replacing an existing contract with a new one, or varying the terms of an existing one
7Fish & Meat Co Ltd v Ichnusa Ltd – pg 98 Novation – agreement to substitute one of the parties or the terms of the contract.Obligations under the old contract are discharged.Japan Motors v Randolph Motors – pg 99
8To successfully plead it: Intention to substitute, which may be by words or conduct. Conduct must be clear and unambiguousThere must, in fact, be a substitution of the old with the newMutual consent – express or by conduct
9Discharge by Performance Performance is where one or both parties have fulfilled their obligations under the contract in accordance with the terms of the contract.General rule is that performance must be exact and complete. Partial performance is no performance. E.g.:Goods to be supplied under a contract must be of the right kind and of the right quantity. If it is not, the goods could be rejectedMoney to be paid in cash must be in cash and not cheque. It will only be exact when the cheque is honouredThe effect of this (exact and complete performance) is to discharge a party/parties from any or further obligations under the contract
10TimeGenerally time is not an issue unless the parties expressly state so,Or where the nature of the contract makes time of the essence, e.g., the supply of perishable goods
11ExceptionsIf the contract can be divided into several parts, complete performance of each part constitutes performance in respect of those parts, but the obligation to perform the rest remains.Where party who is to benefit accepts part performanceWhere the party who is to benefit prevents the other party from performing his obligationsWhere there is substantial performance of the entire obligation, this can arise in situations where hardship would be occasioned otherwise. E.g., a carpenter contracted to produce 4 chairs, but who is able to produce 3. He will be paid for the 3 and discharged.
12Discharge by Frustration Frustration is where the performance of obligations under the contract becomes impossible as a result of events beyond the power and control of either partyEffect is to discharge the parties from the contract. No legal action can be taken against either.
13Frustration can occur in the following ways: Death of a party to the contractDestruction of the subject matter, Taylor v. Caldwell: a contract to hire a hall for a musical show was frustrated because the hall was destroyed by fire through no the fault of the owner.non occurrence of an event – where the performance is dependent on an event, Krell v. Henry: held that a contract to hire a room overlooking the proposed route of the coronation procession of King Edward VII was frustrated when the procession was cancelled due to the king’s illness. Purpose of the contract was to view the coronation, not just to hire a room.
14Commercial purpose defeated Government intervention, e.g. compulsory acquisition, change in law has made performance illegalWhere frustration will not apply:Self induced events – Afrifa v Class Peters – pg 102Where parties foresaw the frustration and made provision for it
15Effects of frustration under the Contracts Act All monies paid would be recovered, and all monies payable would cease to be payableWhere a party has incurred expenses, he may be allowed to recover or retainIf there is part performance, courts may sever parts of the contract as if it were a separate contract
16Discharge by BreachWhere a party, without lawful reasons, and without consent of the other party fails to perform his side of the contractTypes of breach:Total failure to performAnticipatory – where before the date of performance, party indicates his intention not to performIncomplete or defective performance
17Effects of Breach:Not all breaches will warrant discharge from the contract. Mostly fundamental and serious conditions will lead to a dischargeWhere the other party has put himself in a position which makes it impossible to perform then the innocent party may be discharged and may sue for damages
18ExerciseRed Army is a carpenter. He contracted with Early Steps Pre-School to construct tables and chairs for use of the toddlers of the school. Under the contract, he was to build a 100 chairs and tables over a period of 7 days. At a point when RA had constructed 80 chairs and 83 tables, he received an urgent message from his village that his relative had passed away. As the oldest son, he immediately left for the village, after advising the school proprietor of his predicament. He did not return till two weeks later and was told that someone else had completed the contract and the school intends to sue him for breach. Advise the parties?
20Remedies for breach of contract Once a breach has occurred, the innocent party may seek redress in accordance with the terms of the contract.This may be by initiating a court action or arbitration.
21There are several means of redress: DamagesSpecific performanceInjunctionRescissionRectification
22Damages Awarded to compensate the innocent party for the breach basis is to put the injured party in a position he would have been in, as far as money can, if the other party had performed his obligationsCase: Juxon-Smith v KLM Dutch Airlines- 110Losses which are remote or cannot reasonably be linked to the breach cannot be paid for.
23Damages may be general or special General flows from the breachSpecial – liquidated, verifiable and provable sums, e.g., lost income, expenses incurred etcIn determining damages, the court considers two thingsRemotenessMeasure of damages
24Remoteness of damagesDamages must not be remote – they must be proximate to the breachHadley v Baxendale – 1112 tests established under this case:Do the damages arise naturally from the breach?Was it in the reasonable contemplation of both parties as being a probable result of the breach?If the answer is yes, then damage is not remote and therefore recoverable
25Horne v Midland Railway – 115 Note also page 116 on the essential principles
26Measure of damagesThis is the computation of how much money must be paid by the party in breach to the party suffering from the breach.Arkoful v State Fishing Corp – 117Note: An aggrieved party is required to mitigate his damages by taking reasonable stepsAttitsogbe v Posts and Telecommunications - 118
27Societe Generale de Compensation v Ackerman – 118 Loss incurredWages due and payableValue of any other benefit [one] is entitled toKisco Products (Gh) Ltd v Delmas America America Africa lines -119 to 120
28Quantum Meruit An equitable remedy meaning “how much it is worth”. Absent express terms the courts will assess an amount which is fair and reasonableSkanska v Klimatechnik Engineering Ltd – “reasonable, ..just right; not too little or too much”
29Applies where 122 Party is precluded from completing a contract No concluded contract122
30Money had and Received Frafra v Boakye – 123 An order compelling a defendant to refund monies paid by or on behalf of the plaintiff to the defendant, the ground being that the defendant has not at all performed his contractual obligations.
31Specific Performance An equitable and discretionary remedy It is not automatically available to a party who prays for itAn order of the court directing a party to perform his contractual obligationsIt will be available if damages will be inadequate, where the subject matter is of special interest and value to the plaintiff, where time is of the essence etc
32The one seeking the remedy must come with clean hands and must not himself be tainted by fraud or crookedness.IBM World Trade Corporation v Hasnem Enterprises Ltd – 127Addo v Ghana Co-operative Marketing Association LtdKoglex v Field – “the relief of SP lies whenever agreement between parties have got to a stage that it would amount to fraud on the part of the other party to refuse to perform his side of the bargain”
33Redco Ltd v Sarpong – 129Where a third party has provided valuable consideration, and acquired an interest in the subject matter, and has no notice of the rights and interests of the plaintiff, then SP would not lie, but rather damagesBasare v Sakyi & Another - 131
34SummaryThe courts will therefore consider the following for the grant of SP:Whether there is a contractWhere damages will not be an adequate remedyWhere the subject matter is unique and specialWhether time is of the essencePart performance and clean handsIs Remedy sought in a timely mannerWhere conduct of Plaintiff makes it fair and equitableWhether there is a bona fide purchaser for value without notice of any prior interest
35InjunctionAn equitable remedy directed at a party to refrain from doing a specified ActFish & Meat Co Ltd v Ichnusa Ltd - 132
36RescissionRemedy granted to one party to set aside a contract on grounds of fraud, misrepresentation, mistake.Car & Universal Finance Co. Ltd v Caldwell – 135SA Turqui & Bros v Lamptey – 136Restoration of both parties to their original positions must be possible for this remedy to lie
37RectificationAn equitable remedy where the court corrects or amends an error in a written contract to bring it into conformity with the actual agreement reached between the partiesit ensures that the written contract is in consonance with the oral or prior agreementIt is to restore the instrument to the true intention of the partiesWalker Property Investment (Brighton) Ltd v Walker - 137