What Kind Of Breach Of Contract Entitles The Innocent Party To Repudiate The Contract? Are The Rules Sufficiently Clear To Produce The Certainty Required In Commercial Transactions?
Commercial Law regulates corporate contracts, hiring practices, and the manufacture and sales of consumer goods. This is to focus on commercial transactions, aiming to protect business entities participated in between. A contract is used as an agreement record between parties, in the event of a breach that is substantial, which means that one or more of the terms and conditions laid out in the contract has been broken, allowing judicial intervention by relieving the innocent party of the obligations and claim for damages on the breaching party, this may also lead to the contract break down. In contract law consideration is concerned with the bargain of the contract. A contract is based on an exchange of promises. Each party to a contract must be both promisor and a promise. They must each receive a benefit and each suffers a detriment. This is referred to the terms on the agreement, known as conditions and warranties, where condition is a major term of the contract which goes to the root of the contract. If a condition is breached the innocent party is entitled to repudiate the contract and claim damages. Warranties are minor terms of contract which are not central to the existence of the contract. If a warranty is breached the innocent party may claim damages but cannot end the contract, compared to conditions.
In general, there are four types of breach of contract.
Minor breach, said to be a partial breach, when the specified order of performance is achieved, but found working in an alternative method, will be seen as a minor breach of contract, but can only collect actual amount of damage. Material breach, occur when one failed to achieve the performance required, the innocent party will be deprived of the benefit which they reasonably expected, they can either compel performance, or collect damages because of the breach. For both of the cases the innocent party cannot repudiate the contract.
Repudiatory breach is a breach which is sufficiently serious to entitle the innocent party to bring the contract to an end. However it is quite difficult to indentify if repudiatory breaches occur or not, serious difficulties can arise if care is not taken. The innocent party usually has two options. It can either accept the repudiation and treat the contract as at an end or affirm the contract and insist on performance. It can be difficult to decide whether a breach is sufficiently serious where there is neither an outright refusal to perform in future nor a breach of condition but where the innocent party considers the breach or threatened breach to have significant commercial consequences. In some cases innocent party wishes to rely on the cumulative effect of numerous breaches, the situation can be more complicated if the contractual terms are not in writing or if the obligations are “unclear”. Timing can be another important factor in the case. They usually decide quickly to reserve their position, since there might be risk of new contractual terms replacing the original, result in totally changing the situations. There might be some rare cases as the defaulting party’s honest misapprehension was no bar to a finding of repudiation given the immediacy and severity of its threatened breach. This might bring difficulties for the innocent party to decide.
Anticipatory breach occurs when a clear indication is shown that the party will not perform at the time the performance is due. It entitles the innocent party to terminate the contract if it can be established in advance that the other party will not perform its obligations, for instance, due to financial situation, etc. anticipatory breach must be a material breach.
As stated above, to decide whether it’s a breach or not, rules are needed to clarify the situation. Statements made during the course of negotiations could amount to a contractual term or a representation. It is important to know whether a particular statement is a contractual term or if it is a representation as this will determine the appropriate cause of action and remedy available. If the statement amounts to a term of the contract and is not fulfilled, the innocent party may sue for breach of contract. If the statement is merely a representation which turns out to be untrue, the innocent party may bring an action for misrepresentation.
While there might also be mistake appears in the contract. A contract requires a meeting of the minds .In common mistake; both parties make the same mistake. Each knows the intention of the other and accepts it but each is mistaken about some underlying and fundamental fact. In mutual mistake, the parties misunderstand each other and are at cross purposes. Where the courts make a finding of mistake this will generally render the contract void from the beginning so it is as if the contract never existed. This represents an important distinction from voidable contracts. Where a contract is voidable, the contract exists and is valid until such time as the innocent party takes action to set the contract aside. Thus where there is a voidable contract a person acquiring goods under a contract will obtain good title to those goods. If a contract is void, no title passes. This distinction is most relevant where the goods have been sold on to a third party. A purchaser of the goods will acquire good title if the original contract was voidable, but will not obtain title if the contract is void.
A misrepresentation is a false statement of fact or law which induces the representee to enter a contract. Where a statement made during the course of negotiations is classed as a representation rather than a term an action for misrepresentation may be available where the statement turns out to be untrue. The affect of a finding of misrepresentation is the contract is voidable i.e. the contract exists but may be set aside by the representee. The remedy available depends on the type of misrepresentation, but generally consists of rescission and or damages. The right to rescind the contract may be lost in some circumstances.
Undue influence exists where a contract has been entered as a result of pressure which falls short of amounting to duress, the party subject to the pressure may have a cause of action in equity to have the contract set aside on the grounds of undue influence. Undue influence operates where there exists a relationship between the parties which has been exploited by one party to gain an unfair advantage. Undue influence is divided into actual undue influence and presumed undue influence. Where a contract is found to be entered into as a result of undue influence, this will render the contract voidable. This will enable the person influenced to have the contract set aside as against a party who subjected the other to such influence. In addition, in some instances the party influenced may be able to have a contract set aside as against a party who was not the person inflicting the influence or pressure.
As of the factor stated above and some of the cases studied, rules are not sufficiently clear at the stage for judgment on breach of contracts.
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