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Termination Of Contract Notes

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Termination of Contract When can a contract be terminated?
o Chen Wishart: courts favour keeping contract in place and D paying damages for unperformed parts rather than allowing termination. o Where failure of performance is total
? C entitled to terminate contract o Where failure of performance is partial
? Chen Wishart: difficult technical questions arise

1. Is the obligation dependent on the other party's performance?
o Independent Obligations: where A and B have promissory obligation to one another, but this is independent of the performance of the condition (e.g. tenant's covenant to pay rent is independent from landlord's covenant to repair) o C cannot terminate, but D is liable for any breach o Dependent Obligations: Where A's performance is dependent on B's performance (e.g. where C buys goods from D, C need only pay if D delivers) o If this is an entire obligation
? (where D must complete entire performance before C is obliged to pay, for instance)

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then if D defaults, C can terminate, need not pay any of the performance completed, and D is liable for any breach. o If this is a divisible obligation
? Then if D defaults

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C can claim damages o But may not be able to terminate contract

2. If the obligation is divisible, when can this be terminated?
o Breaches of "conditions"(essential term) = C can terminate in all circumstances. o Hong Kong Fir Shipping v Kawasaki [1962]: X hired vessel from Y for 24 months, returned after 12 claimed "unseaworthy" therefore breaching contract.
? Sellers LJ:

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unless the non-performance alleged goes to the whole root of contract, o it is not to be treated as so fundamental as to undermine the whole contract.
? It will only give rise to damages, not termination. o Breaches of "warranties" (subsidiary term) = C cannot terminate. o Hong Kong Fir Shipping v Kawasaki [1962]:
? Upjohn LJ:

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Where term is open to many interpretations, o it is contrary to common sense to suppose that in such trivial breaches of the term, D should immediately have a right to end the contract.
? Unless the contract makes that very clear indeed. o Innominate terms (wait and see) o Problem: It's sometimes impossible to tell at contract formation whether a term in a condition or warranty - hence rise of innominate terms:

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