Law of Contracts in Sri Lanka specific mixture of English law with roman dutch law .pptx

basic law of contracts part 2

1. Law of Contracts - Part 2 MBA in Logistics Management Subject : Legal aspect of Logistics By Prabash Semasinghe LLM -Wales (International Trade Law) LlM -Colombo (Commercial Law) Attorney at Law

2. 3. Due observance of prescribed forms or modes of agreement , if any. Statutory provisions relating to forms : Section 2 of the Prevention of Frauds Ordinance No 7 of 1840 : This declares any sale ,purchase ,transfer mortgage of land or immovable property Any contract for future sale of a land Any promise or contract for effecting any security or encumbrances affecting land Should be in writing and such document should be signed in the presence of a licensed Notary Public and two or more witnesses .

3. Cont… 2. Section 18 of the Prevention of Frauds Ordinance States that no promise ,contract , bargain or agreement ,unless it is writing and signed by the parties making same or some person authorised by him shall be in force for any of the following purposes…. For charging any person with debt or default For pledging movable property

4. 3. Section 17 and 18 of the Registration of Documents Ordinance: Section 17/18 of this Ordinance states that no pledge , mortgage or bill of sale shall be any force or give any right or priority to u nless , the property is actually delivered into the possession Such instrument should be in writing in the presence of witnesses and registered at the office of the registrar of Lands

5. Section 22 of the Crown Land Ordinance Any grant ,sale or lease of state land should be under signature of the Governor General and now the President .

6. Contracts unenforceable unless in a particular form.. Sale of Goods- section 5 says contract for sale of good is unenforceable unless buyer has accepted at least a part of the goods or paid the price or part of it and some note or memo in writing to establish the contract. Promise of Marriage should be in writing ( Section 19 of the General marriage Ordinance ) Section 18 of the Prevention of fraud Ordinance on Partnership Agreement

7. 4. Consideration The English common law doctrine of "consideration" has an economic value (the money value passed) and is an essential component of the validity of a contract. A valuable consideration in the eye of the law may be where each party has bought the other’s promise either by doing some act in return for it or by offering a counter promise. Consideration need not be adequate but must be of value. Examples of consideration – the act of giving, act of performance, to abstain from doing an act, to suffer detriment or loss, to assume a liability or responsibility which did not bind one before. An existing moral obligation (which is not enforceable at law) does not constitute a good consideration

8. Cont…. In the Roman Dutch law, the simple requirement of “just causa” suffices and this is what is generally operative in Sri Lanka. However, in respect of contracts governed by principles of English law (mainly because of Civil Law Ordinance ) consideration may be required. “just causa” denotes the ground, reason or object of a promise, giving such promise a binding effect in law. It has a much wider meaning than the English term “consideration” and comprises the motive or reason for a promise and also moral consideration [Lipton v. Buchanan, (1904) 8 NLR 49 Jayawickrema v. Amarasuriya, (1918) 20 NLR 293, 294- Moral Consideration was accepted as a valid ground.

9. Capacity to Contract

10. Capacity to Contract Capacity to contract means the legal competence of a person to enter into a valid contract. Usually the capacity to contract refers to the capacity to enter into a legal agreement and the competence to perform some act. All persons have the capacity to contract. However, the law provides protection to certain persons as provided below. -

11. Minors Minority in all legal regime acordered a recognition as a condition or status requiring special protection. Therefore on behalf of a child , a next friend Guardian ad litem - representing the child in courts curator : administer and manage the goods and property of a child (Minor) Guardian of the person : is in charge of the Minor and maintenance of the Minor Civil Procedure Code shall provide legal procedure for such intervention in respect of a Minor . Chapter XXXV , Section 480 of the Civil Procedure Code states that an order made in action in court to which a minor is a party but without such minore being represented by a guardian ad litem may be discharged .

12. Termination of Minority By attainment of age (18 years ) By grants of letters venia aetatis By marriage By emancipation In the case of Muslim, by attain of puberty

13. Persons of unsound Mind If a party to a contract is insane at the time of contracting , such contract is null and avoid A guardian can be appointed on behalf of such person with insane mind. However insanity is a relative concept and should consider the medical openion on the intencity of the lunacy and should consider the lucid intervals as well.

14. Drunkenness According to RDL intoxication of the required degree renders a contract voidable . Test is whether the decree of intoxication deprived him of his reasoning powers. If so he can repudiate the contract within 24 hours otherwise hold to the contract.- However now not in common usage Where one party knows the other party is intoxicated and nevertheless entered with a contract , that amounts to a fraud and contract is void. Section 3 of the Sale of Goods Act states that if the life necessities are sold a minor , person with mental incapacity or a drunk person, even such person should pay the price for such necessities.

15. Marriage as a phenomenon which incapacitate a person from entering to contract. Under Thesawalamai Law a married woman is not competent to deal with her immovable property without the concurrence of the husband.

16. Insolvency This curtails but does not wipe out contractual capacities. These matters governed by the Insolvency Ordinance No 7 of 1853 If the Court adjudged a person is insolvent , his all dealing including all the contracts are become void. Section 51

17. Terms of Contract

18. The difference between a term and a representation This section will examine the key differences between a term and a representation, and how the courts will make a decision on the matter. Is the statement in writing? If Yes will form a term of the contract Is there any specialist skill or knowledge from one party? Is there reliance on the statement, or importance placed on the statement? How long was the lapse of time between the statement being made and the formation of the contract? Could the party relying on the statement have verified it?

19. Is the statement in writing? If a statement is in writing, there will be a presumption that it will form a term of the contract. Parol Evidence Rule : Claims pointing to other documents or oral agreements will usually be ignored. This is known as the ‘parol evidence’ rule. Henderson v Arthur [1907] 1 KB 10 However , If the contract was intended to be partly written and partly oral, the parol evidence rule will not apply.

20. Is there any specialist skill or knowledge from one party? If the individual making the statement has some specialist skill/knowledge of the contractual subject matter, or claims to have such knowledge, the presumption is that the statement is more likely to be a term. In Oscar Whell Ltd v Williams [1957] 1 WLR 370, a car seller represented his car to be a model which was worth substantially more than the actual model he was selling. This statement was held not to be a term, as the seller had no specialist knowledge, and used what the registration book told him. Furthermore, the buyers were actual car dealers, and should have discovered the truth In Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623 a car dealer stated a car had only done 20,000 miles, when it had done significantly more. As the statement was made by a car dealer, with specific knowledge, the statement was held to be a term.

21. Is there reliance on the statement, or importance placed on the statement? If the individual relying on the statement makes it clear that the statement was of such importance that they would unlikely have contracted without that guarantee, the presumption is that the statement will be a term The case of Bannerman v White (1861) 10 CB NS 844 Party A asked whether sulphur was used in the product he was buying, explicitly stating he was not interested if they included sulphur. He was assured by Party B that there was no sulphur included. This is an example of expressly confirming the importance of a term, therefore, when there was sulphur included, the defendant could rely on this term to claim for breach of contract.

22. How long was the lapse of time between the statement being made and the formation of the contract? The first presumption relating to a lapse of time is that if a party makes a statement , and soon after , the contract is reduced to writing without inclusion of the said statement in writing , that statement would not form a term of the contract, and would only be a representation In Inntrepreneur Pub Co v East Crown Ltd [2000] 2 Lloyd’s Rep 611, i t was stated that the longer the interval between the statement and the contract, there is a greater presumption that the statement is not a term.

23. Could the party relying on the statement have verified it? T here are two presumptions which fall under this heading. First, if a statement maker accepts responsibility for the truth of a statement, the statement will be a term. The second presumption is that where a statement is made, but that party advises or tells the other party to verify that statement, the statement will be a representation, not a term. This is because the statement maker suggests the statement may not be true and he would advise it is confirmed. Ecay v Godfrey (1947) 80 Lloyd’s Rep 286

24. Term or Representation Both terms and representations provide a remedy for the aggrieved party, therefore, why does it matter which of the two a statement is? The significance is the form of remedy, as the remedies are different for the two. First, it is helpful to define the two. Term : A promise as to the truth of a statement. On a breach of a term, there is automatically a right to claim for damages Damages will be based on an expectation measure - the claimant will be put into the position they would have been in had the contract been properly performed. Damages will be recoverable based on the remoteness rule from Hadley v Baxendale (1854) 9 Exch 341 . This test requires that the loss suffered by the claimant was ‘reasonably contemplated’ by the parties. Representation /Misrepresentation There is no promise, but the statement induces the making of the contract A misrepresentation only allows a claim for damages if it can be proven that the statement was made fraudulently or negligently, an innocent representation will not result in a claim for damages Damages will be limited - the claimant will be put into the position they were in before the contract was made. Fraudulent misrepresentation will allow for a claim for all direct loss by the claimant, irrespective of foreseeability .

25. Incorporation of terms

26. Once a statement has been identified as a term of a contract, it is not the case that this will always be binding on the parties; the term must have been successfully incorporated into the contract. Only following incorporation will that term become a part of the contractual obligations. There are three main ways by which this may be done: Signature: It is held that if a party signs a document containing contractual terms, they are wholly bound. The terms are incorporated, and it is immaterial whether or not they read the document. Notice: In order for a term to be incorporated into the contract, the party who it confers obligations upon must be or ought to be aware of its existence Previous course of dealings: There are some occasions where notice of terms will not be required to be given. This will be on the basis that the parties have had a previous course of dealings, and therefore will be aware of all the relevant terms.

27. N ature of terms - express or implied? A term may be incorporated into the contract either expressly or impliedly. Express terms are those which have been explicitly communicated between the parties orally or in writing. The intention of the parties is clear and there is little discussion to be had of these. Implied terms are those terms which fill the gaps in the contract. For example, take a contract in which an individual goes to a restaurant for a meal. The express contractual terms will be for the exchange of an amount of money for the food. However, there will be implied terms as to the quality of the food; for example,

28. Different types of terms Contractual terms can be classified as one of three different types of terms: Conditions Warranties Innominate

29. Condition s & warranty A condition is the most important of terms. If a condition of a contract is breached, the aggrieved party can choose to bring all contractual obligations to an end, and will have the right to sue for damages. A condition will be typically described as being of fundamental importance to the contract. In contrast, a warranty is of less importance to the contract. The result of a breach of warranty is the innocent party can claim damages for that specific breach of contract, but will not be able to bring the contract to an end, their contractual obligations will continue despite this breach

30. Innominate terms An innominate term is one which strikes a middle ground between a condition and a warranty, and it would be unfair to classify the term as either. in Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 in a contract for the lease of a ship. The term is question was that the ship must “be in every way fitted for ordinary cargo service”. This term was breached when the ship was not kept in adequate repair, which resulted in the ship only being at sea for six months of the contract. This breach was considered to be a breach of warranty, due to the less serious nature of the breach. The same term could have been breached by the ship not being seaworthy and actually sinking, destroying the subject of the contract, therefore in such a case the breach would have been serious and would likely be classified as a condition.

31. Factors Affecting the Validity of a Contract

32. Vitiating factors Even the most carefully drafted contract can be unenforceable if a vitiating factor applies. These are factors that, had they been known by all parties at the time of the contract, an agreement may have never been reached and the contract never formed Misrepresentation Mistake Duress Illegality

33. Misrepresentation A misrepresentation is an untrue or misleading statement which induces a party into a contract. It can be distinguished from opinions shared by the other party or sales talk, such as stating something is “the world's best” a misrepresentation will be a material statement of law or fact, but what is most important is that this representation, however it was made, actually caused someone to enter into the contract The courts will attempt to give effect to the parties’ intention insofar as this is possible. This will be an objectively applied standard Innocent misrepresentation :-Where the party who made the statement can prove that they had reasonable grounds to believe and did in fact believe , up to the time of the contract, that the facts represented were true . The remedy is either rescission or damages calculated on normal contractual principles.

34. Cont…. Fraudulent misrepresentation : Where the party making the statement e ither knows it is false, does not believe it , or is reckless as to whether it is true or not . The remedy is rescission and/or damages calculated by including all losses stemming from the misrepresentation, even consequential ones. Derry v Peek (1889) 14 App Cas 337A fraudulent misrepresentation was defined as a false statement which is ‘made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false’ Negligent misrepresentation : Where none of the first two options apply. It is usually found when the party who made the statement cannot prove that they had reasonable grounds to believe that the statement was true, and the remedy is the same as for fraudulent misrepresentation. Negligent misrepresentation can also be found at common law when there is a special relationship between the parties which g ave rise to a duty of care, and the remedy is damages based on the delicts. This claim was first established in the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. Caparo Industries plc v Dickman [1990] 2 AC 605, in order for a claim in negligence to be successful, there must be a special relationship between the parties so that there would be a duty of care which arises.

35. Mistake . When it comes to mistakes in contracts, there are 2 scenarios which can arise: Mistake preventing agreement Mistake nullifying agreement Unilateral Mistakes

36. Mistake preventing agreement An agreement mistake is one in which a fundamental mistake has been made relating to the terms of the contract which prevent the formation of a legally binding contract. This is often referred to as an ‘offer and acceptance’ mistake. The parties will subjectively believe they have formed a legally binding contract, but in reality have not done so. in Raffles v Wichelhaus (1864) 2 Hurl & C 906, where a contract was made for the purchase of some cotton which would be delivered by a ship named ‘Peerless’ which sailed from Bombay. However, there was two ships named ‘Peerless’ which sailed from Bombay, one in October and one in December. One party believed the contract was for the delivery in October, and the other party believed it was a contract for the delivery in December. Therefore, as per offer and acceptance rules, there was no mirror agreement due to this mistake. This was a reasonable mistake to make, therefore the contract was void for mistake.

37. The courts have identified a doctrine of fault in the law of Mistake, preventing agreement. Even where there can been a valid agreement, if one party is responsible for the mistake of the other party, the court will decide the case in favour of the aggrieved party. The courts will apply an objective test to the question of whether there is an agreement, considering whether one party’s interpretation was more reasonable than the others.

38. Mistake, nullifying agreement mistake refers to where the parties have reached a valid agreement, but would like nullify this agreement due to a mistake as to the terms or subject of the agreement. This is often referred to as a ‘ common’ mistake, as a claim for non-agreement mistake requires that both parties made the same mistake. The case of Strickland v Turner (1852) 7 Ex 208 confirmed that a mistake as to the subject matter would amount to one which is fundamental to the decision to enter the agreement . In this case, there was a contract for the annuity of a person’s life, but there was a mistake, in that the person was already dead.

39. Bell v Lever Bros Ltd [1932] AC 161 In this case, the Lever Bros appointed the two defendants to positions of power in a subsidiary of his company. The company was extremely successful and made a lot of revenue. The two defendants then retired. As part of their retirement package, they received large bonuses of £30,000 and £20,000 each. It was subsequently discovered that the defendants had been involved in a cartel in order to steal information and make money. Lever Bros attempted to claim that the contract was void for mistake of fact. The House of Lords held the contract was not void for mistake. The mistake was not sufficiently close to the subject matter of the contract (the retirement payments).

40. Unilateral mistake This form of mistake applies when only one of the parties to the contract is mistaken as to part of the contract . Unilateral mistake is limited, but will usually operate in circumstances where one party is mistaken as to part of the contract, and the other party is aware of this fact and takes advantages of it . The three requirements that will render a contract void for unilateral mistake in relation to the terms of a contract are: One party is mistaken as to a term of the contrac t, and would not have entered the contract but for this mistake The mistake is known or reasonably ought to be known to the other party The mistaken party is not at fault

41. Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR(R) 502 In this case, Digilandmall.com Pte Ltd were selling HP laser printers online. They owned two separate websites. On both of the sites the printer was priced at over $3000. A technical mistake was made by an employee and it was then priced at only $66 on both websites. Chwee Kin Keong discovered the mistake and purchased a large amount of these printers. The website refused to sell and Chwee Kin Keong commenced an action for damages. It was held that the contract was void for mistake. This was because the defendant had constructive knowledge of the mistake. This was clear because they purchased a large amount, knowing a mistake as to the price had been made.

42. E ffect of the mistake The effect of the mistake depends on its nature and whether it goes to the root of the contract . If the mistake fundamentally changes the nature of the contract, then it is likely to be void (invalid from the start) and the remedy will likely be restitution . However, if the mistake is voidable (valid until a party chooses to treat it as unenforceable), then one of the following equitable remedies may be appropriate: rectification, rescission or specific performance.

43. 3. Duress Duress is defined as some kind of threat, violent or other action which is used to coerce some body into doing something against their will . In the context of contract law, this refers to where a party uses duress against the other party in order for them to enter into a contract which they either do not want to , or where the terms of the contract are unfavourable to them .

44. Duress by threat of violence Duress by threat of violence is self-explanatory. If a party is able to prove they were coerced into a contract due to a threat of violence, the contract will be voidable. There are two main requirements of duress by threat of violence: The nature of the threat must be sufficient to amount to duress The effect of the threat must have been that it forced the claimant into the contract In the case of Barton v Armstrong [1976] AC 104 a threat of murder was one amounting to an illegal act of sufficient nature.

45. Economic duress Economic duress refers to a threat to an individual’s financial interests . This was not suggested as a potential ground of duress until the case of Occidental Worldwide Investment Corporation v Skibs A/S Avanti, The Siboen and the Sibotre [1976] 1 Lloyd’s Rep 293. A typical scenario of such duress would be as follows: Party A and Party B negotiate a contract Party B threatens to breach the contract unless the contract is renegotiated Party A opt to renegotiate the contract in favour of Party B because of the potential outcomes in B were to breach the contract In this situation, a breach of contract by Party B could have any number of unwanted consequential results for Party A. Perhaps the contract is a subcontract, and if Party B breach the contract, Party A will be liable in damages to another party. This doctrine requires a fine balance with the commercial needs of society. Legitimate economic pressure can be recognised as a useful negotiation tool, and the courts risk going too far with the scope of economic duress.

46. Bars to Duress claims It should be noted that the bars to rescission can apply in relation to claims for duress. Those is as follows: Lapse of time Third party rights Affirmation Restitutio in integrum (no longer possible due to a change in the goods)

47. Undue influence …i s the improper use of a position of power to pressure a party to enter into a contract . The pressure exerted falls short of duress but it is enough to vitiate a party's free and informed consent . It will be presumed in certain relationships of trust and confidence where it is widely accepted that there is an imbalance of power e.g. doctor-patient or solicitor-client relationships.

48. 4. Illegality Have you ever wondered why criminals do not file lawsuits against their co-conspirators when someone breaks an agreement? Criminals may also be aware that contracts which are made for an illegal purpose or contain illegal terms are unenforceable and therefore an illegal contract. Illegality : 1. Statutory prohibition of contracts 2. Common Law prohibition of contracts - Public Policy

49. Statutory prohibition of contracts A contract may be prohibited by a statute either expressly or impliedly. This is an important distinction to make as whether or not a party may enforce the contract is dependent on this. Express Prohibitions : If a statutory prohibition expressly prohibits a type of contract or term, there is no question as to the illegality of the contract. Neither party will be able to enforce the contract, irrespective of the innocence of either or both parties. The case of Re MahMoud and Ispahani [1921] 2 KB 716 statute prohibited unlicensed dealing in linseed oil. The purchaser of the oil claimed he had a licence to purchase the oil, but in fact did not. When the sellers delivered the oil, the purchaser refused delivery, explaining he did not actually have a licence. Despite the fact the seller of the oil was completely innocent, the contract could not be enforced due to the statutory provision.

50. Cont… I mplied prohibitions: Implied prohibitions are much more difficult to identify, and there are two tests the courts may apply to determine whether the contract made is impliedly prohibited. In Smith v Mawhood (1845) 14 M & W 452 Smith, a tobacconist, sold an amount of tobacco to Mawhood. It was subsequently found that Smith did not have the required licence to sell the tobacco, and therefore statute required he paid a penalty for £200. Smith then attempted to recover the price of the tobacco he had delivered to Mawhood. It was held that the contract was not illegal, and he could claim the price of the tobacco back. This was because the statute’s primary purpose was revenue. Parke B stated ‘Looking at the act of Parliament, I think its object was not to vitiate the contract itself, but only to impose a penalty upon the party offending, for the purpose of revenue’.

51. Common Law prohibition of Contracts - Public Policy Contracts may be prohibited via the common law, on grounds of public policy or morality. There is a lot of uncertainty in this area , and the when the court can prevent a contract from operating is often unclear. The courts approach this area of law with a consideration of the common values of society - if the contract breaches common values of society it will be void for common law illegality. Contracts to commit crimes :In Bigos v Boustead [1951] 1 All ER 92 confirms a contract which includes an obligations to commit a crime will be illegal. Contracts that preclude the jurisdiction of the courts: unless the administration of justice is replaced with arbitration ( Scott v Avery (1855) 5 HL Cas 811) Contracts which are sexually immoral: Pearce v Brooks (1865) LR 1 Ex 213, where a contract for the hire of a carriage used for prostitution was held to be illegal due to public policy. However In Sutton v Mishon de Reya [2003] EWHC 3166 (Ch) a contract outlining an agreement between two people in a master/slave sexual relationship was held to be valid and not contrary to public policy.

52. Contracts which involve public corruption: Common law prohibition of contracts - restraint of trade Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535. Nordenfelt, an arms manufacturer, sold his business to Maxim. The contract included a term preventing Nordenfelt from selling guns or ammunition anywhere in the world for twenty-five years, and to not compete with Maxim in anyway.The court held that this clause was partially valid. The part preventing competition ‘in any way’ was not valid due to its complete restriction on trade.

53. Exclusivity dealing contract s: In Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 the parties involved were two garages and a seller of petrol. These are clearly parties involved in different stages of the commercial chain relating to petrol. One garage agreed to only buy petrol from the seller for a term of over five years in return for a discount. The second garage agreed the same, but for a term of twenty-one years. The courts held that only the contract providing for exclusivity for five years was valid. 21 is disproportionate and therefore not reasonable

54. The effect of illegality The case of Holman v Johnson (1775) 1 Cowp 341 is authority for the general principle of illegality - that the illegal contract will be unenforceabl e. However, as we have seen, dependent on the circumstances, one or none of the parties may enforce the contract, and on occasion only part of the contract will be unenforceable. When both parties are guilty in relation to the illegal contract, the general rule from Holman v Johnson (1775) 1 Cowp 341 is that there can be no recovery of any kind of money or property.

55. Discharge of Contract and Contractual Remedies

56. 6 methods Discharge of contract by breach of contract: Discharge of contract by accord and satisfaction: Discharge of contract by the impossibility of performance: Discharge of contract by lapse of time: Discharge of contract by agreement: Discharge of contract by performance

57. Discharge of contract by breach of contract: Breach of contract is concerned with the termination of the original contract due to the failure of performing obligations by either or all of the parties, which discourages each of the other parties. It relates to void or terminating the original contract completely.

58. 2, Discharge of contract by accord and satisfaction Accord is an executor contract that helps to perform the existing duties at present to avoid the contractual discharge. On the other hand, based on the performance of the accord, the satisfaction of a contract will be considered, and one doesn’t want to void the entire contract.

59. 3. Discharge of contract by the impossibility of performance ( frustration) : The doctrine of frustration discharges both parties from their contractual obligations where following the formation of the contract, performance of the contractual obligations become either: Impossible; or Radically different

60. T aylor v Caldwell (1863) 3 B & S 826 In this case, the claimants had hired out the defendant’s concert hall for four days at the price of £100 each day. After the contract was entered into, but before the day of rental began, the hall was destroyed by fire. The claimant could no longer host their concerts, and as a result lost a significant amount of money. The claiming argued that the defendant should account for those losses, whilst the claimant argued that they could not be liable for an accidental destruction of the concert hall. It was held that the defendants were not liable for the losses. Blackburn J held there was an implied term in the contract that the concert hall would exist at the time of the contract . This implied term formed the basis of the law of frustration

61. Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 In this case, the Davis agreed with the claimants to build 78 houses over eight months for £92,425. The building actually took twenty-two months , because D avis did not have the required staff or materials. Davis argued the contract was frustrated due to their change in circumstance - it was assumed that they would have a certain amount of staff and materials to work with, when in fact they did not. It was held that the contract was not frustrated . The obligations of Davis have become more difficult, but not radically different . The importance of this case was the move away from the doctrine of frustration inserting an implied term covering the change of circumstance. Instead, the construction approach was applied.

62. Eliyathambi vs Miranda 1946 47 NLR 110 , Ceylon Supreme Court decided that contract enetered by the partes have become impossible to perform. Consequences of Frustration :The case of Hirji Mulji v Cheong Yue Steamship Co Ltd [1926] AC 497 confirms the effect of frustration is that it brings the contract to an immediate end, whether or not the parties wish this to be the result. In other words, it is void, not voidable (as is the case for repudiatory breaches).

63. 4.Discharge of contract by lapse of time Prescription may applies as to extinguish a contractual right or bar the remedy . Prescription Ordinance No 22 of 1871 in its Section 6 states as follows , No action shall be maintainable upon any deed for establishing a partnership , or upon a ny promissory note or bill of exchange , or upon any written promise , contract, bargain, or agreement , or other written security not falling within the description of instruments set forth in section 5, unless such action shall be brought within six years from the date of the breach of such partnership deed or of such written promise, contract, bargain, or agreement, or other written security, or from the date when such note or bill shall have become due, or of the last payment of interest thereon.

64. 5. Discharge of contract by agreement: If both of the individuals or parties in the agreement aren’t willing to proceed with the agreement till the due date, then it is changed over to the next party, whether or not they might acknowledge the discharge of the agreement or contract by the understanding will occur. However, it happens in different circumstances. They are as follows: A: Waive r: Waiver refers to the abandonment of right. In case any of the parties surrender their rights from the contract, which affects the other party, then it leads to the discharge of the contract by substitute agreement. B: Alteration : It is another situation where the particulars of the agreement or contract will be changed either partially or totally with the assent of the two parties. Be that as it may, the parties will not change, and they can appreciate new advantages, possibly they may less or more than the old agreement or contract. C: Rescission : Here, both the parties agreed to modify certain rules and regulations in the contract with mutual understanding. It may lead to the cancellation of all the rules or may cancel partially. D: Novation : Specifying the substitution of either a new contract in the place of the original contract or new members in the place of the old one, whether it may be a single person or both the parties, is known as novation, which is a part of the contractual discharge by substitution of agreement.

65. 6. Discharge of contract by performance In order to discharge a contract by performance, both the express and implied terms must be performed. Furthermore, the terms must be performed to the expected standard of performance. There are two different types of performance: The strict contractual obligations The qualified contractual obligations

66. I. The strict contractual obligations A strict contractual obligation is a strict obligation which must be met. These obligations will usually use definitive words, such as must, or will, and will discuss a definite result, rather than an aim or a target. For example, A must do B. Strict obligations must be fulfilled before a contract can be discharged for completed performance. Excuses as to why an obligation could not be fulfilled will not be sufficient.

67. II. The qualified contractual obligations Qualified contractual obligations differ to strict obligations as t hey are not definitive . Qualified obligations will not have to result in a specific outcome; the obligation will be to perform to a standard . In Platform Funding Ltd v Bank of Scotland plc [2008] EWCA Civ 930 In this case, a surveyor was employed to inspect and value a property . The standard of care a surveyor is held to is to survey with the reasonable care and skill that others in the profession would do so. T he surveyor surveyed the wrong house . There was therefore a question of whether this fell under a strict contractual obligation, or a qualified in relation to the standard of care. The court held that the s urveying of the correct property was a strict contractual undertaking , and it was not part of the reasonable care and skill qualified contractual obligation.alified obligation is to exercise reasonable care and skill.

68. THE END Thank you Questions Whatsapp to 0718017058 Or [email protected]