ACCA F4 - Corp and Business Law (ENG)

90 6: Breach of contract and remedies Part B The law of obligations

Study guide

Intellectual level

B The law of obligations^

3 Breach of contract and remedies

(a) Explain the ways in which a contract may be discharged 2

(b) Explain the meaning and effect of breach of contract 2

(c) Explain the rules relating to the award of damages 2

(d) Analyse the equitable remedies for breach of contract 2

Exam guide

In scenario questions you may be asked to explain whether or not one party can claim damages from

another. Knowledge based questions may require you to identify the circumstances where damages and

other remedies would be available.

1 Discharge of contract

Contracts can be discharged through agreement, frustration, performance and breach.

Contracts can be discharged in four ways:

 Agreement. Where both parties agree to end the agreement and it is supported by consideration.

 Frustration. Where performance of an obligation is impossible due to specific circumstances

occurring after formation of the contract.

 Performance. The most common method of discharge. The contractual obligations are exactly or

substantially met (all contract terms are performed).

 Breach. Where one party fails to meet its contractual obligations.

2 Breach of contract

A party is said to be in breach of contract where, without lawful excuse, they do not perform their

contractual obligations precisely.

A person sometimes has a lawful excuse not to perform contractual obligations, if:

 Performance is impossible, perhaps because of some unforeseeable event.

 They have tendered performance but this has been rejected.

 The other party has made it impossible for them to perform.

 The contract has been discharged through frustration.

 The parties have by agreement permitted non-performance.

Breach of contract gives rise to a secondary obligation to pay damages to the other party. However, the

primary obligation to perform the contract's terms remains, unless the party in default has repudiated the

contract. This may be before performance is due, or before it has been completed, and repudiation has

been accepted by the injured party.

Repudiation can be defined as a breach of contract which entitles the injured party to end the contract if

they so choose.

Key term

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