DISCHARGE OF CONTRACT:
Means the rights and the obligations of both parties to the contract have been properly fulfilled. i.e the contractual relationship between them is terminated and none of them has any more claims from or owes the other. Therefore obligating and rights come to an end. This is where parties to contract are no longer under a duty to perform their part of agreement.
WAYS A CONTRACT CAN BE DISCHARGED
A. Discharge by performance: The common way of discharging contracts is by performing them to the satisfaction of the parties involved i.e by fulfilling the agreement with free will. The contract then comes to an end.
B) Discharge by agreement: Sometimes performance is impossible needing the parties to discharge the contract by natural agreement with free will. Discharge by agreement may take the following forms:
(i) Satisfaction and accord: This is applicable to executory contracts where a contract has been performed partly and a party which has performed its obligation (innocent party) may require some compensation for what it performed.
(ii)Waiver: Here the innocent party (with the right to demand compensation) may agree to waive her rights i.e not claim any compensation for the part it performed.
(iii) Novation: This happen where the existing contract is substituted for a new contract or a new contract is formed to discharge the old contract with the free consent of all parties concerned.
C) Discharge by the subsequence impossibility (Frustration): A contract may become impossible to perform because of certain circumstances. After a contract has been made by both parties willing to perform their roles effectively, circumstances may change to the extent that it become impossible or illegal or unreasonable to perform the contract. Circumstance can be :-
(i)Subsequent physical impossibility. Where it is impossible to physically fulfil duties and obligations under a contract, the physical impossibility may however arise after the contract has been made.
(ii) Subsequent illegality. This is where after a contract has been made there is new legislation which makes the contract illegal, therefore the contract become illegal common law.
(iii) Disappearance of purpose of the contract: A contract which is made on the basis of a future event occurring if that does event not happen a contract is frustrated and therefore discharged.
(iv)Distortion of the commercial viability of the contract: Sometimes changes which make a contract an unreasonable undertaking take place after the contract has been made. Therefore it may be rational to terminate the contract if this makes both parties better.
(v) Destruction of the subject matter i.e the subject matter being destroyed
(vi) Death, insanity, incapacity and illness, this is applied mainly for personal services eg employment.
(vii) Acts of God like floods, famine, droughts, earthquake and the like of which their occurrence frustrates the contract.
D) Discharge by breach: Breach of a contract is an actual failure by a party to a contract to perform his obligation under that contract or an indication of his intention not to do so without any justifying cause, therefore injured(not in breach) party may choose not to sue the other party and treat the contract as discharged. Discharge by breach can be :-
(i)Actual breach: occurs when obligations are violated having become due eg. seller fails to deliver the goods on due date.
(ii)Anticipated breach: Takes place where obligations are violated before they become due eg. a seller informs the buyer about his intention of failing to deliver goods.
REMEDIES FOR BREACH OF CONTRACT
Remedy means any of the methods available at law for the enforcement, protection or recovery of rights or for obtaining redress. i.e where a party breach the contract the other party may be favoured by one of the following remedies depending on the nature of the breach.
- Damages: Injured party may claim compensation in money form to cover loss suffered due to the breach. The aim is to put the injured party as near as possible in the same position so far as money can do as if he had not been injured
- Restitution: Remedy to an innocent party, here the injured party claims back his performance, an item or its reasonable value(for item if an item can be traced)
- Specific reliefs(equitable reliefs):These includes:
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(i) Specific performance. Here the innocent party asks the court to order the other party to do according to the terms of the contract. It is mainly applicable in respect of contracts requiring personal services.
(ii) Injunction (stop order): Innocent party will ask the court to order the breaching party to undo a breach of contract.
(iii) Rectification: This remedy will be granted where there has been a mistake not in the actual agreement but which come into existance when the agreement is put into writing.
- Quantum meruit (so much as deserves): Where the contract has been breached but one party still enjoying the benefits out of the transaction, the party enjoying will be liable for the benefits deriving to avoid unfair advantages. This is based on the implied condition that in a void contract a party deriving benefits should pay for those benefits
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SALE OF GOODS CONTRACT
A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for money consideration called the price. It is an agreement to sell where the transfer of property in goods is at a future date or subject to the completion of specific conditions.The sale of goods contract is complete when the terms and clauses set out in the contract have been fulfilled and the transfer of property took place.
Essentials of sale of goods contract (characteristics)
- Parties to contracts: The parties to sale of goods contract are seller and buyer
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-A seller means a person who sells or agrees to sell goods.
-A buyer means a person who buys or agrees to buy goods.
2. Transfer of property: What is transferred in sale of goods contract is properly in goods
3. Subject matter of contract: The subject matter of sale of goods contract are goods.
4.Price: This is consideration which must be in terms of money. Goods for goods do not fall under contract of sale of goods.
5.Agreement to sell and sale: Contract of sale includes sale and an agreement to sell
-Sale: There is immediate transfer of goods in property from seller to buyer.
-An agreement to sell a property in goods is transferred in future or on fulfillment of certain conditions stipulated in a contract.
6. Formalities of a contract: The contract of sale of goods may be made in writing (either with or without seal) , orally that is by word of mouth or as implied from the conduct of parties
7. Nature of parties: The capacity to buy and sell is regulated by general law of capacity to contract (person entering into a contract must be competent). But under this contract persons who are incompetent to contract can also enter into a contract to sale but these contracts must be for necessaries and they will be liable to pay a reasonable price for them.
8. Value of goods: The value of goods is ascertained by price. It may be fixed by the contract or may be left to be fixed in manner provided by the contract(eg. by valuation). It may also be determined by the course of dealing between the parties eg: according to previous transactions between them,custom of trade profession.
CONDITIONS AND WARRANTIES
Under the law of contract, two types of statement are made in the course of negotiating a contract of sale of goods
i.The pre-contractual i.e. Representations
ii.Contractual statements or terms these being either conditions or warranties.
Implied condition and warranties in a contract of sale.
A: Title
i) Conditions as to title: Unless the circumstances show different interition, there is an implied condition on the part of the seller that in case of a sell she has the right to sell goods, and in case of an agreement to sell will have the right to sell the goods at the time when the property is to pass.
*The implication is that the person who buys goods to which the seller has no title is allowed to recover the whole price even though she had some use and enjoyment from the goods before they are dispossessed by the true owner.
ii) Warrants as to title: unless the contract show different intention there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. Also there is an implied warranty that the goods shall be free from any charge/encumbrance in favor of any third part not known or declared to the buyer before or at a time when the contact is made.
B.Time
i.Time of payment: Unless a different intention appears from the contract by stipulations the time of payment is not of essence so failure to pay on time is a breach of warranty no of condition but a seller can provide expressly for right of resale in the absence of prompt payment in case of perishable goods prompt payment is a condition not a warranty.
ii. Time of delivery: The act is silent but we use English laws where time of delivery is fixed by the contract and breach of it is breach of condition and the buyer can reject the goods.
C) Quality and Fitness: This is governed by Caveat Emptor (buyer beware) i.e. When buying you must be aware of all defects obtainable in the goods, except for :
i.An implied condition of quality and fitness for any particular purpose of goods supplied: i.e. when the buyer expressly or impliedly makes known to the seller the particular purpose for which goods are required.
ii.An implied condition that the goods should be of merchantable quality where goods are bought by description from a seller who deals in goods of that description.
iii.An implied condition or warranty as to quality or fitness for goods attached by the usage of trade.
D) Sale by description: There is an implied condition that the goods shall correspond with the description in case there is a contract for the sale of goods by description.
E) Sale by sample. In the sale by sample there is:
i) An implied condition that the bulk shall correspond with the sample in the quality.
ii) An implied condition that the buyer shall have a respond opportunity of comparing the bulk with sample.
iii) An implied condition as to freedom from any defect, rendering them un-merchantable which would not be apparent on reasonable examination of the sample.
EFFECTS OF CONTRACT OF SALE
Effect of contract of sales as provision of the act is divided into two parts
- Transfer of property in goods
- Transfer of title
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TRANSFER OF PROPERTY IN GOODS
The provisions of act regarding the transfer of property in the goods are important due to the following reasons:
i.The parties to contract of sale do not usually express their intentions as to the passing of the property.
ii.The risk normally passes when the property passes and the seller can in general terms only sue for the price as distinct from damages if the property has passed.”Res perit domino” (a thing perishes to the disadvantages of its owner).
Rules of ascertaining intention as time when property passes:
According to the sale of goods act the rules of ascertaining interition as to time when property passes are five.
Rule 1. For the goods in a deliverable state the property in goods passes to the buyer when the contract is made.
Rule 2. In case of the goods not in a deliverable state, the property doesn’t pass until the seller puts them. Into a deliverable state and the buyer is notified thereof.
Rule 3. Where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test or do some other act or things for the purpose of ascertaining the price, the property doesn’t pass until such act or thing is done and the buyer has notice thereof.
Rule 4. In case of sales on approval or in case of sale or return or other similar terms, the property passes to the buyer by either of the two ways:
- When the buyer signifies her approval or acceptance to the seller.
- The buyer retains the goods without giving notice of rejection and then the property passes on the expiry of a return period or reasonable time.
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Rule 5. Where there is a contract of sale of ascertained / future goods by description and goods of that description the transfer to buyer will only be made when the goods have been ascertained, identified and valued.
- TRANSFER OF TITLE
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This is that transfer of the right to legal ownership, this is only possible with the presence of true owner of the goods who possess a good title i.e. the buyer who takes goods from a seller with no title receives no better title than the seller e.g. buying goods from a thief goods would then have to be restored to the true owner possessing title when so claimed.
Exceptions to this rule: According to the sale of goods act:
i. Buying in good faith from mercantile agents who holds the goods with the owner’s consent.
ii. Where a second buyer, acting in good faith buys goods left in possession of the seller by the first buyer.
iii. Where a second buyer, acting a good faith buys goods held by a first buyer who has not fulfilled all the sellers conditions of purchase.
iv. Where a buyer, acting in good faith, buys goods without notice of any defect of title of the seller.
v.where the sale is ordered by the court, the buyer received a good title and where a seller has led the buyer to believe in the formers title the buyer receives a good title.