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Bus120
Chapter 9
21
Law
Undergraduate 1
10/29/2007

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Term
Acceleration clause
Definition

In contract law, a term in a contract that stipulates that upon default of any one payment owing on a loan, the creditor can demand full payment of the balance due and owing from the debtor.  It can also apply to deliveries of goods and supplies, in which case the injured party can demand termination of the contract forthwith without legal liability. 

It is customary for all mortgages to contain an acceleration clause that stipulates that upon default of any one mortgage payment, the whole principal and interest on the mortgage will become due and owing.

Term
Act of God
Definition

Any event arising from circumstances beyond human control, including such things as storms, hurricanes, tornadoes, earthquakes, fires (caused by lightning), death, serious illness, etc.  In contract law, unless anticipated in the contract as conditions subsequent, acts of God could have the effect of frustrating the contract.

As the court found that the cause of the fire was an act of God, the defendant was not in breach of the contract but was discharged of its obligations to do anything further.

Term
Bilateral discharge
Definition

In contract law, the mutual discharge of both parties from their obligations under a contract.  To be enforceable, the discharge must be supported by consideration in a new agreement.

When the carpenter and the retailer agreed that the carpenter would not construct the shelving units as previously contracted and the retailer would not pay him $3,400, there was a bilateral discharge of their previous agreement: each discharged the other of its obligations under the original agreement.

Term
Breach of contract
Definition

Any act by a party to a contract whereby it fails to do something it promised to do in the contract.  Breaches can be major (as in the breach of any condition) or they can be minor (as in the breach of a warranty).  Damages are available for all minor breaches; damages or rescission (or other equitable remedies) are available for major breaches.

By failing to render any payment for the services rendered to it, the defendant had made itself liable to being sued for breach of contract.

Term
Condition
Definition

A major term in a contract, the breach of which entitles the offended party to claim the remedy of damages, or an alternative remedy (such as rescission of the contract).  Conditions can be express or implied by statute (e.g.. certain conditions in the Sale of Goods Act).

It was condition of the contract that the heart-shaped chocolates be delivered to the plaintiff’s shop on or before February 14; very few of its patrons would be interested in buying them at regular price after Valentine’s Day.

Term
Condition precedent
Definition

In contract law, a term in a contract that stipulates that some future event must first occur before the contract will be binding upon the parties.  Often referred to as “subject to clauses,” but not limited to those.

In the Contract of Purchase and Sale a condition precedent stipulated that the purchasers would have to first obtain mortgage financing for at least $50,000 at an interest rate of no more than 7.5 percent per annum calculated semi-annually not in advance, or the deal would not be enforceable against them and they would get their $10,000 deposit back.

Term
Condition subsequent
Definition

In contract law, a term in a contract that acknowledges that one or both parties will be discharged of their obligations under the contract upon the occurrence of some specified future event.  Specified perils such as so-called “acts of God” and force majeure events are the most common form of conditions subsequent.

As the lengthy labour dispute was a condition subsequent in the parties’ contract, the supplier was discharged of its obligation to make deliveries of the widgets to the factory.

Term
Deposit
Definition

A partial payment made at the beginning of an executory contract in which the amount paid is considered to be a reasonable estimate of the damages that would be suffered by the party receiving the deposit should the contract be breached.  It is understood that if the party paying the deposit repudiates the contract, she is forfeiting the money paid as deposit.

The purchasers were not entitled to the return of their deposit of $5,000, as the court held that their repudiation of the contract would cost the vendors approximately that much in damages.

Term
Exemption clause
Definition

A term in a contract that stipulates one of the parties to the agreement is limiting his liability in some way or another.  Such clauses will be upheld by the courts provided they are stated clearly and were deemed to have been brought to the attention of the party bound by those terms. (Note: in written contracts, in many cases the party signing is deemed to have had notice because the law assumes she read the contract before signing.)

The plaintiff could have recovered damages in excess of $50,000, but an exemption clause in her contract with the defendant indicated it could not be liable for any amount in excess of $10,000.

Term
Force majeure clause
Definition

In contract law a clause that anticipates certain future conditions subsequent that will relieve either or both parties of their obligations under the contract if they occur.  Although they can include acts of God, they include future events arising from human activity as well, including such things as strikes, lockouts, vandalism, arson, civil disturbances, riots, foreign invasion, and war.

As the parties’ contract contained a force majeure clause, the defendant company was not in breach of the contract when it refused to deliver supplies to the plaintiff during the labour dispute.

Term
Frustration
Definition
In contract law, the inability of a party to perform his obligations under the contract because of some unanticipated event arising after the contract was made and not foreseen iin the contract that prevents him from doing so.  The Frustrated Contracts Act provides how any expenses or benefits incurred in the meantime should be allocated between the parties as a consequence of the frustration.

The hotel was unable to supply accommodations to the travel group because of frustration of the contract: the hotel was destroyed by a fire two days before the date for which the rooms were booked.

Term
Fundamental breach
Definition

In contract law, a breach that is so major that it is considered to have gone to the very root of the agreement.  Even fundamental breaches can be covered by exclusion clauses provided the latter are stated clearly and the parties are dealing with each other at arm’s length.

A fundamental breach occurred in the contract when the plaintiff discovered that he could not operate the backhoe machine at all; he was entitled to rescission of the contract.

Term
Injunction
Definition

The name of a court order that prohibits a party in a legal proceeding from doing something; often it is a remedy in tort actions or for breach of contract.  Failure to comply with the injunction can result in a finding of contempt of court.  An injunction obtained temporarily, before the final resolution of a matter at a hearing or trial, is called an interlocutory injunction.

In her suit for trespass against the defendant, the plaintiff asked the court for an injunction that prohibited the defendant from coming onto her property at any time in the future unless with her written permission.

Term
Laches
Definition

Undue delay on the part of a party to an action, which under rules of equity may preclude him from obtaining a remedy from the courts that he otherwise would be entitled to.

Laches prevented the plaintiff from obtaining rescission of the contract: over the last four years the defendant had reason to assume that the plaintiff would not seek to have the property returned to her.

Term
Mitigation principle
Definition

In contract law, the legal principle that says a plaintiff must do what she can do reduce her damages arising from the defendant’s breach. 

Because of the mitigation principle, the court did not award the plaintiff her full claim of $35,000 for lost wages for unlawful dismissal: while waiting for her case to come to court, she failed to take alternative employment related to the position in question.

Term
Quantum meruit(Latin) Means literally “as much as one deserves.” 
Definition

In contract law, the principle that says in the absence of agreement between the parties at the time a contract for services is made, the amount to be paid for the services rendered will be a reasonable amount, taking into account what such services would normally cost in that area at that time provided by that kind of service provider.

Although the plumbers had not agreed with the office manager that their services would cost $889, under quantum meruit the court compelled the office to pay $500  as that amount was comparable to the going rate for such services in that area.

Term
Repudiation
Definition

In contract law, an indication by one party to the contract to the other that he does not intend to perform his obligations under the contract.  Usually, the term is synonymous with “breach of contract”; however, there are some circumstances where a party could repudiate and not be in breach, as (for example) when an infant refuses to do what she promised to do in the contract.

There was a repudiation of the contract when the student wrote to the art school to advise that he was not going to attend the first day of classes and he wanted a refund of the money he paid for the course.

Term
Rescission
Definition

court order to be returned to her original position before the contract was made.  This would mean that monies paid and property transferred would be returned to their original owners.  Sometimes the remedy will not be available if, for example, the subject matter of the contract has been consumed or passed to a third party.

Because of the defendant dealership’s fraudulent misrepresentation, the court granted the plaintiff rescission: she returned the car to the dealership and got her money back.

Term
Specific performance
Definition

An equitable remedy for breach of contract whereby the plaintiff is entitled to a court order that compels the defendant to perform specifically the thing she agreed to do in the contract.  Usually only available when the subject matter of the contract is land with unique qualities or goods that are unique in some way.

When the vendor refused to transfer the property she sold to the plaintiff purchaser, the plaintiff obtained an order for specific performance that compelled her to transfer the title as she had promised to do in the contract.

Term
Substantial performance
Definition

The legal principle in contract law that says that if a party in a contract has substantially completed its obligations under the contract, the other party is obliged to pay it for the services rendered; in other words, the latter party is not allowed to withhold the making of any payment until total performance has been made.

Having completed everything in the construction of the building except for the painting of the doorways, under substantial performance, the contractor was entitled to final payment of $124,000 less only $880 to cover the painting of the doorways.

Term
Warranty
Definition

(1) A minor term of the contract, the breach of which entitles the injured party to obtain damages only, but not rescission or some other remedy.  Warranties can be express or implied by statute.  (2) A major term in the contract, which is equivalent to a guarantee, usually for a specified period of time.

(1) As 23 of the 300 boxes were damaged, the plaintiff was entitled to sue the vendor for damages for breach of warranty.

(2) There is a two-year warranty on the battery: if it proves defective before that time has expired, the motorist is entitled to have it replaced with a new one.

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