UNIT 7

DISCHARGE OF CONTRACTS A party who fails to perform his obligations under the contract may seek to justify his failure on the grounds that he is discharged from his obigations under the contract. There are 4 ways by which rights and obligations of the parties come to an end: performance, agreement to discharge, frustration and breach. I. Performance When both parties have performed their obligations, the contract is extinguished. There are 6 exceptions to this rule: a) severable contracts (severability). Where a contract may be divided into several parts, payments for parts that have been completed can be claimed. b) acceptance of part performance. Where A has accepted the partial performance of B, having an option to reject, a promise to pay is implied and a claim for percentage of the contract price in direct proportion to the percentage of work done (quantum meruit) may be claimed by B. c) prevention of performance.Where one party is prevented by the other from completely performing the contract he may bring an action (a claim for percentage of the contract price) to claim for the work done. d) substantial performance. Where a contract has been substantially performed an action lies for the contract price less a reduction for the deficiencies. e) Time of performance. A party who failed to perform his obligations within a given time was in breach of contract. Time is only the essence of the contract. II. Agreement Contractual obligations are created by agreement; they can be discharged by agreement. An agreement will only discharge a partys contractual obligations if it constitutes an enforceable contract. An agreement to discharge a contract is binding only if it is under seal, or if it is supported by consideration. The legal position depends on whether the discharge is bilateral or unilateral. a) Bilateral discharge. The contract is executory or partly executory on both sides.

b) Unilateral discharge. Only one party has rights to surrender. c) Novation. A ows to B, B ows to C; A agrees to pay C, if C releases B from his obligation to pay him. All 3 parties must agree to the arrangement. d) Condition Subsequent. Sometimes a clause in a contract will provide for its discharge if a aprticular event occurs in the future (subsequent to the formation of the contract). III. Frustration A contract is frustrated if performance becomes impossible/ illegal/ if circumstances so change that the commercial purpose of the parties is frustrated. The general rule is that if a person contracts to do something he is not discharged if performance proves to be impossible. Frustration occurs: a) if the whole basis of the contract is the continued existence of a specific thing which is destroyed. b) if either party to a contract of personal serivce dies, becomes seriously ill, or is called up for military service. c) if the whole basis of the contract is the occurence of an event which does not occur. d) if the government prohibits performance of the contract for so long that to maintain it would impose on the parties fundamentally different obligations from those bargained for. e) if the performance of the main object of the contract subsequently becomes illegal. IV. Breach Breach occurs: -if a party fails to perform one of his obligations under a contract, for ex. he does not perform on the agreed date, or he delivers goods of inferior quality; -if a party, before the date fixed for performance, indicates that he will not perform on the agreed date.. This is an anticipatory breach. Effect of Breach. Breach does not automatically discharge the contract. It entitles the innocent party to damages. Affirmation of the breach. If the innocent party elects to treat the contract as still subsisting, and can complete his side without the co-operation of the other, he is entitled to do so, and claim the whole sum due under the contract. Termination. If the innocent party elects to end the contract he is not bound to accept further performance, and he may sue for damages at once.

Anticipatory Breach. Where there is an anticipatory breach, and the innocent party elects to treat the contract as discharged, he can sue for damages at once. If the innocent party elects to treat the contract as still subsisting, he keeps it alive for the benefit of both parties, so that frustration may intervene to release the party at fault from further laibility.

UNIT 8
REMEDIES FOR BREACH OF CONTRACT
The common law remedies are award of damages (the most common), an action for an agreed sum, and a quantum meruit claim. The equitable remedies are specific performance and injunction. Damages. -what kind of damage; -what monetary compensation. DAMAGE = THE LOSS SUFFERED BY THE PLAINTIFF DAMAGES = THE FINANCIAL COMPENSATION AWARDED TO HIM. Remoteness of Damage. Damage is not to remote if it is fairly and reasonably be considered either as arising naturally or as may be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach. Measure of Damages. The plaintiff recovers his loss (in respect of damage which is not to remote). In assessing the award of damages the court may take into account inconvenience and annoyance. Mitigation. The plaintiff must do what is reasonable to mitigate his loss and can not recover any part of it which the defendant can prove has resulted from failure to mitigate. (ex: the plaintiff can not recover for a loss that he ought to have avoided). Liquidated Damages and Penalties. Where no provision for damages is made in the contract then the court will asses the damages payable. Where the parties have agreed in the contract how much is to be payable on a breach, this sum is recoverable. Where it is a penalty the plaintiff can only recover his actual loss in respect of damage which is not to remote. Other common law remedies

Action for an Agreed Sum. A contract will often provide for the payment by one party of an agreed sum in exchange for performance by the other, for ex. goods sold for a fixed price. The innocent party may sue the contract braker for the agreed sum. The plaintiff recovers the agreed sum, neither more/nor less. Quantum Meruit. It means as much as he deserves. It is a claim for reasonable payment for work done/ goods delivered. It is distinct from an action for damages and will arise if in a conatrct for the performance of work, there is no expresesly agreed rate of remuneration. Equitable remedies. Specific performance. Is a decree issued by the court which orders the defendant to carry out his obligations. It is a remedy which is discretionary, is likely to be awarded in contracts for the sale of land, must be available to either party, is not available in respect of certain types of contract, such as those requiring personal services or building contracts. Injunction. -Mandatory i. orders a person to take action to undo a breach of contract. -Prohibitory i. is an order of the court which prohibits a person from doing something. It could be granted to prevent the breach of a reasonable restraint of trade clause.

UNIT 9
EUROPEAN COMMUNITY LAW
I Drafting an Agreement From the client point of view the purpose of drafting an agreement is to ensure that the rights and duties of the parties to the agreement are to set out clearly and if a disagreement arise, that these rights and duties are legally enforceable. If the agreement or a part of it is in breach of the EC competition rules, the agreement or that part may be unenforceable. As a damage limitation exercise, it is important to include a severance clause to ensure that where a particular event of the agreement breaches competition law, the remainder is left intact and enforceable. II Commercial Litigation EC competition rules are enforceable in private proceedings in national courts; they are used to challange the alleged anti-competitive actions of another party; it is also useful to establish whether competition law can be used to defend an action. When somebody tries to enforce a contract against a client, one can argue that the party being sued is unenforceable for breach of competition. A party to a contract may sue the other party for damages for losses arising from the operation of the contract in so far as it infriges competion law. III Disclosure Requirements Under EC law the European Commission is given various powers in order to investigate whether a breach of the competition rules has occured. IV Fines, Penalties and other sanctions The sanctions for breach of competition law include fines and penalties. A party in breach of competition law may find himselfthe subject of an injuction and may be ordered to pay to pay damages. V Negligence Action A legal practitioner should be aware of the possibility of a disappointed client taking a negligence action alleging that he was given poor or defect legal advice on a competition matter.

CONFIDENTIALITY I What information is protected? There are 2 conditions so that information must be protected: 1. the information must have the necessary quality of confidence (for inf. which is in the public domain; 2. it must have been imparted in circumstances importing an obligation (where the confider emphasises that the inf must be kept confidential). II Confidential relationships In certain relationships a duty of confidentiality is imposed automatically by law and some or all information received during the course of the relationship must be confidential. These include the relationships between solicitor and client, employee and employer. III Third parties The obligation of confidence binds the person to whom information is confined. A third party recipient who knows that information is confident is held liable to respect confidence. Where an obligation of confidence arises under a contract, a third party may commit the tort of inducing a breach of contract. IV Breach of duty The breach of duty is broken if the confidee, without the consent of the confider, uses the information for his own benefit or discloses it to any other person. V Defences The only defences to a claim of breach of confidence are: -to deny that the information was confidential; -to claim that disclosures was justified. Disclosures may be justified where it is in the public interest (where law enforcement may apply). In an action for breach of confidence may be necessary to consider the right of freedom of expression protected by the European Convention of Human Rights and the Human Rights Act 1998. VI Remedies The court may award an injunction to restrain a breach of confidence. An injunction may be granted to prevent the person who broke confidence exploiting the information. The injunction will be limited in time accordance with the springboard principle (the defendant is restrained from using the information). The damages may be assessed in the same way as for conversion.

UNIT 10
MORTGAGE
I MORTGAGOR = a lender who lends money to a property owner (the mortgagee) in returns for the grant by the mortgagee of a mortgage over the property as security for the loan. MORTAGEE = the property owner to whom money is loaned by the mortgagor in return for the grant of a mortgage over the propery. A MORTGAGE involves the transfer of an interest in land as security for a loan or other obligation. It is the most commom method of financing real estate transactions. The Mortgagor is the party transferring the interest in land. The Mortgagee, usually a financial institution, is the provider of the loan or other interest given in exchange for the security interest. Normally, a mortgage is paid in installments that include both interest and a payment on the principle amount that was borrowed. Failure to make payments results in the foreclosure of the mortgage. Foreclosure allows the mortgagee to declare that the entire mortgage debt is due and must be paid immediately. Failure to pay the mortgage debt leads to seizure of the security interest and its sale to pay for any remaining mortgage debt. The Foreclosure process depends on state law and the terms of the mortgage. The most common processes are court proceedings judicial foreclosure) or garnts of power to the Mortgagee to sell the property (power of sale foreclosure). Many states regulate acceleration clauses and allow late payments to avoid foreclosure. II A mortagge is a non-possessory form of real security, which involves the transfer of ownership of an asset to a creditor (the mortgagee) by way of security upon condition that the asset will be transffered back to the debtor (mortgagor) when the sum secured is paid. The Mortgagor may retain possession of the mortgaged property, an advantge where the mortgaged property must be used by the Mortgagor in its business. The Mortgagor has the right to recover ownership of the mortgaged property, known as the equity of redemption, on payment of the debt secured by the mortgage.

Any property can be mortgaged, including real and personal, tangible and intangible, present and future propety. This gives a mortgage an advantage over a pledge which cannot be granted over intangible or future property. Mortgages are of several kinds as they concern the kind of the mortgaged property: m. of lands, tenements, hereditaments, m. of goods and chattels. Lender Mortgagee is a party to whom property is mortgaged, usually a lender. Mortgage provides security to the lender. Given the large sum of money involved in financing a property, a mortgage lender will usually want security for the loan that will provide a claim upon that security and will take precendence over other creditors. A mortgage accomplishes this security. The lender loans the money and registers the mortgage with the title to the property. The borrower gives the lender the mortgage as security for the loan, receives funds, makes the required payments and maintains possession of the property. The borrower has the right to have the mortgage discharged from the title once the debt is paid. If the Mortgagor fails to repay the loan according to the conditions set forth by the lender, then the Mortgagee reserves the right to foreclose on the property. Borrower Mortgagor is a party who mortgages property. A Mortgagor owes the obligation secured by the mortgage. Generally, the debtor must meet the conditions of the underlying loan or other obligation and the conditions of the mortgage. Otherwise, the debtor usually ruuns the risk of foreclosure of the mortgage by the creditor to recover the debt. The debtors will be the individual hpme-owners, landlords or businsspeople who are purchasing their property by way of a loan. Enforcement The law of mortgages is mainly governed by common law. A mortgage has four rights as means of enforcing the mortgage: a) a right of foreclosure which terminates the mortgagors right of redemption; b) a right to take possession of the mortgaged property; where the mortgage is a security bill of sale, the mortgagee has a special stautory right of seizure; c) an implied power of sale; d) the right to apply to the court for an order for sale or the appointment of a receiver.

UNIT 11
SERVICE AGREEMENT

What does a SA contain? 1) Description of Services. It is important to clearly define the services that are to be performed and any deadlines for work product/performance. Service levels designated for technical/ other performance should be set foth in an exhibit to the Agreement and stated in detail; these sometimes, also include financial penalties/ rewards. 2) Payment Details. The Agreement should include a provision that states: -how much is to be paid; -when is to be paid; -what is included in the payment (expenses, taxes, travel charges); -procedures for invoicing; -penalties for late payments. 3) The Relationship between Parties. The Agreement should include a provision that clearly states that the relationship is not a partnership, joint venture or employer-emplyee. Since some of these relationships can be implied by law, this is an important provision. 4) Dealing with Confidential Information. The Agreement should include a provision that states that: -parties will exchange confidential information; -how that inf. will be identified and handled down; -restrictions on disclosures and misuse; -exceptions to what is included in confidential inf. 5) Ownership of the Work Product. The service provider will want to make sure that the Agreement does not include a provision stating that the customer owns the work product, so that the Provider

may continue to perform similar services for other customers without the risk of legal interference/restrictions. 6) Outline of Representations and Warranties. The Agreement may also include that: -the service provider will re-perform defective/ non-conforming services for a time period indicated in the Agreement; -the services will be performed at/ above industry standards; -the service provider will not infringe a third party rights in performing services; -the service provider is not violating any other agreement by performing services.

UNIT 12
AGENCY AGREEMENT
In law, agency is the relationship which exists between two persons, principal and agent who have both consented to the creation of that relationship. The law recognises an agent as having power to affect the principals legal position, creating, by his actions, rights and obligations enforceable by and against the principal. An agent is a person who is used to effect a contract between his principal and a third party. The agent may be an employee or an independent contractor. THERE ARE SEVERAL DIFFERENT TYPES OF AGENT: -a special agent. His authority is limited to the performance of a specific act, such as buying a particular car; -a general agent. He has authority to perform any of the duties which are normally within the scope of the business entrusted to him, for ex. a solicitor; -an universal agent. Such an agent is appointed by a deed known as a power of attorney. He has unlimited authority and may perform any acts that his principal could have performed including the execution of a deed on his behalf. The relationship of principal and agent can only arise by consent of the parties. I Appointment of the Agent. Agency may be created in the following 4 ways: 1. Express Agreement. The Agent may be appointed verbally or in writing unless he is authorised to execute a deeed, in which case his appointment must be by deed. 2. Implication. Agency will arise although there is no specific agreement, a contract can be implied from the conduct or relationship of the parties. 3. Necessity. Agency of necessity is formed by operation of law. Thus the principal may be bound to a contract made on his behalf without authority and which he refuses to ratify. Three conditions must be satisfied: a) there must be an emergency, making it necessary for the agent to act as he did; b) it must be impossible to get instructions from the principal; c) the agent must have acted in good faith, and in the interest of all the parties. 4. Ratification. If a duly appointed agent exceedes his authority or a person having no authority purpots (pretinde) to act as agent, the principal is not bound.

II The Relationship between Principal and Agent The Duties of an Agent. -He must carry out his principals lawful instructions, unless he is acting for free; -He must exercise reasonable care and skill in the performance of his duties; -He must act in good faith and for benefit of his principal; -He must not misusue confidential information regarding his principals affairs; -He must not delegate the performance of his duties, unless the principal expressely or impliedly authorises the agent to appoint a sub-agent; -He must not mix his own finanicial affairs with those of his principal (by paying money received on behalf of his principal into his own account. In addition he must render accounts to the principal when required. The Duties of the Principal. -He must pay the agent the commission or other remuneration that has been agreed; -He must indemnify the agent for losses and liabilities arose in the course of the agency. III The Authority of the Agent. 1. Express, Implied And Apparent Authority Where the Agent is given express authority an act performed within the scope of this authority will be binding on the principl and the third party. Where an agent is employed to conduct a particular trade or business he has implied authority to do whatever is incidental to such trade or business. If a persons words or conduct lead another to believe that an agent has been appointed and has authority, he will usually be estopped (interdictie de a reveni asupra declaratiei) from denying the authority of the agent, even though no agency was agreed between the principal and agent. The agent is said to have apparent authority. 2. Breach of Warranty of Authority. The Agent is liable if he acted fraudulently/exceeded his authority, or innocently, where his authority is terminated without his knowledge by death/insanity. The Agent is not liable if the third party knew of his lack of authority at the time the contract was made.

IV Termination of Agency 1. By the Act of the Parties The parties may at any time mutually agree to terminate the agency. The Principal may revoke the Agents authority at any time, subject to the following restrictions: -if the agent is also an employee then proper notice must be given to terminate his contract of employment; -the principal should give notice of the revocation to third parties with whom the agent has dealt, otherwise he will be estopped from denying the capacity of the agent; -a termination in breach of contract will entitle the agent to damages; -where the principal has given the agent an authority coupled with an interest he cannot revoke (if the agent is authorised to collect debts on behalf of his principal and retain a part of the sum collected). If an agent commits a serious breach of an express /implied duty (making a secret profit by failure to disclose the correct selling price of the principals goods), the principal may terminate the agency agreement without notice and sue for damages. 2. By Operation of Law -on death or insanity of either principal or agent; -on the bankruptcy of the principal; -if the subject-matter or the operation of the agency agreement is frustrated (zadarnicita) or becomes illegal (if the principal becomes an alien enemy). 3. By Completion of the Agency Agreement -either the period fixed for the agreement comes to an end or -the purpose for which the agreement was created is accomplished.