A breach of contract is a failure to fulfil a term of the contract.
Liability for breaches of contract are strict liability, meaning that the actual intention of the party who broke the contract is irrelevant. This strict liability can be modified by terms within the contract, however.
It should be noted that a breach of contract does not automatically halt, void or pause the contract. Both parties are expected to continue performing according to their obligations.
Termination (Optional Remedy):
Some breaches give C the option of terminating the contract. This stops further performance of the contract.
A terminated contract still remains valid, so C can still sue for breach. This makes termination different from rescission, where the contract was never valid, and the events are reversed.
Breaches Entitling C to Termination based on Classification:
Terms can be classified to determine whether breach of them should give the option of termination to the claimant.
Ideally, terms will be classified in the contract (for express terms) or statute (for implied terms) to determine whether they are conditions, warranties or innominate terms. If terms are not classified, the court has to determine what classification the term falls into.
Conditions:
A condition is a fundamental term to the contract.
Any breach of a condition gives the claimant the option of termination, regardless of the triviality of the breach.
Warranties:
A warranty is a mere assurance or promise.
No breach of a warranty gives the claimant the option of termination, regardless of the seriousness of the breach.
Innominate Terms:
An innominate term is neither a condition nor a warranty. It is somewhat of a middle ground between them.
Whether the breach gives the claimant the option to terminate is dependent on the consequences of the breach to the claimant. [1] The consequences must be sufficiently serious to warrant termination.
Issues:
The requirement that the breach of an innominate term being sufficiently serious to allow termination creates a danger of the claimant getting it wrong. Seriousness is a rather subjective issue and a court could determine the breach was less serious than the claimant alleged.
Additional Claim:
There are certain circumstances where parties may seek to recover money paid under a terminated contract where there has been a ‘total failure of consideration’. This means that the party received no part of what they had contracted for. EG: money completely wasted.
This is in addition to terminating the contract.
Resources:
References:
[1] Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (CA)
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