The End of A Contract

A contract can be terminated if there is elements such as vitiating factors namely misrepresentation, mistakes or either a breach in a contract or frustration.

(i) Vitiating Factors

Misrepresentation :

Representation is a statement of truth where else a promise is the statement by which the maker of the statement o do something or not to as presented in Kleinwood Benson v Malaysia Mining Co. Thus, misrepresentation is a misleading statement that had induced a person to enter into a contract. Usually misrepresentation causes the the contract to be voidable. The issues here are what sort of statement or conduct will amount to a misrepresentation and what redress does a plaintiff have in these circumstances? Misrepresentation can be discussed in four element which consists of the nature of misrepresentation, silence as to misrepresentation, types of misrepresentation and remedies. 

Not all false statements are misrepresentation. Before deciding whether a representation is actionable, it is imperative to begin distinguishing statements which are mere representations and statements which become terms of the contract. It is also important to identify which type of misrepresentation committed, in order to know which available remedies to claim. The nature of misrepresentation could defined as to check whether  the representation is a misstatement. The misstatement can be misstatement of a fact or a misstatement of opinion or intention. 

Besides identifying tat there must be an actionable misstatement, it must also be proven that the misstatement had induced the addressee to make a contract. A representation does not render a contract voidable unless it was intended to cause and as a matter of fact did caused the representee to enter into a contract. It mut have produced a misunderstanding must have been one of the reason which induced him to make the contract.

When we look into whether silence can amount to a misrepresentation or not, there answer is silence on the part of the representor will not amount to a misrepresentation unless it is distort truth by words, conduct or either by Uberrimae Fidei. This Latin maxim means ‘of the fullest confidence’ or ‘of he utmost good faith’. A contract is said to be uberrimae fidei when the promise is bound to communicate to the promisor every fact and circumstances which may influence him in deciding to enter into the contrac or not.

There are four categories of misrepresentation, which relate principally to the state of mind of the representor making the statement. Types of misrepresentation as below :

• Fraudulent - “Fraud means a false statement made by the maker either he knowingly or deliberately without belief in its truth or recklessly, carelessly whether it be true or false. If it is proven that it is a fraudulent, then the defendant liable for all actual damages.
• Innocent - A statement mae in the genuine belief that it is true and with reasonable grounds for the belief. The maker did not made the statement negligently.
• Negligent (at common law) - A statement made i the belief that it is true but without grounds for that belief. Usually, the maker of that type of statement had a special relationship with the person relying on that statement. This will give rise to a duty under the principles of Hedley Byrne v Heller (1964)
• Negligent (under statute) - S.2 (1) Misrepresentation Act 1967 interpret that the maker of the statement had NO reasonable grounds for believing it to be true. Thus, the defendant is liable for all actual damage flowing from misrepresentation under statute. The advantages of statutory misrepresentation i it do not require that there be a Hedley Byrne relationship between the parties and the measure of damages recoverable under s.2(1) is the measure of damages for the tort of deceit.

If misrepresentation is proven at court, then the defendant is eligible to either claim damages and/or rescission. Rescission has the effect either retrospectively (from the beginning the contract is void) and/or prospectively. However, misrepresentation renders a contract voidable, for instance, the representee can elect to continue with (affirm) the contract or terminate the contract. If he decides to rescind, he must give notice to the representor. 

Mistakes :

There is much disagreement concerning the effect of mistake on a contract. There are many reasons for this such as confusion as to which terms to use, a large number of cases which can be interpreted in different ways, no recent decisive House of Lords decisions on the subject and intervention of equity. The general rule is that a mistake has no effect on a contract, but certain mistakes of a fundamental nature, sometimes called operative mistakes, may render a contract void at common law. If the contract is rendered void, then the parties will be returned to their original position, and this may defeat the rights of innocent third parties who may have acquired an interest in the contract. The reluctant of the courts to develop the common law doctrine of mistakes is probably due to the unfortunate consequences for third parties that can result from holding a contract void. Equity has, however, intervened to produce more flexibility.

Operative mistakes are divided into :

• Common mistakes - it occur when both parties are agreed, but they are both under the same misapprehension. If this misapprehension is sufficiently fundamental, it may nullify the agreement. At common law, this may render the contract void, that is the contract has no legal effect.
• Mutual mistakes - these mistakes negate consent, that is, they prevent the formation of an agreement. The court adopt an objective test in deciding whether agreement had been reached. It is not enough for one of the parties to allege that he was mistaken
• Mistake in equity - the narrow approach taken by the common law towards remedies for mistake (that is it renders that contract void) is supplemented by the more flexible approach of equity. Remedies such as rectification, necessary conditions and refusal of specific performance available in equity as to mistakes.

(ii) Frustration

Frustration occurs where it is established that due to a subsequent change in circumstances, the contract has become impossible to perform, or it has been deprived of its commercial purpose. A good example is Avery v Bowden, in which a ship was supposed to pick up some cargo at Odessa. With the outbreak of the Crimean War, the government made it illegal to load cargo at an enemy port, so the ship could not perform its contract without breaking the law. The contract was therefore frustrated. The legal consequence of a contract which is found to have been frustrated is that the contract is automatically terminated at the point of frustration. The contract is not void ab initio ("from the beginning"); only future obligations are discharged. At common law, obligations which fell due for performance before the frustrating event are still in operation. 

(iii) Termination of contract

Breach

A breach of contract is committed when a party, without lawful excuse, fails or refuses to perform what is due from him under the contract, or performs defectively, or incapacitates himself from performing.

Anticipatory Breach

A anticipatory breach occurs when, before performing is due, a party either repudiates the contract or disables himself from performing it. If the injured party does not accept the breach, he remains liable to perform and retains the right to enforce the other party's primary obligations. acceptance must be complete and unequivocal and he should make it plain that he is treating the contract as at an end. A breach can be accepted by bringing an action for damages, or by giving notice of intention to accept it to the party in breach. 

Termination for breach

A breach gives the injured party the option to terminate the contract or to affirm it and claim further performance. At law, the right to terminate for breach arises in three situations:

• repudiation – where a party evinces a clear and absolute refusal to perform
• impossibility – where a party disables himself from performing
• substantial failure to perform - A failure in performance is "substantial" when it deprives the party of what he bargained for or when it "goes to the root" of the contract. For less serious breaches, a right to damages may arise, but not a right to terminate.