Fraud Discharge Remedies fraud Fraud omnia vitiate fraud

Fraud, Discharge, Remedies

fraud • Fraud omnia vitiate – fraud vitiates everything • Must be specifically pleaded and strictly proven • It can be presumed when consideration is woefully and shockingly inadequate • Can be rebutted by evidence • Makes a contract voidable – party must act timeously upon discovering it

Discharge of Contractual obligations and Remedies

• Where a party is freed from performing his obligations under a contract • Hence there are no outstanding obligations under the contract. • There are 4 ways in which a contract can be discharged or terminated:

• • Discharge by agreement Discharge by performance Discharge by frustration Discharge by breach

Discharge by Agreement • Contracts may be discharged/terminated by agreement just as they are created by agreement • This may be provided for by a termination clause in the contract • If the performance of the obligations under the contract are in the future and neither party has performed his obligations then the parties may agree that each be released from his obligations • Can also apply where parties are replacing an existing contract with a new one, or varying the terms of an existing one

• Fish & Meat Co Ltd v Ichnusa Ltd – pg 98 • Novation – agreement to substitute one of the parties or the terms of the contract. • Obligations under the old contract are discharged. – Japan Motors v Randolph Motors – pg 99

• To successfully plead it: – Intention to substitute, which may be by words or conduct. Conduct must be clear and unambiguous – There must, in fact, be a substitution of the old with the new – Mutual consent – express or by conduct

Discharge by Performance • Performance is where one or both parties have fulfilled their obligations under the contract in accordance with the terms of the contract. • General rule is that performance must be exact and complete. Partial performance is no performance. E. g. : – Goods to be supplied under a contract must be of the right kind and of the right quantity. If it is not, the goods could be rejected – Money to be paid in cash must be in cash and not cheque. It will only be exact when the cheque is honoured • The effect of this (exact and complete performance) is to discharge a party/parties from any or further obligations under the contract

• Time – Generally time is not an issue unless the parties expressly state so, – Or where the nature of the contract makes time of the essence, e. g. , the supply of perishable goods

• Exceptions – If the contract can be divided into several parts, complete performance of each part constitutes performance in respect of those parts, but the obligation to perform the rest remains. – Where party who is to benefit accepts part performance – Where the party who is to benefit prevents the other party from performing his obligations – Where there is substantial performance of the entire obligation, this can arise in situations where hardship would be occasioned otherwise. E. g. , a carpenter contracted to produce 4 chairs, but who is able to produce 3. He will be paid for the 3 and discharged.

Discharge by Frustration • Frustration is where the performance of obligations under the contract becomes impossible as a result of events beyond the power and control of either party • Effect is to discharge the parties from the contract. No legal action can be taken against either.

• Frustration can occur in the following ways: – Death of a party to the contract – Destruction of the subject matter, Taylor v. Caldwell: a contract to hire a hall for a musical show was frustrated because the hall was destroyed by fire through no the fault of the owner. – non occurrence of an event – where the performance is dependent on an event, Krell v. Henry: held that a contract to hire a room overlooking the proposed route of the coronation procession of King Edward VII was frustrated when the procession was cancelled due to the king’s illness. Purpose of the contract was to view the coronation, not just to hire a room.

• Commercial purpose defeated • Government intervention, e. g. compulsory acquisition, change in law has made performance illegal • Where frustration will not apply: – Self induced events – Afrifa v Class Peters – pg 102 – Where parties foresaw the frustration and made provision for it

Effects of frustration under the Contracts Act • All monies paid would be recovered, and all monies payable would cease to be payable • Where a party has incurred expenses, he may be allowed to recover or retain • If there is part performance, courts may sever parts of the contract as if it were a separate contract

Discharge by Breach • Where a party, without lawful reasons, and without consent of the other party fails to perform his side of the contract • Types of breach: – Total failure to perform – Anticipatory – where before the date of performance, party indicates his intention not to perform – Incomplete or defective performance

• Effects of Breach: – Not all breaches will warrant discharge from the contract. Mostly fundamental and serious conditions will lead to a discharge – Where the other party has put himself in a position which makes it impossible to perform then the innocent party may be discharged and may sue for damages

Exercise • Red Army is a carpenter. He contracted with Early Steps Pre-School to construct tables and chairs for use of the toddlers of the school. Under the contract, he was to build a 100 chairs and tables over a period of 7 days. At a point when RA had constructed 80 chairs and 83 tables, he received an urgent message from his village that his relative had passed away. As the oldest son, he immediately left for the village, after advising the school proprietor of his predicament. He did not return till two weeks later and was told that someone else had completed the contract and the school intends to sue him for breach. Advise the parties?

break

Remedies for breach of contract • Once a breach has occurred, the innocent party may seek redress in accordance with the terms of the contract. • This may be by initiating a court action or arbitration.

• There are several means of redress: – Damages – Specific performance – Injunction – Rescission – Rectification

Damages • Awarded to compensate the innocent party for the breach • basis is to put the injured party in a position he would have been in, as far as money can, if the other party had performed his obligations • Case: Juxon-Smith v KLM Dutch Airlines- 110 • Losses which are remote or cannot reasonably be linked to the breach cannot be paid for.

• Damages may be general or special – General flows from the breach – Special – liquidated, verifiable and provable sums, e. g. , lost income, expenses incurred etc • In determining damages, the court considers two things – Remoteness – Measure of damages

Remoteness of damages • Damages must not be remote – they must be proximate to the breach • Hadley v Baxendale – 111 • 2 tests established under this case: – Do the damages arise naturally from the breach? – Was it in the reasonable contemplation of both parties as being a probable result of the breach? • If the answer is yes, then damage is not remote and therefore recoverable

• Horne v Midland Railway – 115 • Note also page 116 on the essential principles

Measure of damages • This is the computation of how much money must be paid by the party in breach to the party suffering from the breach. • Arkoful v State Fishing Corp – 117 • Note: An aggrieved party is required to mitigate his damages by taking reasonable steps • Attitsogbe v Posts and Telecommunications 118

• Societe Generale de Compensation v Ackerman – 118 – Loss incurred – Wages due and payable – Value of any other benefit [one] is entitled to • Kisco Products (Gh) Ltd v Delmas America Africa lines -119 to 120

Quantum Meruit • An equitable remedy meaning “how much it is worth”. • Absent express terms the courts will assess an amount which is fair and reasonable • Skanska v Klimatechnik Engineering Ltd – “reasonable, . . just right; not too little or too much”

• Applies where – Party is precluded from completing a contract – No concluded contract • 122

Money had and Received • Frafra v Boakye – 123 • An order compelling a defendant to refund monies paid by or on behalf of the plaintiff to the defendant, the ground being that the defendant has not at all performed his contractual obligations.

Specific Performance • An equitable and discretionary remedy • It is not automatically available to a party who prays for it • An order of the court directing a party to perform his contractual obligations • It will be available if damages will be inadequate, where the subject matter is of special interest and value to the plaintiff, where time is of the essence etc

• The one seeking the remedy must come with clean hands and must not himself be tainted by fraud or crookedness. • IBM World Trade Corporation v Hasnem Enterprises Ltd – 127 • Addo v Ghana Co-operative Marketing Association Ltd • Koglex v Field – “the relief of SP lies whenever agreement between parties have got to a stage that it would amount to fraud on the part of the other party to refuse to perform his side of the bargain”

• Redco Ltd v Sarpong – 129 • Where a third party has provided valuable consideration, and acquired an interest in the subject matter, and has no notice of the rights and interests of the plaintiff, then SP would not lie, but rather damages • Basare v Sakyi & Another - 131

Summary • The courts will therefore consider the following for the grant of SP: – Whethere is a contract – Where damages will not be an adequate remedy – Where the subject matter is unique and special – Whether time is of the essence – Part performance and clean hands – Is Remedy sought in a timely manner – Where conduct of Plaintiff makes it fair and equitable – Whethere is a bona fide purchaser for value without notice of any prior interest

Injunction • An equitable remedy directed at a party to refrain from doing a specified Act • Fish & Meat Co Ltd v Ichnusa Ltd - 132

Rescission • Remedy granted to one party to set aside a contract on grounds of fraud, misrepresentation, mistake. • Car & Universal Finance Co. Ltd v Caldwell – 135 • SA Turqui & Bros v Lamptey – 136 • Restoration of both parties to their original positions must be possible for this remedy to lie

Rectification • An equitable remedy where the court corrects or amends an error in a written contract to bring it into conformity with the actual agreement reached between the parties • it ensures that the written contract is in consonance with the oral or prior agreement • It is to restore the instrument to the true intention of the parties • Walker Property Investment (Brighton) Ltd v Walker - 137

Questions?