obligations and contracts essay questions

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Laws on Obligation and Contracts (Practi...

Laws on Obligation and Contracts (Practice Test)

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It is a juridical necessity to give, to do or not to do.

Quasi-contract

It is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.(

An element of obligation that binds the parties to an obligation

Active subject

Passive subject

Object or Prestation

Juridical or Legal tie

April wants to start a steak restaurant but her capital is not enough. She decided to borrow money costing Php 100,000 from her hotel heiress friend, Clarice. They executed a contract of loan and agreed that April will pay it after 5 years. Who is the active subject?

April wants to start a steak restaurant but her capital is not enough. She decided to borrow money costing Php 100,000 from her hotel heiress friend, Clarice. They executed a contract of loan and agreed that April will pay it after 5 years. Who is the passive subject?

April wants to start a steak restaurant but her capital is not enough. She decided to borrow money costing Php 100,000 from her hotel heiress friend, Clarice. They executed a contract of loan and agreed that April will pay it after 5 years. What is the prestation?

Php 100,000

Contract of Loan

Teo ordered Shrimp and Garlic pizza from SNR and he has already been waiting for 2 hours so he called SNR to inquire regarding the status of his order and was told that it the pizza was already delivered. Meanwhile, his neighbor, Erwin received a pizza by mistake, accepted and have already consumed all of it to hide the evidence. What is the legal term for this kind of situation?

Quasi-Contract

Negotiorum Gestio

Culpa Aquilana

Solutio Indebiti

Owen is excitedly driving his new Ferrari Tributo Spider in Malabon and got distracted by a phone call when he accidentally crashed in another car, Aston Martin Vantage owned by Adrian. The damage was a scratch on 2 cars. What will be the source of obligation between these two?

Acts or omissions punishable by law

Quasi-delict

The fulfillment of the respective obligations of the parties under the contract, resulting to its accomplishment and extinguishment.

The purpose is the performance of an obligation by one party as the other party performs or has performed its own obligation.

Onerous contract

Consensual contract

Nominate Contract

Valid contract

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Chapter 4 Outline answers to essay questions

Essay question

Critically assess mechanisms utilized by the courts to differentiate terms as conditions and warranties and the effectiveness of the parties’ attempts to define the terms in advance. What impact did the ‘breach-based’ approach have in adding certainty to the definition of terms?

•   The remedy available for breach will depend upon whether it is a warranty or a condition.

•   A warranty is a lesser term of a contract. The importance of identifying whether the term is a condition or warranty is the remedy available to the injured party. If the term breached is a warranty the remedy of damages for any loss may be claimed but the injured party is not entitled to repudiate the contract (they must continue to fulfil their obligations in the contract - Bettini v Gye ).

•   A condition is an important term of the contract. Due to it being so fundamental to the contract, a breach of a condition enables the injured party to claim damages AND they have the option to bring the contract to an end. If the contract is to be ended this must be acted upon quickly and within a reasonable time ( Poussard v Spiers ).

•   Traditionally, identifying the terms of a contract involved a ‘term based’ approach being taken by the courts (looking at the parties’ intentions in drafting the contract). This may not always be the most appropriate mechanism to use and hence it may adopt a ‘breach based’ approach. The focus being on the seriousness of the consequences of the breach. These are described as innominate terms (they are intermediate terms until the consequences of the breach are identified) - Hongkong Fir Shipping Co. v Kawasaki Kisen Kaisha .

Hongkong Fir identified the importance of correct and technical drafting of contracts. Certainty will only arrive following careful drafting of contracts, but this still is dependent to a large degree when left to the courts to determine a term's importance.

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Obligations and Contracts: Everything You Need to Know

Obligations and contracts are interrelated. Each party to a contract is legally bound to perform certain duties. These duties are called contract obligations. 3 min read

Obligations and contracts are interrelated. Each party to a contract is legally bound to perform certain duties. These duties are called contract obligations.

What Are Contract Obligations?

All contracts involve exchanging something that has some value, be it a product, service, or money. Each of the contracting parties has some responsibilities with respect to this exchange. These responsibilities are known as contract obligations. For example, if you enter into a contract to sell a vehicle, you have an obligation to transfer its ownership, whereas the buyer has an obligation to pay you for it. The terms of the contract will specify the ways to fulfill the obligations (amount and mode of payment, time and place of delivery, etc.).

If any of the parties fails to fulfill its obligations, it amounts to a breach of contract and may require the breaching party to reimburse the other party for the damages.

What Is a Contract?

A contract is an agreement that is legally binding upon the parties. Contractual rights and obligations are enforceable in the court of law. A court may either order specific performance of the obligations or award damages for the financial loss caused due to breach of contract.

In order to constitute a valid contract, there must be four essential elements:

• Consideration
• Intention of the parties to create a legal relationship

The parties negotiate on various aspects of the agreement before it becomes binding and takes the form of a contract. Therefore, it's important to determine the precise time of contract formation (i.e., the moment from which the contractual obligations come into effect).

Consideration or the mutual promise of the parties forms the basis of a contract. These promises define the scope of rights and obligations of the contracting parties.

If one party fulfills its obligations under the contract while the other party fails to do so, the fulfilling party can approach a court for seeking relief . For example, a web developer entered into a contract with a graphic designer for designing some promotional material for $3,000. The designer created and delivered the material and the developer confirmed that it meets the terms of the contract. Now, if the web developer fails to pay the designer, the designer can seek relief from a court for the breach of contract.

Usually, courts grant monetary damages for the breach of a contract. However, in some special cases, courts may also ask the breaching party to fulfill its contractual obligations. Since contracts are legally enforceable, the contracting parties can use contracts as a basis of their business relationships.

For example, a multimedia company promised to pay $3,000 to a composer for a brief composition as detailed out in the agreement. Soon after the composer started composing the piece for the company, he got another offer from a big studio and abandoned the contracted project. The multimedia company had to find another composer and pay him $4,000 for the said assignment. The company can now sue the original composer and claim a damage of $1,000 for the loss it incurred due to the breach of contract.

Examples of Contract Obligations

Contractual obligations depend upon the subject matter of a contract. For instance, a sales contract may have altogether different contractual obligations from a property rental contract. Nevertheless, most of the contracts contain some common forms of contract obligations:

• Payment : In a contract to buy or sell a product or a service, the buying party usually has a legal obligation to pay the seller for the said product or service. The contract may specify the terms of payment, such as the amount, form, and time of payment.
• Delivery : The selling party is usually under an obligation to deliver the sold product or service. The contract may specify the terms of delivery, such as the date and method of delivery.
• Quality of Goods : Most of the sales contracts require the seller to provide goods that meet a certain level of quality. A contract may specifically describe the required quality standards.

In addition to the above types of specific obligations, the contracting parties are also bound to follow the general principles of contract. For example, all contracting parties have a legal obligation to deal fairly with each other. No party should use any force or coercion for creating a contract.

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2 Contracts, Promises and the Law of Obligations

• Published: August 1990
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The conceptual apparatus which still dominates legal thinking is the apparatus of the nineteenth century. This influence extends not only to law itself, but also to the processes of thoughts and to language in political, moral, and philosophical debate. This chapter illustrates the conceptual framework of contract and its place in the law of obligations as a whole. It argues that that this conceptual apparatus is not based on any objective truths; rather, it is the result of the previous decade's heritage, created and moulded in the shadow of past movements and reflecting the values of yesterday. It further claims the need to recognize that many of the societal values today differ from the values of yesterday, and argues that revising concepts is necessary so that they conform more closely to the values of today and be more functional.

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Home » News & publications » Latest news » Terminating for breach of progress obligations – key questions

Terminating for breach of progress obligations – key questions

Posted: 14/08/2024

This article considers the questions that commonly arise when considering a termination under a construction contract for breach of a contractor’s, or subcontractor’s, progress obligations. 

What types of progress obligations are there?

Often there will be an obligation to complete by a date (or dates), with a mechanism to adjust this. In the absence of a specified date, there is likely to be an implied obligation to complete within a reasonable time.

Many contracts will include additional progress obligations. For example:

• to proceed ‘regularly and diligently’, ie JCT DB 2016 clause 2.3. JCT SBC/Q 2016 clause 2.4;
• ‘in accordance with a programme’, ie JCT DBSub/C 2016 clause 2.3; or
• ‘in accordance with the progress of the main contract works’, ie JCT DBSub/C 2016 clause 2.3.

Would an obligation to proceed ‘regularly and diligently’ be implied?

Conceivably, but in reported cases the courts have declined to imply such a term, preferring instead to hold that the (sub)contractor should be at liberty to organise its work as it chooses.

Note also that some standard form construction contracts contain a right to terminate for not proceeding ‘regularly and diligently’, even without a freestanding obligation to proceed as such. 

What does an obligation to proceed ‘regularly and diligently’ (or similar) require? 

Early cases offered limited guidance:

London Borough of Hounslow v Twickenham Garden Developments [1971] Ch 233 – ‘ These are elusive words , on which the dictionaries help little. The words convey a sense of activity, of orderly progress, and of industry and perseverance…’ 

GLC v Cleveland Bridge and Engineering [1984] 34 BLR 50 – the contractor must ‘get on with it’. What is required ‘depends on the objective’.

West Faulkner Associates v London Borough of Newham [1995] 71 BLR 1 – ‘…to proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work…’ 

‘…like the elephant, [it is] far easier to recognise than to describe’.

More recent cases – Sabic UK Petrochemicals Ltd v Punj Lloyd Limited [2013] EWHC 2916 and Vivergo Fuels Ltd v Redhall Engineering Solutions Limited [2013] EWHC 4030 – have offered more practical guidance:

• delay against the intended programme is not in itself conclusive, but may suggest and evidence a lack of due diligence; 
• failure to produce a programme on which to plan the work or by which to monitor and manage the work is not of itself conclusive, but may suggest and evidence a lack of due diligence; 
• failure to achieve the programmed productivity because of inadequate resourcing will usually evidence a failure to proceed regularly and diligently; 
• poor labour management and inadequate supervision does not necessarily establish that a contractor is not proceeding regularly and diligently, but again it may be good evidence of this; 
• the contractor is not released from its obligation to exercise diligence simply because the completion date has been missed ; and 
• an employer may jeopardise its position where it tries to manage and mitigate a delay caused by the contractor, and requests that the contractor re-deploy resources to higher priority areas.  

Is it possible to terminate for failure to complete on time?

Most terminations for breach of progress obligations relate to obligations to proceed ‘regularly and diligently’ (or similar wording), or to unlawful suspension or abandonment. 

Failure to achieve an obligation to meet a particular completion date may not be a separate ground for termination in a construction contract. It is not under JCT forms of contract, for example. It is more common in other types of agreement, ie development agreements or agreements for lease with development obligations.

Are there procedural formalities to be observed?

Yes, and the courts tend to apply such contractual requirements strictly, with the result that a procedural irregularity could invalidate an otherwise justified termination. Worse still, the exclusion of a contractor or subcontractor from site while relying on an invalid termination could put the terminating party in repudiatory breach, with very significant adverse consequences.   

Typical requirements relate to:

• timing, particularly where there is a requirement to serve a default notice prior to a termination notice, or otherwise to allow a period for correction. Contractual provisions regarding timing for the service of a notice will need to be considered;
• the form and content of the notice;
• who may serve the notice. It may not be the same for a default and a termination notice; and
• how any notices have to be served. Again, it may not be the same manner for a default and a termination notice.

When should the test be applied?

Under most default notice regimes with a period for correction, the test should be applied:

• when the default notice is served; and
• when the period for correction expires.

What should I consider when applying the test?

This will very much depend on the facts, but the following areas of enquiry are invariably relevant:

Is there a programme? Is it up to date? In practice, there may well be a gap between the last updated programme and the relevant points in time. Developments in this gap will need to be considered, particularly at the subcontract level where there may be lots of ongoing activities for which the subcontractor in question is not responsible.

How does actual progress compare to the programme? Can any differences be explained away?

What level of resource was required? Consider:

• tender and contract documents;
• method statements;
• contemporaneous records of requests and projections/statements of intent;
• cash flow forecasts versus applications for payment; and
• an analysis of the resource required.

Was there sufficient allocation of resource? Consider:

• site records, attendance records, inspection reports;
• emails; and
• accounts from site personnel.

Other reasons for delay

Are delays explained by matters for which the (sub)contractor in question is not responsible? This may be apparent from:

• progress reports or meeting minutes;
• notices of delay or extension of time requests; or
• responses to calls to ‘hurry up’.

What effect did these factors have? 

The assessment should be concluded with a critical and objective consideration of the grounds for termination. In practice, the terminating party will need to justify its decision and it would be wise to ensure that it can be clearly explained and supported by strong evidence. It should consider critically whether any improvement in a period for correction is sufficient to satisfy the contract.

Peter Stockill

Email Peter +44 (0)20 7457 3000

Sam Mullender

Email Sam +44 (0)20 7457 3132

Related expertise

• Construction and infrastructure

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