Commercial Law: Contract Termination and Breach of Contract

This article discusses the contract termination and breach of contract under commercial law. It covers the rules, application, and conclusion of the case. The case involves the termination of the contract between an artwork company and Laura due to breach of contract. The article explains the different types of breaches and the consequences of each. It concludes that the artwork company can terminate the contract and ask for compensation from Laura.

Running head: COMMERCIAL LAW
Q & A
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to problem 3.......................................................................................................................2
Issue:............................................................................................................................................2
Rules:...........................................................................................................................................2
Application:.................................................................................................................................3
Conclusion:..................................................................................................................................4
Reference:........................................................................................................................................5

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Answer to problem 3
Issue:
The central issue of the case is to consider whether the artwork company can terminate
the contract with Laura or not.
Rules:
This case is based on the provision of contract and termination of contract. A contract is a
legal agreement signed in between two or more parties that binds both the parties legally. A
contract includes certain offer and acceptance of the offer. Once a contract has been signed in
between the two parties, the terms will be mandatory in nature. However, there are certain
processes by which a contract can be terminated by either party. The processes can be
categorized as impossibility of performance, breach of contract, prior agreement, and rescission
of contract and completion of contract. Apart from the above mentioned topic, there are certain
other grounds by which the liabilities of the parties to the contract can be exceeded. The
exclusion clause is one of them. however, in this case, the provision of breach of contract has
been discussed.
In case of any contract, offer and acceptance plays important role. When a party has
made an offer and the other person accepts the same, contract has been formed in between them.
After the formation of contract, both the parties are obliged to follow the terms and conditions of
the contract. Breach of contract happens if any of the parties to the contract does not perform any
condition mentioned in the contract. According to the Law of Contract, both the parties to the
contract are obliged to perform their duties as specified in the contract. In case of breach of
contract, the other party to the contract can terminate the contract entirely or partially.

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There are four kinds of breaches that can be made under the term breach of contract such
as minor breach, material breach, fundamental breach and anticipatory breach. It has been
mentioned under the Contract Law that in case of minor breach, the parties may not terminate the
entire contract and the affected party can ask for the compensation only. In case of material
breach, the breaching term should be a condition. However, there are certain exceptions to this
rule. It has been stated that if any party to the contract has failed to perform any part of the
contract, the cost of the performing terms should be considered and the contracting party can
keep the cost of the breaching terms. It has been observed in Foran v Wight (1989) 168 CLR
385 that if the breaching provision is not that much harmful for the affected party, then the entire
contract should not be terminated.
Other than the material breach, there are certain other breaches such as fundamental breach
where the affected party can terminated the contract due to non-performance of fundamental
conditions of the contract. Further, it is to be started that the party to the contract who made
breach to the terms of the contract is denying the rights of the other party and the consequence of
the same can be detrimental for the other party. In this case, the infringing party should have to
get liable for all the losses and he has to bear the liabilities. The Contract law has given much
opportunity to the affected party to claim compensation from the breaching parties to this effect.
However, in case of part performance of the contract, the effect could not be detrimental and the
affected party could make payment for the part performance only.
Application:
It has been observed that a contract has been made in between Laura and the company.
The main terms of the contract was Laura will create sculptures for the artwork company and
should have to deliver three sculptures in a year. This is the main term of the contract. It has

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further been observed that Laura has failed to supply three sculptures and delivered only two.
Therefore, she has done breach. Now it has to be considered the scope of the breach done by
Laura in this case. it has been observed that the main condition of the contract was to deliver
three pieces of sculptures to the company. She had delivered two sculptures. It is true that there
is a breach regarding the same. However, it is to be considered that she has not violated all the
terms of the contract and therefore, the Artwork Company should partly pay her. On the other
hand, due to breach of the provision, the company can terminate the contract and ask for
compensation from Laura.
Conclusion:
Therefore, the artwork company can terminate the contract made between them and
Laura can ask for part performance of the contract.

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Reference:
Fitzpatrick, G.P. and Haynes, T.R., International Business Machines Corp, 1995. Method and
system for enhanced data access efficiency in an electronic book. U.S. Patent 5,392,387.