chapter  4
18 Pages

Non-performance of contractual obligations

If the parties to a contract perform their respective obligations as they should, all well and good and everyone is happy. However, a situation may arise where one party’s performance either fails to materialise at all or, even if it does, falls short of what was required under the contract. In such a case, the aggrieved party may well regard the other to be in breach and seek an appropriate remedy, something to which, in the majority of cases, he would be entitled. However, the defaulting party might seek to disclaim responsibility by arguing that in the time since the making of the contract, circumstances have changed and that his failure to perform should be judged in this light. For example, suppose that X contracts to sell to Y a quantity of grain at a specified price and in the period

following the conclusion of the contract the market price of grain doubles. If X has to buy grain on the open market in order to supply Y’s order, it could well be that, far from making a profit on the transaction, he will incur a significant loss. In such circumstances, X might argue that he should be relieved of the obligation to deliver at the original price. Although such an argument might not seem entirely unreasonable, it is unlikely to find favour with the law. This is because of a general rule which states that a party will not be released from their original obligations merely because circumstances have changed, making it more expensive or difficult for them to perform. This said, however, in most jurisdictions there are some, albeit limited, circumstances where the strictness of the rule is mitigated. Should any of these apply, the party in default is excused performance and will not be liable for breach.