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Difficulty: Very hardLaw of Contract: Discharge, Vitiating Elements, and Remedies for Breach

A commercial printer entered into a binding contract to supply 50,000 customized promotional banners to a corporate client. After the printer successfully produced and delivered 20,000 banners, a new government regulation was passed banning the display and distribution of such promotional materials nationwide, rendering further performance impossible. The client refused to pay for the 20,000 banners already delivered, arguing that the contract was terminated by frustration. Which of the following legal remedies or principles allows the printer to claim reasonable payment for the work performed prior to the frustrating event?

  1. A claim on quantum meruit to recover the value of work already performed before frustration occurred.Answer
  2. B
    An action for damages for breach of contract, treating the statutory prohibition as a breach of a major condition by the client.
  3. C
    An application for an injunction to enforce the contract on the grounds that statutory changes constitute an invitation to treat.
  4. D
    A claim for specific performance under the rule that title to the remaining unproduced banners passed immediately upon contract signing.

Answer

A claim on quantum meruit allows the printer to recover reasonable payment for the 20,000 banners produced and delivered before the contract was discharged by frustration.
When a contract is discharged by frustration due to subsequent illegality, neither party is in breach. However, where one party has already performed work or delivered goods prior to the frustrating event, that party is entitled to bring a claim on a quantum meruit basis to recover reasonable payment for the value of the work executed.

Step-by-Step Solution

1
Analyze the mode of contract discharge in the scenario.
The subsequent government legislation banning the banners made further performance illegal and impossible without fault of either party, discharging the contract by frustration.
Frustration operates automatically when an unforeseen external event renders performance impossible or illegal.
2
Determine the rights of the performing party regarding partial performance prior to the frustrating event.
The contract is discharged as to future performance, but obligations already fulfilled where value was conferred require equitable settlement.
At common law and under frustrated contract principles, a party who has performed part of an indivisible contract before frustration can claim on a quantum meruit basis for the reasonable value of services rendered or goods supplied.
3
Evaluate the appropriate legal remedy.
Quantum meruit ('as much as earned') is the legal claim for reasonable remuneration for work completed prior to discharge.
Damages and specific performance apply to breach of contract, not automatic discharge by frustration.

Key Concept

Discharge of Contract by Frustration and Quantum Meruit Remedy
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Topics

Law of Contract: Discharge, Vitiating Elements, and Remedies for Breach

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