Discharge of a contract

• Discharge of a contract

  The point at which a contract comes to an end normally through performance where all contractual obligations are filled and both parties have done as promised.

  Other ways contracts can be discharged - through agreement, breach or frustration
• Performance

  • most contracts end this way, once the agreed terms are in fact performed the legal relationship will cease.
  • In order to be discharged the performance must be complete and exact according to the obligations within the contractual agreement
  • All obligations must be performed to he required standard otherwise the claimant is entitled to make a claim - Re Moore
  • Cutter v Powell - There's a breach of contract if performance is not complete and exact which can lead to injustice

  To deal with the harshness of the contract there have been a number of modifications
• 1. Divisible contracts

  Where a contract can be seen as being separate parts, non completion of one part isn't a breach of the whole contract

  Ritchie v Atkinson - If a contract can be divided into parts there can be performance of some parts and breach of some parts
• 2. Substantial performance

  If a party has done substantially what was required under the contract there must be payment of the amount appropriate to what has been done

  Dakin & Co v Lee - there can be a breach of some aspects of a contract however there should be payment for the contract that has been completed
• 2. substantial performance

  What amounts to substantial payment can be difficult, no specific percentages for completion are specified. It is decided on the circumstances of each case. Two contrasting cases:

  Hoenig v Isaacs - Case example of where performance was substantial enough in the circumstances to avoid breach of the whole contract and so payment should be made on work completed

  Bolton v Mahadeva - Case example of where performance was not substantial enough in the circumstances to avoid a breach of contract
• 3. prevention of full performance

  If one party prevents the other from carrying out his contract, then the innocent party can claim to be paid on a quantum meruit basis

  Planche v Colburn - If complete performance is prevented then the party that was prevented is entitled to be paid based on the part of a contract they've already completed.
• 4. Acceptance of part performance

  • Can arise if both parties agree but the agreement must be genuine
  • If either party prevented the performance the rule doesn't apply
  • If one party has offered performance which has been refused by the other then - discharged.
  • If the innocent party has no option but to take the benefit of the work done - this is not consent
  • Sumpter v Hedges - A contract can be discharged through agreement if parties didn't have a choice but to accept part payment or non performance
• Time of Performance

  • Failure to perform on time is normally a breach of warranty and cannot repudiate a contract.
  • An exception is when time is of the essence if both parties had made this clear Charles Rickards Ltd v Oppenheim
• Agreement

  • if both parties agree and had provided consideration when the contract is formed, they can agree to discharge the contract or vary the contract particularly where there is no specified end date at any time - providing both sides mutually agree
• Breach

  • A contractual party breaches the contract when they totally or partially fail to perform their contractual obligations
  • Breaches occur when there is a failure by a party to perform their obligations under the contract either through non performance or defective performance or repudiating obligations without reason

  There are 2 types of breaches : Anticipatory and actual
• Actual Breach

  • When a party fails to fulfill their contractual obligation within the time frame or completely fails to perform them. It can be minor - warranty or material - condition
  • Eurocross Frozen Fish - where goods aren't supplied in accordance to a contract it amounts to a breach
  • Remedies =
  • primary remedy is damages
  • if there is a breach on condition - repudiation
  • however the innocent party can still choose to affirm the contract but they can still claim damages for the breach
• Anticipatory breach

  • Occurs when party indicates they intend not to perform their obligations before the performance of the contract is due
  • Non breaching party may attempt to sue for damages immediately or wait till the actual breach occurs
  • losses may have increased so they might wait to ensure damages reflect the loss
  • SK Shipping Ltd / Hochester v De La Tour - Can be an anticipated breach where the breach is communicated before it occurs
• Anticipatory breach

  Remedies :

  • primary remedy is damages
  • claimant has option of suing immediately
  • Anticipatory breach of condition means the suffering party can repudiate the contract
• Frustration

  A frustrating event typically occurs between contract formation and the expected time of performance

  where this occurs, contract is frustrated and non performance doesn't allow a claim

  Definition = if a party to a contract was prevented from keeping the promise because of an unforeseeable, intervening event, he or she wouldn't be liable for a breach of contract - Taylor v Caldwell -

  A contract is frustrated if both parties face an unforeseeable intervening event which wasn't in their control
• Frustration 2

  • Frustration was developed to provide a remedy where during the contract situations arise which make further performance illegal, impossible or fundamentally different
  • event must not be the fault of either party
  • remedy = automatic termination of the contract
  • some contracts contain provisions to anticipate frustrating events called 'force majeure clauses' which can exclude liability for delay in performance in extraordinary circumstances = frustration not relevant
• There are 2 elements to frustration

  1. a supervening event - either impossibility, illegality or a change in circumstances which means the purpose of the contract can no longer be achieved
  2. The supervening event isn't the fault of either party
• Impossible ( destruction of the subject matter )

  • applies where the subject matter becomes destroyed or becomes unavailable through no fault of parties ( Jackson v Union Marine Insurance Co ) - weather events can frustrate a contract.
  • Unavailability of the party who is to perform the service because of illness as in Robinson v Davidson or failure to perform on medical advice as in Condor v The Baron Knights - if a doctor advises for medical reasons that a party can't perform their obligations then this is a frustrating event.
• Subsequent illegality

  • A contract will be frustrated rather than breached where due to the law between contract formation and expected performance the obligations have become against the law or illegal
  • Seen Re Shiptons case
• Change in circumstances

  • This is where there is a radical change of circumstances which means the primary objective or purpose of a contract can't be achieved. If the main purpose is based on an event and the event didn't take place then the contract may be frustrated
  • Krell v Henry - when the cancellation of an event deprives the contract of its business purpose
  • Herne Bay steamboat Co v Hutton - If a contract hasn't been deprived of its sole commercial purpose as its still possible to perform the terms it's not frustrated
• 2 - supervening event isn't the fault of either party

  frustrations don't apply where -

  1. It is self induced Martime v Ocean Trawlers - there is control over supervening event
  2. IF the event being a foreseeable risk of the event was mentioned in the contract - Armchair Answercall v People in Mind - in general the courts are reluctant to find this
  3. Where the contract has become less profitable - Davis Contractors - A contract becoming less profitable or difficult to complete isn't a reason for frustration as the law doesn't seek to rescue parties from a bad bargain