Discharge of contract

• Discharge

  A contract creates obligations on one or all parties involved.

  The discharge of a contract happens when these obligations come to and end
• Contracts are discharged by:

  • Performance
  • Frustration
  • Breach
• Discharge by performance - The 'Entirety Rule'

  This is where all the obligations under the contract have been met (Cutter v Powell)
• Exceptions to the Entirety rule:

  • Divisible contracts
  • Prevention of performance
  • Substantial performance
  • Acceptance of part performance
• Divisible contracts (Ritchie v Atkinson)

  • A contract is divisible when payment is due at various stages of performance, rather than in one lump sum when performance is compled
  • Price for each stage can be claimed when the stage is completed
• Substantial performance (Bolton v Mahadeva)

  If a party done substantially what was required under the contract they can recover an amount appropriate to what has been done under the contract
• Prevention of Performance (Planche v Colburn)

  • If the other party prevents a party from carrying out their obligations because of some act or omission
  • The party trying to perform may have an action or damages
• Acceptance of part performance (Sumpter v Hedges)

  • Applied where one of the parties has performed the contract, but not completely
  • If the other side has shown willingness to accept the part performance, then the strict rule of the Entirety rule will not apply
  • Agreement must be reached without pressure
• Time for performance

  Usual rule is that a party performs their obligations, but not within the time stipulated in the contract:

  • Can claim damages for the delay
  • Cannot terminate the contract
• Time for performance - Cancel contract

  However sometimes Time is ' of the essence' so the innocent party is entitled to bring the contract to an end:

  1. Where the parties have made an express stipulation in the contract that Time is of the essence
  2. Where the surrounding circumstances show that Time of performance is critical
  3. Where a new date is insisted upon after failure to comply
• Frustration

  If after a contract is made, something happens, through no fault of either party, to make its performance impossible, The contract is said to be frustrated
• Frustration types:

  • Impossibility
  • Illegality
  • Commercial sterility
• Impossibility (Taylor v Caldwell)

  • The contract is frustrated because performance has become impossible
  • Death of either party
• Illegality - ( Re Shipton) - Has to become illegal not already illegal

  • Where after the contract is formed, a change jn the law makes its performance illegal
  • This can often happen in times of war when law may change rapidly and cause a contract to be frustrated
• Commercial sterility - radical change of circumstances (Krell v Henry)

  • Where the commercial purpose of the contract has disappeared because of the intervening event, The contract may be frustrated
  • Performance of the contract had to become pointless, even though it is still technically possible
• When frustration cannot apply:

  1. Self - induced frustration (Maritime)
  2. Contract becomes less profitable (Amalgamated)
  3. Foreseeable risk ( or when mentioned in the contract) - ( Davis Contractors)
• Remedies for frustration:

  Law Reform (Frustrated contractors) Act 1943

  • Ends contracts
  • Existing obligation still enforceable but future ones are not
  • Deposits are recoverable
  • Money owed is not payable
  • Discretionary compensation for work done