Discharge by Performance

• The usual way for contracts to be discharged (completed) is by performance meaning that both parties perform their obligations (so one party delivers goods or a service and the other party pays for those goods or services). The general strict rule for discharge by performance is that performance must be complete (CUTTER V POWELL) and exact (RE MOORE V LANDAUER).
• This rule was seen as very strict and harsh so the courts introduced some exceptions such as prevention of performance. If one party prevents the other from carrying out full performance of the contract, then the innocent party can argue some performance and can claim to be paid on a quantum meruit basis (money for services completed so far); (PLANCHE v COLBURN).
• There can be an acceptance of part-performance which means the party who has not completed all the work may be paid on a quantum meruit basis. For part-performance to be accepted, it must be voluntary and there must be consent. Both parties must (1) specifically acknowledge this is acceptable and (2) there is no unfair pressure or duress to accept part- performance so there is genuine choice. This was not the case in SUMPTER v HEDGES where a builder ran out of money half way through and left the customer with no choice but to finish the job themselves.
• Divisible (severable) contracts are also an exception to the strict rule. If a contract can be seen as being in separate parts and clearly divided, then non-completion of one part is not a breach of the whole contract (RITCHIE v ATKINSON).
• Another exception is where there has been substantial performance of the contract. If the defendant has done most of the work or actually done all of the work but some of it isn't to a satisfactory standard then the courts may treat this as performance and payment on a quantum merit basis (as much as it is worth) as illustrated in DAKIN v LEE. The D completed a contract worth £1500 but left £80 worth of work still to be done so L could not refuse to pay full sum but could pay on a quantum merit basis, the £1500 less €80. However, there is no definition of 'substantial performance' so it will depend upon the circumstances on a case by case basis.
• In HOENIG V ISSACS, a decorator completed a contract worth £750 with £55 of repairs left outstanding and he was entitled to be paid on a quantum meruit basis. However, in BOLTON v MAHADEVA, there was no substantial performance so no payment was due when a builder did central heating job for £560 but did it badly and it needed £170 repairs. It was held that completion of 69% of the work was not

  'substantial.
• If there is delayed performance, it does not normally lead to the end of the contract. However, if the contract states 'time is of the essence' as in UNION EAGLE LTD V GOLDEN ACHIEVEMENT), it is obvious that time of performance is critical or one party then makes 'time of the essence' as in CHARLES RICKARDS V OPPENHEIM (where the customer served notice that unless work completed in 4 weeks, he would cancel the contract which he did) then the 'time' term will be a condition.
• Remedies available for failure to perform include: 'quantum meruit where the court orders payment for the work that has been done. Specific performance where the court will order the work to be finished. Damages (compensation, money, for breach of contract or a right of repudiation (withdrawal of the contract).