Chapter 3: Discharge of the contract

Question 1

How can a contract be brought to an end?

Answer 1

By Performance

By Frustration

By Breach of contract

Question 2

Performance of the contract

Answer 2

A contract is usually discharged by the performance of both parties of their obligations under the contract.

Question 3

Requirements of performance of the contract

Answer 3

Generally, the rule is that performance must be exact and precise and that a partial performance is no performance.

Cutter v Powell (1975)

Question 4

Facts of ‘Cutter v Powell (1795)’

Answer 4

C was employed on a ship sailing from Jamaica to the UK.
He died before completing the journey.
His wife tried to sue to recover part of the wages due to her husband.

Question 5

Held by ‘Cutter v Powell (1795)’

Answer 5

The widow was not entitled to anything because her husband had not completed the journey and there was no complete performance of the contract.

Question 6

When can partial performance discharge the contract?

Answer 6

If it is freely accepted by the other party.

Question 7

What level of performance would be a sufficient discharge?

Answer 7

Substantial Performance

Question 8

If a contractor has substantially performed the contract with only minor defects what are they entitled to?

Answer 8

They are entitled to the contract price less the cost of remedying the defects.

Hoenig v Issacs (1952)

Question 9

Facts of ‘Hoenig v Issacs (1952)’

Answer 9

H was employed by I to decorate his flat.
The price was £750 to be paid in instalments.
I paid £400 but refused to pay the rest as he was dissatisfied with H’s work.

Question 10

Held by ‘Hoenig v Issacs (1952)’

Answer 10

I had to pay the outstanding amount less the cost of remedying the minor defects in H’s work.

Question 11

What is meant by severable contracts?

Answer 11

If the contract is divisible, as in building contracts or employment contracts, the contracts can be discharged by performance of part of the obligations

Question 12

In what circumstances is the offer or performance sufficient to discharge contractual obligations?

Answer 12

In some cases, one party is prevented from performing his or her duties under a contract due to the actions of the other part (e.g. if one party refuses the other party access to the site of building work).

Question 13

What is meant by bringing an action for quantum meruit?

Answer 13

This is an order for the defendant to pay damages for the proportion of the contract price that the work is worth at this point.

Planche v Colburn (1831)

Question 14

Facts of ‘Planche v Colburn (1831)’

Answer 14

C had agreed to write a book as part of a series of titles.
He was to be paid £100 on completion.
He did some research and started the book but the series for which the book was intended was cancelled.

Question 15

Held by ‘Planche v Colburn (1831)’

Answer 15

C was entitled to payment of half of the agreed price as reasonable play on a quantum meruit basis.

Question 16

Frustration of the contract

Answer 16

If it is impossible to perform the contract when it is made there is usually no contract at all.

If the contract is made and then the performance becomes impossible due to a matter for which neither party is responsible the contract is said to be discharged by ‘frustration’.

Question 17

Frustration Case Law

Answer 17

Taylor v Caldwell (1863) - Destruction of Subject Matter
Condor v Barron Knights (1966) - Personal Incapacity
Morgan v Manser (1947) - Government Intervention
Krell v Henry (1903) - Non-occurrence of an event

Question 18

Taylor v Caldwell (1863)

Answer 18

The hall let to a musician for a series of concerts was destroyed by fire before the first one.
The contract was held to be frustrated.

Question 19

Condor v Barron Knights (1966)

Answer 19

A drummer contracted to play seven nights a week could only play four nights due to ill health.

Question 20

Morgan v Manser (1947)

Answer 20

A comedian was contracted to perform but was conscripted into the armed forces.

Question 21

Krell v henry (1903)

Answer 21

A room was booked to watch the coronation but the King’s illness caused the coronation to be postponed.

Question 22

What is an example when a contract is not frustrated?

Answer 22

It is not frustrated if it is merely more difficult or expensive, the contract must be impossible.

Question 23

What does The Law Reform (Frustrated Contracts) Act 1943 do?

Answer 23

This Act regulates the rights and liabilities of each party following the frustration of a contract.

Question 24

The Law Reform (Frustrated Contracts) Act 1943 provides that where a contract has been frustrated:

Answer 24

Amounts paid by one party to another party under the contract are to be refunded.

Amounts still outstanding are no longer due.

If a person has to repay sums he or she may set off any expenses, provided those expenses were incurred in carrying out the contract prior to the frustrating event.

If either party has benefited other than with a payment of money the court can, at its discretion, order a payment of all or part of that value as it considers just.

Question 25

At what point does actual breach of contract occur?

Answer 25

Actual breach occurs at the time performance of the contract was due.

Question 26

What causes actual breach of contract?

Answer 26

One party fails to put forward any sort of performance.

The performance put forward is so inadequate the injured party is substantially deprived of the whole benefit of the contract.

Question 27

At what point does anticipatory breach occur?/

Answer 27

This takes place before the due date for performance of the contract.

Question 28

What are the two types of anticipatory breach?

Answer 28

Express anticipatory breach
Implied anticipatory breach

Question 29

What is express anticipatory breach?

Answer 29

One of the parties declares before the date of performance that he or she has no intention of carrying out his or her duties.

Question 30

What is implied anticipatory breach?

Answer 30

One of the parties does something which makes the performance of the contract impossible.

Question 31

What are the two options available to the injured party when an anticipatory breach takes place?

Answer 31

The contract may be treated as being discharged immediately and the injured party may sue for damages.

Hochster v De La Tour (1853)

The injured party may continue with his or her obligations under the contract until such time as there is an actual breach of the contractual terms.

White Carter Ltd v McGregor (1961)

Question 32

Facts of ‘Hochster v De La Tour (1853)’

Answer 32

Hochster was engaged as a courier on a European tour.
Before the contracted period was due to start he was informed that his services were no longer required.

Question 33

Held by ‘Hochster v De La Tour (1853)’

Answer 33

Hochster was entitled to claim for payment as soon as he was aware of the anticipatory breach.

Question 34

Facts of ‘White and Carter Ltd v McGregor (1961)’

Answer 34

M contracted with the claimants to have advertisements put on litter bins.
He then write to them asking them to cancel the contract.
The claimants refused and displayed the adverts.

Question 35

Held by ‘White and Carter Ltd v McGregor (1961)’

Answer 35

The claimants were entitled to carry on with the contract and did not have to accept the defendant’s anticipatory breach.
They could then claim the agreed price under the contract.

Question 36

When can damages be sought?

Answer 36

Damages may always be sought where there is a breach of contract, but only if the breach goes to the root of the contract can it be treated as ending the contract.

Question 37

What is a repudiatory breach?

Answer 37

A very serious breach

Question 38

How can the injured party treat a contract with a repudiatory breach?

Answer 38

Treat the contract as ended

Or they can affirm the contract

Question 39

What is a valid reason for a breach?

Answer 39

There are circumstances in which there is a lawful excuse for the breach.
No breach occurs where there is a lawful excuse.

Question 40

What circumstances is a lawful excuse for a breach?

Answer 40

If one party has offered to perform their obligations under the contract, but the other party has refused.

If one party makes it impossible for the other to perform their obligations.

Where the parties have agreed that certain obligations shall not be performed.

Question 41

What is an alternative dispute resolution?

Answer 41

Where parties with a dispute use any type of procedure or a combination of procedures, to come to a resolution rather than going to court.

Question 42

What are the key procedures used in an alternative dispute resolution?

Answer 42

Arbitration, Mediation and Conciliation

Question 43

What is arbitration?

Answer 43

A dispute is heard and settled by an independent person (the arbitrator).
Arbitrator is chosen by the parties.
Parties must agree to submit to the process.
The arbitration agreement will set out what the arbitration process involves as well as the rights and obligations of the parties.

Question 44

What is mediation and conciliation?

Answer 44

Involve an independent third party in helping the parties to resolve their dispute.
Solutions and agreements are not automatically legal binding on the parties which limits their usefulness to some degree.

Question 45

What are the advantages and disadvantages of an alternative dispute resolution?

Answer 45

Expertise
Cost
Privacy
Solutions
Speed