Contract - Doctrine of Complete Performance (7)

Question 1

What is the doctrine of complete performance?

Answer 1

Doctrine of Complete Performance: Performance of a contract should be precise and exact; failure to do so may result in damages or part-payment.

(1) General Rule: Traditionally, parties are not required to pay for a contract only partially performed (Cutter v Powell).

(2) Modern Rule: Today, parties may be able to seek damages or withhold full payment for partially performed contracts (see below). These scenarios are:
* Divisible obligations;
* Substantial performance;
* Wrongful prevention;
* Voluntary acceptance.

Question 2

What is the divisible obligations exception?

Answer 2

Divisible Obligations: If a contract clearly stipulates payment upon each ‘stage’ of completion, then each stage may be treated as a separate contract and payable proportionately.

(1) Requirement: The stage must be completed to be payable.

Question 3

What is the substantial performance exception?

Answer 3

Substantial Performance: If a party has completed their obligations, but they are slightly defective, they may be entitled to full payment less the cost of remedy.

(1) Slight Defect: A work may be slightly defective if the cost of remedy is not more than 1/14 of the original contract price (Bolton v Mahadeva).
In Practice: This rule is not absolute - SBAQs differ on the ‘slight’ element.

(2) Calculation: This is the contract price less the cost of the remedy (Hoenig v Isaacs).

(3) Serious Defects: If there are serious defects, i.e. £3500 to remedy a £4000 contract, the party in default is now owed anything.

Question 4

What is the wrongful prevention exception?

Answer 4

Wrongful Prevention: An innocent party may claim damages or a reasonable sum for restitution if the other party wrongfully terminated the contract prior to completion (Robinson v Harman; Planche v Colburn).

(1) Wrongful Termination: Termination other than for breach of condition or major breach of an innominate term.

Question 5

What is the voluntary acceptance exception?

Answer 5

Voluntary Acceptance: Where an innocent party voluntarily accepts the partial performance of the other party, they are obliged to pay a reasonable sum for it.

(1) Voluntary: If the innocent party has no choice but to accept performance, it is not voluntary (Sumpter v Hedges).

(2) Reasonable Sum: The reasonable sum will generally be a ‘quantum meruit’.
Consumer Goods: Where a consumer voluntarily accepts a number of goods below the contracted amount, they must pay for the quantity of goods delivered at the contract rate (s25(1) CRA 2015).