discharge

Question 1

What does it mean for a contract to be discharged?

Answer 1

Where all obligations arising under a contract are discharged and all rights
thus extinguished, the contract is discharged.

Question 2

In what ways (5) may a contract be discharged?

Answer 2

1- performance
2- expiry
3- agreement
4- breach; or
5- frustration

Question 3

What is meant by discharge by expiration?

Answer 3

A contract will expire when it is completed according to its own terms.
- Contract expiration is often by date ie the parties incorporate a term in the contract which stipulates when the contract comes to an end.

Question 4

What is meant by discharge by performance?

Answer 4

A contractual obligation is discharged by a COMPLETE performance of the obligation.
- The promise is entitled to the benefit of complete performance exactly according to the promisor’s ‘undertaking’.
- A promisor who only performs part of their obligation is not discharged from that obligation.

Question 5

What are the 4 exceptions to the entire completion rule (complete performance)?

Answer 5

(1) Acceptance of partial performance;
(2) Substantial performance;
(3) Divisible obligations; and
(4) Wrongful prevention of performance.

Question 6

What’s the definition of ‘acceptance of partial performance’ as an exception to the entire completion rule & how does it work?

Answer 6

Where one party has given only partial performance of contractual obligations, it’s possible that innocent party, might accept that part of performance.
- at their discretion
- once accepted, party will be entitled to payment on a quantum merit basis (meaning as much as is deserved).

Question 7

What’s the definition of ‘substantial performance’ as an exception to the entire completion rule & how does the court decide this?

Answer 7

More than a partial performance
- obligation to pay full contract price, minus cost of remedying defects.
- Court’s question is whether the
defect goes ‘to the root of the contract’ to decide what ‘substantial performance’ is.

Question 8

What’s the definition of ‘divisible obligations’ as an exception to the entire completion rule?

Answer 8

Where contract allows for performance of one or more obligations separately from others

Question 9

What’s the definition of ‘wrongful prevention of performance’ as an exception to the entire completion rule & what are the acting party’s 2 options?

Answer 9

Where party 1 performs part of obligation but is prevented of completing entirely due to third party’s fault, party 1 is entitled to payment despite incompletion with 2 choices:
1- To sue for damages for breach of contract; or
2- To claim a quantum meruit.

Question 10

One defence to allegations of failure to perform is ‘tender of performance’, what does this term mean?

Answer 10

For a plea of tender to be successful, promisor must show that they unconditionally offered to perform their obligations in accordance with the terms of the contract, but that promisee refused to accept such performance.

Question 11

In which 2 ways can a discharge by agreement occur?

Answer 11

1- By a subsequent binding contract between the parties; or
2- Alternatively, by operation of a term of the original contract.

Question 12

What is meant by subsequent binding contract between the parties?

Answer 12

Where parties in a contract haven’t completed obligations and no consideration is given, a mutual waiver of performance constitutes consideration

Question 13

Which 2 elements must be present for discharge by subsequent binding contract to be effective under?

Answer 13

Accord and Satisfaction
- there must be agreement that the obligation will be released (‘accord’), and there must be consideration for the promise to release a party from the obligation (‘satisfaction’).
- There is no need for accord and satisfaction when a party is released from an obligation
by deed.

Question 14

What is meant by operation of a term in the contract itself under discharge by agreement, & the 2 conditions?

Answer 14

condition precedent
- condition which must be satisfied before any rights come into existence subject to an occurrence of specific event. (It is a condition in a contract that must be fulfilled before contract itself or certain contractual rights or obligations become binding)

condition subsequent
- term providing for the termination of the contract and the discharge of obligations outstanding under the contract, in the event of a specified
occurrence.

Question 15

What choice does an innocent party have where there has been a repudiator breach?

Answer 15

Where breach was of a condition or innominate term treated as condition, innocent party can generally chose to terminate the contract.

Question 16

What is the definition of anticipatory breach and its effect?

Answer 16

where a party indicates they will not perform their contractual obligations in advance of the date for performance.
- Innocent party has immediate right to ‘accept’ the renunciation and to treat contract as terminated (as long as breach was repudiators and not a minor breach!!)

Question 17

What is the effect of terminating a contract for repudiatory breach?

Answer 17

innocent party can claim damages not only arising from the specific breach but also the loss of contract caused by the termination of contract as a whole.

Question 18

What does it mean for innocent party to affirm the contract where there has been a breach or when party has indicated that they won’t perform their obligations?

Answer 18

The contract survives and the rights of the innocent party are preserved.

where party has indicated refusal of obligation performance:
- innocent party can still affirm the contract, perform its own obligations and claim the sum due under the contract in a debt action

Question 19

What are the limits on affirmation of contract where there has been a breach?

Answer 19

1- co-operation of the breaching party is required for continued performance of the contract

2- party has no ‘legitimate interest, financial or otherwise’ in affirming the contract and continuing with performance.

Question 20

How is discharge by frustration defined as?

Answer 20

without default of either party, a contractual obligation has become incapable of being performed.
- beyond the control of either party,
- occurs after formation of contract
- which render contract radically different from what was agreed at time of contract

Question 21

For what reasons may performance be radically different?

Answer 21

• performance is illegal
• performance is impossible
• common purpose is frustrated

If a contract is frustrated, it is brought to an end automatically: the parties have no choice in the matter.

Question 22

What is meant for frustration to be radically different due to performance being impossible?

Answer 22

• destruction or unavailability of a thing / person necessary to perform the contract
• person= due to death or incapacity

Question 23

What is meant for frustration to be radically different due to performance being illegal?

Answer 23

Frustration may also occur where a change in the law or state intervention renders performance illegal.
- Patel v Mirza case

Question 24

What is meant for frustration to be radically different due to common purpose being frustrated?

Answer 24

Non-occurrence of an event can frustrate purpose of contract if event was central to the common purpose of both parties the fact that it is still physically possible to carry out the contract.

Question 25

What elements act as a limitation for frustration of contracts?

Answer 25

-Supervening: (event occurs between agreement and performance)
-Unforeseeable: (event must not have been foreseen by parties)
-Neither party’s fault
-Merely an increase in expense
-Provided in the contract

Question 26

Which act deals with the legal consequences of frustration of contract and which obligations does it deal with?

Answer 26

Law Reform (Frustrated Contracts) Act 1943
- Act deals with obligations arising prior to the frustrating event not future obligations.

Question 27

What does the Reform Act say about money paid before and after frustration event?

Answer 27

s1(2)
- money paid before frustrating event is recoverable, money which became payable before frustrating event (still needs to be paid) ceases to be payable.

Question 28

What does the Reform Act say about non-monetary valuable benefit?

Answer 28

s1(3)
- a party who has gained a valuable benefit under the contract before the frustrating event may be required to pay a just sum for it.

Question 29

What does the Reform Act say about contracts which are excluded from the Act?

Answer 29

s2(5)
- old common law rules apply where there is:
Total Failure= s1(2) applies -(card 27)
Partial Failure= at date of frustrating event, any rights and liabilities already accrued are enforceable.