Discharge Flashcards
What happens where an obligation is discharged by one party?
The corresponding right of the other party is exhausted
What happens where all obligations under the contract are discharged?
All rights under the contract are extinguished and the contract is discharged
When will there be discharge by expiry?
A contract will expire when it is completed according to its own terms eg contracts ends on specified date or by occurrence of specific event
When will there be discharge by performance?
Where there is complete performance of all obligations.
Part performance will not result in discharge
What are the exceptions to the rule that only performance of entire obligations will lead to discharge?
- acceptance of partial performance
- substantial performance
- divisible obligations
- wrongful prevention of performance
Is there an onus on the innocent party to accept partial performance?
No - it is at their discretion
If the innocent party does accept partial performance, is the defaulting party entitled to anything?
Yes - payment of a quantum meruit basis
What does payment on quantum meruit basis mean?
It means ‘as much as deserved’ ie the claimant may be entitled to claim a reasonable sum for performance done so the defendant is not unjustly enriched
What may be available to a defaulting party who has substantially perform any contract?
They may be able to bring a claim to obtain the contract price subject to a deduction to reflect cost of remedying ‘defect’ ie aspect which has not been performed
What will the courts consider in deciding a claim of substantial performance?
They will consider the nature and extent of the defect, which is done by measuring the cost of remedying the defect against the contract price
What will happen if the defect is too serious in a claim of substantial performance?
The defaulting party will not be entitled to recover any money
What will happen if the defect is not too serious defeat a claim of substantial performance?
Then the defaulting party will be entitled to the contract price subject to a deduction
What will amount to substantial performance?
It will depend on whether or not the defect goes to the root of the contract.
If it does then will not be substantial performance.
What will happen if the contract is one which has divisible obligations?
The performing party will be entitled to payment for each part which it has performed
When will there be a contract which has divisible obligations?
When the parties intend for there to be divisible obligations eg fixed term contract of employment with payment of salary
When will the exception of wrongful prevention of performance arise?
When one party who is willing to perform agreed obligation is prevented from completing it by some fault of the other party
What will the innocent party be entitled to under the exception of wrongful prevention of performance?
They will be entitled to payment - either:
- sue for damages for breach of contract
- claim a quantum meruit
What is the defence of tender of performance for a party failing to perform obligations?
Promisor must show they unconditionally offered to perform obligations in accordance with contract terms but promisee refused to accept such performance
What are the two ways a contract can be discharged by agreement?
- by a subsequent binding contract between the parties
- by operation of a term of the original contract
What is required for discharge by a subsequent binding contract?
Each party must agree to waive their rights under the old contract in consideration for being released from their obligations under the old contract.
There must be accord and satisfaction:
- accord - there must be agreement that the obligation will be released
- satisfaction - there must be consideration for the promise to release a party from the obligation
If one party has already performed all its obligations under the old contract, meaning it cannot give consideration, but the other party still has obligations to perform, how may that party be released from its obligations?
Where satisfaction and accord are not possible, the party to whom the obligation is owed may release the other party under a deed, avoiding the need for consideration. (A gratuitous promise is enforceable under a deed)
Alternatively - party whom obligation is owed may provide consideration by agreeing to accept something different in place of the former obligation eg accelerated payment of sum payable in instalments
Where there is discharge by operation of a term in the contract, what are the two possible categories of terms?
- condition precedent
- condition subsequent
What is a condition precedent?
A condition precedent is a condition which must be satisfied before any rights come into existence