Discharge

Question 1

How can an Obligation be Discharged?

Answer 1

• Expiry.
• Breach.
• Agreement.
• Frustration.
• Performance.

Question 2

When is an Obligation Discharged by Expiry?

Answer 2

When a Contracually-specified Date or Event passes.

Question 3

When is an Obligation Discharged by Breach?

Answer 3

• Repudiatory Breach.
• Anticipatory Breach.

Question 4

When is an Obligation Discharged by Repudiatory Breach?

Answer 4

• A Party Breaches a Condition (or an Innomiate Term treated as such); following which
• The Counterparty can immediately Terminate (or Affirm) the Contract.

Question 5

When is an Obligation Discharged by Anticipatory Breach?

Answer 5

• A Party demonstrates an Intention to Breach a Condition (or an Innomiate Term treated as such); following which
• The Counterparty can immediately Terminate (or Affirm) the Contract.

Question 6

What is the Effect of Termination following Breach?

Answer 6

Discharge of Primary Obligations:

• Unperformed Primary Obligations are Discharged.
• Unperformed Secondary Obligations Survive.

Accrued Rights:

• All Rights and Obligations accrued beforehand remain Enforceable.

Damages:

• The Aggrieved can claim Damages for:
  • The Breach; and
  • The loss of the whole Contract.

Question 7

What is the Difference between Primary and Secondary Obligations?

Answer 7

• Primary Obligations are the Parties’ central Duties under the Contract.
• Secondary Obligations are the Duties that arise if the Primary Obligations are Breached.

Question 8

When is Party Barred from Affirming a Breach?

Answer 8

Affirmation is barred if the Counterparty:

• Has no legitimate interest in Affirmation; or
• Needs the Defaulting Party’s cooperation to perform the Contract.

Question 9

When is an Obligation Discharged by Agreement?

Answer 9

• Use of a Subsequent Contract.
• Operation of a Contractual Term.

Question 10

When is an Obligation Discharged by a Subsequent Contract?

Answer 10

The Parties enter into a Deed to Waive an Obligation(s) under the Original Contract.

A Deed is used to neutralise any issues of Consideration.

Question 11

When is an Obligation Discharged by Operation of a Contractual Term?

Answer 11

• A Condition Precedent is never satisfied, thus never activating the Obligation.
• A Condition Subsequent is satisfied, thus enabling Discharge.

Question 12

When is an Obligation Discharged by Frustration?

Answer 12

Contractual Performance:

• Becomes Illegal.
• Becomes Impossible.
• Becomes Unachievable.

Question 13

When is an Obligation Discharged by Frustration through Impossibility?

Answer 13

Performance of the Obligation’s subject matter becomes physically impossible due to a Frustrating Event.

Question 14

When is an Obligation Discharged by Frustration through Unachievability?

Answer 14

The Parties’ Common Purpose, judged at Formation, becomes thwarted by a Frustrating Event.

Question 15

What constitutes a Frustrating Event?

Answer 15

• An Event that is:
  • Unforseeable;
  • Post-Contractual;
  • Beyond the Parties’ control;
  • That has a Frustrating effect.
• The Event cannot be:
  • Foreseeable;
  • Self-induced;
  • Mere hardship; or
  • Contractually accounted for (e.g. Force Majeure).

Question 16

What are the Consequences of Discharge by Frustration?

Answer 16

General Consequences:

• Present and Future Rights and Obligations are Discharged; however
• Accrued Rights and Obligations are still Enforceable.

Specific Consequences — Pecuniary Recovery:

• Funds paid before the Frustrating Event can be recovered by the Payer.
• Funds due but unpaid before the Frustrating Event are no longer payable.
• At the Court’s discretion, the Payee may deduct Expenses from Funds payable if:
  • It is just; and
  • They were incurred from to attempted Performance.

Specific Consequences — Non-Pecuniary Recovery:

• At the Court’s discretion, the Giver may recoup a just sum based on the Benefit’s value.

Question 17

When is an Obligation Discharged by Performance?

Answer 17

When it is completed in its entirety.

This is called the ‘Entire Obligation Rule’.

Question 18

What are the Exceptions to the Entire Obligation Rule?

Answer 18

• The Counterparty wrongfully prevented Full Performance.
• The Counterparty voluntarily accepts Partial Performance.
• The Obligation is Divisible, and certain Fractions are Performed.
• The Obligation is Substantially Performed, in which case, any Defects or Omissions will be deduced from the Price.

Question 19

What is the Obligor’s Defence against an Allegation of Non-Performance?

Answer 19

Tender of Performance:

• The Obligor unconditionally offered to Perform its Obligations; and
• The Counterparty refused.