discharge Flashcards
what are the 5 ways which a contract can be discharged?
- by performance
- by expiry
- by agreement
- by breach
- by frustration
what does it mean that a contract can be discharged via the ‘entire obligations rule’?
a contractual obligation is charged by a complete performance of the obligation. therefore, until the obligations are completely performed, the performing party is not entitled to payment.
what are the exceptions (there are 4) to the entire obligations rule?
acceptance of partial performance
substantial performance
divisible obligations
wrongful prevention of performance
what is acceptance of partial performance?
where one party has only partially performed their obligations then innocent party can accept part of the performance rather than reject.
at discretion of the innocent party
if a party is building a fence on your land and stops half way through and cant complete - is this partial performance?
no, because you are in possession of what could not fail to keep. therefore, you have to fix it and finish the job off - there is no voluntary acceptance as you have to do it
what is substantial performance?
if contract has been substantially performed then other party can get paid for what they have done
what question should you ask when considering substantial performance?
whether the defect goes to the root of the contract. therefore, consider the purpose and circumstances arising around the contract.
what is wrongful prevention of performance?
where one party cannot perform part of their obligation or is prevented from completing because there is some fault of the other party (therefore, entitled to payment even though they did not complete their obligations)
what are the 2 different ways that a contract can be discharged via an agreement?
- by a subsequent binding contract between the parties; or
- alternatively, by operation of a term of the original contract
what factors need to be present when creating a subsequent contract between the parties discharging the original contract?
need to have accord and satisfaction
therefore, need to have an agreement that releases obligations from previous contract and needs to be consideration for promise to release party from its obligation
if a subsequent deed is created to discharge a contract via an agreement - does it need consideration?
no consideration is needed for a deed
what is a condition precedent which is a term included in a contract to provide for its own discharge?
condition precedent is a condition that must be satisfied before any rights come into existence. therefore, doesnt discharge a contract in the strict sense, but prevents it from becoming binding in the first place
suspends the contract or specific right or obligation until the condition is satisfied
what is a condition subsequent which is a term included in a contract to provide for its own discharge?
it is a term providing for the termination of the contract and discharge of obligations outstanding under the contract upon the happening of a specific event
what is the effect of an anticipatory breach?
when a person by words or conduct leads a reasonable person to conclude that they do not intend to perform their part of the contract is said to have renounced the contract. innocent party has an immediate right to accept renunciation and to treat contract as terminated.
what is a repudiatory breach?
where one party has breached a term of the contract which is either a condition, or an innominate term which is treated as a condition, entitling the other party (in principle) to treat the contract as terminated.
what is an anticipatory breach?
where party indicates they will not perform their contractual obligations in advance of the date of performance
if there is a breach of warranty - is there right to terminate the contract?
no and the notice to do so was wrongful therefore, the wrongful notice will be regarded as renunciation of future performance of the contract and/or a serious breach of contract and may be accepted by the other party
what are the 2 limitations on affirmation of a contract? (limitations on the innocent party’s right to affirm the contract in response to a repudiatory breach)
- the co-operation of the breaching party is required for continued performance of the contract; or
- innocent party has no ‘legitimate interest, financial or otherwise’ in affirming the contract and continuing with performance
what is the rights of the innocent party who is faced with a repudiatory breach?
innocent party has the right to election between terminating and affirming the contract and the right to claim damages
what does it mean that a contract can be discharged by frustration?
frustration is about events that are beyond the control of either party, occur after the formation of the contract and which render performance radically different from that which was agreed to at the time the contract was formed.
how can performance be rendered radically different? (3 ways)
performance is impossible
performance is illegal
common purpose of contract is frustrated
can performance be impossible via frustration if one party dies or illness?
yes, in personal contracts
for frustration of purpose - which party needs their purpose frustrated?
it is the joint purpose of the parties not just one party
if a contract has an event which renders it more expensive - can you use frustration (frustration for purpose) to discharge contract?
no you cannot
what is a force majuere clause?
it is a clause that states what will happen to the contractual relationship between parties should a particular set of circumstances *which would otherwise amount to frustrating events) materialise. Eg, acts of god, terrorism ect
what did the law reform (frustrated contracts) act 1943 establish?
by default, money paid before time of discharge should be repaid (no need to show complete failure of consideration)
money payable (eg, which became due on a date prior to the frustrating event but was not in fact paid) ceases to be payable.
what are the 2 steps established in BP case for a s1(3) claim (provides where party receives a non-monetary benefit prior to frustrating event?
- identification and value of the benefit
- assessment of a ‘just sum’
