Discharge

Question 1

When is payment owed for less-than-complete performance of an entire obligation, and how much payment is owed (5 cases)?

Answer 1

1. Where obligation substantially performed - pay full contract price less cost of remedying defects
2. Where obligation performed partially and performance voluntarily accepted - quantum meruit lies for the cost of performance
3. Where entire obligation divisible from other obligations for which payment is due - payment for those other obligations
4. Completion of performance by 3P - acceptable unless contract incapable of exactly similar performance by anyone else
5. Prevention - C has been prevented from performing by D

Question 2

Decision for an innocent party receiving an anticipatory repudiation?

Answer 2

1. Wait for specified date of performance and elect to perform, or terminate and claim damages
2. Treat contract as immediately repudiated

Question 3

Two requirements if innocent party wants to affirm and continue performing so as to claim contract price?

Answer 3

1. Must be possible to perform without cooperation of contract-breaker
2. Must have a legitimate interest in affirmation - no legitimate interest if compensation (as opposed to the contract price) is adequate remedy, or if affirming is wholly unreasonable

Question 4

4 requirements for frustration? What is the doctrine’s effect?

Answer 4

1. Supervening event
2. Which is unforeseeable and not dealt with in the contract (e.g. by force majeure clause) or if dealt with in the contract, occurs in a manner of such severity as to take it outside the risk assumed ounder the contract
3. Not due to the act or election of either party - i.e. not self-induced (the interposition of human choice between the supervening event and the frustration negates the doctrine)
4. Which renders contract impossible, illegal or radically different from that originally agreed upon (NOT sufficient that performance becomes onerous or difficult or loss-making)

Effect is to discharge all future obligations from date of frustration.

Question 5

When will contract be impossible to perform?

Answer 5

1. Destruction or unavailability of thing necessary to fulfil the purpose contemplated by the contract
2. Unavailability (e.g. incapacity) or death of person necessary to perform the contract

Question 6

When will the non-occurrence of a specified event constitute frustration?

Answer 6

If the specific common purpose (express or implied) has been totally frustrated by the non-occurrence of the event, so that the purpose cannot be met AT ALL (cf Herne Bay)

Question 7

When will govt or legislative intervention be frustrating?

Answer 7

Only if it consists of emergency legislation, or long-term government intervention. An Act passed through ordinary Parliamentary procedure does not frustrate; nor will a short-term intervention.

Question 8

What is the effect of a frustrating event on (i) money paid under the contract and (ii) money becoming payable under the contract before that event?

Answer 8

(i) Can be recovered

(ii) No longer payable

Question 9

What is the effect of a frustrating event on expenses incurred by either party in preparation for performance or in performance of the contract?

Answer 9

Either party is entitled to recover a “just sum” for expenses recoverable up to the limit of (i) money paid; or (ii) payable before the frustrating event, whichever is less - i.e. if no payments have occurred before the event NOTHING IS PAYABLE.

Question 10

What is the effect of a frustration of a lease on rent?

Answer 10

Rare for lease to be frustrated - but theoretically possible if property becomes unavailable for a long period. But since obligation to pay rent is divisible, past rent not affected, although future rent will be.

Question 11

What is the effect of frustration on non-pecuniary benefits?

Answer 11

If one party has gained a non-monetary valuable benefit (assessed by reference to the end-product of the service rather than the service itself), he may be required to pay a just sum for it - but if the event has reduced the benefit’s value to 0, then no just sum will be payable.

Question 12

3 ways to discharge a contract by agreement?

Answer 12

1. Bilateral agreement
2. Unilateral discharge - must be by deed or supported by fresh consideration
3. Accord and satisfaction - release breaching party from obligation in return for performing another obligation

Question 13

What must a party seeking to rely in a force majeure clause show in order to succeed?

Answer 13

1. Event falls within FM clause or constitutes FM event
2. As a result, party was unable to fully or partially fulfil performance obligations
3. If FM clause refers to events beyond party’s control, party must show that it took all reasonable steps to avoid engaging the FM clause or mitigate its results or avoid the event altogether
4. All other conditions of the FM clause, such as notice, have been complied with