Discharge by Performance Flashcards
What is discharge by expiry?
contract expires when its completed according to its own terms.
How can contract discharge by expiry?
Parties often incorporate a term in contract which stipulates when contract comes to an end.
Can a contract expire based on an occurrence of an event?
Yes - eg contract may incl a term that the supplier is to deliver goods to the buyer within a given time frame and upon delivery the contract comes to an end.
What is the general rule for discharge by performance?
The entire obligations rule
How can a contract be discharged by performance?
By a complete performance of the obligation.
The promisee 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.
What are the 4 exceptions to the entire obligations rule?
(a) Acceptance of partial performance;
(b) Substantial performance;
(c) Divisible obligations; and
(d) Wrongful prevention of performance.
What is acceptance of partial performance?
Where one party has given only partial performance of the contractual obligations, it is possible for the innocent party, rather than reject work done, accept that part of the performance.
NOTE: such an acceptance = discretion of innocent party. If the innocent party voluntarily accepts partial performance, then defaulting party will be entitled to payment on a quantum meruit basis. Quantum meruit (meaning as much as is deserved) is a remedy whereby the claimant may be able to claim a reasonable sum so that the defendant is not unjustly enriched. The court will assess the value of a quantum meruit award on an objective basis using the information available to it, for example the usual market price for goods or services.
What can the party who gave the substantial performance do?
obtain the contract price subject to a deduction to reflect the cost of remedying the ‘defect’
How is substantial performance dealt measured?
court considers nature + extent of defect.
This is done by measuring the cost of remedying the defect against the contract price. If the defect is too serious, the party who did that performance won’t be entitled to recover any money.
However, if substantial performance is found to have been rendered, then party will be entitled to contract price subject to deduction.
does the defect go ‘to the root of the contract’?
What did Bolton v Mahadeva state?
FACTS:
C undertook to install a central heating system in D’s house - £560.
system didn’t work + D refused to pay
The cost of remedying the defects would have been £174.
court had to determine whether C was entitled to recover any payment under the contract.
POL:
whether or not contract had been substantially performed should be viewed w regard to the purpose of the contract + the circumstances as a whole.
purpose of contract = install central heating system
If that system did not function adequately + produced harmful fumes = not possible to say that contract had been substantially performed.
= C not entitled to recover any of contract price but, had he offered to remedy the defects, and had then done so, he would be justified in claiming the contract price.
What are divisible obligations?
Some contracts are clearly intended to be divided into parts, eg the payment of a salary under a fixed contract of employment.
- if so performing party = entitled to payment for each part which is performed.
How is it decided whether a contract is divisible?
depends on intention of the parties.
What is wrongful prevention of performance?
Where one party performs part of the agreed obligation, and is then prevented from completing the rest by some fault of the other party = entitled to payment despite not having completed the rest of the obligation
What 2 options does the innocent party have in wrongful prevention of performance?
(a) sue for damages for breach of contract; or
(b) claim a quantum meruit.
What is the defence of tender of performance?
a party being accused of failing to perform his obligations can potentially use this defence
