Discharge MCQs Flashcards
A builder contracts with a homeowner to build a swimming pool by the summer of the year. A nationwide shortage of skilled tilers means that the contract will not be completed by the summer and will now take until the winter of that year to complete at significantly greater cost to the builder, as tilers from Europe will need to be brought in. The builder argues the contract to be frustrated.
Which of the following statements as to whether the contract has been frustrated is the most accurate?
The contract is frustrated on the basis of unforseeability.
The contract now being substantially more difficult to perform will render the contract frustrated.
On the basis that the contract is now significantly different in time and cost than first agreed, the contract is frustrated.
The contract now being substantially more difficult to perform will not render the contract frustrated.
The contract is frustrated on the basis of impossibility.
The contract now being substantially more difficult to perform will not render the contract frustrated.
A builder agrees to build a yoga studio for a hotel. The contract stipulates that £15,000 is payable once the foundations are built, £15,000 is payable once the roof is built and the final £15,000 is payable three months after completion. The builder walks away from the contract after the foundations have been built.
On what basis is it most likely that the builder can enforce payment under the contract?
The builder is entitled to £15,000 on a quantum meruit basis.
The builder is entitled to £15,000 as partial performance has taken place.
The builder is entitled to £15,000 as voluntary acceptance of partial performance has occurred.
The builder is entitled to £15,000 as the contract allows for sums to be payable by divisible amounts.
The builder is entitled to £15,000 as substantial performance of the contract has taken place.
The builder is entitled to £15,000 as the contract allows for sums to be payable by divisible amounts.
This is a contract where payment is payable in instalments (it is divisible). As works are completed at each stage the requisite payment of £15,000 will be due in respect of the works done, namely one of the three stages having been satisfied.
An electrician agreed to install light fittings in a hotel at a cost of £10,000. A deposit of £2,000 was paid at the time of contracting with the balance being payable upon completion. The hotel was destroyed by a typhoon two weeks prior to the work being fully completed.
Under the Law Reform (Frustrated Contracts) Act 1943 what is the most likely outcome should the electrician wish to enforce the contract?
The contract if substantially fulfilled will entitle the electrician to the entire payment with an adjustment for the incomplete work.
The contract, if substantially fulfilled, will entitle the electrician to payment upon a quantum meruit basis.
The contract is not fulfilled, and the electrician is entitled to a minimum of £1,000 in relation to the expenses incurred prior to the frustrating event.
The contract is not fulfilled, and the electrician is entitled to reasonable expenses incurred prior to the frustrating event not exceeding the initial deposit.
The contract has been frustrated by impossibility and the electrician is therefore entitled to nothing.
The contract is not fulfilled, and the electrician is entitled to reasonable expenses incurred prior to the frustrating event not exceeding the initial deposit.
Correct – this is the likely outcome in light of the Act and Appleby v Myers. The court will use its discretion to award such a sum as is reasonable prior to the frustrating event (see s 1(2), namely no more than such sums paid prior to the frustrating event).
A dental surgery contracted with a small company to install new lighting in the surgery. After the work was completed, the dental surgery explained to the company that it was in financial difficulties and asked if the company would accept a lesser sum than the amount due under the contract in exchange for a free dental check-up for the company’s employees. The company agreed.
Which statement best describes whether this agreement is binding?
The agreement is binding because there has been voluntary acceptance of partial performance.
The agreement is binding as there was a mutual waiver of obligations.
The agreement is not binding as payment of a lesser sum cannot discharge a contractual obligation to pay a greater sum.
The agreement is binding because of accord and satisfaction.
The agreement is not binding because the entire obligations rule applies.
The agreement is binding because of accord and satisfaction.
This is the correct answer. Under the general rule, performance of an existing obligation is not good consideration for a promise to accept less. However, as the company has agreed to accept a lesser sum plus dental services instead of the full sum, there has been accord and satisfaction here so this agreement will be binding. The original contractual obligation to pay the full sum has been discharged by agreement.
An advertising company sells advertising space. A retailer agrees to buy advertising space for three months from the advertising company for £1,000. It provides the advertising company with an advert to use for the three-month period. Before the advert is posted the retailer changes its mind and refuses to pay the £1,000.
Which one of the following statements best explains the legal position?
Unless the retailer can prove that the advertising company did not have a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
The advertising company cannot affirm the contract and claim the contract price as they are required to take reasonable steps to mitigate their loss.
The advertising company cannot affirm the contract as the retailer’s cooperation is required to pay the contract price.
Provided the advertising company can prove that it had a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
The advertising company cannot affirm the contract as it is only in extreme cases that it would be reasonable for the innocent party to affirm the contract.
Unless the retailer can prove that the advertising company did not have a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
Correct. This answer correctly sets out the innocent party’s right to affirm the contract in response to a breach of condition. Although the other answer options sound plausible, they are all incorrect. The burden of proof is on the contract breaker to show that the innocent party did not have a legitimate interest in affirming. It is only in exceptional circumstances that the party in breach of condition will be able to discharge this burden and fetter the innocent party’s right to affirm.
Question 1
A landlord wanted to upgrade one of his rental properties. He entered into a contract with
a bathroom fitter to remove the old bathroom fittings and to replace them with new sanitary
ware. The contract price was £8,000. The landlord paid the builder £500 in advance and
agreed to pay the balance on completion. The work was finished but the shower tray leaks
(as it was not sealed properly) and so the shower cannot be used. The landlord is refusing
to pay the balance of the contract price.
If the builder sued for breach of contract, which of the following would be the most likely
legal outcome?
A The builder would be awarded £7,500.
B The builder would keep £500 but not be entitled to any more money.
C The builder would be awarded £7,500 less the cost of properly sealing the shower tray.
D The builder would have to forfeit £500 and not be entitled to any more money.
E The builder would be awarded a reasonable sum in restitution for the work he had done.
Answer
C is correct. There has been substantial performance as the work had been finished but
appears to be only slightly defective.
The builder is not entitled to £7,500 as the work was not precise/ exact (the doctrine of
complete performance) and so A is wrong.
B is wrong. The builder would be entitled to keep £500 in restitution (as there has not been a
total failure of consideration) but would be entitled to more money due to having substantially
performed the contract.
D is wrong. The builder can keep £500 advance payment in restitution as there was not a total
failure of consideration.
E is wrong. The builder is not entitled to a reasonable sum for what he did as there was no
voluntary acceptance of part performance (Sumpter v Hedges).
Question 2
A client owns a warehouse and agreed to let it on terms including the following:
RENT £200 per month payable in advance on the first day of each month
TERM One year from and including 1 March
ROOF Landlord to repair the roof within first two weeks of the Term
The tenant paid the rent on 1 March and the client carried out the repairs to the roof at a
cost of £500. Then on 2 April the warehouse was completely destroyed by an accidental fire
and will take at least 10 months to repair. The tenant had not paid the rent due on 1 April.
Which of the following statements describes the most likely legal position?
A The tenant will be liable to pay the rent for the full term as a lease of land cannot be
frustrated.
B The lease will come to an end as a matter of law but the tenant will be liable for
breach of contract if he does not pay the rent that was due on 1 April.
C If the client sues the tenant for non- payment of rent the tenant may claim the contract is
frustrated.
D If the contract is frustrated the tenant must be refunded £200 rent paid in March and
the client will be entitled to £500 to cover the cost of repairing the roof.
E If the contract is frustrated neither party will be in breach and they can elect to treat
the contract as at an end.
Answer
C is correct. Whether the contract is in fact frustrated would depend on whether there was a
valid force majeure clause or the lease otherwise included an express provision on the matter.
A is wrong as a lease of land may be frustrated eg if the event or change of circumstances
makes performance totally different.
B is wrong. If a contract is frustrated both parties are released from future obligations as a
matter of law and neither party will be liable for breach.
D is wrong. Repayment of expenses incurred is at the discretion of the court and the most the
landlord would be entitled to here is £400 (ie the total paid and payable by the tenant at the
time of the frustrating event).
E is wrong because if a contract is frustrated the contract automatically comes to an end.
Question 3
A client hired a holiday cottage from a company for the month of August for £2,000. The
client paid £200 immediately and agreed to pay the balance of £1,800 on 31 August. The
company agreed to put locks on all of the cottage windows. On 8 August the cottage was
destroyed by fire. The company had spent £250 on fitting the window locks.
Assuming that the contract is frustrated, which one of the following best describes the
client’s legal position?
A The company can keep £200 paid in advance and the client will have to pay the £1,800
due on the 31 August or otherwise be in breach of contract.
B The company can keep the £200 the client paid on the making of the contract and the
client will have to pay a further £50 to cover the expenses incurred by the company.
C The client can get back the £200 she paid on making the contract and would not have
to pay anything else to the company.
D The court may allow the company to retain some or all of the £200 the client paid on
making the contract and award a just sum for the use of the cottage.
E The client will have to pay £500 for the benefit of having used the cottage and
contribute a reasonable sum towards the expenses incurred by the company.
Answer
D is correct. Under s 1(2) of the LR(FC)A 1943 (there is nothing in the facts to suggest that this
Act does not apply) a court may allow a party who has incurred expenses in performing the
contract to recover some or all of these out of the total money paid and payable before the
frustrating event. Also under s 1(3) a court should award a ‘just sum’ for any benefit incurred
taking into account any money forfeited under s 1(2) and the effect the frustrating event had
on the benefit. The client had enjoyed 7 days’ full use of the cottage.
A is wrong because if a contract is frustrated the parties are discharged from future
obligations so the client does not have to pay the £1,800.
B and C are wrong. Section 1(2) of the LR(FC)A 1943 provides that a court may allow a party
who has incurred expenses in performing the contract to recover some or all of these but only
out of money paid and payable before the frustrating event. So here the court may allow the
company to retain some or all of the £200 but this is the maximum they can get.
E is wrong. A just sum for the use of the cottage may not be £500 and in relation to the
expenses incurred the most the court could award would be £200 but up to that sum the court
would have complete discretion.
A caterer engages a cake shop to supply 100 cakes at a total cost of £100. Due to a fault with their oven, the cake shop only makes 60 cakes. The caterer collects the 60 cakes.
Is the cake shop entitled to any payment?
Select one alternative:
No. The contract is entire and only complete performance of the contract entitles the cake shop to payment
No. There is an absence of accord and satisfaction between the caterer and the cake shop.
Yes. The cake shop partially performed the contract and voluntary acceptance has occurred by the caterer.
Yes. The cake shop has substantially performed the contract.
Yes. The contract has been discharged by mutual waiver and the caterer must pay for services already received.
Yes. The cake shop partially performed the contract and voluntary acceptance has occurred by the caterer.
This is a contract law question on the topic of discharge of a contract. This is voluntary acceptance of partial performance (and therefore an exception to the entire performance rule). The cake shop is entitled to payment on a quantum meruit basis. An insufficient proportion of the contract has been performed for this amount to substantial performance.
On 1 August a contractor enters into a contract to provide services for a client. The date of performance under the contract is 31 August. The client pays the contractor £1,500 on 1 August. The balance of £2,000 is payable on 31 August. On 5 August, the contractor incurs £1,600 of expenses. On 30 August, the contract becomes impossible to perform through no fault of either party. The client refuses to pay the contractor the outstanding £2,000.
What advice would you give the client?
Select one alternative:
The contract is discharged through frustration. The client cannot recover the advance payment as there has not been a total failure of consideration.
The contract is discharged through frustration. The client can recover the advance payment of £1,500. The contractor may seek to recover expenses up to the value of £1,500.
The client is in repudiatory breach of contract. The contractor should elect to affirm the contract and claim the contract price. The contractor’s action is in debt so it is not required to mitigate its loss.
The contract is discharged through frustration. The client can recover the advance payment of £1,500. The contractor may seek to recover expenses up to the value of £1,600.
The client is in repudiatory breach of contract. The contractor should elect to terminate the contract and claim £2,000 in damages from the client, taking reasonable steps to mitigate its loss.
The contract is discharged through frustration. The client can recover the advance payment of £1,500. The contractor may seek to recover expenses up to the value of £1,500.
This is a contract law question on the topic of frustration. The contract has become impossible and so is frustrated, not breached. Frustration discharges future obligations. Advance payments can be recovered. Expenses may be off set against the advance payment (but no more than the advance payment may be recovered in expenses).
A charity is going through financial difficulty and has told a community leader that it will not be able to pay a contractor the £1,000 it owes them. The community leader, keen to support the charity, contacts the contractor and offers to pay £800 in full and final settlement of the charity’s debt. The contractor is relieved to be getting most of its money and agrees to this. One year later, however, the contractor sends an invoice to the charity for the outstanding £200.
Is the charity liable to pay this?
Select one alternative:
No, because the contract has been discharged through mutual waiver.
Yes, because the community leader did not pay all of the debt so it has not been fully discharged.
No, because the contractor accepted partial payment from the community leader in full and final settlement of the whole.
Yes, it was their debt and not the community leader’s.
No, because the contractor delayed one year before asking for the full amount so they have affirmed the variation of contract.
No, because the contractor accepted partial payment from the community leader in full and final settlement of the whole.
This is a contract law question on the topic of discharge of a contract. Partial payment by a third party in full and final settlement will discharge the debt. The promisor will not be able to pursue the promisee for the remainder.
