Discharge Of Contract Flashcards
Discharge by performance
• The rule here is that the performance must be complete and exact – Cutter v Powell (1795).
• As you can see, the rule can be quite harsh, so the courts have tried to temper it: divisible contracts, substantial performance, prevention of full performance and acceptance of part performance.
Scenario – page 353.
• Divisible contracts – when a contract can be seen as being of separate parts, non- completion of one part is not a breach of the whole contract – Ritchie v Atkinson (1808).
• Substantial performance – where most of what was required has been completed, but where little things may not be performed exactly – Dakin & Co. v Lee (1916).
• The percentage completion is based on the facts of each case – Hoenig v Isaacs (1952), Bolton v Mahadeva (1972). Quantum meruit – as much as it’s worth.
• The courts will sometimes use their discretion however in order to reach a fair decision – Young v Thames Properties Ltd (1999).
Divisible Contracts
when a contract can be seen as being of separate parts, non- completion of one part is not a breach of the whole contract – Ritchie v Atkinson (1808).
Substantial Performance
where most of what was required has been completed, but where little things may not be performed exactly – Dakin & Co. v Lee (1916).
Prevention of full performance
when one party prevents the other from carrying out the contract, then the innocent party is entitled to payment quantum meruit (a fee for work already done) – Planche v Colburn (1831).
Acceptance of part-performance
consent here is key. If the innocent party has no option but to take the benefit of the work done, this is not consent to part-performance – Sumpter v Hedges (1898).
The effect of a term as to time for performance of contract
if time is expressly stated in the contract; if in the circumstances, time for completion is critical (like a wedding dress) or if one party has failed to perform on time and the other has insisted on a new date, then time is a condition. If none of the above apply, time is a warranty – Charles Rickards Ltd v Oppenheim (1950), Union Eagle Ltd v Golden Achievement Ltd (1997).
Discharge by frustration
• If a party to the contract is prevented from keeping the promise because of an unforeseeable, intervening event, they would not be liable for a breach of contract – Taylor v Caldwell (1863).
• Many contracts include a force majeure clause that excludes liability for delay in performance in these circumstances.
• Frustration of contract can be divided into:
- Impossibility of performance - In Jackson v Union Marine Insurance Co. Ltd (1874), the long delay when a ship ran aground and couldn’t be loaded for a long time led to frustration of contract as the court agreed loading in a reasonable time was an implied term in the contract. In Robinson v Davidson (1871) and Condor v The Baron Knights (1966), illness was the issue.
- The contract becoming illegal to perform – a change in the law might make a contract illegal to perform, such as a result of war – Denny, Mott & Dickson Ltd v James B. Fraser & Co. Ltd (1944), Re Shipton Anderson & Co. and Harrison Bros & Co. (1915).
- Or a radical change of circumstances – if the main purpose of the contract is based on a particular event and then that event can’t take place, then that is also frustration – Krell v Henry (1903), Herne Bay Steamboat Co. v Hutton (1903).
Impossibility of performance
In Jackson v Union Marine Insurance Co. Ltd (1874), the long delay when a ship ran aground and couldn’t be loaded for a long time led to frustration of contract as the court agreed loading in a reasonable time was an implied term in the contract. In Robinson v Davidson (1871) and Condor v The Baron Knights (1966), illness was the issue.
The contract becoming illegal to perform
a change in the law might make a contract illegal to perform, such as a result of war – Denny, Mott & Dickson Ltd v James B. Fraser & Co. Ltd (1944), Re Shipton Anderson & Co. and Harrison Bros & Co. (1915).
radical change of circumstances
if the main purpose of the contract is based on a particular event and then that event can’t take place, then that is also frustration – Krell v Henry (1903), Herne Bay Steamboat Co. v Hutton (1903).
Frustration cannot apply when:
- Self-induced frustration, i.e. when the frustrating event is within the control of one party – Maritime National Fish Ltd v Ocean Trawlers Ltd (1935) – in this case, there was no frustration, because it was in one party’s control, but in Gamerco SA v ICM Fair Warning (Agency) Ltd and Missouri Storm Inc. (1995), there was frustration because it was out of their control.
- The contract has become less profitable – this is not a reason for frustration – Davis Contractors Ltd v Fareham Urban District Council (1956).
• The event being a foreseeable risk or was mentioned in the contract – Amalgamated Investment & Property Co. Ltd v John Walker & Sons Ltd (1977). Listed buildings are buildings that are protected by law for historical value and are not allowed to be changed, demolished or redeveloped.
Remedies for frustration – Law Reform (Frustrated Contracts) Act 1943
• When a contract is frustrated, it is terminated.
• At the common law, there had been some decisions seen as unjust:
- Prior to the introduction of the Act, the rule that was created
in Chandler v Webster (1904) restricted the rights of a claimant seeking payment in the circumstances of a frustrated contract. In Chandler v Webster, Webster agreed to rent a room to Chandler so he could witness the king’s coronation. Chandler paid for his room on the basis of the agreement but the coronation never took place. Chandler’s claim for a refund was rejected by the court and he had to pay the remainder of the sum that had been agreed. This rule was considered to be generally unjust
• The Law Reform (Frustrated Contracts) Act 1943 rectified this situation:
- S 1(2) Money already paid, such as a deposit is recoverable.
- S 1(3) Money already due under the contract is not payable.
• The court can also use its discretion to award compensation for any work done or expenses before the frustrating event provided there was an obligation to pay before the frustrating event.
Discharge by breach
• When a party fails to perform his obligations under a contract, that party may be sued for breach of contract.
• An anticipatory breach is when a party gives notice in advance to the other party that they will not be performing or completing the contract.
• An actual breach at the time of, or during the course of, performance.
• In Hochster v de la Tour (1853), the court decided that the claimant could sue immediately and did not have to wait until the time agreed for the performance of the contract to begin in order to sue.
• This makes sense as it is probably more advisable to sue immediately, because the other party may run into financial difficulties or there may be other events that lead to discharge by frustration.
• Geden Operations Ltd v Dry Bulk Handy Holdings Inc (Bulk Uruguay) (2014) states that if there is an inevitability of non-performance, then the victim can treat the contract as at an end and can be repudiated before its start date.
Remedies for breach
• On an anticipatory breach, the victim can claim damages immediately.
• They can also wait for the actual breach and assess the loss and
damages at that time.
• They can just repudiate the contract, which means that they are no longer bound by any obligations.
• For breach of condition, the remedy is damages and/or repudiation.
• For breach of warranty, the remedy is just damages. The contract remains live.
