Discharge of Contract

Question 1

How can a contract be discharged through performance? (divisible contract, substantial performance, full performance prevented, acceptance of part performance)

Answer 1

Through performance when all contractual obligations are fulfilled and both parties have done as promised. One way in which a contract is discharged is through the strict rule, performance must be complete and exact according to the obligations in the contract. This can lead to harsh results such as in the case of Cutter V Powell. Due to this strict nature, courts have developed exceptions.

If it is a divisible contract, comprising separate parts, then non-completion of one part is not a breach of the whole contract (Ritchie v Atkinson). Contract was divisible as it specified a price to be paid per ton. Here…

OR

If a party has substantially done what was required under the contract, there must be payment of the amount appropriate to what has been done as stated in the case of (Dakin).
Here…

OR

Another modification of the rule is where full performance is prevented, if one person prevents another from carrying out their obligations under the contract, the innocent party can be paid on a quantum meruit basis as stated in (Planche v Colburn).
Here…

OR

If there is acceptance of part performance by both parties it can discharge the contract but the agreement must be genuine and if either party has prevented or refused the performance this rule doesn’t apply. If the innocent party has no option but to take the benefit of the work done, this is not considered consent to past-performance (Sumpter v Hedges).
Here…

Question 2

How can a contract be discharged through agreement?

Answer 2

Discharge of a contract is the point at which a contract comes to an end normally through performance where all contractual obligations are fulfilled and both parties have done as promised. If both parties agree and had provided consideration when the contract is formed, they can agree to discharge the contract or vary the contract.

Question 3

How can a contract be discharged through breach?

Answer 3

ACTUAL BREACH - Where the breach occurs at the time or during the course of performance, this can include a total failure to perform or a partial failure. It will be repudiatory where the breach is serious enough to entitle the innocent party to treat the contract as terminated.

ANTICIPATORY BREACH - This is where a party to a contract gives notice in advance to the other party that they will not be performing or completing the contract. The innocent party has a choice to sue immediately for breach of condition or wait for the time agreed for performance, and then sue if performance doesn’t take place (Hotchster v de la Tour).

Question 4

How can a contract be discharged through frustration?

Answer 4

If a party was prevented from keeping promise because of an unforeseeable intervening event they have not breached their contract (Taylor v Caldwell).

Frustration can take place in three ways:

1. Where it is impossible to perform the contract: where subject matter is unavailable (Jackson v Union Marine Insurance), where one party is ill at time of performance (Robinson v Davidson) or failing to perform on medical advice (Condor v The Baron Knights)
2. A contract can be frustrated due to a change in the Law that makes a contract illegal to perform (Denny, Mott & Dickson v James Fraser & Co)
3. If the main purpose of the contract is based on a particular event and the event will not take place, the contract may be frustrated (Krell v Henry

(frustration doesn’t apply where self induced, contract becomes less profitable, event was a foreseeable risk)

Question 5

Remedies for frustration?

Answer 5

These are controlled by the Law Reform (Frustrated Contracts) Act (1943)​
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S1(2) - Money already paid (such as a deposit) is recoverable and money already due under the contract is not payable​

S1(4) - The court can use its discretion to order compensation for work done and expenses incurred before the frustrating event. The amount to be paid is based upon ‘quantum meruit’​

S1(3) - The court may order compensation to be paid for any valuable benefit one party may acquire under the frustrated contract