Discharge of Contract Flashcards
what are the types of discharge to a contract
Discharge of Agreement
Discharge of Performance
Discharge of Breach
Frustration
what is discharge of a contract
the ending of a contract
when a person is no longer subject to an obligation under a contract.
what is discharge by agreement
parties agree to discharge contract before contract has been performed.
what are the two types of agreement
bilateral
unilateral
explain bilateral discharge
- where neither party performs their part of the contract and both agree to discharge the other from their obligations to the contract.
- needs to satisfy all elements of a contract to be enforceable.
- Berry v Berry - shows where a contract has to be agreed to be discharged before a new contract can be created
what case goes with bilateral discharge.
what is the significance
Berry v Berry
shows where a contract has to be agreed to be discharged before a new contract can be created
what is unilateral discharge
one party has performed their act so they discharge the other.
seen in MWB Business Exchange v Rock Advertising 2016 - where Rock Advertising argued that there was a unilateral agreement for a lower rate to be paid for the same amount of office space, effectively discharging one party of their duty to the contract (paying the whole rate)
what is discharge of performance
- when parties have performed their contractual obligations so contract is discharged.
- Most contracts end when performance has been reached.
What is the key principle in discharge of performance
- Entire obligations rule
What is the entire obligations rule
- The idea that contracts performed in accordance w/ their terms.
- If only one party performs their action- can sue other party for breach.
^idea reinforced by Cutter v Powell 1795
name the key cases and legislation for discharge of agreement
- Berry v Berry - shows where a contract has to be agreed to be discharged before a new contract can be created (bilateral)
- MWB Business Exchange v Rock Advertising 2016 - where Rock Advertising argued that there was a unilateral agreement for a lower rate to be paid for the same amount of office space, effectively discharging one party of their duty to the contract (paying the whole rate) (unilateral)
what are the exceptions to the entire obligations rule
what area of discharge does this principle come under?
substantial performance
divisible contracts
part performance
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Discharge of Performance
what is substantial performance
- An exception to the entire obligations rule
- if performance has been done with minor errors - court can hold a party has been discharged from their obligations
- e.g., Hoenig v Issacs
what is divisible contracts
- An exception to the entire obligations rule
- a party may complete their performance in instalments.
- Example, payment overtime.
- failure to perform entire obligation does not lead to non-payment of the whole amount
^ Cutter v Powell = if this was a divisible contract there would have been a fairer outcome
what is part performance
- An exception to the entire obligations rule
- when one party (voluntarily) accepts part performance then the other is discharged from further performance.
^e.g., Sumpter v Hedges - ‘quantum merit’ = equitable doctrine. . Rooted in equity and aims to prevent unjust enrichment—where one party benefits unfairly at the expense of another.
what is discharge of breach
- When a party breaches the terms of a contract- and the innocent party may be able to discharge the entire contract.
Name the different contractual terms
condition
warranty
innominate
what is anticipatory breach
- When one party informs the other that they will not be able to complete the contractual obligations
- Innocent party can choose to 1) terminate contract or 2) insist its performance
- White & Carter (Councils) v McGregor [1962] – some parties may have a interest in having the contract completed rather than accepting an anticipatory breach and claiming damages.
what are the key cases and legislation which come under discharge by performance
- Hoenig v Issacs – example of when one party accepts part performance (voluntarily) then the other is discharged from further performance. (substantial performance)
- Cutter v Powell – if this was a divisible contract there would have been a fairer outcome (divisible contract)
- Cutter v Powell 1795 – shows how harsh entire obligations rule is (entire obligations rule)
- Sumpter v Hedges – if performance has been done with minor errors - court can hold a party has been discharged from their obligations (part performance)
what are they key cases and legislation which come under discharge by breach
- White & Carter (Councils) Ltd v McGregor [1962] AC 413 – some parties may have a interest in having the contract completed rather than accepting an anticipatory breach and claiming damages. (anticipatory breach)
what is Frustration of a contract
A contract is discharged by frustration when a ‘supervening event’ outside of the parties’ control happens after the parties contracted.
define illegal frustration of contract
A contract is frustrated by a change in law after its formation, renders performance illegal.
Courts will not enforce illegal contracts
^ as seen in Denny, Mott and Dickinson Ltd v James B Fraser and Co Ltd [1944], - where wartime regulations made a timber supply contract illegal.
the three types of frustration
illegal
impossible
radically different
define impossible frustration of contract
when it becomes impossible for one of the parties to perform their obligations.
Knell v Henry [1903] / VS /Herne Bay Steamboat Co v Halton [1903]
^^ VERY similar cases, but only knell v Henry frustrated. This is because Herene Bay Steamboat case had two purposes to the contract so whole purpose wasn’t frustrated
explain when a contract is rendered radically different
Supervening event makes performance of a contract radically different to what was agreed. To enforce would be unjust.
Davis Contractors Ltd v Fareham UDC [1956]
^ event has to be radically different the performance can not simply by onerous.
how willing are the courts to apply doctrine of frustration and why
not very willing.
They apply the doctrine very narrowly.
This is so to not interfere with the freedom to contract.
Paradine v Jane (1647)
^shows how narrowly they apply doctrine.
^said D had a contractual duty to pay rent even when her home had been invaded by army for 3 years.
^this was many years ago- frustration is still being developed
what is a Force Majeure Clause
A clause in a contract which anticipates an intervening event.
This is used like an ‘escape’ from frustration which is very narrowly applied.
The FMC only applies to what is listed inside of the clause. Otherwise frustration still applies.
Jackson v Union Marine Insurance (1874)
What happens when a contract is frustrated and was this reformed?
- when a contract is frustrated it discharges all obligations, ending the contract.
Under Common Law – money paid before the frustrating event was not recoverable. (UNFAIR!)
Fibrosa Case changed this. HOL said money paid without consideration could be recovered.
- Law Reform (Frustrated Contracts) Act 1943 – extended fiboras reasoning.
what happens if a party to a contract dies, suffers personal injury or is imprisoned?
If it is personal service – usually enough to frustrate contract
^ Condor v The Barron Knights
If it’s a company contract – not enough to frustrate a contract
what is the consequences of frustration
obligations under the contract are discharged.
key cases and legislation in the doctrine of frustration
- Denny, Mott and Dickinson Ltd v James B Fraser and Co Ltd [1944] - (illegal frustration)
- Davis Contractors Ltd v Fareham UDC [1956] (radically different)
- Knell v Henry [1903] / VS /Herne Bay Steamboat Co v Halton [1903] - (impossible)
- Paradine v Jane (1647) - (application)
- Jackson v Union Marine Insurance (1874) - (force majeure clause)
- Condor v The Barron Knights (death/imprisonment)
- Fibrosa Case / AND / Law Reform (Frustrated Contracts) Act 1943 - (reform)
What are the limitations to the doctrine of frustration
- Foreseeability - The supervening event must be unforeseen at the time of contracting. If anticipated, it should be in force majeure clause.
- Induced Frustration: A party cannot rely on frustration if they caused the frustrating event.
^ Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] shows this.
what case goes with unilateral discharge AND what is the significance
seen in MWB Business Exchange v Rock Advertising 2016 - where Rock Advertising argued that there was a unilateral agreement for a lower rate to be paid for the same amount of office space, effectively discharging one party of their duty to the contract (paying the whole rate)
What case reenforces the entire obligations rule
- Cutter v Powell 1795 – shows how harsh entire obligations rule is
what case goes with substantial performance and what is the significance
- Hoenig v Issacs – if performance has been done with minor errors - court can hold a party has been discharged from their obligations
what case goes divisible contracts and what is the significance
Cutter v Powell = if this was a divisible contract there would have been a fairer outcome
what case goes with part performance and what is the significance
- Sumpter v Hedges – example of when one party accepts part performance (voluntarily) then the other is discharged from further performance.
What is ‘quantum meruit’
equitable doctrine. Rooted in equity and aims to prevent unjust enrichment—where one party benefits unfairly at the expense of another.
what are the remedies when there is a breach of condition
- Remedies ; Repudiate contract, common law remedy (damages)
what are the remedies when there is a breach of warranty
Remedies : Claim damages ONLY.
what are the remedies when there is a breach of innominate
- Remedies : repudiate contract BUT seriousness will decide if this is allowed
What is the name of the breach that occurs before performance is due
anticipatory breach
what case goes with anticipatory breach and what is the significance
- White & Carter (Councils) Ltd v McGregor [1962] AC 413 – some parties may have a interest in having the contract completed rather than accepting an anticipatory breach and claiming damages.
What are the remedies for discharge of breach and what do they do
Repudiation: Terminate the contract for a breach of condition.
Damages: Financial compensation for proven losses.
Equitable Remedies: courts discretion – case specific – but they can order Rescission, Specific Performance, Injuction
what are they key cases and legislation which come under discharge
- Berry v Berry - (bilateral)
- MWB Business Exchange v Rock Advertising 2016 - (unilateral)
- Sumpter v Hedges– (part performance)
- Cutter v Powell – (divisible contract)
- Cutter v Powell 1795 – (entire obligations rule)
- Hoenig v Issacs– (substancial performance)
- White & Carter (Councils) Ltd v McGregor [1962] AC 413 – (anticipatory breach)
- Denny, Mott and Dickinson Ltd v James B Fraser and Co Ltd [1944] - (illegal frustration)
- Davis Contractors Ltd v Fareham UDC [1956] (radically different)
- Knell v Henry [1903] / VS /Herne Bay Steamboat Co v Halton [1903] - (impossible)
- Paradine v Jane (1647) - (application)
- Jackson v Union Marine Insurance (1874) - (force majeure clause)
- Condor v The Barron Knights (death/imprisonment)
- Fibrosa Case / AND / Law Reform (Frustrated Contracts) Act 1943 - (reform)
what case goes illegal frustration of contract and what is the significance
Denny, Mott and Dickinson Ltd v James B Fraser and Co Ltd [1944], - where wartime regulations made a timber supply contract illegal.
what case goes impossible frustration of contract and what is the significance
Knell v Henry [1903] / VS /Herne Bay Steamboat Co v Halton [1903]
^^ VERY similar cases, but only knell v Henry frustrated. This is because Herene Bay Steamboat case had two purposes to the contract so whole purpose wasn’t frustrated
what case goes radically different frustration of contract and what is the significance
Davis Contractors Ltd v Fareham UDC [1956]
^ event has to be radically different the performance can not simply by onerous.
what is the key case to go with courts application of doctrine of frustration AND what is the significance
Paradine v Jane (1647)
^shows how narrowly they apply doctrine.
^said D had a contractual duty to pay rent even when her home had been invaded by army for 3 years.
^this was many years ago- frustration is still being developed
what the name of the clause which can be inserted into a contract in anticipation of intervening events
force majeure clause
what case goes with force majeure clause. AND what is the significance
Jackson v Union Marine Insurance (1874)
^ The FMC only applies to what is listed inside of the clause. Otherwise frustration still applies.
what case goes with limitations of frustration AND what is the significance
Induced Frustration: A party cannot rely on frustration if they caused the frustrating event.
^ Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] shows this.
