Discharge of Contract Flashcards
Discharge of Contract by Performance Scenario Definition
Discharge of contract is where the contract has come to an end an end and there is no need for the party to do anything else. For a contract to be discharged by performance, it must firstly be proved that both parties have done exactly what has been promised and that performance is full and complete, as established in the case of Cutter v Powell. Where the performance is incomplete by one party, then the contract has not been discharged and as such the other party will not have to complete their part either.
Introduction of Exception to Discharge of a contract by performance
However, there are exceptions to the rule in Cutter which have been developed by the court.
exception paragraph for performance - where incomplete performance is accepted is when performance was substantial.
Another exception, where incomplete performance is accepted is when performance was substantial. This is where a party has done substantially what was required and there are only minor details missing, as in Hoenig v Isaacs where D had fully furnished the room but some of the furniture was defective. However, if the amount that remains to be done removes all the benefit then the contract will not be seen as substantially performed as in the case of Bolton where the fully installed central heating system gave off poisonous fumes so the court refused to see D’s performance as substantial
Exception paragraph for performance - Divisible contracts
This is where a contract can be seen as as separate parts of the contract,non-completion of one part is no breach of the whole contract this can be seen in the case of Ritchie v Atkinson where a ship owner agreed to carry a cargo at an agreed rate per ton, but he carried only a part of the cargo. He was entitled to be paid for the part of the cargo he had carried at the agreed price per ton, but was liable in damages for breach of contract for not carrying the whole cargo.
Exception Paragraph for discharge of contract by performance - Full performance prevented by Defendant
One exception is - Full performance prevented by Defendant this where if one party prevents the other carrying out his contract then the innocent party can claim to be paid on Quantum meruit Basis this can seen in the case of Planche v Colburn where A publisher hired an author to write one of a series of books. When the publisher decided to abandon the whole series, the author was prevented from completing the work through no fault of his own. He was entitled to recover a fee for his wasted work.
Exception Paragraph of performance - Defendant accepted Part performance by c
Another exception is the defendant accepted part performance by the claimant this is If one party has agreed the other party need not completed the entire contract , the contract must be paid on a quantum merit basis this can be seen in the case of Sumpter v Hedges where A builder agreed to build two houses. He completed just over half of the work and then ran out of money. The customer completed the outstanding work. The builder argued that in completing the work himself, the defendant accepted part-performance. The court said the defendant had no choice but to accept part-performance as he was left with half a completed house on his land. Therefore, the builder was not entitled to be paid for the work he had done so far. There was insufficient work done for substantial performance. However, as some of the materials left behind by the builder were used in completing the work, the builder was awarded a sum for the use of those materials.
Exception Paragraph of performance- Late performance
One Exception is late performance, This is where terms relating to the time in which the contract if the contract states that time of the essence then it will be seen as a condition if one party is late in completing in his part this can be seen in the case of Charles Rickards Ltd v Oppenheim where A buyer of a Rolls-Royce car chassis agreed for a body to be built upon it by a fixed date. The body was not completed by that date. The buyer kept pushing for delivery, and eventually gave notice that unless delivery of the car with a completed body was ready within four weeks, he would cancel the contract. The car was not delivered within the period of four weeks. When the car was completed, he rejected it. The claimant was entitled to cancel the contract as time had been made of the essence and that term had not been complied with.
Structure of Discharge of Contract by Performance
1.Who is the agreement between?
2. What is the agreement for exactly
3.What needs to be done for full performance
4. General Rule-In Culter V Powell
5. Apply Exceptions and legal authority
6.Conclude
Discharge of Contract By Frustration Definition
If a Contract is frustrated this means it has been discharged due to unforeseeabke circumstances and neither party needs to do anything else, These circumstances may have prevented either party from completing their side of the contract
The defendant must proved one of the following
1.Performance was impossible
2. Performance would have been illegal
3. Circumstances had radically changed
Contract is Frustrated because performance has become impossible
This is where the defendant was unable to perform due to a situation that arose that made the performance impossible this is seen in the case of Taylor v Caldwell where The owner contracted to rent out his music hall. Through no one’s fault, and before the rental could take place, the music hall burned down. The hirer had spent money advertising the events for which he would not be paid until after the events. As it was now impossible to complete the contract, it was frustrated. This ended the contract and there was no recompense for the wasted expenses.
Contract is frustrated because it has become illegal to performance
this is where there are restrictions that are put in place that has made it illegal for the defendant to perform the contract this can be seen in the case of Denny, Mott and Dickson Ltd v James B Fraser and Co. Ltd where The court said that a contract to import certain goods would be frustrated if importing goods of that kind became illegal after the contract was made.
Contract is frustrated due to radical change in circumstances
This is where there has been a disruption that is forced a radical change and thus the defendant is unable to perform the contract this can be seen in the case of Krell v Henry where A man hired a hotel room in order to view Edward VII’s coronation procession. The Prince became ill so the coronation and procession were postponed. The court said that the event was the main purpose of the contract; as it would not occur, the contract was frustrated even though the room could still have been used. however it was not frustrated in the case of Herne Bay Steamboat Co. v Hutton (1903) Hutton hired a boat in order to see the fleet when the King reviewed it as part of his coronation celebrations. Hutton claimed he did not have to pay as the King was ill and did not attend. However, the court said the contract was not frustrated as one main reason for the contract still remained, to view the fleet. All that was missing was the King’s presence. This was not enough to frustrate the contract. In Krell , the commercial purpose of the contract was to watch the procession. The contract was frustrated because the outside event beyond the control of the parties (the King’s illness) destroyed the commercial purpose. In Hutton , the commercial purpose was not destroyed as he could still go and see the fleet of ships that assembled, so the contract was not frustrated. Frustration in specific situations Leases
Situations where it will not count as a frustrated contracts- if the frustrating event was self induced
1, If tne frustrating event was self induced this can be seen in the case of Superservant 2 case where The defendant agreed to transport the plaintiff’s drilling rig using a transportation unit, described as Super Servant One or Super Servant Two. Under the contract, the defendant could replace the transportation unit by other means of transport. Super Servant Two sank before the performance of the contract and the defendant informed the claimant that he could not use Super Servant One for the transportation of the rig as Super Servant One was engaged on another contract. The claimant claimed damages for breach of contract. The defendant claimed that the contract had been frustrated, it was decided that tehre was no frustration
Situations where it will not count as a frustrated contracts- if the frustrating event just made the contract less profitable but not impossible
This is where a lack of performance has made the claimant suffer a loss this can be seen in the case of Tsakiroglou and Co. Ltd v Noblee Thorl GmbH where The defendants agreed to ship peanuts from Sudan during November or December 1956 to Hamburg. Both parties anticipated that the ship would sail through the Suez Canal but the actual route was not specified in the contract. However, the Suez crisis of 1956 meant that on 2 November, the Suez Canal was closed to shipping. The defendant could still have transported the peanuts within the contractually agreed time but this would mean going via the Cape of Good Hope, which would have taken much longer and cost much more. The court held that the contract was not frustrated. 42.2 Discharge by frustration
Situations where it will not count as a frustrated contracts- The risk of the event happening was mentioned in the contract or was foreseeable at the time the contract was made
this is where the event was foreseeable nad mention at the time of the contract this was seen in the case of Amalgamated Investment and Property Co. Ltd v John Walker and Sons Ltd where This involved a contract to sell a building to the investment company who wanted it for redevelopment. After the contract was made, the Department of the Environment made the building a listed building, meaning that it could not be used for development. This resulted in a huge drop in the value of the building. The court rejected a claim of frustration, as listing was a risk associated with all old buildings, and precontract enquiries showed the developers were aware of this possibility
Discharge of contract due to a ‘Breach of Contract’
Discharge of contract due to a ‘Breach of Contract’
Breach = a total failure to perform (eg. not paying)
contract
OR
Failure to do exactly as agreed (but see earlier - this might be part-performance/substantial performance)
In terms of when the breach happens, breach could be ‘anticipatory’ or ‘actual’.
Anticipatory breach
Before performance is due - D tells C that s/he is not going to do what s/he promised under the contract.
Actual breach
At the time performance was agreed to happen, D fails to do as agreed or does it differently.
If breach is ‘anticipatory, C has a choice - to sue for breach of contract immediately OR to wait until the time of performance and then sue. this can be seen in the case of Hochster v de la Tour where Hochester agreed to work as a courier on a tour due to start in June. However, the company told him in May that it no longer required his services. In that situation he was entitled to sue immediately and did not have to wait until the actual breach of contract, which would have occurred in June.
