Discharge of Contract Flashcards
Discharge of contract
A contract is said to be discharged when neither party has any further legal responsibilities to perform
How can a contract be discharged?
Performance Agreement Breach Death Frustration of Contract
discharge of contract:
Performance
§ As soon as each party has fulfilled their obligations under the contract so that nothing remains to be done, the contract is discharged.
§ So if Jones Ltd agrees to paint Smith’s house for £3,000, the contract is performed and therefore discharged as soon as the house has been painted and the £3,000 has been paid.
§ Generally, a party must do everything that he/she has promised to do and part- performance is no performance at all.
§ This means that if performance is not complete he/she cannot recover any payment for the work that has been done unless the other party has accepted that work.
Discharge of contract:
Agreement
§ Since the parties to a contract enter into their relationship by agreement it follows that they may also, by agreement, release each other from their promises.
§ Discharge by agreement may also occur where both parties agree beforehand that the occurrence of some specific event will discharge the contract.
Discharge of contract:
Breach
§ Since the parties to a contract enter into their relationship by agreement it follows that they may also, by agreement, release each other from their promises.
§ Discharge by agreement may also occur where both parties agree beforehand that the occurrence of some specific event will discharge the contract.
Discharge of contract:
Death
§ If the contract involves the performance of personal services
□ e.g. painting a portrait or designing a house then the contract will be discharged if the person performing the personal service dies.
§ In all other types of contract however, death does not discharge the contract and the personal representatives of the deceased will be required to perform the contract.
§ Therefore if X agrees to sell his/her house to Y but dies before the conveyance has been completed, Y will be able to force the personal representatives of X to complete the conveyance.
Discharge of Contract:
Frustration of Contract
§ Sometimes unexpected events occur, which are beyond the control of the parties, which make it impossible for one or both parties to perform the contract.
§ The original approach of the courts was to hold that contractual obligations were absolute so if one party could not perform his/her part of the agreement then that party was in breach of contract even if the failure was due to circumstances beyond their control.
When does frustration of a contract occur
when an external event beyond the control of the parties causes the contract to become:
a. Impossible to Perform
b. Illegal to Perform OR
c. Radically Different from what was intended
Frustration:
a. Impossible to Perform
® The following case is an example of the type of circumstances where the courts will declare that a contract has been frustrated on the grounds that it has become impossible to perform.
E.g. Taylor v Caldwell 1863
Frustration:
b. Illegal to Perform
® Sometimes it will be possible to perform the contract as agreed but because of a change in the law it has become illegal to do so. In such circumstances the courts take the view that the contract has been discharged by frustration.
E.g. Re Shipton Anderson & Co 1915
Frustration:
c. Radically Different from what was intended
® Sometimes a contract is based upon the happening of some specific event.
® If that event does not take place then the whole purpose of the contract is lost and the courts take the view that the contract has been frustrated.
The attitude of the courts can be seen by comparing the following 2 cases:
E.g. Krell v Henry 1903
E.g. Herne Bay Steam Boat Co. v Hutton 1903
◊ Both cases arose at the time of the coronation of Edward VII. ◊ A number of celebrations were taking place in London to celebrate the crowning of a new King. ◊ The King however, was taken ill and many events had to be cancelled.
When is a contract NOT frustrated
a contract will not be frustrated simply because it has become more difficult or more expensive to perform.
◊ The court must be satisfied that the contract is impossible or illegal to perform or radically different due to circumstances beyond your control before frustration will be allowed.
- Force Majeure Clauses
○ The parties to a contract can often avoid litigation by ensuring that the contract is carefully drafted.
○ In particular, a well-drafted contract should include a force majeure clause which specifies what will happen if an event occurs which is beyond the control of the contracting parties.
○ This would prevent a party from arguing that the contract is frustrated.
- E.g. In the Davis Contractors case
The Law Reform Act 1943
Frustrated Contracts
§ Money paid in advance can be recovered – e.g. a deposit
§ Expenses may be claimed e.g. a builder who has paid for scaffolding
§ Further money due/work promised no longer has to be paid/completed
§ The court may require payment for any benefits obtained – the Quantum Meruit rule
