Discharge of contract

Question 1

Discharge of contracts - 4 types

Answer 1

1) Discharge by performance
2) Discharge by breach
3) Discharge by acceptance
4) Discharge by frustration

Question 2

Discharge by performance

Answer 2

Is there full, exact, precise performance by the parties of all contractual obligations?

YES
- Discharge by performance
𝐂𝐮𝐭𝐭𝐞𝐫 𝐯 𝐏𝐨𝐰𝐞𝐥𝐥
where a sailor died during his voyage, before his full completion of obligations, so his widow wife cannot claim anything.

NO

• check for 5 exceptions
  1) De Minimis Rule
  2) Severable obligations
  3) Substantial performance
  4) Voluntary acceptance of partial performance
  5) Prevented performance

Question 3

Discharge by performance - exception - De Minimis Rule

Answer 3

If the deviation in performance is microscopic, the contract will be deemed to have been performed fully and precisely.

eg; u ask for a dark brown carpet but u received a light brown - microscopic!!

Question 4

Discharge by performance - exception - Substantial performance

Answer 4

• usually where a party has performed its obligations effectively.
• if a party has substantially performed his obligations, he is entitled to the agreed sum, subject to a DEDUCTION for the omission or defect in performance
• ONLY applies if contract is divisible and payment is NOT conditional upon full performance of the contract.

eg; build a door without door handles

Question 5

Discharge by performance - exception - Severable obligations

Answer 5

Contracts carrying obligations that are separate and independent can be charged separately when fulfilled. Payment is paid accordingly to the price attached to each sub-contract.
- It depends on the intention of parties to see whether a contract is Entire or Divisible.

Question 6

Discharge by performance - exception - Voluntary acceptance of partial performance

Answer 6

• where one party partially performs and other party accepts, the promisor is entitled to claim payment equal to the amount of work he has done on a quantum meruit basis.

Exception:
where one has NO CHOICE but to accept the partial performance
𝐒𝐮𝐦𝐩𝐭𝐞𝐫 𝐯 𝐇𝐞𝐝𝐠𝐞𝐬
where Hedges had no choice but to accept the partially completed building on his land. Sumpter cannot claim anything.

Question 7

Discharge by performance - exception - Prevented performance

Answer 7

If the promisor was prevented by the promisee from performing his obligations fully and precisely, the promisor can sue the promisee for damages for breach of contract, as well as claim payment for the work he had already done on a quantum meruit basis.

𝐏𝐥𝐚𝐧𝐜𝐡𝐞 𝐯 𝐂𝐨𝐥𝐛𝐮𝐫𝐧
where Colburn abandoned the book-writing project he contracted Planche to write. Planche could claim remuneration on a quantum meruit basis.

Question 8

Discharge by breach

Answer 8

Breach must amount to a clear and unequivocal repudiation of contract. If it is not clear, and there is an underlying willingness to corretc one’s understanding and fulfil his obligations, then there is no actual repudiation.

Not all breaches are repudiatory in nature
4 Situations in RDC Concrete determins if the breach is repudiatory.
- Anticipatory breach
- Repudiatory breach of a condition
- Fundamental breach
- Breach of warranty which entails serious consequences

Question 9

Discharge by breach - Anticipatory breach

Answer 9

Where time of performance is not due yet but promisor indicates he will not perform.
2 options
- wait and insist on performance
- treat contract as discharged and sue for breach of contract.

Situation 2 of RDC Concrete, where party in breach renounces that he will not perform his obligations, entitling the innocent party to terminate the contract.

Question 10

Discharge by breach - Effects

Answer 10

Grants the innocent party a right of eletion as to whether to affirm or terminate the contract.

1. Affirming the contract
   - contract continue, entitled to damages
2. Terminate the contract
   - contract ends, entitled to damages

Question 11

Discharge by breach - Breach of a condition

Answer 11

Situation 3a of RDC Concrete v Sato Kogyo Pte Ltd
where the party in breach has breached a condition, which allows the innocent party to terminate the contract regardless the consequences of the breach

Question 12

Discharge by breach - Fundamental breach

Answer 12

Situation 3b of RDC Concrete v Sato Kogyo Pte Ltd
where regardless of the type of term breached, if the consequences of the breach deprives the innocent party of substantially the whole benefit of the contract, the innocent party is entitled to terminate the contract.

Question 13

Discharge by breach - Express right to terminate

Answer 13

Situation 1 of RDC Concrete v Sato Kogyo Pte Ltd

where the contract cleary states that in the event of a breach, the innocent party may terminate the contract

Question 14

Exception to RDC Concrete v Sato Kogyo Pte Ltd

Answer 14

𝐒𝐩𝐨𝐫𝐭𝐬 𝐂𝐨𝐧𝐧𝐞𝐜𝐭𝐢𝐨𝐧 𝐯 𝐃𝐞𝐮𝐭𝐞𝐫 𝐒𝐩𝐨𝐫𝐭𝐬
where the contract expressly states that the clause is a warranty and states clearly and unambiguously that the breach of a warranty will NEVER entitle the innocent party to terminate the contract.
Then, the Court will give effect to such a clause and the contract cannot be terminated when a warranty is breached.

Question 15

Discharge by agreement

Answer 15

For existing agreements:
A termination clause in the existing agreement allows discharge by allowance if conditions are met.
- eg; in employment contracts - either party can terminate with a 3 months’ notice

For subsequent agreement:
must be supported by all 4 elements of a valid contract in the fresh agreement unless under either:
- Unilateral release under seal or deed
- Doctrine of promissory estoppel applies
- Principles set out in Williams v Roffey applies: discharging an existing duty owed to the promisor may constitute good consideration for a fresh promise.

Question 16

Discharge by frustration

Answer 16

ALL 3 criteria have to be met:

• an unexpected event beyond the control of the parties
• after making of the contract but before performance of the contract is completed
• which makes the circumstances RADICALLY DIFFERENT & usually makes contract
  1. Illegal
  2. Impossible to perform
  3. Radically different from what was originally envisaged

If established, parties will be excused from performing their obligations.

Question 17

Discharge by frustration - Destruction of subject matter

Answer 17

𝐓𝐚𝐲𝐥𝐨𝐫 𝐯 𝐂𝐚𝐥𝐝𝐰𝐞𝐥𝐥

where the contract to lease a music hall is discharged by frustration as the music hall destroyed by fire.

Question 18

Discharge by frustration - Non-occurrence of event

Answer 18

𝐊𝐫𝐞𝐥𝐥 𝐯 𝐇𝐞𝐧𝐫𝐲
where the contract to rent a room is discharged by frustration when the coronation parade was cancelled. The purpose of renting the room was that it had a splendid view of the coronation parade.

Question 19

Discharge by frustration - Government Interference

Answer 19

𝐌𝐞𝐭𝐫𝐨𝐩𝐨𝐥𝐢𝐭𝐚𝐧 𝐖𝐚𝐭𝐞𝐫 𝐁𝐨𝐚𝐫𝐝 𝐯 𝐃𝐢𝐜𝐤, 𝐊𝐞𝐫𝐫 & 𝐂𝐨
where D was contracted to construct a reservoir for the Water Board. It was discharged by frustration when a statute was set up during World War I to halt the work.

Question 20

Discharge by frustration - Change of circumstances

Answer 20

Introduction of war, natural disasters.
𝐅𝐢𝐛𝐫𝐨𝐬𝐚 𝐒𝐩𝐨𝐥𝐤𝐚 𝐀𝐜𝐤𝐜𝐲𝐣𝐧𝐚 𝐯 𝐅𝐚𝐢𝐫𝐛𝐚𝐢𝐫𝐧, 𝐋𝐚𝐰𝐬𝐨𝐧 𝐂𝐨𝐦𝐛𝐞 𝐁𝐚𝐫𝐛𝐨𝐮𝐫 𝐋𝐭𝐝
where contract was frustrated because the port was subsequently occupied by enemies during WW2. Even though it was physically possible to go to the port, it is against public interests to have commercial links with enemies in times of war.

Question 21

Discharge by frustration - Personal Incapacity

Answer 21

𝐏𝐨𝐮𝐬𝐬𝐚𝐫𝐝 𝐯 𝐒𝐩𝐢𝐞𝐫𝐬 & 𝐏𝐨𝐧𝐝

where the contract is discharged by frustration when the opera singer fell ill.

Question 22

Scenarios where Frustration is unlikely to apply

Answer 22

1. Forseeable events
2. Self-induced frustration
3. Force Majeure Clauses

Question 23

Frustration cannot be applied - Foreseeable events

Answer 23

by definition, frustration is the occurrence of an unexpected event. So if an event is reasonably foreseeable, frustration cannot be applied to the contract.
If it could have been foreseen and parties still went on with the contract, the parties cannot rely on frustration.
𝐇𝐃𝐁 𝐯 𝐌𝐢𝐜𝐫𝐨𝐟𝐨𝐫𝐦 𝐏𝐫𝐞𝐜𝐢𝐬𝐢𝐨𝐧 𝐈𝐧𝐝 𝐏𝐭𝐞 𝐋𝐭𝐝
where D knew for a long time that their rented land was blocked and had no access to it. Frustration could not be applied since they were aware of the issue for a long time.

Question 24

Frustration cannot be applied - Self-induced Frustration

Answer 24

If the frustrating event was brought about by one of the parties, frustration cannot be raised.
𝐌𝐚𝐫𝐢𝐭𝐢𝐦𝐞 𝐍𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐅𝐢𝐬𝐡 𝐋𝐭𝐝 𝐯 𝐎𝐜𝐞𝐚𝐧 𝐓𝐫𝐚𝐰𝐥𝐞𝐫𝐬
where Maritime self-induced frustration by allocating the licenses to other ships and not the fishing trawler it should have.

Question 25

Frustration cannot be applied - Force Majeure Clauses

Answer 25

• a clause in the contract which relieves parties from obligations should some unexpected event occur
• such clauses may enable parties to suspend the contract for some time instead of being discharged by frustration
• if parties intended that such clause would be exhaustive of the parties’ rights, then frustration may not apply

Question 26

Is Covid-19 covered in Force Majeure clauses?

Answer 26

If a Force Majeure Clause has a list and is exhaustive and words such as epidemic or pandemic are not used, Covid-19 will not fall under the FMC.
However, if the list is non-exhaustive and uses words such as “acts of God”, Covid-19 can be argued to be one since it is reasonably unforeseeable.

Act of God vs Government’s intervention.

If personal services business left with a few employees are unable to carry out the work, rendering the contract impossible to perform, then yes. Covid-19 will be discharged by frustration.

On the other hand, for businesses that were forced to shutter temporarily because of the government’s response to Covid-19, this will fall under Government’s intervention which will cause the contract to be discharged by frustration.

Question 27

Effect of Frustration

Answer 27

Common law:

• Contract is automatically discharged and all outstanding obligations are no longer required to be performed.
• Under the general rule, all costs or expenses incurred prior to the frustrating event cannot be claimed, unless if there is a total failure of condition.

Frustrated Contracts Act (FCA)
s2(2): money paid before discharge may be recoverable if just to do so
s2(2): money payable ceases to be payable
s2(3): expenses paid to perform the contract may be recoverable in part or in whole.
s2(4): any non-monetary benefits that were conferred before discharge can be compensated with an amount the Court decides

Question 28

𝐂𝐮𝐭𝐭𝐞𝐫 𝐯 𝐏𝐨𝐰𝐞𝐥𝐥

Answer 28

where a sailor died on the voyage before the completion of his obligations, so his widow wife cannot claim anything.

Question 29

𝐒𝐮𝐦𝐩𝐭𝐞𝐫 𝐯 𝐇𝐞𝐝𝐠𝐞𝐬

Answer 29

where Hedges had no choice but to accept the incompleted building on his land, thus Sumpter cannot claim anything.

Question 30

𝐏𝐥𝐚𝐧𝐜𝐡𝐞 𝐯 𝐂𝐨𝐥𝐛𝐮𝐫𝐧

Answer 30

where Colburn abandoned the book-writing project he contracted Planche to write. Planche could hence claim remuneration on a quantum meruit basis.

Question 31

𝐓𝐚𝐲𝐥𝐨𝐫 𝐯 𝐂𝐚𝐥𝐝𝐰𝐞𝐥𝐥

Answer 31

Discharge by frustration - Destruction of subject matter

where the contract to lease a music hall was frustrated when it was destroyed by fire.

Question 32

𝐊𝐫𝐞𝐥𝐥 𝐯 𝐇𝐞𝐧𝐫𝐲

Answer 32

Discharge by frustration - Non-occurrence of event
where a room was rented to view the coronation parade, which was cancelled. Thus, the contract is frustrated as the sole purpose of renting the room was that it had a splendid view of the coronation parade.

Question 33

𝐌𝐞𝐭𝐫𝐨𝐩𝐨𝐥𝐢𝐭𝐚𝐧 𝐖𝐚𝐭𝐞𝐫 𝐁𝐨𝐚𝐫𝐝 𝐯 𝐃𝐢𝐜𝐤, 𝐊𝐞𝐫𝐫 & 𝐂𝐨

Answer 33

Discharge by frustration - Government’s interference

where a contract to construct a reservoir was frustrated as a statute was set up during WWI to halt the work.

Question 34

𝐏𝐨𝐮𝐬𝐬𝐚𝐫𝐝 𝐯 𝐒𝐩𝐢𝐞𝐫𝐬 & 𝐏𝐨𝐧𝐝

Answer 34

Discharge by frustration - Personal incapacity

where the opera singer fell ill and was unable to perform, making the contract frustrated.

Question 35

𝐅𝐢𝐛𝐫𝐨𝐬𝐚 𝐒𝐩𝐨𝐥𝐤𝐚 𝐀𝐜𝐤𝐜𝐲𝐣𝐧𝐚 𝐯 𝐅𝐚𝐢𝐫𝐛𝐚𝐢𝐫𝐧, 𝐋𝐚𝐰𝐬𝐨𝐧 𝐂𝐨𝐦𝐛𝐞 𝐁𝐚𝐫𝐛𝐨𝐮𝐫 𝐋𝐭𝐝

Answer 35

Discharge by frustration - Change of circumstances
where a port was subsequently occupied by the enemies of WWII. While it was physically possible to go to the port, it is against public interests to have commercial links with enemies of war.

Question 36

𝐇𝐃𝐁 𝐯 𝐌𝐢𝐜𝐫𝐨𝐟𝐨𝐫𝐦 𝐏𝐫𝐞𝐜𝐢𝐬𝐢𝐨𝐧 𝐈𝐧𝐝 𝐏𝐭𝐞 𝐋𝐭𝐝

Answer 36

Discharge by frustration - limitations - Foreseeable events
where D was long aware that the land rented was inaccessible. Frustration cannot be applied since they were aware for a long time.

Question 37

𝐌𝐚𝐫𝐢𝐭𝐢𝐦𝐞 𝐍𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐅𝐢𝐬𝐡 𝐋𝐭𝐝 𝐯 𝐎𝐜𝐞𝐚𝐧 𝐓𝐫𝐚𝐰𝐥𝐞𝐫𝐬

Answer 37

Discharge by frustration - limitations - self-induced

where Maritime self-induced frustration by allocating the licenses to other ships and not the one by Ocean Trawlers.