Discharge of Contract Flashcards
What happens when a contract is discharged?
- It is terminated
What is discharge by performance?
- When a contract becomes discharged, as both parties have fulfilled their contractual obligations
What was decided in Cutter v Powell (1795)?
- If a party fails to perform the contract in its entirety, they are entitled to nothing under the contract from the other party
What are the ways in which the harsh rule in Cutter v Powell (1795) can be mitigated? (4)
- Substantial performance
- Severable contracts
- Acceptance of past performance
- Prevention of performance
What is the doctrine of substantial performance?
- If a party has done substantially what was required under contract, the party can recover the amount appropriate to what has been done under the contract
Name three key cases for substantial performance
- Dakin & Co v Lee (1916)
- Hoeing v Isaacs (1982)
- Bolton v Mahadeva (1972)
What happened in Dakin & Co v Lee (1916)?
- Defendants promised to build a house according to spec
- Failed to carry out exactly all specs
- Entitled to recover the contract price as it was bad workmanship/negligence NOT abandonment of the job
- Basically they did a shit job but it still counts
What happened in Hoeing v Isaacs (1952)? What two things were held?
- Contract for decoration
- There were defects that cost £55 to repair
- Held that an employer cannot deprive a contractor of any payment due to defects
- Also held - whether the entire performance of a contract is a condition precedent to payment depends on the constitution of the specific contract
What was held in Bolton v Mahadeva (1972)? Why?
- The claimant’s attempt to enforce the payment (also house decorating with defects) was denied as there was no substantial performance
When is a contract severable?
- When payment becomes due at various stages of performance, rather than in one lump sum when performance is complete
Give an example of a severable contract
- If one hires a childminder for six weeks and pays weekly, the childminder can claim the first week’s pay even if they then refuse to work the following five weeks
What happens under acceptance of part performance?
- Where one of the parties has performed the contract, but not completely, if the other side has shown willingness to accept the part performance the strict rule in Cutter v Powell will usually not apply
When may acceptance of part performance occur?
- When there has been a shortfall in the delivery of goods or where a service is not fully carried out
What is a key case in acceptance of past performance?
- Sumpter v Hedges (1898)
What happened in Sumpter v Hedges (1898)?
- Claimant was unable to finish building work on the defendant’s land (did half)
- The claimant argued that the defendant had accepted part performance as he had completed the work himself
- Held - claim failed as the defendant has no choice but to complete the work himself
What happens under prevention of performance?
- If one party prevents the other party from carrying out his or her obligations because of some act or omission, then the rule in Cutter v Powell cannot are
Under prevention of performance, the party trying to perform may have an action for what?
- Damages
Name two key cases for prevention of performance
- Planche v Colburn (1831)
- Startup v Macdonald (1843)
What happened in Planche v Colburn (1831)?
- Claimant agreed to write book for defendant
- Claimant had completed a great deal when the defendant cancelled
- Defendant refused to pay
- Claimant entitled to damages as defendant had prevented the performance
What happened in Startup v Macdonald (1843)
- Claimant delivered oil late, bit still within designated time frame
- Defendant refused to accept delivery as it was late
- Claimant entitled to damages for non-acceptance
What happens if a party performs all of their obligations, but not within the time stipulated?
- This will give rise to damages as a breach has occurred, but NOT repudiation of the contract
- List the three occasions where time will be considered “of the essence” and a repudiation of the contract will be available
- When the parties have made an express stipulation in the contract that time is of the essence
- Where the surrounding circumstances show that time of performance is critical e.g with the delivery of perishable goods
- Where one party has already failed to perform their obligations under the contract. In this case, the other party is able to confirm that unless performance is then completed within a stated period, repudiation will occur
Name a key case under breaches of contract terms concerning times
- Charles Rickards Ltd v Oppenheimer (1950)
What happened in Charles Rickards v Oppenheimer (1950)?
- Oppenheimer bought a car that was to be built by a certain date
- It was late so he gave a notice saying he would cancel unless it was completed in four weeks
- When claimant tried to deliver, it was rejected. They tried to sue
- HELD - defendant entitled to cancel contract
What is discharge by frustration?
- When something happens (through no fault of the parties) to make the performance of the contract impossible, it is said to be ‘frustrated’
In what case was the general rule of discharge by frustration decided?
- Taylor v Caldwell (1863)
What happened in Taylor v Caldwell (1863)?
- Action to enforce failed because the contract had become impossible due to a building where a contract was due to take place burning down
What are the three main types of circumstances in which the doctrine of discharge by frustration will operate?
- Impossibility
- Illegality
- Commercial Sterilisation
Explain impossibility under the doctrine of discharge by frustration?
- Where the contract is frustrated because performance has become impossible
What are three examples of when performance becomes impossible? Give a case for each
- Destruction or unavailability of something essential for the contract’s performance
- Taylor v Caldwell (1863)
- Unavailability of the party
- Robinson v Davidson (1871)
- Method of performance is impossible
- Nicholl and Knight v Ashton Edridge & Co (1901)
What happened in Robinson v Davidson (1871)?
- A contract by a pianist to perform on a specific day was held to be frustrated when the pianist became too ill to perform
What happened in Nicholl and Knight v Ashton Edridge & Co (1901)?
- A contract specified a certain ship to deliver goods
- Ship became damaged and was being repaired when the contract was due to take place
- Contract frustrated as they had named the ship and it was impossible for it to carry the cargo at that time
Explain illegality under the doctrine of discharge by frustration. When does this often happen?
- Where after a contract is formed, a change in the law makes its performance illegal
- This can often happen in times of war when laws may change rapidly
Name two key cases under illegality (discharge by frustration)
- Pioneer Shipping Ltd v BTP Tioxide Ltd (1981)
- Metropolitan Water Board v Dick Kerr & Co (1918)
Define commercial sterility under the doctrine of discharge by frustration
- Where the commercial purpose of the contract has disappeared as a result of an intervening event, the contract may be frustrated
Name two key cases under commercial sterility (discharge by frustration)
- Krell v Henry (1903)
- Herne Bay Steamboat Co v Hutton (1903)
What happened in Krell v Henry (1903)?
- Flat was rented in order to view the King’s coronation procession
- Procession cancelled as the King fell ill, so the contract was discharged as the sole reason for which it was rented ceased to exist
What happened in Herne Bay Steamboat Co v Hutton (1903)?
- Defendant hired claimant’s steamship to take passengers to view the king’s procession (also offering a day cruise)
- The King was sick so the defendant didn’t end up using the ship
- Held - contract not frustrated as it had not been deprived of its sole commercial purpose as it was still possible to do the day cruise
What is discharge by agreement?
- Where the parties themselves agree to terminate a contract so that one or both parties are released from their obligations
What are the two types of discharge by agreement?
- Bilateral discharge
- Unilateral discharge
What happens in bilateral discharge?
- The assumption is that both parties are to gain a fresh but different benefit from the new agreement
What happens in unilateral discharge?
- The benefit is only to be gained by one party, who is therefore trying to convince the other party to let them off the obligations arising under the original agreement
What is discharge by breach?
- Whenever a party fails to perform an obligation, or performs an obligation defectively, or indicates in advance that they will not be performing an obligation under the contract, then the party can be said to be in breach of contract
What is actual breach?
- Where a party does not perform their obligations under the contract at all
Name three key cases for actual breach
- Platform Funding Ltd v Bank of Scotland PLC (2008)
- Pilbrow v Pearless de Rougemont & Co (1999)
- Modahl v British Athletic Federation (1999)
What happened in Platform Funding Ltd v Bank of Scotland Plc (2008)?
- Surveyor inspected and valued the wrong house
- Held - even though they exercised reasonable skill and care it was on the wrong house, so they were liable
What happened in Pilbrow v Pearless de Rougemont & Co (1999)?
- Claimant asked to see a solicitor, but instead saw someone unqualified
- He refused to pay the bill and it was held that he didn’t have to, as he was contracted to see a solicitor (which he didn’t)
What is anticipatory breach?
- Where a party indicated in advance that they will not be performing their obligations as agreed
Name two cases for anticipatory breach
- Frost v Knight (1872)
- Avery v Bowden (1855)
What happened in Frost v Knight (1872)?
- Knight promised to marry Frost once her father had died
- While he was still alive, Knight told Frost that he had changed his mind
- Frost held entitled to sue as the contract had been breached
What happened in Avery v Bowden (1855)?
- Claimant was to carry cargo for the defendant
- Arrived early and was told by the defendant that there would be no cargo
- Would’ve been able to sue for breach of contract, but the Crimean War broke out and so the contract became frustrated
