Discharge of Contracts Flashcards
What four ways can you end a contract?
(1) Agreement (2) Performance (3) Breach of Contract (4) Frustration
Agreement
How does this work?
Where parties mutually agree the contract should come to an end. A contract to nullify the contract.
Consideration is required to make the agreement enforceable.
Consideration may be the release of the remaining contractual obligations if any outstanding
Problem where all obligations are carried out. No actions left to constitute consideration.
Agreement
How does one effect an agreement to end a contract via Accord and Satisfaction?
To effect an agreed termination, must have mutual agreement (accord) & satisfaction (consideration).
(a) Bilateral Discharge Both parties agree, both benefit so there’ll be accord and satisfaction.
(b) Unilateral Discharge Only one party benefits under the termination agreement as the other party has already carried out the terms (executed) the contract. Thus there is a lack of consideration. Such agreements are only enforceable if contained in a deed under seal or fresh consideration is provided. Otherwise, it’ll come within the doctrine of promissory estoppel.
Sale of Land: If it’s a contract for the sale of land, it was formed according to the formalities required by the Statute of Frauds Act 1965. If parties want to terminate this by way of agreement, they need not abide
by the same formalities. Discharge by oral agreement is sufficient.
Performance
General Rule?
Where contractual obligations have been performed, the contract is deemed to have been discharged.
General Rule: The terms of a contract are breached if performance hasn’t been completed in full
Performance - Entire Contracts
Cutter v Powell [1975] - Died on Voyage
- Sailor died on ship en route. Promised 30 guineas if he successfully completed the trip.
- Widow claimed payment. Refused. She sued but rejected: held this was an entire agreement and thus was required to be completed in full before any payment was made.
Performance - Entire Contracts
Coughlan v Moroney [1905]:
Contract to build house breached despite being partly built
Performance - Entire Contracts
Re Moore v Landauer [1921] - 24/30 Tins Fruit
- Seller delivered tinned fruit to buyer. Contract stated 30 tins were to be packed in each case.
- Despite fact total amount of tins delivered was correct, some cases only had 24 tins.
- Seller held not entitled to payment: breached term to deliver 30 per case. Harsh result.
Performance - Substantial Performance
Boone v Eyre [1779]: - Minor Deviations
Held where a contract is performed with minor deviations, payment will be due less the amount required for the deviations.
Performance - Substantial Performance
Hoenig v Isaacs [1952] - 750-55 Bookcase
- H contracted to redecorate I’s home for £750. While H substantially complied with the terms, he failed to completed a book case. Ordered I pay full fee minus £55 (value of bookcase).
Performance - Substantial Performance
Bolton v Mahadeva [1972] No SubP @ 66%
Anything falling short of substantial performance will not merit any payment under the terms
- Contract to install heating system in M’s house for £560. Work done w some defects (cost £124)
- Held no substantial performance despite the fact the contract was 2/3 performed. No payment
Performance - Substantial Performance
Kincora Builders v Cronin [1973] - SubP inv if abandoned
- Builder refused to complete insulation work in attic. Despite the fact the work was substantially performed, refused to find substantial performance on basis the builder had abandoned the work.
Performance - Rule in Sumpter v Hedges
Sumpter v Hedges [1898]: - Acquiesce to PartP
If willing to accept incomplete performance, should be willing to pay for it
- S contracted to build 2 houses and stable on H’s land for a lump sum. Indicated he was unable to complete the work due to financial problems.
- Held S had abandoned the work and not entitled to recover on a quantum meruit basis.
- However, the court held there are cases in which although P has abandoned the performance, it’s possible for him claim for the work he’s completed to date provided the other party has voluntarily acquiesced to the part-performance. Here, it may be possible to infer a new contract.
Performance - Divisible Contracts
Taylor v Laird [1856]
- T employed as a commander on a steamer on an exploration and trading voyage.
- Contract stated he was hired at £50 per month. Court held this contract was not entire as according to the express wording, T was employed on a monthly basis (complete bits each month)
Performance - Prevention of Performance
Planché v Colburn [1831] - Cancelled Book Series
If one party is preventing another completing the performance required, then the attempting party may be entitled to part-payment for the work completed to date.
- P contracted w C to write a series of books. Before P finished, C decided to discontinue series.
- As C prevented P performing his obligations, P entitled to part-payment for work done to date
Performance - Tender of Performance
Startup v MacDonald [1843] Oil at 8pm
Attempt to perform: attempt must be done in accordance with the terms of the contract
- S contracted w M to deliver oil by 31 March. Upon attempting to deliver on 31 March at 8pm, M refused to accept it on the basis it was too late. Held since performance had been tendered and S
did everything possible to perform its obligations, entitled to be paid despite M’s refusal to accept
Performance - Time
General rule?
The equitable rule states normally time for performance is not of the essence.
But if contract expressly states the time for performance is crucial, failure is a breach.
In absence of express statement, it may be implied due to the subject matter
Also you may serve notice subsequently that ‘time is of the essence’
Breach
General rule?
Results from a failure to perform contract obligations w/o excuse. Right of election on innocent party:
(i) Repudiation: Reject the contract thus discharging his own duties as well as the other party’s AND sue for damages, or
(ii) Continue: Treat the contract as remaining in existence and claim for damages only for the loss
caused by the breach.Only where the breach is one of following three. If just a breach of warranty, can only claim damages
Repudiatory Breach
Athlone Rural DC v Campbell [1912] - Well - “Don’t need your services”
If one party decides not to perform its obligations & repudiates the contract, innocent party may elect to terminate the contract. Breach must be serious and deliberate including an intention not to perform.
- Contractors hired to excavate well. After dispute, contractors wrote to local authority indicated they were willing to complete performance. LA responded saying their services no longer needed.
- Held this to be a repudiation of the contract allowing contractors to consider it discharged.
Anticipatory (Repudiatory) Breach
Hochester v De La Tour [1853] - Hired & Fired in May
: Innocent party is given right to terminate a contract before it falls due for performance if it’s made explicitly / implicitly clear other party has no intention of performing
- H (courier) agreed in May to start work on 1 June with D. Agreement terminated by D by letter sent during May. D argued H couldn’t sue until 1 June. Rejected.
- Held didn’t need to wait & could sue for damages now bc of clear breach of an existing promise
Fundamental breach
Dundalk Shopping Centre v Roof Spray Ltd [1979] - Delay & Neg
- D engaged R to spray a waterproof substance over centre’s roof. Due to delay and negligence by R, water seeped into the centre. Held failure to make roof watertight a breach of a fund term.
- Fundamental term was to provide a watertight roof within a reasonable time.
- Thus D could terminate the contract and claim damages for the loss suffered.
- While it was clear R intended to perform the entire contract, their negligent performance was sufficiently serious to constitute a fund breach & thus entitle D to treat the contract as discharged
Clark’s two most important elements of identifying a fundamental breach: (1) The seriousness and effect
of it (2) the likelihood of it recurring in contracts with future obligations on breaching party.
Breach of a Condition
General Rule?
A condition is a term that either party/statute consider sufficiently important to
entitled the innocent party to repudiate the contract should it be breached. Examples in SGA 1893.
Breach
What are the bars to and effects of breach?
Delay by innocent party in bringing action may be fatal as court may consider it as affirming the existence of the contract. BUT they’ll still have a right to sue for damages even where the right to discharge has been lost through delay/affirmation/waving. Discharge only relieves the
parties of their contractual obligations with prospective effect.
Frustration
General Rule?
Occurs when a contractual obligation is incapable of being performed under the circumstances as performance would render it a thing radically different from what was agreed. Circumstances out of the control of the party may frustrate its performance.
Frustration - Development of the Doctrine
Taylor v Caldwell [1863] - Concert Hall Burned
- Music hall hired as concert venue, but 6 days before concert it caught fire and was destroyed.
- Neither at fault. Destruction made performance impossible. T sued for advertising costs.
- Held destruction of the hall discharged the contract.
