Discharge of contracts Flashcards
What is a discharge of contract?
The contract has been complete/come to an end. There is no need for either party to do anything else.
What 3 ways can a contract been discharged?
- By performance
- By frustration
- By breach (depending on type of term)
By performance
Both the parties have done exactly what they promised.
Cutter v Powell
Cutter v Powell
- Cutter agreed to work as a second mate on a voyage for a fixed fee. He died at sea near the end of the voyage and his widow sued for a proportion of fee.
- C had not completed his side of the bargain so contract was discharged, D did not have to pay
Exceptions to the rule of discharge by performance
- Divisible contracts
- Substantial performance
- Full performance prevented by D
- D accepted part- performance by C
- Late performance
Divisible contracts
Where a contract can be seen as being separate parts, non-completion of one part is not a breach of the whole contract
Ritchie v Atkinson
Ritchie v Atkinson
A ship owner agreed to carry a cargo at an agreed rate per tonne, he carried only one part of the cargo. He was entitled to be paid for the part of the cargo he had carried at the price per tonne.
Substantial performance
If a party has done almost everything that was required under the contract, the doctrine of substantial performance may apply.
Dakin v Lee
Dakin v Lee
Contract had been substantially performed. The fact that the work was done badly did not mean it had not been performed at all. The builder was entitled to be aid for the price, with a deduction for the defective work.
Bolton v Mahadeva
Performance is not substantial if what has been done so far ‘removes the whole benefit of the contract or causes further damage’
Full performance prevented by D
If one party prevents the other from carrying out his contract, then the innocent party can claim to be paid on a quantum beruit basis.
Planche v Colburn
Planche v Colburn
A publisher hired an author to write part of a series of books. The publisher decided to abandon the whole series, the author was prevented from completing. They were entitled to a fee for the wasted work.
D accepted part performance by C
If one party has agreed the other party need not complete the entire contract, the contract must be paid for on a quantum meruit.
Sumpter v Hedges
Sumpter v Hedges
D had no choice but to accept performance as he was left with half a completed house in his land. Builder was not entitled to be paid for what he had done but was awarded for the materials left behind.
Late performance
Terms in a contract about the times for performance of contract
Charles Rickards v Oppenheim
Startup v Macdonald
Charles Rickards v Oppenheim
C was entitled to cancel the contract as time had been made of the essence and that term had not been complied with.
Startup v Macdonald
The claimant had tendered performance within the agreed contractual acceptance
Contract discharged by frustration
If a contract is ‘frustrated’, this means it has been discharged due to unforeseeable circumstances. Neither party needs to do anything else.
Force majeure clauses
A clause often found in commercial contract. It excludes liability for the parties for delay in performance or the non- performance if there are any extraordinary events.
What if a contract does not contain a ‘force majeure’ clause?
A court might still decide that a contract was frustrated - so C’s claim that D breached the contract will fail.
What must the defendant prove to say that a contract has been frustrated?
- Performance was impossible
- Performance would have been illegal
- Circumstances had radically changed
Performance was impossible
Taylor v Caldwell
Taylor v Caldwell
Music hall had burned down and so the contract was impossible to complete. It was frustrated and so ended the contract and there was no recompense for the wasted experience
Contract is frustrated because it has become illegal to perform
Denny Mott v Dickson
Denny Mott v Dickson
Court said for 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 a radical change in circumstances
Krell v Henry
Krell v Henry
Man hired a hotel room to view the coronation of Edward VII. Prince became ill so coronation was postponed. Court said that the event was the main purpose of contract so contract was frustrated.
Herne Bay Steamboat v Hutton
Hutton hired a boat to see the fleet when the King reviewed it as part of his coronation celebration and he was ill so did not attend. Contract was not frustrated as the contract still remained to view the fleet, it just lacked the Kings presence.
If the frustration was self induced it will not count as a frustrated contract
Superservant 2 case
Superservant 2 case
No frustration as the contract provided for another vessel to be used and so the sinking of the Superservant 2 did not frustrated it. No other vessel being available was self induced by D.
It will not count as frustration if the frustrating event just made the contract less profitable but not impossible
Tsakiroglou v Noblee Thorl
Tsakiroglou v Noblee Thorl
D could still have transported the peanuts within the contractually agreed time but this would have taken longer and costed more. Court held that the contract was not frustrated.
The contract will not be seen as frustrated if the risk of the event happening was mentioned in the contract or was foreseeable
Amalgamated Investment and Property Co v John Walker
Amalgamated Investment and Property Co v John Walker
Being given ‘listed’ status, is a foreseeable risk with old buildings so the contract was not frustrated.
Remedies for a frustrated contract
Law Reform Act 1943
Law Reform Act 1943
s1(2) Money already paid to the other party can be recovered.
s1(3) A sum can also be claimed if any work already done has unjustly enriched the other party
Discharge of a contract due to a breach of contract
Breach - a total failure to perform OR
Failure to do exactly as agreed
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 a breach of contract immediately or wait for them to breach the contract.
Hochster v de la Tour
Hochster v de la Tour
Hochster agreed to work but the company told him they no longer require his services. In that situation, was entitled to sue immediately and didn’t have to wait until the actual breach of contract. He was entitled to sue immediately.
Why might waiting for them to actually breach the contract be good?
The other party might be able to perform their part after all when the time comes BUT this carries the risk that something might happen to frustrated the contract - so the innocent party will lose their chance of compensation.
