L8: Discharge of Contracts

Question 1

State the four ways for discharge of contracts

Answer 1

1. Discharge by agreement
2. Discharge by performance
3. Discharge by breach
4. Discharge by frustration

Question 2

Explain Discharge by Performance and list 5 the exceptions.

Answer 2

It is when party has done what they promised to do, the contract comes to an end. The performance must be exact and precise.

5 Exceptions:

1. Apportionment Act
2. Principle of Substantial Performance
3. Prevention of Performance
4. Acceptance of Partial Performance
5. Severable / Divisible Contracts

Question 3

Explain discharge by breach

Answer 3

It is an anticipatory breach where one party indicates that he longer wishes to perform the contract before the date for performance has arrived.

The innocent party may treat the contract as discharged and claim compensation at once.

OR

Insist on performance on the due date and will have no remedy if it is subsequently frustrated.

Question 4

Explain discharge by frustration

Answer 4

It is after a contract is formed, an unforeseeable event that is beyond the control of both parties makes the contract:

• illegal to perform
• impossible to perform
• performance of contract is different from what it is originally thought.

Question 5

The 4 ways a contract can be frustrated

Answer 5

1. Destruction of subject matter
2. Incapacity or illness of a party
3. Government Acquisition
4. Change in law making the contract illegal

Question 6

What is the 3 effects of frustration?

Answer 6

1. Contract is discharged
2. Parties released from future obligation.
3. Obligation due before frustration has to be performed.

Question 7

What is the effect of frustration relating to the payment of money?

(Frustrated Contracts Act)

Answer 7

1. Any money paid before the frustration can be recovered.
2. Any money payable at time of frustration no longer has to be paid
3. If expenses have been incurred in performing the contract, the person incurring the expense can keep / recover the expenses
4. If a person obtains valuable benefit, court require to pay on a quantum meruit basis

Question 8

Explain the “Force Majeure” clause and why is it important

Answer 8

It is a contractual clause where parties agree what will happen to the contract should certain events occur.

It is important as they allow a party to treat a contract as discharged in situations that may not otherwise amount to frustration under common law