LAW P3 CONTRACT (DISCHARGE OF A CONTRACT) Flashcards
What does discharge of a contract mean?
Discharge of a contract = contract is brought to an end.
What are the 4 ways a contract can be discharged?
- Discharge by performance
- Discharge by agreement
- Discharge by breach
- Discharge by frustration
What is discharge of a contract through performance?
The general rule of discharge by performance came from the case of Cutter v Powell.
The rule from this case is that if a contract requires entire performance and a party fails to perform the contract in its entirety, they are entitled to nothing from the other party under the contract.
A contract becomes discharged through performance where both parties have fully performed their contractual obligations.
What are the exceptions to the rule of discharge by performance?
The harshness of this rule relating to discharge by performance has been mitigated by the creation of various exceptions:
- Severable contracts
- Substantial performance
- Acceptance of partial performance
- Tender of performance
- Performance prevented by the promisee
What is the exception ‘severable contracts’?
The concept of severable contracts means that the contract can be divided into seperate parts.
CASE - Ritchie v Atkinson, the claimaint is entitled to payment for the amount supplied.
What is the exception ‘Substantial performance’?
An exception exists where a court is satisfied that substantial performance is present.
The court may then award the contractually agreed price and deduct sums to reflect the amount not performed.
CASE - Hoeing v Isaacs, Claimant had substantially performed the contract and was therefore entitled to the contractually agreed price minus the cost of the defects.
What is the exception ‘acceptance of part performance’?
This is where one party freely agrees to accept partial performance, then a sum is payable for the work completed.
CASE - Sumpter v Hedges, the defendant had no choice but to accept partial performance as he was left with a half completed house on his land.
What is the exception ‘Tender of performance’?
Tender of performance is where a party is willing to perform and tries to tender performance but the other party does not accept the performance.
then the party seeking to tender performance is discharged from the contract and the non accepting party is liable in damages for non acceptance.
CASE - Startup v Macdonald, the claimant had tendered performance within the agreed contractual period and was thus entitled to damages for non acceptance.
What is the exception ‘Performance prevented by the promisee’?
Performance prevented by the promisee is where the promisee prevents completion of the performance, then the promisor is entitled to payment for the work which has been completed.
CASE - Planche v Colburn, the claimant was entitled to recover £50 because the defendant had prevented the performance.
What is discharge by agreement?
Discharge by agreement is when both parties agree to bring the contract to an end, and release each other from their contractual obligations.
In discharge by agreement, what are the 2 types of discharge
Bilateral discharge - the assumption is that both parties are to gain a fresh but different benefit from a new agreement.
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 of the original agreement.
What must there be for a contract to be discharged through agreement?
For a contract to be discharged by agreement, there must be:
- Accord
- Satisfaction
What is accord?
Accord = agreement
Each party must agree to end the contract. The agreement must be freely given
What is satisfaction?
Satisfaction = consideration
Both parties must also provide consideration. If both parties have continuing obligations then generally the consideration will be simply each of them giving up their rights under the contract.
What is discharge by breach?
Discharge by breach is where there exists a breach of condition, which will enable the innocent party the right to repudiate the contract (bring the contract to an end) in addition to claiming damages.
