Chapter 12

Question 1

Discharge of contracts

Answer 1

the cancellation of the obligation of a contract

-, i.e. make the K null and inoperative

Four ways to discharge a contract: by performance, agreement, frustration, and operation of law

Question 2

Discharge by Performance

Answer 2

• Most common method by which contracts are discharged

* Where both parties to the contract perform their obligations under the contract satisfactorily

Question 3

Discharge by Agreement

Answer 3

Where the parties agree not to proceed with the contract

Question 4

2 ways to discharge by agreement

Answer 4

2 ways:
Waiver:
•An agreement not to proceed with the performance of a K already in existence
•Can only occur when neither party has fully performed – consideration for waiver becomes an issue where one party has performed
•Must be by agreement of both parties

Substituted Agreement:
•Accord and Satisfaction - Can be an out of court settlement where one party offers to pay money in lieu of performance
•Giving money instead of performing **
•Could be Novation where the old K is discharged and a new K is entered into in its place

Question 5

Contract Provides for its Own Dissolution

Answer 5

Condition Precedent:
•Neither party can perform unless a certain future event occurs
•Contract is discharged if that event doesn’t happen

Condition Subsequent:
•An uncertain event that brings a promisor’s liability to an end if it happens
•Contract is discharged if that event happens
•Ex. baseball game gets rained out you get another ticket

Option to Terminate:
•Term in contract could give one party or both choice to bring contract to an end
•Allows for termination of the K on providing notice to the other party
•Ex. employment contracts, leases

Question 6

Discharge by Frustration

Answer 6

Doctrine of Frustration: Where the law excuses one party from performance when external causes have made performance radically different from that contemplated by the parties

•Performance could be made impossible, pointless, or radically different

Question 7

Self induced frustration

Answer 7

• Where a party wilfully disables itself from performing a contract in order to claim that the contract has been frustrated
• A party deliberately makes performance impossible
• This is NOT frustration – it is a breach of K

Question 8

Effect of frustration

Answer 8

• Frustration discharges contract at the moment of frustrating event, therefore…
• Where one party has partially performed and the other party has not, then a frustrating event can leave the performing party out of pocket
• Issue of fairness
• Obligations before the frustrating event remain, obligations after it will be discharged

Question 9

Discharge by Operation of Law

Answer 9

Bankruptcy and Insolvency Act

•Discharges bankrupt debtor from contractual liabilities