Discharge Of A Contract

Question 1

Discharge of a contract

Answer 1

When a contract comes to an end

Question 2

4 methods of terminating a contract

Answer 2

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

Question 3

Discharge by agreement

Answer 3

• where the parties agree to bring a contract to an end before all obligations have been completed
• unilateral agreement to discharge: Can only be released if that party provides some consideration for the release
• agreement to be released = accord
• supply of consideration to be released = satisfaction

Question 4

Discharge by frustration

Answer 4

Before the obligations have been completed, event may occur (through no fault of the parties) that renders performance impossible
- E.g. dustruction of subject matter

Question 5

Discharge by breach

Answer 5

where one of the parties breaks one or more terms of the contract
breach will only discharge the contracts if it is a condition or an innominate term that deprives the party of substantially the whole benefit of the contract

Question 6

Two types of breach

Answer 6

1. Actual breach
2. Anticipatory breach

Question 7

Discharge by performance

Answer 7

• this is the ideal method of discharge
• each party has done precisely what they have promised to do
• contract ends as all obligations have been performed

Question 8

Remedies for breach of contract

Answer 8

• if the contract is breached, the innocent party may claim for one or more of the following remedies in the court:
  1. Damages
  2. Quantum Meruit
  3. Specific performance

Question 9

Damages

Answer 9

Monetary compensation: aims to put the parties into the position they would have been if the breach had not occurred
- the aim of damages is to restore the innocent party to the same financial position they would have been in if the contract had been performed

Question 10

Remoteness of damages

Answer 10

claims for damages are restricted to the recovery of losses that are not too remote

Question 11

Measure of damages

Answer 11

If the contract was for the sale of goods, the damages are usually assessed according to the market rule i.e. examining how much the goods would have cost on the open market

Question 12

Damages in building contracts

Answer 12

• Usually, when a building contract is breached:
  Cost of correcting the defect = amount of damages that can be claimed
• However, the courts may decide that the cost of remedying the defects is disproportionate o the difference in value between what was supplied and what was ordered

Question 13

The duty to mitigate

Answer 13

• The claimant must take appropriate steps in order to minimise their losses
• they cannot claim damages for losses which could have reasonably been avoided (note: this does not include taking risky or extraordinary measures)

Question 14

Liquidated damages

Answer 14

• sometimes, a contract may state the amount of damages to be paid in the event of a breach of contract
• this amount is known as liquidated damages
• generally, this will be the sum awarded by the courts

Question 15

Quantum meruit

Answer 15

Allows a court to award reasonable compensation to a person who has completed contractual obligation
E.g. doing work on a persons car charged 500, only increased value of a car by 200, 300 in quantum meruit