Discharge of contract: Performance

Question 1

discharge

Answer 1

DISCHARGE deals with the end of contract.

majority of contracts will end by the parties performing all their respective obligations (they have done what was agreed in the contract) - law will not become involved.

But, sometimes a contract will be ended by one of the parties not performing (breaching) some/all their obligations.

Not every breach will discharge a contract

Question 2

how can a contract be discharged

Answer 2

1. Complete PERFORMANCE (discharges)
2. A FRUSTRATING event (discharges)
3. A BREACH of a condition (discharges if the victim so chooses)

Question 3

discharge by performance

Answer 3

strict rule: performance must be complete and exact.

party fails to meet all obligations -> contract is not discharged, may require a remedy.

unjust nature of strict rule: Cutter v Powwell (widow claiming wages)

harsh rule: Re Moore v Landauer (tins) (Sale of Good Act 1979)

Question 4

exceptions to strict rule

Answer 4

1) Divisible contracts
2) Substantial performance
3) Acceptance of part performance
4) Prevention of full performance

Question 5

1) Divisible contracts

Answer 5

if contract can be seen as comprising separate parts -> non-completion of one part is not a breach of whole contract

(eg yearly salary divided into monthly payments)

Ritchie v Atkinson

Question 6

2) substantial performance

Answer 6

if party has completed a ‘substantial’ amount of work under the contract -> entitled to be paid for the work done.

Doesn’t apply where contract is considered to be an entire contract where all the obligations are seen as a single transaction that can’t be broken down (Cutter v Powell)

party ‘at fault’ may be entitled to payment based on quantum meruit (as much as it is worth) (Hoeing v Isaacs)

if substantial, can recover the amount appropriate to what has been done

what is substantial = question of fact to be decided in each case

Dakin v Lee
Bolton v Mahadeva (69%)

Question 7

3. acceptance of part performance

Answer 7

If agreed need not complete the entire contract, strict rule will not apply.

Only apply when the party who is the victim of the part performance has a genuine choice of whether or not to accept (Sumpter v Hedges)

Contract must be paid for on a quantum meruit basis.

Question 8

4. prevention of performance

Answer 8

If one party prevents the other from carrying out his obligations the party trying to perform may have an action for damages (Planche v Colburn)

Question 9

TIME of performance GENERAL rule

Answer 9

Generally, failure to complete a contract on time = breach of warranty

so, claim can only be made for damages and the contract will continue.

Question 10

exception to time of performance

Answer 10

court will regard time as a condition (‘making time of the essence’), If:

1) parties have expressly stated in the contract that time is of the essence

2) In the circumstances time for completion is critical

3) One party already failed to perform on time and the other has insisted on a new date for completion as ‘time of the essence’

s52 CRA 2015 - trader must perform within a reasonable time (if Act applies)

V can claim the contract is repudiated (terminated) and/or damages