Discharge of Contract Summarised Notes for the Contract Law module, LLB, at City, University of London (achieved a 1st class using these) - can of course be used for other universities as well!
Would really recommend the full bundle of notes
DISCHARGE OF CONTRACT
Discharge by performance
Discharge by agreement
Discharge by breach
Discharge by frustration
Contract becomes discharged – comes to an end when obligations arising under it are performed,
but under certain circumstances, a contract may be discharged before performance is complete
Discharge by performance
Normally a contract is not discharged until all obligations arising under it have been performed
precisely and exactly
The strict rule= contracts requires complete performance of all obligations and can give rise to
harsh consequences
o Cutter v Powell (1795): a seaman agreed to serve on a ship, his wages to be paid at end of
voyage, he died mid-voyage and his widow tried to claim his wages not able to recover as he
had not completed performance of contractual obligation (now in Merchant Shipping Act 1970)
o Re Moore & Co and Landauer & Co Arbitration (1921): defendants agreed to buy 3,000 tins of
canned fruit from the claimant, packed in cases of 30tins ; but was packed in cases of 24tins D
refused to pay held entitled to reject as was not precisely done as agreed – now 2 statute
Sale of Goods Act 1979, section 15A
Buyer would have right to reject goods by reason of a breach of the seller of a term
Breach is so slight that would be unreasonable for him to reject them
Sale of Goods Act 1979, section 30(2A
Buyer who does not deal as consumer may not –
oWhere the seller delivers a quantity of goods less than he contracted to sell, reject the goods
oWhere the seller delivers a quantity of goods larger than he contracted to sell, reject the whole
Exceptions to the strict rule
Several obligations: contract imposes several obligations if payment under it is due from time to
time as performance of a specified part of the contract is rendered
Partial performance: if contract is severable, then whole contract is not breached, payment can
be expected for part performance
oRoberts v Havelock (1832): Shipwright agreed to repair a ship, contract did not expressly say
when payment would be made. Before completing repairs, he requested payment for work
completed to date, defendants refused to pay Held: since contract did not require claimant to
complete all work before payment, court held shipwright was no bound to complete all work
before some payment
oSumpter v Hedges (1898): claimant agreed to build house and stables on D’s land, he
completed around 2/3s or work then abandoned contract, D completed building then refused
to pay claimant for work done Held: claim failed as D had no option to accept partially
completed work D would need to have free choice to accept partial performance for payment
Substantial performance: payable amount corresponds to price of contract minus cost of
incomplete workdamages for incomplete work
oH. Dakin & Co Ltd v Lee (1916): claimants agreed to carry out repairs to Ds house, work was
completed but 3 defects which could be fixed at small cost, D refused to pay Held substantial
work completed, so subject to deduction of cost of fixing defects
oBut what constitutes as ‘substantial’
1
, Bolton v Mahadeva (1972): claimant contracted to install hot water and central heating system
in Ds home for £560; there was various defects which fumes affecting air in living room, house
was average 10% less warm than should be, with cost of £175 to rectify Held not sufficiently
substantial performance, so claimant not entitled to recover anything
Prevention of performance: where party is wrongly prevented from performing contractual
obligations by other party then strict rule does not apply – claimant can claim damages by breach
of contract or on quantum meruit basis for work done
Tender of performance: where unable to complete contractual obligations without co-operation
of other party, can make ‘tender of performance’, which can be accepted/rejected. If rejected,
then party who has tried to complete their contractual obligations will be discharged from further
liability
oStartup v MacDonald (1843): parties contracted for sale of 10 tons of linseed oil to be delivered
‘within the last 14 days of March’, claimant delivered oil at 8:30pm (Late time), on 31 March D
refused to accept delivery and refused to pay Held tender performance was equivalent to
performance and claimant was entitled to damages for non-acceptance Sale of Good act now
states tender of goods must now be made at a ‘reasonable hour’
Time of performance: contract fixed date for performance, only possible to repudiate for breach
where ‘time is of the essence’ – this will occur where?
oContract expressly provides time is of the essence
oTime being of the essence can be inferred from the nature of the subject matter and the
circumstances of the contract (e.g. contract for sale of perishable fruit)
oTime becomes of the essence: where one party failed to perform in a timely manner and the
injured party gives notice that performance must take place within a reasonable time
If time is ‘of the essence’ any delay will amount to repudiation
Union Eagle Ltd v Golden Achievement Ltd (1997): Held 10mins delay would suffice to
repudiate
Exam tip: when dealing with problem Q, look at facts and ascertain what was required to
complete performance of contract what was actually done and how far short was it off
contractual obligation
Discharge by agreement
Like a contract can be made by agreement, can be discharged by agreement, but consideration is
required to enforce the agreement to discharge or vary the contract
Where consideration is promised to perform an act in the future it is fine
Where parties exchange promises to release one another will be good consideration
Where consideration is given:
Deed is required to effect valid release of other party, OR
Other party must provide ‘accord and satisfaction’ (new consideration)
OR without consideration, can give voluntary waiver to other for no performance, can give without
formality
Discharge by breach
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