discharge

intro

• deals with the end of a contract

• majority end by parties performing all their respective obligations, if so the law will not become involved

• however, a contract will be ended by one of the parties not performing, so breaching, some or all of their obligations

reasons for discharge

1. performance

2. frustration

reasons for performance discharge

• not performed

• time of performance

• prevention of performance

performance

• strict rule- performance must be complete and exact

  • Cutter V Powell

  • RE Moore and CO

• exceptions for strict rule:

  1. divisibility- if contract is divisible then noncompletion of one part is not breach of whole contract

     • → Ritchie V Atkinson

  2. substantial performance

     • substantially done what is required to be done in contract

     • C can recover amount appropriate to what has been done

       → Dakin + CO V Lee

       → Hoeing V Isaacs

       → Bolton V Mahadeva

  3. acceptance of part performance

     • applies when party who is victim of part performance has a genuine choice of whether or not to accept

     • → Sumpter V Hedges

time of performance

• generally, failure to complete a contract on time is treated as a breach of warranty, so a claim can only be made for damages

• court will regard time as a condition (allows victim to claim contract is repudiated AND/or damages) if:

  1. parties have expressly stated that time is of the essence

  2. time for completion is critical

  3. one party has already failed to perform on time and other has insisted on a new date for completion

prevention of performance

• if one party prevents the other from carrying out their obligations, the party trying to perform may have an action for damages

  • Planche V Colburn

frustration

• frustrating event = event happens when a contract has been made but before it can be completed, that is not the fault of either party and is unforeseen

• originally, law refused to take this into account

  • Paradine V Jane

• more recently, courts have seen this as very unfair when the event is completely unforeseeable

  • created doctrine of frustration

    → introduced in Taylor V Cadwell, contract was impossible to perform, so frustrated

    → frustrating event must make the performance of contract ‘radically different’ from what was originally agreed between the parties

ways a contract can be frustrated (frustrating events)

1. impossibility

2. subsequent illegality

3. death/incapacity for personal performances

4. radical changes in circumstances

impossibility

• it is impossible for the contract to be completed

  • Taylor V Cadwell

subsequent illegality

• if due to a change in law, purpose for which contract was made becomes illegal

  • Denny

  • Mott + Dickinson

death

or

incapacity in case of contract for personal performances

• Medical condition made it impossible for them to perform contractual obligations

  • Condor V Baron Knights

radical changes in circumstances

• deprived of its core contractual purpose = contract frustrated

  • Krell V Henry

• performance could still be completed, just without added bonus opportunity = not frustrated

  • Henre Bay Steamboat + CO V Hutton

remedies for frustration intro

• common law traditionally said any loss resulting from frustration should lie where it fell, so advance payments made under the contract prior to the frustrating event would not be recoverable

• ‘all or nothing’ approach had potential to be very unfair, so legislation was passed

remedies for frustration act + purpose

Law Reform (frustrated Contracts) Act 1943

parliament passed Act to cover what happens once a frustrating event has occurred

• s1(2)

  • Money already paid (e.g. deposits) → recoverable

  • Money already due → not payable

  • work done / expenses paid before FE → court can order compensation, using its discretion

  • court can only award up to the amount that was meant to be paid before FE

    • If more is needed, it must be claimed under s1(3)

• s1(3)

  • If a party gained a valuable benefit from the contract before the FE,
    → court can order compensation to the other party

    → amount is what court considers having regard to all circumstances of case

• s1(4)

  • court will estimate amount of any expenses that either party to the contract has had to pay, and will include the ones that seem reasonable, including:

    1. expenses

    2. work/services performed

when frustration may not apply, and there could be a breach

• self-induced frustration within Cs control

  • → Maritime National Fish LTD V Ocean Trawlers

• contract become less profitable/more onerous to perform will not cause frustration

  • Davis Contractors LTD V Fareham UDC

• FE was either a foreseeable risk or referred to in contract itself

  • no release from obligations

    → Amalgamated Investment V Walker LTD

conclusion for frustrating event

• FE will terminate the contract immediately and future contractual obligations of parties are cancelled

• contract is not discharged by frustration = may be a breach of contract (go through breach)