Discharge

What is the first step when analysing discharge of a contract by breach?

Identify the contractual breach from the facts.

What is the second step when analysing discharge by breach?

Determine whether the breach is actual or anticipatory.

What is an anticipatory breach of contract?

An anticipatory breach occurs where a party indicates by words or conduct, before performance is due, that they will not perform their contractual obligations.

What does it mean for a party to renounce a contract?

Renunciation occurs where a party indicates in advance that they will not perform the contract.

What option does an innocent party have following an anticipatory breach?

The innocent party may accept the renunciation and treat the contract as terminated immediately.

What did Hochster v De La Tour establish about anticipatory breach?

Hochster v De La Tour established that where one party indicates before the performance date that they will not perform, the innocent party may accept the renunciation and terminate immediately.

Must the innocent party wait until the contractual performance date after an anticipatory breach?

No. The innocent party may accept the renunciation and treat the contract as terminated before performance becomes due.

What is the third step when analysing discharge by breach?

Determine whether the breach is repudiatory.

What is a repudiatory breach?

A repudiatory breach is a breach of a condition or a sufficiently serious breach of an innominate term treated as a condition.

What right arises where a breach is repudiatory?

The innocent party has a right of election to terminate or affirm the contract.

Which case is associated with the right of election following repudiatory breach?

Hochster v De La Tour is associated with the innocent party’s right to accept a renunciation and terminate.

How must the innocent party exercise the right to terminate for repudiatory breach?

The innocent party must communicate the decision to terminate to the party in default.

What did Vitol SA v Norelf Ltd, The Santa Clara establish about termination?

Vitol SA v Norelf Ltd, The Santa Clara established that the innocent party must make its decision to terminate known to the defaulting party.

What happens to unperformed primary obligations when a contract is terminated for repudiatory breach?

All unperformed primary obligations on both sides come to an end.

What happens to contractual rights and obligations accrued before termination?

Rights and obligations that accrued before termination remain enforceable.

What damages may an innocent party claim after terminating for repudiatory breach?

The innocent party may claim damages for the specific breach and for loss of the contract caused by termination.

What is the risk of wrongful termination?

If a party terminates without a valid right to do so, that attempted termination may itself amount to a repudiatory breach.

What happens where A wrongly terminates a contract?

A’s wrongful termination may amount to renunciation, allowing B to accept it and sue for wrongful termination.

Why is termination especially risky where the breached term is not expressly classified as a condition?

The party must apply the Hong Kong Fir seriousness test, and may wrongly terminate if the breach is not sufficiently serious.

Does good faith protect a party who wrongly terminates a contract?

No. Acting in good faith does not prevent an unjustified termination from becoming a repudiatory breach.

What is affirmation following repudiatory breach?

Affirmation is a clear and unequivocal decision to keep the contract alive despite the other party’s repudiatory breach.

What did The Dynamic establish about affirmation?

The Dynamic established that affirmation requires a clear and unequivocal commitment to continue the contract.

What is the principal effect of affirming a contract after repudiatory breach?

The contract survives and the innocent party preserves its contractual rights.

Can an innocent party affirm a contract and later claim contractual sums as a debt?

Yes. Where the innocent party performs after affirmation, a contractual sum may become recoverable in a debt action.

What is the difference between a debt claim and a claim for unliquidated damages after affirmation?

A debt claim seeks a contractual sum that has become due, whereas unliquidated damages compensate loss caused by breach.

What did White and Carter (Councils) Ltd v McGregor establish about affirmation?

White and Carter v McGregor established that an innocent party may affirm after renunciation, perform the contract and claim the contractual sum as a debt.

What happened in White and Carter v McGregor?

One party renounced the contract, but the innocent party affirmed, performed anyway and successfully claimed the contractual payment as a debt.

Does affirmation waive the innocent party’s right to damages for the existing breach?

No. Affirmation does not waive damages arising from the breach.

Can an innocent party terminate after affirming the contract?

No. Once the contract is affirmed, the innocent party cannot terminate for that repudiatory breach.

Why may affirmation reduce the damages available to the innocent party?

Because the contract remains alive, damages will not include compensation for loss of the entire contract through termination.

When may affirmation be impractical because the defaulting party’s cooperation is required?

Affirmation may not be possible where continued contractual performance depends on cooperation from the breaching party.

What did Hounslow London Borough Council v Twickenham Garden Developments Ltd establish about affirmation?

Hounslow LBC v Twickenham Garden Developments illustrates that affirmation may not operate where performance requires the breaching party’s cooperation.

When may an innocent party be prevented from affirming because it has no legitimate interest?

Affirmation may be denied where the defendant shows that damages would be adequate and the decision to affirm is unreasonable.

What did The Dynamic establish about legitimate interest in affirmation?

The Dynamic established that affirmation may be restricted where the innocent party has no legitimate interest and damages would adequately compensate it.

What remedy is available where a breach is not repudiatory?

The innocent party may claim damages only.

What is the fourth step when analysing discharge of a contract?

Consider whether the contract has been discharged by frustration.

What is frustration in contract law?

Frustration occurs where an event beyond either party’s control arises after formation and makes performance radically different from what was agreed.

Which case provides Lord Radcliffe’s formulation of frustration?

Davis Contractors Ltd v Fareham Urban District Council provides the formulation that performance must become radically different from that undertaken.

What comparison should be made when deciding whether a contract is frustrated?

The court should weigh the contract’s total obligations against what has already been completed and what remains outstanding.

Is there an exhaustive list of circumstances that amount to frustration?

No. The factors indicating radically different performance are non-exhaustive.

Can destruction of an object necessary for performance frustrate a contract?

Yes. Total or partial destruction of something essential to performance may frustrate the contract.

What did Taylor v Caldwell establish about destruction of contractual subject matter?

Taylor v Caldwell held that a contract to use a music hall was frustrated when the hall burned down before the concerts.

Why was the contract frustrated in Taylor v Caldwell?

The music hall was essential to performance and its destruction made performance impossible.

What did Appleby v Myers establish about destruction of premises necessary for performance?

Appleby v Myers held that a contract concerning installation and maintenance of machinery was frustrated when the essential factory burned down.

Can death or illness frustrate a personal-services contract?

Yes. Death or illness may frustrate a contract where personal performance is essential.

Which case illustrates frustration through illness?

Condor v The Barron Knights Ltd illustrates frustration caused by illness preventing personal performance.

Can temporary unavailability frustrate a shipping contract?

Yes. Temporary unavailability may frustrate where, in context, the delay is sufficiently serious relative to the contract’s remaining duration.

What did Bank Line Ltd v Arthur Capel & Co establish about temporary unavailability?

Bank Line v Arthur Capel & Co held that a five-month interruption within a 12-month contract was sufficient to frustrate it.

What did Tamplin Steamship Co Ltd v Anglo-Mexican Petroleum Products Co establish about temporary unavailability?

Tamplin SS Co v Anglo-Mexican Petroleum held that an interruption of approximately two-and-a-half years in a five-year contract was not sufficient to frustrate it.

Is the remaining duration of a contract decisive in assessing temporary unavailability?

No. It is a starting point within a broader multi-factor assessment.

What did The Sea Angel establish about delay and frustration?

The Sea Angel established that the time left to run is only a starting point and that frustration requires a multi-factor assessment.

How may a renewal date affect frustration?

A forthcoming renewal date may limit the significance of temporary unavailability and make frustration less likely.

Can supervening illegality frustrate a contract?

Yes. A change in law or state intervention making performance illegal may frustrate the contract.

Which case illustrates frustration through illegality?

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd illustrates frustration caused by supervening illegality.

Why must the exact wording of a new law be considered when alleging frustration by illegality?

The contract must precisely conflict with what the law prohibits; general similarity is insufficient.

Can a contract be frustrated where performance remains physically possible?

Yes. Frustration may arise where a supervening event destroys the parties’ shared contractual purpose.

What did Krell v Henry establish about frustration of common purpose?

Krell v Henry held that hiring a room to view the coronation procession was frustrated when the procession was cancelled because the common foundation disappeared.

Why is Krell v Henry treated as a narrow or exceptional decision?

The contract was frustrated despite physical performance remaining possible because the sole shared purpose had been destroyed.

Must a frustrated purpose be shared by both parties?

Yes. The purpose must form a common foundation of the contract rather than merely one party’s private motive.

What did Herne Bay Steamboat Co Ltd v Hutton establish about common purpose?

Herne Bay Steamboat v Hutton held that a boat-hire contract was not frustrated because, although the naval review was cancelled, the cruise remained possible.

Why was there no frustration in Herne Bay Steamboat v Hutton?

The contract had more than one purpose, and the remaining cruise could still be performed.

What did Canary Wharf (BP4) T1 Ltd v European Medicines Agency establish about common purpose?

Canary Wharf v EMA held that a lease was not frustrated by Brexit-related relocation because the parties had no single common purpose and the bargain was not radically altered.

Why was the EMA lease not frustrated by Brexit?

The parties had different purposes for the lease, and the relocation did not make the contractual obligations radically different.

Does increased expense or difficulty normally frustrate a contract?

No. Performance becoming more expensive, inconvenient or difficult is generally insufficient.

What did Davis Contractors Ltd v Fareham UDC establish about increased expense?

Davis Contractors v Fareham UDC held that labour shortages, material shortages, bad weather and increased cost did not frustrate a building contract.

Why was the contract not frustrated in Davis Contractors v Fareham UDC?

Performance had become more onerous and expensive, but not radically different from what was agreed.

What is self-induced frustration?

Self-induced frustration arises where the party relying on frustration caused the frustrating situation through its own choice or conduct.

Can a party rely on self-induced frustration?

No. A party cannot rely on frustration where it caused the event or created the lack of alternatives.

Who bears the burden of proving self-induced frustration?

The party alleging that the frustration was self-induced bears the burden of proof.

What did J Lauritzen AS v Wijsmuller BV, The Super Servant Two establish about self-induced frustration?

The Super Servant Two held that a party could not rely on frustration where its own allocation decision caused it to have no alternative means of performance.

How does foreseeability affect frustration?

Frustration is less likely where the event was foreseeable and the contract failed to allocate the risk.

Can a foreseeable event ever frustrate a contract?

Yes. A foreseeable event may still frustrate if its consequences exceed the risk reasonably assumed by the parties.

What did The Sea Angel establish about foreseeability?

The Sea Angel established that even a foreseeable event may frustrate if it falls outside the risk assumed under the contract.

What did Flying Music Company Ltd v Theatre Entertainment SA establish about foreseeable economic conditions?

Flying Music Company v Theatre Entertainment held that signs of the Greek economic crisis meant the parties could have allocated the risk contractually.

What question did Canary Wharf v EMA identify regarding foreseeability?

The question is whether the event could have informed how the parties assessed the risk of entering the contract.

Does every theoretically foreseeable event prevent frustration?

No. Mere theoretical foreseeability is not automatically fatal to a frustration claim.

How does an express contractual provision affect frustration?

A clause allocating the relevant risk, such as a force majeure clause, may prevent reliance on frustration.

What is a force majeure clause?

A force majeure clause is an express contractual term allocating the consequences of specified events beyond the parties’ control.

Why must frustration be applied narrowly?

It alters the parties’ bargain and automatically discharges future obligations, so it must not be invoked lightly.

What did Tsakiroglou & Co Ltd v Noblee Thorl GmbH establish about the limits of frustration?

Tsakiroglou v Noblee Thorl established that frustration must be applied within very narrow limits.

What did Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema establish about frustration?

The Nema emphasised that frustration should not be lightly invoked.

What is the common-law effect of frustration on future obligations?

Future contractual obligations are automatically discharged.

Which statute regulates obligations and benefits arising before frustration?

The Law Reform (Frustrated Contracts) Act 1943.

What does section 1(2) of the Law Reform (Frustrated Contracts) Act 1943 provide about money already paid?

Money paid before the frustrating event is recoverable.

What does section 1(2) provide about money payable before frustration but not yet paid?

It ceases to be payable.

Can a payee retain or recover expenses incurred before frustration?

Yes. The court may allow retention or recovery of expenses to a limited extent where it considers this just.

Is the court required to award all expenses incurred before frustration?

No. The power is discretionary and depends on what the court considers just.

What connection must expenses have to the frustrated contract under section 1(2)?

The expenses must be directly related to performing the contract.

Who bears the burden of proving expenses under section 1(2)?

The payee must prove that the expenses were incurred and that allowing retention or recovery would be just.

What is the maximum amount that may be retained or recovered for expenses under section 1(2)?

It cannot exceed either the actual expenses incurred or the amount paid or payable before frustration.

Does “just” under section 1(2) mean full reimbursement?

No. The court may award less than the actual expenses incurred.

What did Gamerco SA v ICM/Fair Warning (Agency) Ltd establish about section 1(2)?

Gamerco v ICM/Fair Warning established that the court has a broad discretion, with no presumption of total retention or equal division.

What is the purpose of the court’s discretion under section 1(2)?

Its purpose is to mitigate the harshness of leaving losses where they happen to fall.

What does section 1(3) of the Law Reform (Frustrated Contracts) Act 1943 address?

It addresses valuable non-monetary benefits conferred before frustration.

When may a party have to pay for a non-monetary benefit received before frustration?

A party that obtained a valuable benefit under the contract may be required to pay a just sum.

Must the non-monetary benefit arise under the contract?

Yes. The benefit must have been conferred under the frustrated contract.

What must the court do under section 1(3) before awarding a just sum?

It must identify and value the benefit received and then assess what amount would be just.

Can an award under section 1(3) exceed the value of the benefit?

No. The award cannot exceed the value of the benefit conferred.

What did BP Exploration Co (Libya) Ltd v Hunt (No 2) establish about valuing benefits?

BP Exploration v Hunt (No 2) held that the benefit is valued at the time of frustration rather than by reference to the cost of performance.

What happens under section 1(3) if the benefit has no remaining value at the time of frustration?

No recovery is available.