Discharge by Performance

Discharge by Performance: Strict rule

There is a strict rule that performance must be complete and exact. This means if one party didn’t fulfill their obligations, the contract can be discharged

Cutter v Powell: C’s husband died near the end of a voyage. Because he agreed to work for the whole voyage, he could not claim.

Re Moore and Landauer: C could reject the order of peaches as there were not enough crates.

How can the strict rule be avoided? (PADS)

PADS:

1. Prevention of full performance

2. Acceptance of part performance

3. Divisible Contracts

4. Substantial Performance

1. Prevention of full performance

If one party prevented another from fulfilling a contract, the innocent party can claim on a quantum Meruit basis. (They can claim for the work done)

Planche v Colburn: Publisher cancelled a book series before the author could finish it. The author could claim for the work done.

2. Acceptance of part performance

There must be consent for this to apply, and the consent must be free from pressure. Not consent if they had no choice but to accept.

If the parties agree that the other party does not have to fulfill their entire obligations, then the contracts must be paid on a quantum meruit basis.

Sumpter v Hedges: Builder failed to complete a house so the customer completed it. The builder claimed the customer had prevented them from finishing. HELD: Because the customer had no choice but to accept the builder’s part performance, the builder was entitled to nothing.

3. Divisible Contracts

If a contract has separate parts then it is a divisible contract. Failing to complete one part does not cause the entire contract to be discharged. (E.g. train has outward and return journeys)

Richie v Atkinson: Cargo would be paid for by the ton. Some cargo was missing. Because it would be paid for by the ton, it was a divisible contract.

4. Substantial Performance

This is when a party does substantially what is enough to complete the contract. Here, the party must be paid an appropriate amount for the work done.

Darkin & Co v Lee: Builders agreed to repair premises. Some repairs were below standard. Held: There was substantial performance as they had done enough.

Hoenig v Isaacs: A decorator was hired to furnish a room. Some furniture had defects. HELD: It was substantial performance.

This will not apply if the contract is seen as a single transaction. Cutter v Powell - was a single transaction as he had to complete whole journey before payment. (E.g. if the party says the whole thing must be done before payment, it is a single transaction.)

Substantial performance will not apply if the work done had no benefit (e.g. they supply the wrong thing or the items are unusable) or the work was dangerous.

Bolton v Mahadeva: Centeral heating was installed but it was defective. Substantial performance failed as there was no benefit and the work was dangerous.

Young v Thomas Properties: Defects in a car park were held not to be sufficient enough to discharge the contract, so substantial performance was allowed.

Where time is relevant

If the party states that time is of the essence (e.g. they say that they are in a rush), in the circumstances time is critical for the contract (e.g. perishable products) or if one party missed a deadline so the other party gave them a second deadline, time will be considered a condition of the contract.

If the above are not relevant, time will only be considered a warranty.

Union Eagle v Golden Achievement: When selling a flat, seller said they needed the money by 5pm because time was of the essence. The money was sent at 5:10pm. HELD: Seller successfully repudiated the contract because they said time was of the essence.

Charles Rickards v Oppenheim: Manufacturer needed to give a client a car on a certain date. They missed this date so the buyer gave them 4 weeks. When the manufacturer missed this date he rejected the contract. HELD: This was allowed.

If time being ‘of the essence’ is waived, the parties must insert this as a term to prevent future issues arising. (Hakimzay Ltd v Swailes)