chapter 10 termination
1. Termination for Breach of Contract
1.1 Right to Terminate: Overview
The right to terminate future performance arises where:
There is a breach of a condition, or
There is a serious breach of an innominate term.
These are called repudiatory breaches — entitling the innocent party to treat the contract as terminated.
Important Rule:
Breach does not automatically terminate the contract. The innocent party must choose to:
Affirm the contract (treat it as continuing); or
Terminate (discharge) the contract.
Once affirmed, the right to terminate is lost.
1.2 Types of Terms & Remedies
Term Type | Consequence of Breach |
|---|---|
Condition | Right to terminate + claim damages |
Warranty | Claim damages only |
Innominate Term | Depends on seriousness of breach |
🔹 Very serious breach of innominate term → Termination allowed
🔹 Minor breach of innominate term → Only damages
1.3 Example
Barot v Attwal (fictional example):
Attwal contracted to build Barot’s house in 4 stages.
Barot prepaid for Stage 1, 2, and 3. Attwal completes Stages 1 and 2.
After Stage 3 payment, Attwal breaches a condition.
Barot can either:
Affirm and continue to Stage 4, claiming damages; or
Terminate and refuse further payments.
If she terminates:
Attwal is released from further duties.
Barot may sue for extra costs to hire someone else (mitigation required).
2. Frustration
2.1 Doctrine of Frustration
Where an unforeseen event, after contract formation, makes performance:
Impossible, or
Radically different, and
Is beyond the parties’ control.
→ The contract is automatically discharged by law.
2.2 When Does Frustration Apply?
2.2.1 Legal Test (from cases):
✔ Supervening event must:
‘Radically different’
Most of the cases that have considered frustration have been placed into convenient categories of circumstances that render performance of the contract ‘radically different’. These categories include:
(a) Government intervention
(b) Unavailability of a specific person crucial to the contract
(c) Illegality
(d) Destruction of the subject matter
(e) Non-occurrence of a fundamental event
But in all cases it will be a question of degree.
2.2.2 Common Categories:
Category | Example | Frustrated? |
|---|---|---|
Destruction of subject matter | Fire destroys venue before use | ✅ Yes |
Personal incapacity | Author gets seriously ill | ✅ Yes |
Illegality | Law changes making contract illegal | ✅ Yes |
Government intervention | Wartime bans halt performance | ✅ Yes |
Non-occurrence of fundamental event | Coronation cancelled (Krell v Henry) | ✅ Yes |
Employee illness (substitute available) | Worker replaced | ❌ No |
Contract becomes harder/costlier | Route blocked, delays, price up | ❌ No |
🔍 Case: The Super Servant Two
Contract to use either ship A or B.
B sank; A was used in other contracts.
Held: No frustration — self-induced impossibility.
2.3 Delay and Frustration
Not every delay frustrates. Courts assess:
Duration relative to total contract time
Reason for delay (e.g., war vs. traffic)
Whether delay fundamentally alters the contract
In fact, a delay is more likely to mean that a party is in breach of contract. For example, if it is a term of the contract that the seller will deliver goods on 3 March and they do not do so, they are likely to be in breach of an express term of the contract and frustration would not apply. When deciding if delay frustrates the contract, relevant factors include:
whether there are contract provisions for the consequences of delay;
the likely length of delay relative to the duration of the contract;
any time set in the contract for the obligations to be performed; and
whether the performance resumed is radically different from the contract.
📌 Metropolitan Water Board v Dick Kerr (1918)
→ Delay due to WWI was so long that the contract was frustrated.
2.4 Foreseeability & Force Majeure
If the event was foreseeable, frustration usually fails.
✅ If contract has a force majeure clause, frustration doesn't apply — contract terms govern.
⚠ Force majeure clauses are subject to UCTA 1977 s 3: they must be reasonable.
2.5 Legal Consequences of Frustration
Common Law:
Automatic discharge of future obligations.
No fault → no breach.
Statute: Law Reform (Frustrated Contracts) Act 1943
Rule | Effect |
|---|---|
s1(2) | 💰 Money paid = recoverable. |
Money due = need not be paid. | |
Court may award expenses to payee. | |
s1(3) | 📈 Valuable benefit conferred → Court may award a just sum. |
Example: Boat Fire
£200 deposit paid, £400 due, boat destroyed.
Moira can recover £200, doesn’t owe £400.
Jane may recover up to £600 (expenses).
If boat had been used for 1 week → s1(3) applies: Moira may owe a “just sum”.
3. Discharge by Performance
3.1 Doctrine of Complete Performance
General rule: Performance must be complete and exact.
Otherwise, the other party may:
Refuse to pay
Not owe any part of price
Exception: If one party has already paid, they cannot recover unless there's a total failure of consideration.
3.2 Exceptions to Doctrine
Exception | When It Applies | Consequence |
|---|---|---|
Divisible obligations | Contract split into parts | Payment for completed parts |
Substantial performance | Minor defects only | Payment minus defects’ cost |
Wrongful prevention | Employer wrongfully stops work | Contractor entitled to reasonable sum |
Voluntary acceptance of part performance | Other party accepts partial work | Payment for accepted work only |
3.3 Examples of Exceptions
Divisible Obligations:
🧱 Brooks paints rooms for Sarah.
Agreed: £200 (kitchen), £400 (dining), £300 (bedroom).
Brooks finishes kitchen + dining, abandons bedroom.
✅ Entitled to: £600
❌ Not entitled to bedroom payment
Substantial Performance:
🔨 Benjamin builds extension for £10,000.
Minor defects = £100 to fix.
✅ Benjamin entitled to: £9,900
Wrongful Prevention:
✂ Eleanor hires Vince to cut 5 trees for £900.
She stops him after 2.
✅ Vince entitled to damages or restitution
Voluntary Acceptance:
🏗 Sumpter v Hedges (1898)
Builder did partial work, then quit.
Owner had no choice but to accept.
→ No payment for work
→ Paid for materials voluntarily used