Performance and Breach

Nature of Contract
Divisible Contracts A divisible or severable contract is a contract where the consideration and the payment thereof is apportioned or is capable of apportionment according to the work to be done: Steele v Tardiani. The contract itself has divided the performance of the work and the payment of the consideration expressly. Whether a contract is divisible or entire depends on the parties intention in the light of the subject matter: Roberts v Havelock The court will consider each divisible part of the contract separately as though they were separate agreements instead of considering all of the partys obligations of performance under the contract. The party performing the contract is able to recover after each part of the contract is performed notwithstanding the whole contract has not been completed. Lump Sum Contracts A lump sum contract is a contract which is not divisible and provides for the payment of a specific sum upon the completion of specific work: Hoenig v Issacs. !n lump sum contracts the court would consider the whole of the performing partys obligations under the contract and whether the performance rendered satisfied the re"uirements of the contract as a whole.

Nature of Obligation

Dependant or Independent Independent An independent obligation is where one person must perform regardless of whether the other does so. Where the obligations are independent each party may call upon the other to perform without each having performed his or her obligations. Dependant #ne party must perform his or her obligations before the other $ the performance of the contract by the second party is dependant on the performance by the first party eg the payment for goods is not re"uired until the goods are delivered and accepted by the buyer: Slave of Goods Act 1896 %&ld'. (enerally if the goods or services are not provided an obligation to pay the contract price does not arise: Automatic Fire S rinklers v !atson" )or example if the buyer refuses to accept the goods when delivered the seller will only have a claim in damages. *owever if the goods and services are not exactly provided but rather substantially provided the court must determine the nature of the obligation is entire or not entire as to whether substantial performance will be enough to claim the contract price minus the cost of reparation of the defects in the good or service. Entire or Not Entire !f the obligation is entire the contract will only be payable in exchange for exact performance. !f the obligation is not entire the party will be entitled to claim the contract price in exchange for substantial performance of the contract. The mere fact the contract provides for the contract price to be payable in a lump sum or +payable on completion, is not enough for the obligation to be entire. The contract must indicate that complete performance of the obligation to provide services or goods is a condition recedent to payment: #urcell v $acon.

The Degree of Performance

(enerally performance of a contract must be exact and on time in order for a party to recover the contract price and be discharged from further performance: Hoenig v Isaacs" *owever when the obligation is not entire a party who

has not exactly but has substantially performed the contract will also be able to obtain payment of the contract price less an amount for the defective performance. E act Elements of Exact Performance -xact performance is performance which corresponds exactly to the re"uirements of the contract. Effect of Exact Performance A party who exactly performs his or her obligations under either a lump sum contract or a divisible contract will be entitled to the contract price. Substantial Elements of Substantial Performance A party will usually be considered to have substantially performed a contract where the defects in the services or goods are of a minor nature. A determination of whether the performance is substantial will be a "uestion of degree to be determined by the court after consideration of: .. the nature of the defect/ and 0. the cost of rectifying the defect compared to the contract price. Where the nature of the defect is serious and the cost of rectification is high by comparison to the contract price a court will conclude that the party has not substantially performed his or her obligations. The contrary will be the case where the defect is minor and the cost small. !n determining each of these factors regard must be paid to Hoenig v Isaacs and $olton v %a&adeva" !n Hoenig v Isaacs a contract to decorate and furnish a flat was held to be substantially performed where the defects were that the door of a wardrobe re"uired replacing and a bookshelf which was too short needed to be remade and the relative cost of these rectifications was about 1 percent. 2onversely in $olton v %a&adeva a contract for the installation of a water heating system was held not to have been substantially performed where the system emitted fumes that made the premises uninhabitable and the system did not properly work due to insufficient radiators and insulation and where the relative cost of rectification was between one third and one "uarter of the contract price. Effect of Substantial Performance 'um Sum (ontracts A party who substantially performs his or her obligations under a lump sum contract where the obligation to provide the services or goods is not entire will be entitled to recover the contract price less a set off for the cost of rectification. *owever if the obligation to perform is entire a party who substantially performs a lump sum contract will not be entitled to recover the contract price as the condition precedent of exact performace of the partys obligations will not be fulfilled: (utter v #o)ell. *ivisible (ontracts A party who substantially performs a divisible part of a contract will be entitled to recover the contract price for that divisible part less a set off for rectification of the defects if the part is not entire. !t will not be necessary to substantially perform the whole of the contract to recover any part of the price. *owever if the obligation to perform that divisible part is entire the party will only be able to recover the contract price for that divisible part if the performance is exact. Partial Elements of Partial Performance 3artial performance is performance which is defective and those defects go to the root of the contract: Sum ter v Hedges. -xamples of partial performance are: the work is of no value to the defendant/

the work is entirely different from the provided for by the contract: (onner v Stainton/ or the conduct of the plaintiff constitutes a repudiation or abandonment of the contract: Sum ter v Hedges

Effect of Partial Performance 4espite the fact the contract price may not be recoverable a party to the contract may be able to seek alternative remedies. .. The first alternative is for the party who has undertaken work or provided goods to seek damages for the breach of the other party. 4amages may be claimed only if the party seeking the damages is not themselves in breach. 0. The second alternative is to make a restitutionary claim of quantum meruit for the return of a benefit provided to the other party. A party may not seek both damages and "uantum meruit.