Discharge of a contract

-contract is brought to an end

-when contract is discharged each party is freed from continuing obligations under the
contract

Discharge of contract falls under:

I. Performance
II. Breach
III. Agreement
IV. Frustration

Discharge by Performance
-both parties have fully performed their contractual obligation

Performance: Entire obligation rule

-Complete performance required for payment: Cutter v Powell (1975)
- Cutter v Powell (1975):
 Claimant’s husband agreed by contract to act as a second mate on the ship
the ‘Governor Parry’ on a return voyage to Jamaica.
 The voyage take eight weeks and he was to be paid on completion.
 Term: Ten days after the ship ‘Governor Parry’ myself master, arrives at
Liverpool, I promise to pay Mr. T. Cutter the sum of thirty guineas, provided he
proceeds, continues and does his duty as second mate in the said ship from
hence to the port of Liverpool. Kingston, July 31st, 1793.”
 Six weeks into voyage the claimant’s husband died. She sought to claim a sum
to represent the six weeks work undertaken.
 HELD: Wife’s action failed. Payment on condition that he worked the ship to
Liverpool, since he did not fulfill this condition the widow was entitled to
nothing.
-Performance must be precise and exact:
- re Moore& Landauer:
 A contract for the sale of $3,000 tins of peaches described tins as being
packed in cases of 30.
 When arrived, tins were packed in cases of 24
  HELD: Did not constitute satisfactory performance and purchaser was entitled
to REJECT the whole delivery as they were not as described.
-Acros v Ranaason (1933) AC 470 House of Lords
 A contract for the sale of a quantity of wooden staves for making barrels
described the staves as being ½ an inch thick
 Some delivered staves were not ½ an inch thick but slightly out. There was
nothing wrong with the quality of the wood and they could still be used for
intended purpose of making barrels.
 The buyer then REJECTED the goods as the price of wood had fallen and he
could purchase them cheaper elsewhere.
 HELD: The purchasers were entitled to reject the goods under s.13 as they
were not as described.

Mitigating (reduce the harshness) the unfairness of entire mitigation

-the harshness of this rule relating to discharge through performance has been mitigated by
the creation of various exceptions:

 Substantial performance
- A court is satisfied by the performance and award the contractually agreed price
and deduct sums to reflect the amount not performed.
- Problem to think about: to what extend/ amounts to substantial performance.
There is no precise limit to set down but is to be determined on the facts of
individual cases.

- Hoeing v Isaacs (1952) Court of Appeal

 The claimant agreed to decorate and furnish the defendant’s flat for
$750 payable by two installments and the balance on completion.
 The claimant completed the work but the defendant was unsatisfied
some of furnishings and refused to pay the all the final installment.
 The cost of defects in the furniture came $56
 HELD: The claimant had substantially performed the contract and was
therefore entitled to contractually agreed price minus the cost of the
defects.
- Bolton v Mahadeva (1972) Court of Appeal
 The claimant installed central heating in defendant’s home.
 The agreed contract price was $560
 The defendant was not happy with the work and refused to pay.
 Defects in the work amounted to $174
 HELD: action by claimant to enforce payment failed because there was
no substantial performance.

 ‘Quantum Meruit’ is a Latin word for ‘as much as he deserved’ (paid for what he had
done)

Condition to apply:

o Voluntary acceptance of partial performance

-where one party freely agrees to accept partial performance, then a sum is
payable for the work completed. (Main focus would be on free acceptance)

-Sumpter v Hedges (1898) Court of Appeal

 The claimant agreed to build two houses and stables for defendant.
 It was agreed that $565 would be payable on completion.
 The claimant commenced performance and then ran out of money and
was unable to complete, only performed ½ of the contract.
 Defendant complete the work himself.
 The claimant sought to recover $333 representing the value of the
work he had completed.
 He argued that in completing the work himself, the defendant had
thereby accepted partial performance and prevented the claimant from
completing the contract.
 HELD: The claimant action’s failed. The court held that the defendant
had no choice but to accept the partial performance as he was left with
a half-completed house on his land.
o Divisible obligation
-The rule relating to discharge through full performance applies where there exists
an entire contract.
-Where it is possible to divide a contract into separate parts.
-Example #1: If a sum is agreed to be payable per week/ hour, then the courts can
award a sum for the separate parts of the contract which have been completed.
-Example #2: If you work in a supermarket and the last of the month you decided
to escape work for a vacation. You will only be paid the day you work but deduct
the day you escape.
-Example #3: In a restaurant, you ordered food, you eat but when you order a
drink you are not satisfied and refuse to pay. You pay for food but not the drink
(Divisible).
-Example #4: Contract is making a computer but the claimant cannot complete
the task and only manage to do parts. Claimant sought to get money for the parts
he had done. The claimant action failed because is to get a computer not PARTS!
Parts is not divisible and have no use to defendant.

-Ritchie v Atkinson (1808)

 By contract the claimant agreed to carry cargo of specified quantity of
hemp and iron.
 The price agreed was $5 per to for the hemp and 5 shillings per ton of
iron.
 The claimant only carried part of the agreed quantity.
 The defendant argued the contract had not been fully performed and
therefore no payment was due.
 HELD: Contract could be divided into separate parts as the parties had
agreed a price per ton. The claimant was thus entitled to payment for
the amount carried although defendant was entitled to damages for
non-performance in relation to the amount not carried.
 -Role & Frank Co v Crompton Bros (1925)
 The claimants and defendants entered an agreement for the supply of some
carbonized tissue paper.
 Under the agreement the claimants were to be defendant’s sole agents in US
until March 1920.
 The contract contained an honorable pledge clause which stated the
agreement was not a formal or legal agreement and shall not be subject to the
jurisdiction of the courts in neither England nor the US.
 The defendants terminated the agreement early and the claimants brought an
action for breach.
 HELD: The honorable pledge clause rebutted the presumption which normally
exists in commercial agreements that the parties intend to be legally bound by
their agreements. The agreement therefore had no legal affect and was not
enforceable by the courts.

o Contracting party prevents completion of performance

- Where the promise prevents completion of performance, promisor is then entitled to
payment for the work which has been completed

- Planche v Colburn (1831) Kings Bench Division

 The claimant agreed to write the book on costume and armor for defendant as
part of a series called ‘the Juvenile Library’
 The agreed contract price was $100 to be payable on completion.
 The claimant commenced writing and had completed a great deal of it when the
defendant cancelled the series.
 The defendant refused to pay the claimant despite his undertaking and the fact
that the claimant was still willing to complete.
 The claimant brought an action to enforce payment
 HELD: Claimant entitled to recover $50 as defendant had prevented the
performance.
Performance by a third party
-use someone to finish contract?
-IT technician told his subordinate to complete to do his job, can the contract continue?
Answer: YES
-British Waggon Co v Lea (1880)
 The contractor contracted to keep railway carriages in repair over a number of
years.
 On liquidation, the benefit and burden of contract was assigned to British
Waggon.
 Lea could not refuse performance despite the assignment.
 Cockburn CJ state: All the hirers, the defendants, cared for in stipulation was
the wagons should be kept in repair, it was indifferent to them by whom the
repairs should be done. Thus if, without going into liquidation or assigning to
contracts, the company entered into contract with a competent party to do the
repairs and so procured them to be done, we cannot think that this would
have been a departure from the terms of the contract to keep the wagons in
repair.
Except: contract of personal services
-Robson v Drummond (1831)
 D had hired a carriage from S for a five-year period. S was under obligation to keep it
painted and in good repair.
 Unknown to D, S was in partnership with R. When S retired, R claimed to be entitled to
continue with the contract.
 He was not. S could treat the agreement as terminated by S's retirement.
 Liabilities (responsibility) are not assignable(transferable) as painting required skills
 With exception that:
o The parties agree the duties of one of them shall be assignable
o Liabilities may be transferred by novation
o Liabilities may be vicariously performed by a third party on behalf of the
person bound; unless the service is personal or it is agreed that a certain
individual perform it.

-or Sir Hameed’s example: If Messi was supposed to become ambassador but instead a
gentlemen name Messy arrive. It’s a big No. This Messy doesn’t have the same skills as Messi.
Discharge by Agreement
-Both parties agreed to bring contract to an end, release each other from their contractual
obligations.
-For a contract to be discharged through agreement there must be accord and satisfaction.
-Accord= Agreement
-Satisfaction=Consideration
-both parties must also provide consideration
-If both parties have continuing obligations then generally the consideration will be simply
each of them giving up their rights under the contract.
-The only time consideration become an issue is when one party has fully performed their
part of contract and the other is not.
-the no-performing party must provide consideration to make the agreement binding.
-Also, if agreement is made by deed there is no requirement to provide consideration.

By Sir Hameed’s
‘Condition Subsequent’
-Head v Tatterall (1871)

i)Wholly executory
-The Hannah Blumenthal (1983)
 A contract was made for the sale of a ship.
 A dispute arose between parties regarding alleged defects.
 The dispute was referred to arbitration but the requirement for a third arbitrator
under the contract was not fulfilled and the arbitration was delayed.
 The sellers raised proceedings for a declaration that the arbitration agreement was
discharged by repudiation, consensual rescission or frustration.
 ISSUE: At first instance, it was held that there had been no agreement to abandon the
arbitration but it had been discharged by frustration. The Court of Appeal agreed that
the agreement had been frustrated because, due to the long period of time that had
passed, it would be impossible for there to be a fair trial of the buyer’s claim. The
buyer further appealed to the House of Lords.
 HELD: The House of Lords allowed the appeal. The arbitration agreement was not
frustrated. Both parties were in default of the agreement by not applying to the
arbitral tribunal for direction to prevent delay. Such a default excluded the operation
 of the doctrine of frustration. Lord Diplock held that the virtual impossibility of a
satisfactory trial following the delay was incapable of being classified as a frustrating
event; even If it had come about without the default by either party. Furthermore, the
sellers had not proven abandonment of the arbitration as they had not shown that
they believed that the buyers had intended to abandon the action and there were
actions by them which were inconsistent with such a belief.
ii)Partially performed
-by deed-no need consideration
-accord & satisfaction

Agreed termination
-On specified notice period
-Upon occurrence of agreed events
-Upon agreed types of breach e.g material breach

Discharge by breach
Breach condition
-Victim party is entitled to (repudiate)end contract and claim damages (condition)
Poussard v Spiers (1876)
-Madame Poussard entered a contract to perform as an opera singer for 3 months
-She became ill 5 days before the opening night and not able to perform the first 4 nights
-Spiers then replaced her with another opera singer
HELD:
-Madame Poussard was in breach of condition and Spiers were entitled to end the contract
-She missed the opening night which wass the most important performance as all critics and
publicity would be based on this night.

Anticipatory breach
Before the time of performance – where one party informs the other that they will not
fulfil their obligations under the contract
-Right of action given immediately to the innocent party:
Hochster v De La Tour (1853)
-The claimant agreed to be a courier for the defendant for 3 months starting on 1st June 1852.
-on 11th May, the defendant wrote to the claimant stating he no longer wanted his services
and refused to pay compensation.
-The claimant obtained a service contact elsewhere but this was not to start until 4th July
-The claimant brought an action on 22nd May for breach of contract
-The defendant argued that there was no breach of contract on 22nd May as the contract was
not due to start until 1st of June.
HELD:
-Where one party communicates their intention not to perform the contract, the innocent
part need not to wait until the breach has occurred before bringing their claim.
-they may sue immediately or they can choose to continue with the contract and wait for the
breach to occur.

-Breach may be express or implied;

Frost v Knight

-Where the breach is of a warranty – the aggrieved party may receive damages only – if they
mistakenly treat the contract as repudiated and fail to fulfil their own obligations then they
themselves will have committed a serious breach (Hong Kong Fir) - even if acting in good
faith!
-Warranties are minor terms of a contract which are not central to the existence of the
contract. If a warranty is breached the innocent party may claim damages but cannot end the
contract:
Bettini v Gye (1876)
- Bettini agreed by contract to perform as an opera singer for a three-month period
- He become ill and missed 6 days of rehearsals
- The employer sacked and replace him with another opera
HELD
- Bettini was in breach of warranty and therefore, the employer was not entitled to end
the contract
- Missing the rehearsals did not go to the root of the contract.
Repudiatory Breach
Renunciation: Person who’s obligated to perform but refused to do it.
Eminence Property Developments Ltd v Heaney (2010)
Remedies
- Solution / what you can get as an injured party
Severe breach
- Can terminate contract
- Non-severe: cannot terminate
- If Council considered the breach is not severe, the claimant is considered making a
severe breach

Ways to terminate breach

-By showing the breach is ‘repudiatory breach’ : a kind of breach that allows end of contract
-Agreed termination for breach clauses: the contract has mentioned about termination
-Example #1: Fix laptop- but fixer unable to fix only to polish the laptop and said that if switch
on is okay but when you open cannot!!
HELD: SMALL BREACH!
-Example #2:

Rule of election
Where there has been a breach of a condition or an innominate term the innocent party has
the right of election – innocent party may choose whether to affirm the contract or to
terminate it (but can always claim damages)
 Innocent party must make his decision known to the defaulting party (The Santa Clara)
– must be clear and unequivocal
 · Innocent party will only be bound by his decision where he knows of the right of
election (Peyman v Lanjani)
 · Innocent party given time to decide (Stoczbia Gdanska v Latvian Shipping Co)

Discharge by Frustration
- A change in circumstances after contract was made
- Not the fault of either of the parties
- Resulted of contract to be impossible to perform
- Outside of control of both parties
- If frustrated, each party is discharged from future obligations under the contract and
neither party may sue for breach
Requirements
- Supervening
- Radically different
- Contracts makes no sufficient/ provision
- Unforeseeable
- At no fault of either party

Types of frustrating events

 Impossibility
-Destruction of subject matter i.e. A hall is structed by lightning
Taylor v Caldwell (1863)
-The claimant hired out a music hall in Surrey for the purpose of holding four grand
concerts.
-The claimant went to great expense and effort in organizing the concerts
-A week before the first concert was due to take place at the music hall was destroyed
by an accidental fire.
-The claimant sought to bring an action for breach of contract for falling to provide
the hall and claiming damages for expenses incurred
HELD:
-The claimant’s action of breach of contract failed.
-The contract has been frustrated as the fire meant the contract was impossible to
perform

 Supervening Illegality
-contract becomes illegal to perform
Fibrosa Spolka v Fairbairn (1943)
-An English company which manufactured textile machinery agreed by contract
dated 12th July 1939 to supply some machines to a Polish company.
-The machines were to be delivered in 3-4 months.
-£1,600 was payable up front and the balance of £3,200 payable on delivery.
-The Polish company paid £1000 on 18th of July on account of the initial payment
due.
 -On 1st Sept Germany invaded Poland and on 3rd Sept Great Britain declared war
on Germany.
-On 23rd of September Orders in Council made Poland an enemy territory making
it illegal for British companies to trade with Poland.
HELD:
-the contract was frustrated as it was no longer possible to perform the contract
because of the supervening illegality.

 Frustration of common purpose

-Sometimes subject of matter is present. Contract is there but the essence is
different
-Purpose is taken away.
Krell v Henry [1903] 2 KB 740

The defendant hired a flat on Pall Mall for the sole purpose of viewing King
Edward VII's coronation procession. The price agreed was £75 for two days. The
defendant paid £25 deposit. Due to illness of the King the coronation was
cancelled. Consequently, the defendant did not use the flat. The claimant sought
to claim the outstanding £50.

Held:

The contract was frustrated as cancellation of the procession deprived it of its

commercial purpose. The claimant's action for breach of contract was thus
unsuccessful.
 Frustration of leases

A contract will not be frustrated where:

1. It is more difficult or expensive to perform
Davis Contractors v Fareham UDC [1956] AC 696

Davis Contractors agreed to build 78 houses for Fareham Council within 8 months for an
agreed price of £85,000. Due to a shortage in skilled labour and material the contract
 took 22 months to complete and was much more expensive than anticipated. Davis
Contractors were paid the contractually agreed price but bought an action arguing for
more money based on the fact that the contract had become frustrated and therefore
they were entitled to further payment based on a quantum meruit basis.
HELD:
The contract was not frustrated. The fact that a contract becomes more difficult to
perform or not so profitable is not sufficient to amount to frustration. It was still possible
to perform the contract.

Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93

The defendant agreed to ship some Sudanese peanuts during November or December
1956 to Hamburg for a certain price. On 2nd of Nov the Suez-canal was closed to
shipping. The defendant could still have transported the peanuts within the contractually
agreed time but this would mean going via the Cape of Good Hope which would have
taken four times as long and increased the cost of transport considerably. The defendant
did not carry the goods and argued that the contract had been frustrated.

HELD:
The contract was not frustrated. It was still possible to perform the contract without any
damage to the peanuts. The fact that it was more difficult or costly to perform is not
sufficient to amount to frustration.

2. Impossibility of performance is the fault of either of the parties

Maritime National Fish v Ocean Trawlers [1935] AC 524

The claimant owned five fishing vessels one of which was chartered to the defendants.
The fishing vessels were all fitted with otter trawler nets. New legislation was introduced
requiring licences to be held by those using otter trawl nets. The claimant applied for five
licences but was only granted three. He had to name which vessels the licence would be
used on. He named his own vessels and excluded the vessel which the defendant was
using. This meant that the defendant was unable to use the vessel for fishing. The
claimant sued the defendant for the price of hire and the defendant in his defence stated
the defendant had committed a breach in not providing a license so he was not obliged
to pay for the cost of hire. The claimant argued there was no breach as the failure to
provide a license was a frustrating event in that the decision to grant licenses rested with
the secretary of state.

Held:

The contract was not frustrated since the claimant had chosen to keep the three licenses
granted for himself rather than using one to fulfil his contractual obligation. He had
therefore induced the frustrating event and was therefore in breach of contract.

3. Where there is a force majeure clause

Jackson v The Union Marine Insurance Co Ltd (1874)
The plaintiff ship owner, contracted under a charter party to proceed with all the possible
dispatch to Newport. He insured the cargo. The ship ran aground before the cargo could
be collected, and was delayed. The charterers threw up the charterparty and contracted
elsewhere for the delivery of the goods. The plaintiff claimed under his insurance.

Held:

The delay had been so long as to put an end to the contractual obligations. It was the
happening of the event and not the fact that the event was the result of a breach by one
party of his contractual obligations that relieved the other party from further performance
of his obligations.
4. Where the frustrating event could be foreseen

Walton Harvey Ltd v Walker & Homfrays Ltd [1931] 1 Ch 274

A hotel owner entered a contract with an advertising agency enabling them to put
illuminated adverts on the roof of their hotel. The hotel was then compulsorily purchased
by the Local Authority and demolished. The advertising agency sued for breach of
contract and the hotel argued the contract had become frustrated.

Held:
 The contract was not frustrated as the hotel owners were aware that the Local Authority
were looking to purchase the hotel at the time, they entered the contract. They should
have foreseen the fact that this could happen in the life time of the contract and made
provision in the contract for such an eventuality. They were therefore liable to pay
damages for breach of contract.

Peter Cassidy Seed Co Ltd v Osuustukkuk-Auppa Ltd [1957] 1 WLR 273

The claimant, an English company, purchased some ant’s eggs from the defendant in Finland.
The ant’s eggs required an export license. The after agreeing to the sale, the defendant was
refused the license. The claimant brought an action for breach of contract. The defendant
argued the contract was frustrated so they were not liable for breach.

Held:

The defendant should have foreseen the possibility of the license being refused and therefore
the contract was not frustrated.