Discharge & remedies.

Discharge may be by: by performance, by agreement, by breach, by lapse of time, by law, by the doctrine of frustration. Discharge by performance - A contract is discharged by performance where both parties precisely fulfil their contractual obligations: Sumpter v Hedges. - There are four exceptions to the rule that contracts must be precisely fulfilled: (1) if there is clear evidence from the agreement that the contract is divisible; (2) where partial performance is accepted by the other party. In these circumstances the party who has partially performed their contractual obligations may ask the court for quantum meruit on the basis that the other party has accepted part performance and therefore should pay for the benefit received; (3) if one party, who is willing to perform their contractual obligations, is prevented from doing so by the other party to the contract; (4) if one party has substantially, but not completely, performed their obligations then the court may allow that party to recover moneys owing under the contract. Discharge by agreement: - A contract can be terminated by another agreement between the original contracting parties. The purpose of the second agreement is the release of each of the parties from their contractual obligations under the original agreement. - If one of the parties has completed their part of the contractual obligations then accord and satisfaction will be required before the other party is released from their contractual obligations. Accord and satisfaction refers to an agreement between the parties whereby the party who has not performed their contractual obligations must provide consideration (satisfaction) in return for the other party (who has performed their obligations) releasing them from their obligations. - Conditions precedent are terms in an agreement that provide that a contract will not come into effect until these conditions are met. Conditions subsequent are terms in a contract that refer to possible future events, which if they occur have the effect of discharging the contract. - A contract may contain a term that allows one of the parties to terminate the contract. - Abandonment refers to both parties abandoning the contract. In these circumstances it may be implied that the parties have agreed to cancel the contract. - Waiver refers to one of the contracting parties waiving some or all of their contractual rights under the contract. If the other party acts on the basis of the waiver then the party who has waived rights may be estopped from returning to the original agreement and enforcing their rights. However, the provision of consideration as noted earlier in the discussion of accord and satisfaction is a more certain way of ensuring that there isnt any attempt to return to the obligations of the original contract.

Discharge by Breach: - If one of the parties to the contract commits an actual breach of a condition of the contract then the other party has the option to terminate the contract and claim damages for losses incurred as a result of the breach. - An anticipatory breach occurs when one of the parties indicates expressly or impliedly an intention not to complete the contract. In these circumstances the other party does not have to wait until the actual breach is committed but can treat the contract discharged at the time the intention of the other party is made known: Progressive Mailing House Pty Ltd v Tabali Pty Ltd. Discharge by lapse of time: - In Victoria, the Limitation of Actions Act 1958 (Vic) establishes time periods in which legal actions may be brought. Outside of this time limit the parties cannot usually sue on the contract. The time limit for ordinary contracts in Victoria is 6 years. Discharge by operation of law - There are three areas where the contract may be discharged by the operation of legal rules: (1) if one of the parties to the contract materially alters a contractual document without the consent of the other party and with the purpose of obtaining a benefit, then the innocent party may discharge the contract; (2) if a debtor is declared bankrupt, then the effect is to pass all debts to the trustee who will collect the assets of the bankrupt and usually sell the assets to pay the debts. The debtor is generally released from bankruptcy after a period of time and, after release, is no longer liable for any outstanding debts; (3) if parties to a contract at a later time enter into a deed or formal contract dealing with the same matter, then there is deemed to have been a merger of the documents and the first agreement is extinguished and replaced by the second document. Discharge by frustration: Occurs where a contract has been entered into but before completion, a supervening event occurs that makes completion of the contract impossible. Requirements for frustration: (1) the supervening event must radically alter the contractual position of at least one of the parties; (2) the event was not within the contemplation of the parties at the time they entered the contract; (3) the event was not caused by either party to the contract; (4) it would be unjust to hold at least one of the parties to the original contract. A contract will be impossible to complete if: (1) the law changes making performance of the contract illegal: Ertel Bieber & Co v Rio Tinto co Ltd; (2) the subject matter of the contract is destroyed: Taylor v Caldwell; (3) non-occurrence of an event where the event is the basis of the contract: Krell v Henry; (4) the circumstances on which the contract is based cease to exist: Horlock v Beal. (5) contracts for personal service will be frustrated when ill health or death or some other intervention makes performance of the contract impossible: Robinson v Davison;

(6) government intervention may prevent performance of the contract, eg banning exports of particular goods will frustrate a contract to export those goods: Metropolitan Water Board v Dick, Kerr & Co Ltd. Effect of frustration under common law: (1) where an amount of money has been paid under the contract, but there is no performance by the other party, the money is to be reimbursed; (2) where moneys are outstanding on a frustrated contract and there is no performance by the other party, the outstanding money cannot be claimed; (3) the contract is valid until the moment of frustration and therefore rights and obligations may accrue until the time of frustration; (4) there is no right (at common law) to reimbursement of money paid under a frustrated contract unless there is total failure of consideration (no performance). SEE STATUTE BELOW Statutory Reform - Sec 3(2) Frustrated Contracts Act 1959 (Vic) provides that in a frustrated contract sums paid are recoverable and sums payable cease to be payable. - The court must take into account expenses incurred by the parties prior to the frustration when making these orders.

Remedies flowchart
The rights of redress available to a successful plaintiff in an action for breach of contract. When calculating remedies, the court used the rule established in Hadley v Baxendale. It is a rule of two parts- firstly, losses must flow in the normal course of things from the breach, ie it must be a natural consequence of the breach. <were damages a natural consequence of breach?> Secondly, if exception circumstances exist, the defendant will only be liable for damages that flow from these circumstances if made aware of them, i.e damages must be in contemplation of both parties <were dam Damages: consequences that flow from a breach of contract. Their purpose: to compensate the plaintiff for losses flowing from the breach. Must be reasonably foreseeable (or not too remote) In determining liability for damages, courts use a rule from the case Hadley v Baxendale. (flour mill) This rule has two parts: (a) Losses must flow in the normal course of things from the breach, ie must be a natural consequence of the breach (b) If exceptional circumstances exist, the defendant will only be liable for the damages that flow from these circumstances if made aware of them, i.e. damages must be in contemplation of both parties. -------------------------------------------------------------------------------------------------------------------------------------The quantum of damages: - General damages compensate the plaintiff for the actual financial losses (including expected profit) arising from the breach. Robinson v Harman, Victoria laundry (Windsor) ltd V Newman Industries - Nominal damages may be awarded for the breach if there is no actual loss arising from the breach. They are simply token amounts such as $1. Eg Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd.

- Damages may compensate for loss of expected profits and cost of expenditure incurred on the basis of promises made by the other party. Commonwealth of Australia v Amann. Distress and disappointment - Damages for distress and disappointment not usually awarded unless the breach results in physical injury, inconvenience or mental distress and the purpose of the contract was to provide the plaintiff with enjoyment (eg holiday travel) then damages may be awarded. Baltic Shipping The Mikhail Lermontov v Dillon. Mitigation of loss: The plaintiff has a responsibility to mitigate or minimise the damages suffered as a result or breach. Payzu v Saunders. Plaintiffs are required to act responably, and not take an undue steps to expose themselves to risk; Burns v Man Automotive Pty Ltd -------------------------------------------------------------------------------------------------------------------------------------EQUITABLE REMEDIES: (1) Rescission: e.g. unconscionable contracts. This power extends to any contract where the parties do not receive what they have bargained for. Even in the case of an innocent misrepresentation, where common law will not allow a remedy, equity may allow rescission of the contract. restitutio in integrum, Once a contract is rescinded it is treated both at law and in equity asnon-existing: Newbigging v Adam. Until the contract is rescinded it remains valid. It is not void ab initio. It is voidable. Affirmation? Right to rescind has been lost; Coastal Estates Pty Ltd v Melevende (2) Specific performance: A court order directing the breaching party to perform their contractual obligations. May be ordered in contracts involving real estate or contracts for personal property when this property is unique and damages would not be an appropriate remedy. Specific performance will not be ordered when damages are appropriate, when the contract is one of personal service or the order would cause injustice to the other party. (3) Injunction: A court order restraining a party from an act or continuing on a course of action; It will restrain a party from breaching a contract. Warner bros pictures v Ingolia (4) Mareva order Prevents the removal of the defendants assets from the jurisdiction of the court while action is being heard. (Carlos Cabal Case). (5)Restitution: A court order to return something to itd original state, which prevents unjust enrichment by one of the contracting parties at the expense of the other party. Pavey & Matthews Pty Ltd v Paul, Boxborough v Rothmans of Pall Mall