03.Discharge_of_Contract.pdf

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When each party has performed their rights and
obligations as required under their contract, precisely and
exactly in accordance with the terms of the contract.
Cutter v Powell (1795)
Before all obligations under contract have been performed.
Bilateral discharge
: both parties have not completed
their obligations and agree to terminate early.
Unilateral discharge
: one party has completed their
obligations, other is satisfied and agree to end the contract.
The party that failed to comply must give fresh consideration
to the other party for agreeing to discharge early.
A contract may contain clause allowing one/both
parties to end the contract upon giving the other party
period of notice.
Non-performance
Partial performance
Defective performance
Serious breach
-> breach of a condition
-> the contract may be discharged; the
injured party can claim damages
(
repudiatory breach
)
Less serious breach
-> breach of
warranty -> the contract continues; the
injured party can claim damages
Performance
Agreement
There exists a change in circumstances, after the contract
was made, which is not the fault of either of the parties,
which renders the contract either impossible to perform or
deprives it of its commercial purpose. => Each party is
discharged from future obligations under the contract and
neither party may sue for breach.
Frustration must
Be an unforeseeable event
Cause a radical change in the obligations
Make completion of the contract impossible
Not be caused by either party
Maritime National Fish Ltd v Ocean Trawlers (1935)
Notice
Methods of
discharge
How parties end their
contractual relationships
with each other.
Events generally
NOT
considered frustrating
Industrial disputes
Shortage of labour/materials
One party fails to perform at least one
of contractual obligations properly, by
Breach of
contract
Does not automatically
discharge a contract, the injured
party’s right to repudiate the
contract will depend on the
seriousness of the breach
Discharge
of Contract
Frustration
Frustration
Actions/events that
frustrate a contract
Self-induced breach
Davis Contractors v Fareham UDC (1956)
Impossibility
: impossible to perform due to destruction of
an essential part of the contract or by death/illness of
someone essential to the performance of the contract
Taylor v Caldwell (1863)
Illegality/Government intervention
: if a new law comes into
force that makes continued performance of the contract illegal.
Fibrosa v Fairbairn Lawson Combe (1943)
Anticipatory breach
– when a party tells the other party
in advance of commencing their obligations under the
contract that they cannot perform the contract.
Law requires/provides for the discharge.
Examples:
• One of the parties dies or becomes mentally/physically incapacitated
• Insolvency/bankruptcy
Contract discharged because of frustration automatically comes to an end
Any rights and obligations that existed before the frustration still remain
Any rights and obligations that exist after the frustration are extinguished
by frustration
Payments made prior to frustration are capable of recovery if the party making
the payment received nothing in return ->
total failure of consideration
Fibrosa v Fairbairn Lawson Combe (1943)
The legal effects of
frustration
Non-occurrence
: of an event, which was the sole reason for
entering into contract, so it makes performance pointless.
Krell v Henry (1903)
Operation of
the Law
Death or incapacity
causing the party to be unable to
fulfil their obligations.

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