DISCHARGE OF

CONTRACTS
 DISCHARGE OF CONTRACTS
This refers to situations where one or both parties to a contract are relieved of their respective
obligations under a contract. The effect of such a situation is that the contract is terminated.
There are a number of ways by which one or both parties may be relieved of their obligations to
perform a contract.
(a) Discharge by performance
Generally, a party must perform all his obligations under a contract completely and exactly in order
to be discharged from further performance or in order to be entitled to sue to enforce the other
party’s performance. Thus for a party to be discharged from further performance and be entitled
to sue to enforce the performance of the other party, his own performance must be precise and
exact, ie, the performance tendered must be strictly in accordance with the terms of the contract
and must leave nothing else to be done.(See Re Moore & Co v Landauer & Co (1921) 2 KB 519)
Exceptions to the general rule on exact and precise performance
1. If a contract can be divided into several parts, the complete performance of each part
constitutes performance in respect of those parts, but the obligation to perform the rest of
the parts remains.
2. Where a party who is to benefit from the performance of a particular obligation accepts
part performance of the obligation. In that case whether the contract is severable or not,
the acceptance of part performance discharges the party having the obligation to perform
from further obligations. This principle is clearly illustrated in section 14 (1) of the Sale of
Goods Act, which states: Where the seller delivers to the buyer a quantity of goods less
than he contracted to sell the buyer may reject them but if he accepts the goods so
delivered, he must pay for them at the contract rate. See also Mabsout v Fara Bros
(Ghana) Ltd (1964) GLR 437 SC
3. Where a party to benefit from the performance prevents the party having the obligation to
perform from performing. In such a case the law allows the performing party two options: (a)
He can either sue to recover damages for breach of contract; or (b) He may sue to recover
reasonable remuneration on quantum meruit for the work he has done.
See Planche v Colburn (1831) 8 Bing 14-The Plaintiff had agreed to write a book on costume
and ancient armour for publication by the defendant as part of a series being published by the
defendants. It was agreed that the plaintiff would receive £ 100 on the completion of the book.
He collected material and wrote part of the book, but the defendant abandoned the series
altogether before the plaintiff finished writing the book. The Plaintiff brought an action
claiming reasonable remuneration on quantum meruit basis for the work done, which was
granted by the court.
4.Where there is substantial performance of the entire obligation. The principle of substantial
performance states that if the performance tendered falls short of the required performance
only I some relatively trivial aspect, the party not at fault is not completely discharged from his
performance. He must pay the price agreed upon for the work done or the services rendered,
but may counterclaim for the loss he has suffered by reason of the incomplete or defective
performance. This means there will be a deduction for partial non-performance or trivial
defects in performance.

See: Hoenig v Isaacs (1952) 1 TLR 1360; (1952) 2 All ER 176- the parties entered into a contract
for the decoration of a one-roomed flat. The plaintiff, the decorator, had completed the work
but there were certain defects, which would cost £ 56 to repair. The total contract price was £
750.The court held that looking at all the relevant circumstances, the contract had been
substantially performed and, therefor, the plaintiff could sue for the contract price, subject to a
counterclaim by the defendant for damages for the cost of repairing or rectifying the work
done.
(b) Discharge by agreement
Parties to a contract may be discharged by their own agreement. The parties to an existing contract may
enter into a subsequent agreement to extinguish the rights and obligations created by their earlier
contract.
In Fish & Meat Co.Ltd v Ichnusa Ltd(1963) 1 GLR 314 at 317, Prempeh J noted: ‘ It is a general rule of
law that one of the modes in which an existing contract may be discharged is by the same process and in
the same form as that in which it is made, that is by mutual consent of the parties.’
The general rule is that an agreement to discharge a contract is ineffective unless supported by
consideration or made by deed.
Where, however, a party gives up his right to the other’s performance of his obligations, that waiver is
effective if the party having the obligation relies or acts on it. This is so whether or not the agreement is
supported by consideration or made by a deed.
Where a party who has fully and completely carried out his obligation receives consideration from the
other party who has yet to perform or complete his obligation, in return for agreeing that he should no
longer perform his obligation, there is what is called accord and satisfaction. The accord relates to the
agreement and the satisfaction relates to the consideration.
(c) Discharge by frustration

A contract is frustrated when the performance of the obligations under the contract has become
impossible or impracticable as a result of the occurrence of events beyond the control of the parties or
not the fault of the parties after the formation of the contract.
When such events occur the contract is said be frustrated and the parties are discharged from the
obligations they have undertaken to perform under the contract.
The doctrine of frustration of contracts allows the court to bring the contract to an end and do justice
between the parties.
In order for the court to treat a contract as frustrated, certain things must be proved:
(1) That the frustrating event has rendered the contract fundamentally different from what the parties
intended it to be.
(2) That it should be proved that the frustrating event has rendered the performance or further
performance of the obligations under the contract impossible or impracticable.
(3) It must also be proved that neither of the parties to the contract is in any way responsible for the
occurrence of the frustrating event.
(4)That when the parties formed the contract, they did not expect, anticipate or contemplate the
occurrence of the frustrating event, and so did not make provisions to cater for their occurrence.
The doctrine of frustration was first introduced as being based on an implied condition or term in the
contract.
See Taylor v Caldwell
The case involved a contract for the hire of a music hall for 4 days. After the contract had been made,
the hall was burnt down through no fault of either party. The plaintiff sued the defendant for damages
for breach of contract on the ground that the defendant had failed to provide the hall as agreed.
It was held that where from the nature of the contract, it is clear that the parties must have known that
the performance of the contract would be impossible, unless at the time of the performance, a specific
thing continued to exist, then such a contract was not an absolute contract, but was subject to an
implied condition that the parties should be excused if, before breach, performance became impossible
due to the perishing nature of the thing without the default of the contracting parties
In the view of the court, the existence of the musical hall was essential to the performance of the
contract.
See also Fibrosa v Fairmbairn(1943) AC 32
 What happens where money has been paid before a contract is frustrated?
According to Section 1 (1) of the Contracts Act, 1960, the one who paid the money can
recover it from the other party.
Where no money is paid before a contract is frustrated
Where money is payable but has not yet been paid before a contract is frustrated, that money
will no longer be payable if because of the frustration of the contract the purpose for which the
money is to be paid can no longer be accomplished.

Where expenses have been incurred before a contract is frustrated

Where a party, to whom money has been paid before a contract is frustrated, incurs expenses
relating to the contract, that party can retain from the money paid to him an amount that is
equivalent to the expenses incurred. If no money has been paid to him, he can recover from the
other party the amount of money equivalent to the expenses incurred Section 1(2) of Act 25
(d) Discharge by breach
A ground for the discharge of a contract is the breach of the contract by one party. In certain cases, a
breach by one party releases or discharges the other party from his duty to perform his obligations under
the contract.
A breach of contract, no matter what form it takes, always entitles the innocent party to maintain an
action for damages. However, it is not every breach which discharges the innocent party from his liability
or obligation to perform. The right of a party to treat a contract as discharged arises only in two kinds of
cases:
(1) Firstly, where the party in default has repudiated the contracted before performance is due or before
the contract has been fully performed, such repudiation amounts to anticipatory breach.
(2) Secondly, where the party in default has committed what is described as fundamental breach of the
contract. A breach is said to be fundamental if, having regard to the contract as a whole, the promise
which has been violated is of relatively major importance to the contract.Frost v Knight (1872) LR 5 Ex.
322; 26 L.T 77
 What is an Anticipatory breach?
This is when a party by his words (explicit) or conduct (implicit) demonstrates that he does
not intend to perform his obligation under the contract. Such repudiation amounts to
anticipatory breach where the party in default renounces his obligations under the contract
even before the time fixed for performance.
See Frost v Knight where the defendant promised to marry the plaintiff after his father’s
death. The defendant then broke off the engagement during his father’s lifetime and the
plaintiff brought the action for damages for breach of promise to marry. The Plaintiff’s action
succeeded.
 Legal significance of the distinction between actual breach and anticipatory breach of
contract
An ordinary breach automatically terminates the contract, and the innocent party can sue the
defaulting party for damages.
An anticipatory breach on the other hand, does not automatically terminate the contract. It
rather opens up two courses of action to the innocent party:
(1)He can accept the breach and sue for damages. The contract is terminated with his
acceptance of the breach
(2) He may ignore the breach and treat the contract as still subsisting until the time for
performance is due for him to treat the contract as breached, and then sue for damages.
Effect of breach on the contract
A breach brings to the contract to an end. Where there is a breach either expressly or by
conduct, the other party is then free not to carry out his part of the contract. See Krusevic Co v
Bonsu (1981) GLR 256
If the breach is fundamental, then it entitles the party not fault the right not to carry out his
obligations under the contract. A breach is fundamental if it touches on the root or substance
of the contract and this will depend on the facts of each case.
 REMEDIES FOR BREACH OF CONTRACT
Remedies are legal solutions the law provides to a party who has suffered a breach of contract.
(1) Damages
This within the context of the law of contract, refer to money that a court orders a defaulting party to pay as
compensation to an innocent party.
The rationale behind the payment of damages is to compensate a party so as to put him in the position he would
have found himself in if the contract had been performed.
In Livingstone v Rawyards,Lord Blackburn in considering the basis on which damages should be assessed in the
context of the law of contract, stated that, one should as nearly as possible get that sum of money that will put the
innocent party in the same position as he would have been if he had not suffered the breach of contract.
See also Victoria Laundry v Newman Industries Ltd
Benda v Awuku( builder sued for breaching building contract)
From the Benda v Awuku case (supra), it can be gleaned that the objective, in the award of damages for breach of
contract, is not to punish the defaulting party neither is it to enrich the innocent party. It is simply to put thee
innocent party in the position he would have been in if the contract had been performed. In pursuit of this
compensatory policy and objective, courts are mindful not to cause injustice to a defaulting party by requiring him
to pay for losses which do not naturally and directly result from the breach or losses he did not, at the time of the
contract, know as likely to result from any breach by him.
No compensation for injured feelings
No compensation for conduct which injures the feelings of a party, a point made in Benda v
Awuku, where it was stated that the conduct of a party to a contract towards another party in
the course of committing a breach of contract which leads to injury to the feelings of that party,
cannot be used as a basis to determine the payment of damages. This according to the court is
because damages for the breach of contract are awarded by way of compensation for loss
suffered and not by way of punishment for wrongful conduct.
 
The compensation amount
The amount of money a person is entitled to is an amount which represents the value of the loss
he has suffered as a result of the breach. The law takes the view that this amount should be
sufficient to place the injured party to the position he would have been in if the contract was
performed.
Principles for the award of damages in contract
In Victoria Laundry v Newman Industries Ltd, the court stated that the policy of the law in
awarding damages is not to provide him with a complete indemnity for all losses resulting from
the breach.
The courts do not award damages for improbable or unpredictable losses. To do so will be harsh
and unjust to the defaulting party. According to Treitel to compensate an innocent party fully for
loss that can be said to result from the breach of contract is undesirable. According to the
learned author, such complete protection of the innocent party deters people from entering into
contracts or leads to undue raising of charges.
To strike a balance between making sure that an innocent party is compensated for injuries and
losses suffered, as well as ensuring that injustice is not meted out to the defaulting party, the
courts have developed certain principles to guide them.
(a)Remoteness of damage
An innocent party is not entitled to damages which are too remote. A loss is too remote from a
breach if it does not naturally or directly result from the breach. This will depend on the
circumstances of each case.
Alternatively, a loss is too remote if the party in breach, at the time he entered into the
contract, did not know or could not have foreseen or contemplated that such loss was likely to
result from any breach by him.
See Hadley v Baxendale where the court held that ‘ where two parties have made a contract
which one of them has broken, the damages which the other party ought to receive in respect
of such breach of contract should be such as may fairly and reasonably be considered either
arising naturally, ie, according to the usual course of things, from such breach of contract itself,
or such as may reasonably be supposed to have been in the contemplation of both parties, at
the time they made the contract, as the probable result of the breach of it’
The court held that the mill owners were not entitled to loss of profits because such loss did not
flow naturally from the breach of contract (that is flowing from the usual course of things from
such breach). Secondly, the owners of the mill did not tell the carrier that a delay in returning the
shaft would stop the mill from operating and prevent the owners from making profit. In the view
of the court, it was possible that the mill owners had a spare shaft, which they could use while
the broken shaft was being repaired. The fact that the mill would not work without the broken
shaft was a special piece of information unknown to the carrier at the time of the contract.
The court found that in the usual course of things, the delay would not result in the mill being
stopped-because it was possible that the mill owners had a spare shaft, or that the mill was
defective in some other respect.
The rule in Hadley v Baxendale is normally analysed into two branches:
(1)Losses which naturally arise, ie in the course of things, from the breach of the contract itself.
They are referred to as general damages and they are recoverable because they are the
natural result of the breach and are reasonably foreseeable as the likely result of the breach.
(2)The second branch refers to special damages, since they arise, not in the usual course of
things, but as a result of special or exceptional circumstances. The defendant is liable for such
losses only if he knew of the special circumstances that gave rise to them.
 
(1) The rule on mitigation of losses
• This rules requires an injured party to take steps, which are reasonable in the circumstances, to
minimise his loss, which arise from the breach of contract. The court will normally take this into
consideration the various steps which the injured party has taken or has the means of taking, or ought
to have taken as a prudent person to minimise his loss in assessing damages.
• Failure on the part of the injured person debars the injured party from making any claim in damages in
respect of that loss suffered by him owing to his failure to mitigate.
• The rationale behind the rule is to see to it that a party who breaches his contractual obligations is only
responsible for that part of the injured party’s loss that realistically results from the loss. It does not
impose a legal duty on the injured party to mitigate his losses. It is optional.
• Thus under Section 48 of the Sale of Goods Act, 1962 (Act 137), where a buyer repudiates the contract
of sale before the date fixed for acceptance of the goods and the seller accepts the repudiation,
damages in such a case are calculated as the difference between the contract price and the market
price on the date of the repudiation. This is because the duty to mitigate arises as soon as the party not
in breach accepts thee repudiation
Liquidated damages
A clause in a contract of sale qualifies as liquidated damages if it is a genuine pre-estimate of the loss one
party in the event of breach by the other party.
The courts will therefore refuse to enforce liquidated damages if the amount is fixed as a threat to prevent
breach or if the above is too excessive (penalty) and cannot, in the view of the courts, be a genuine
estimate of the value of the breach.
 
Unliquidated damages
They are an amount of money awarded by the court as compensation to a party who has suffered loss
because of a breach of contract. The assessment is done based on the rules relating to remoteness in
addition to the rule on mitigation of loss.
The difference between liquidated and unliquidated damages is that liquidated damages is fixed by the
parties when the contract is formed but unliquidated damages is determined by the court when there is
breach of contract.
(2)Action for agreed sum
This arises where the parties agree that a sum of money should be paid in exchange of the performance
of an act. Therefore where the act is performed but the money is not paid, the injured party can sue for it.
This is different from damages because whereas damages is for compensation for losses incurred, an
agreed sum is for an amount agreed on by the parties.
Principles such as remoteness of damages, mitigation are therefore not applicable in an action for an
agreed sum.
Another instance where an action for agreed sum could arise is where the parties agree that a sum of
money should be paid to a named third party (beneficiary) when a specified event or contingency occurs.
Here the occurrence of the special event entitles the beneficiary to sue for it.
Even though an action for an agreed sum is not for damages, an injured party may in addition ask the
court for cost, including solicitor’s fees.
(3)Action to recover money had and received for lack of consideration
• Where a party to a contract gives money to or deposits money with another party to the contract in
exchange for the performance of an act or the provision of a service, the non-performance of the act
of the provision of service entitles the party who gives the money to take action to recover the money
for failure of consideration.
• In such a situation, the non-performance of the act or the service amounts to a failure of consideration
for the money given. The rationale for the action to recover is to prevent unjust enrichment of the
party who has taken the money. See: Hayford v State Housing Corporation & Harlley v Ejura Farms
Ltd
 
(4)Quantum meruit
• A quantum meruit action is instituted by a person to claim money from another person in
respect of work done but for which no amount of money is stated as payable. The amount of
money claimed as quantum meruit action normally represents the fair value of the work. This
may arise from a contractual relationship in which the parties do not state the consideration,
which a party who benefits from the piece of work should provide.
• Secondly, where in a contract a party is entitled to be paid a specified sum of money on the
completion of a specified task, that party may claim a reasonable amount of money on the
basis of quantum meruit where he performs the task in a manner that does not fully comply
with the terms of the contract.
• The third situation is where a person does work for another person not for free but also not
on the basis of a contract ( or no mention is made of the consideration). Under the
circumstance, the court will impose an obligation on the person for whom the work is done to
pay a reasonable amount.
(5) Specific performance
This is an equitable remedy and it is an order which compels a party to a contract who is unwilling to
perform his contractual obligations to perform them. This is applicable where in some circumstances
the award of monetary compensation does not adequately compensate the injured party for the loss,
which he has suffered as a result of the breach. In such a situation, this remedy is considered to be
more satisfactory and just than the award of damages.
Damages will be deemed to be inadequate where the plaintiff cannot get a satisfactory substitute or
where the seller refuses to deliver specific or ascertained goods
A court of law does not always and automatically grant an order of specific performance. In other
words, it is a discretionary remedy. This means that the remedy is not available as a matter of right to
the person seeking relief, but is subject to the discretion of the court.
If in the view of the court the award of damages will satisfactorily compensate the injured party for
the loss he has suffered from the breach the court will decline to order specific performance.
In addition, where the defaulting party will suffer injustice and hardship in carrying out an order of
specific performance, than the injured will suffer if damages are awarded to him the court will
award damages and not specific performance.
See: Fofie v Zanyo
Contracts in respect of which specific performance will be granted
(i) Contracts for the sale of land
Where it is a contract for the sale of land or lease of land, the court will generally grant an order
for specific performance. This is because the courts take the view that no two lands are the
same (uniqueness of land). For this reason, the courts consider monetary compensation as
unsatisfactory since that may not secure the same piece of land.
See: Redco Ltd v Sarpong
 
(ii) Contracts for the sale of items of special value
The court will normally grant specific performance if it has to do with an item of special value to
the buyer or unique value. In other words, where the item has a special value or means much
more to the buyer than monetary compensation. This is usually so where the item in question
cannot be found on the market or scarce on the market. Another situation is where the cost of
obtaining the item is prohibitive.
Contracts in respect of which specific performance will normally not be granted
1. Contracts which require personal service, such as employment contracts and those which require
constant monitoring or supervision of the court.
2. Where a party fraudulently secures a contract with another person and that other person breaches
the contract, in circumstances that would otherwise have entitled the injured party to an order of
specific performance. This is because fraud vitiates everything.
3. Contracts that are not enforceable against both parties to the contract. Generally contracts between
infants and adults are not enforceable against the infant even though it can be enforced against the
adult. The court will therefore not grant an order of specific performance to an infant in respect of a
contract between the infant and an adult. Where however such an infant has performed his side of
the bargain or has provided sufficient consideration then the courts will normally grant it.
4.Where the party seeking the order of specific performance misleads the other party into entering into
the contract on mistaken terms and the other party upon realising the mistakes decides not to perform
his obligation under the contract.
(6) INJUNCTION
An injunction is an order of the court directed at a party to do or to restrain from doing a particular ac
(interim or interlocutory injunction and perpetual injunction).
It is issued where the conduct of a party is likely to cause injury to the applicant. Like specifi
performance an injunction is in personam
Types of injunction: prohibitive and mandatory injunctions
The general rule is that an injunction will not be granted if the effect is to directly or indirectly compe
the defendant to do acts, the performance of which the court would not grant specific performance.

Principles governing injunction

(i)Prima facie case to be made by the applicant
(ii)Equitable or legal right to be protected
(iii)Balance of convenience

 
(7) RESCISSION
This means to set it aside or withdraw from it. The effect it rescission is that the party rescinding will not
be obliged to perform his obligations under the contract.
Situations where a party can rescind
 Where a party enters into a contract based on misrepresentation
 Where a party enters into a contract based on a mistake not attributable to him, but the mistake
must be one which renders the contract voidable.
 Undue influence or duress
The aim of this remedy is to restore the parties to their original positions before the contract. To this end
if a party who wishes to rescind the contract has derived a benefit from the contract, he must be willing
and able to return it to the other party.
Conditions for rescinding a contract
(i) Rescission must be done early
It must be done within a reasonable time. The circumstances of each case differs. The person must do so
timeously before a bonafide third party acquires some right in the contract in good faith and without
knowledge of the right to rescind. If that happens the injured party may only be entitled to damages.
(ii)There must be no affirmation of the contract
The party entitled to rescind must not have affirmed or accepted (by words or deed) the
contract, having knowledge of the right to rescind. (Estoppel by conduct).
Thus where goods are delivered to a buyer who has the right to rescind (because the goods do
not conform to description or sample) by rejecting the goods and refusing to pay the price, but
who instead receives the goods and uses them or keeps them with him for a period of time that
makes it unreasonable for him to reject them, the court will take it that he has affirmed it.
The party who wishes to rescind must be in the position to return to the other party whatever
benefit he has derived from the contract.