DISCHARGE OF CONTRACT

including breach of contract,

performance and frustration
Objectives

• Explain what is meant by discharge of contract.

• Explain what is mean by discharge by agreement,
including bilateral and unilateral agreements.
• Explain what is meant by discharge by breach,
including anticipatory breach.
• Explain what is meant by discharge by frustration
• Explain what is meant by discharge by
performance.
Discharge by performance
This is where all the obligations under the contract have been met.

General Rule:
Cutter v Powell (1795) - if a contract requires entire performance,
and a party fails to perform the contract in its entirety, they are
entitled to nothing under the contract from the other party.
There are ways in which the harshness of this rule can be
mitigated:
Substantial performance
Severable contracts
Acceptance of part performance
Prevention of performance
Discharge by performance
Substantial Performance

 If a party has done substantially what was required under the

contract, then the doctrine of substantial performance can
apply.
 The party can recover the amount appropriate to what has
been done under the contract.
 Key Cases:
Dakin & Co v Lee (1916)
Hoeing v Isaacs (1952)
Bolton v Mahadeva (1972)
Discharge by performance
Severable Contracts

 A contract is severable when payment becomes due at various

stages of performance, rather than in one lump sum when
performance is completed.
 Major building works usually operate in this way.
 The price for each stage can be claimed when that stage is
completed – if you take on a childminder for six weeks and pay
weekly, the childminder can claim the first week’s pay even if they
then refuse to work the following five weeks.
Discharge by performance
Partial performance

 Where one of the parties has performed the contract, but not
completely, if the other side has shown willingness to accept the
part performed, then the strict rule in Cutter v Powell will usually
not apply.
 This may occur where there has been a shortfall in the delivery of
goods or where a service is not fully carried out.
 Key Cases:
Sumpter v Hedges (1898)
Discharge by performance
Prevention of performance

 If the other party prevents a party from carrying out his or her
obligations because of some act or omission, then the rule in
Cutter v Powell cannot apply.
 In these circumstances, the party trying to perform may have an
action for damages.
 Key Cases:
Planche v Colburn (1831)
Startup v Macdonald (1843)
Discharge by performance
Breaches of terms concerning time
 If the other party performs all their obligations, but not within the time stipulated, this
will give rise to damages because a breach has occurred, but not repudiation of the
contract.
 Three occasions where time will be considered “of the essence” and a repudiation of the
contract will be available:
1. Where the parties have made an express stipulation in the contract that time is of the
essence.
2. Where the surrounding circumstances show that time of performance is critical, as
would be the case with the delivery of perishable goods.
3. Where one party has already failed to perform their obligations under the contract.
In this case, the other party is able to confirm that unless performance is then
completed within a stated period repudiation will occur.
 Key Cases:
Charles Rickards Ltd v Oppenheimer (1950)
United Scientific Holdings Ltd v Burnley Borough Council (1978)
Discharge by frustration
If after a contract is made, something happens, through no fault of the parties, to make its
performance impossible, the contract is said to be frustrated.

General Rule:
Taylor v Caldwell (1863) – action failed because performance
of the contract had become impossible due to a building
where a concert was due to take place, burning down.

The doctrine will operate in three main types of circumstance:

Impossibility
Illegality
Commercial sterilisation
Discharge by frustration
Impossibility
This is where the contract is frustrated because
performance has become impossible, for example:
 Destruction or unavailability of something essential for
the contract’s performance: Taylor v Caldwell (1863)
 Death of either party.
 Unavailability of the party: Robinson v Davidson (1871)
 Method of performance is impossible: Nickoll and Knight
v Ashton Edridge & Co (1901)
Discharge by frustration
Illegality
 This is where after the contract is formed, a change in
the law makes its performance illegal
 This can often happen in times of war when laws may
change rapidly and cause a contract to be frustrated.

 Key Cases:
Pioneer Shipping Ltd v BTP Tioxide Ltd (1981)
Metropolitan Water Board v Dick Kerr & Co Ltd (1918)
Discharge by frustration
Commercial
 This is where the commercial purpose of the contract
has disappeared as a result of the intervening event,
the contract may be frustrated.
 It is also sometimes known as ‘pointless’ -
performance of the contract becomes pointless, even
though it is still technically possible.

 Key Cases:
Krell v Henry (1903)
Herne Bay Steamboat Co v Hutton (1903)
Activity
Which of the following involve frustrating events and which do not?

1. A famous comedian dies just before he is due to appear on stage.

2. A plumber is contracted to fit central heating in a house. He underestimates
the days needed to complete the work and as a result he will lose profit on the
price agreed.
3. A car I had contracted to buy is destroyed when an explosion sets fire to it.
4. As a lecturer, I have contracted to personally take 15 students on a trip to
court. An Act is passed requiring teaching and lecturing staff to take no more
than ten students per one member of staff on educational visits.
5. In a contract to supply a Far Eastern state with machinery, one clause in the
contract stipulates what happens in the event of war. In fact war is declared
after the making of the contract.
Discharge by Agreement
In some cases, the parties themselves will agree to terminate a contract, so that one or
both parties are released from their obligations.

Bilateral discharge: here the assumption is that both parties

are to gain a fresh but different benefit from the new
agreement.

Unilateral discharge: the benefit is only to be gained by one

party, who is therefore trying to convince the other party to
let them off the obligations arising under the original
agreement.
Discharge by Breach
Whenever a party fails to perform an obligation, or performs defectively an
obligation, or indicates in advance that they will not be performing as agreed an
obligation arising under a contract then that party can be said to be in breach of
contract.

Actual Breach
 This is where a party to a contract does not perform their
obligations under the contract at all.

 Key Cases:
Platform Funding Ltd v Bank of Scotland plc (2008)
Pilbrow v Pearless de Rougemont & Co (1999)
Modahl v British Athletic Federation Ltd (1999)
Abramova v Oxford Institute of Legal Practice (2011)
Discharge by Breach
Anticipatory Breach
 This is where a party indicates in advance that they will not be
performing their obligations as agreed.

 Key Cases:
Frost v Knight (1872)
Avery v Bowden (1855)
Fercometal Sarl v Mediterranean Shipping Co (1989) [The Simona]
White and Carter Ltd v McGregor (1962)
Activity
Research the following case:

Martin-Smith v Williams (1999)

This concerned the singer Robbie Williams following the break up of the
band, Take That. Consider the following questions:

1. What breach of contract occurred in this case?

2. Why did Robbie Williams fail in his quest for damages?
3. What did the Court of Appeal say about implied terms in the
management contract?