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Discharge of Contract Law

The document discusses the discharge of contracts through various methods such as agreement, frustration, breach and performance. It provides details on discharge by agreement, specifically bilateral agreement where both parties agree to end the contract. It also covers discharge by frustration, where an unexpected event beyond either party's control makes fulfilling the contract impossible. Examples are provided such as a car being destroyed before one party could use it. The document outlines situations that do and do not qualify as frustration, such as an event being foreseeable or self-induced versus an unforeseen circumstance.

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202 views8 pages

Discharge of Contract Law

The document discusses the discharge of contracts through various methods such as agreement, frustration, breach and performance. It provides details on discharge by agreement, specifically bilateral agreement where both parties agree to end the contract. It also covers discharge by frustration, where an unexpected event beyond either party's control makes fulfilling the contract impossible. Examples are provided such as a car being destroyed before one party could use it. The document outlines situations that do and do not qualify as frustration, such as an event being foreseeable or self-induced versus an unforeseen circumstance.

Uploaded by

Abi abirami
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Introduction:

Contracts begin with offers, consideration and acceptance, and come to


conclusion with discharge.

‘To discharge is to deprive a right or obligation of its binding force by


release a person from an obligation, thus payment, discharges of debt,
recisssion, release, accord and satisfaction, performance and judgment’.
-Concise Law Dictionary by Roger Bird (seventh edition).

In other words discharge of a contract is to bring it to an end, allowing


the parties or one party to be released from contractual obligations.

For example, if a contract has been entered into and then breached, the
contract will be discharged allowing the other party or parties involved
in the contract freedom from their obligations according to the contract.

There are different cases that lead to discharge of contract such as:

• Discharge by frustration
• Discharge by agreement
• Discharge by breach
• Discharge by performance‎

DISHARGE BY AGREEMENT
An old Latin maxim says: 'Eodem modo quo constistur eodem modo
estruitur'. Translated as: ‘a thing may be destroyed in the same manner it
was constructed'

In certain cases, the two parties simply agree to dissolve a contract in


order to let one or both parties to be released from their contractual
obligations under discharge by agreements there could be two ways in
which a contract may be discharged. These are bilateral and unilateral
discharge.

a. a. Bilateral discharge by agreement

This is an agreement of both parties to dissolve their contract, allowing


both parties to be free of their contractual obligations. For example if
Jade and I agree to host a party where she supplies the snacks and I hire
a DJ but also agree that if it rains it will be called off. If it happens to
rain, the party will be called off so I don’t have to hire a DJ and Jade
does not need to supply snacks

Bilateral discharge contracts take place only in cases where:

• The agreements are wholly executory


• The agreements are partly executory and partly executed
• Form is an issue

Where agreements are wholly executory

Agreements such as this are based on mutual promises. The parties have
reached an agreement but the obligations are not yet rendered at all
under the contract.

If one party or both parties has not yet performed any obligations at all
then there is a new consideration for the promise in each case. The party
being released from their obligation is the consideration in return for the
other party not to fulfill theirs. Although if neither party fulfils any
obligation then there is no issue; this fresh agreement discharges the
initial contract.

However, in a situation where the parties wish to continue the


arrangement of the old contract but with new terms, the parties can
assert rights under the old agreement and substitute the old agreement
with the new ones.

The agreements are partly executory

In the case where one of the parties wants to give less than full
performance, if there is an agreement, part performance will be
acceptable.

In a circumstance where one party was being asked to accept a part


performance that is not acceptable as in the case of Sumpter v. Hedges,
In this case, Mr Sumpter was a builder. He had a contract to build two
houses and stables for Mr. Hedges for £565. He did work valued at £333
and said he had to stop because he had no more money. He had already
been paid part. Hedges finished the building, using materials which
Sumpter had left behind. Sumpter sued for the outstanding money. It
turned out that Mr. Sumpter had abandoned the contract, and said he
could get money for the value of the materials but nothing for the work.
The other party may waive his rights under the original agreement.
However, there is obviously a problem there is an absence of
consideration for the agreement.

Form is an issue
Form can be an issue where the original agreement was needed to
comply with specific formalities usually in writing. Traditionally, it
should have been dealt with subject to the Law Property Act of 1925 and
the doctrine of part payment. However, it no longer applies.

Now, an agreement to change the terms of a contract that requires


specific performance will be considered invalid if it is not in writing. If a
new agreement is to be a substitute for an existing agreement this change
will be invalid unless it is evidenced in writing.

a.

DISCHARGE BY FRUSTRATION

A frustrating event is an event beyond the control of either party to a


contract that makes the contract impossible - Contract Law by Elliott
and Quinn

In other words it is an event that terminates a contract where parties lack


capacity to influence the outcome. This means that if two people enter a
contract, an occurrence that affects any party beyond their control is
frustration

For example John agrees to let Sarah drive his car while he is away, for
$100. Shortly before the time for Sarah to collect the car, the car is burnt
to ashes, making it impossible for Sarah to use the car; in this event, the
contract is discharged by frustration.

Frustrating events may occur due to:

• impossibility
• subsequent illegality
• commercial sterility
Impossibility

The contract may be frustrated if the subject matter is destroyed beyond


repair or if it no longer exist; it means that the contract cannot be
performed and it will be unfair to hold parties to their agreement in such
a situation

The case of Taylor v. Caldwell (1863) where Caldwell had agreed to


rent the Surrey Gardens and Music hall to Taylor for a series of concerts
but since the hall burnt down before the day of the performance. Since
Taylor had already made preparations, he sued but was not granted
remedy since the contract was frustrated.

Subsequent illegality

Based on the maxim: ex turpi causa non oritur actio, the law will not
enforce an illegal contract or a contract that is tainted with illegality, thus
if the law changes after the contract has been made and perhaps some
manners in which the contract should be carried out are made illegal
then the contract is frustrated as the court will not expect the parties to
carry on with an illegal contract.

In the case of Denny, Mott &Dickson v. James B. Fraser &co. ltd


(1944), an agreement was made for the sale of timber. This contract was
to continue for a number of years, under it the seller was bound to give
the buyer the timber yard and also an option to buy it but it became
illegal to continue with the timber sales. The House of Lords ruled that
the contract was frustrated and should therefore be discharged.

Commercial Sterility

This simply means that the essence of the contract has been lost. In a
circumstance where even though the contract is not impossible to
perform but the main purpose of it is lost as a result of an interfering
event.

In the case of Krell v. Henry (1903) a contract was made for the hire of
a room with a good view of the coronation of King Edward for two days.
However, when the coronation did not take place due to the king's
illness, the defendant refused to pay, claiming frustration. His claim was
accepted since there was no use of the room since the purpose of renting
the room was lost.

The limitation on the doctrine of frustration:

In order to ensure that the doctrine applies as fairly as possible the


following situations do not count as frustration of contract:

• self-induced frustration
• more difficult rather than impossible contract terms
• foreseeable risk of frustration
• provision for frustration in contract
• absolute undertaking to perform

Self-induced frustration

If a party causes the event or is within the control of an event that may
frustrate the contract then it is not considered as frustration.

Difficult but possible to perform

The court will not declare a contract frustrated and release the party
from their contractual obligations simply because the performance of the
said obligation is hard or less beneficial to the party as a result of
intervening events.
Provision made in the contract in case of frustration

If the parties have thru thought of the possibility of frustrating event and
takes care of it in their contract then their plea for frustration will be
invalid thus they cannot be released from their obligations.

Foreseeable risk

If at the time of the frustration of contract the event may cause


frustration is contemplated by the parties, their claim for frustration in
court will be denied as the parties already saw it coming.

Absolute undertaking to perform

In a situation where the contract states that undertaking of performance


should hold under any circumstance, an event that may prove frustrating
is also one of them. This inevitably binds the parties to the contract and
even and intervening event is irrelevant in the context of the contract.

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