Discharge or end of a contract
In contract law, discharge or end of a contract occurs when the parties have fully performed their contractual obligations or when events, conduct of the parties or operation of law releases the parties from performance.(Miller/JentzPage281,2006).and some kinds of transaction involve a preliminary stage in which one party invite the other to make an offer which is called Invitation to treat that containing general requirements.(Elliott and Quinn, Page 13,2007 ).
The most common way to discharge or to terminate contract, one’s contractual duties is by the performance of those duties. The duties to perform under a contract may be conditioned on the occurrence or nonoccurrence of a certain event, or the duty may be absolute (Miller/JentzP2812006).
Contract also can be terminated in numerous other ways, including discharge by agreement of the parties and terminate buy operation of law.(ibid).
In performance there are the conditions which are: qualification, provision, or clause in a contractual agreement, the occurrence or nonoccurrence of which creates, suspends, or terminates the obligations of the contracting parties.(ibid P282).
HOW CONTRACT TERMINATE BY PERFORMANCE?
The contract comes to an end when both sides or parties fulfill their respective duties by performing the acts they have promised. performance can also be accomplished by tender.(tender is an unconditional offer to perform by a person who is ready, willing and able to do so. Therefore, a seller who places goods at the disposal of a buyer has tendered delivery and can demand payment according to the terms of the agreement. A buyer who offers to pay for good has tendered payment and can demand delivery of the goods.(Miller/JentzP282 ibid)
Performance has been tendered, the party making the tender has done everything possible to carry out the terms of the contract. If the other parties then refuses to perform, the party making the tender can consider the duty discharged and sue for breach of contract.(ibid)
Contract that has been fully performed on both sides is called Executed contract. A contract that has not been fully performed on either side is called an Executory contract.(Miller/jentzP207)
There are three ways where a contract become to an end.(Brown and Sukys P272 ,2006)
-Breach of contract.
1) Most contracts are discharged by performance, which means that the parties do what they agreed to do. When the time for performance is not stated in a contract, it must be performed within a reasonable time. When the time is started, the court will allow additional time to perform unless something indicates that time is of the essence. then-time for performance will be strictly enforced.
Unless the parties agree otherwise, satisfactory performance will be determined by objective standards. substantial performance will discharge the agreement with the right to reimbursement for correcting details that were not completed. Condition may determine the rights and duties of the parties prior to performance during performance and following performance.(ibid)
It is important to make tender of performance to test the other party’s willingness and ability to perform. If neither party makes tender, a breach of contract is not established.(ibid)
2)Nonperformance can also discharge contractual obligations. Not every instance of nonperformance results in a breach of contract. Parties can agree to discharge a contractual obligation by terms in the contracts, mutual rescission, waiver, novation accord and satisfaction, and general release. Contractual obligation can also be discharged when it becomes impossible to perform a contract.(ibid)
The frustration-of- purpose doctrine releases a party from a contractual obligation when performing the obligation would be impractical and senseless. These obligations can also be discharged by operation of law under principles of bankruptcy and the statute of limitation. When contractual obligations terminate by agreement or by operation of law, no liability falls to either party. However, when breach of contract comes from a deliberate breach, a repudiation of contractual obligation, or an abandonment of performance, liability will result. (ibid)
3) A breach of contract relieves the injured party from any obligation under the contract.
Breach of contract also gives the injured party the right to ask a court of law for a remedy, usually in the form of damages.
Injured parties are required to mitigate their damages when money will not be sufficient relief, the injured party may ask for specific performance or for injunctive relief.(ibid)
HOW A CONTRACT TERMINATE BY AGREEMENT?
Any contract can be discharged by agreement of the parties. the agreement can be contained in the original contract ,or the parties can form a new contract for the express purpose of discharging the original contract.(ibid P286)
Discharge by Rescission.
Rescission is the process in which the parties cancel the contract and are returned to the positions they occupied prior to the contract’s formation. For mutual rescission to take place, the parties must make another agreement that also satisfies the legal requirements for a contract there must be an offer, an acceptance and consideration. If parties agree to rescind the original contract, will be legal consideration for the second contact. Mutual rescission can occur in this manner when the original contract is executory on both sides.(ibid).
Discharge by novation.
The process of novation substitutes a third party for one of the original parties. Essentially, the parties to the original contract and one or more new parties all get together and agree to the substitution.(ibid)
The requirement of novation:
-the existence of a previous, valid obligation
-Agreement by all of the parties to a new contract.
-The extinguishing of old obligation.
-A new, valid contract (ibid)
In some case the parties will simply agree to terminate a contract, so that one or both parties are released from their obligations. A distinction is generally made between bilateral discharge, in which both parties receive a benefit from the discharge, and unilateral, where the change is made for the benefit of one party only.(Catherine and Frances P294 2007).
General, an agreed discharge will be binding if it contains the same ingredients that make a contract binding when it is formed and the two which tend to present most problems are formality and consideration.(ibid)
HOW A CONTRACT TERMINATE BY OPERATION OF LAW?.
Under some circumstances, contractual duties may be discharged or terminate by operation of law .these circumstances include material alteration of the contract, the running of the relevant statute of limitations, bankruptcy, and impossibility of performance.(Miller/JntzP287,2006).
To discourage parties from altering written contracts the law allows an innocent party to be discharged when one party has martially altered a written contract without the knowledge or consent of the other party.(ibid)
Statutes of limitations.
Statutes of limitations limit the period during which a party can sue on a particular cause of action.(ibid)
A proceeding in bankruptcy attempts to allocate the debtor’s assets to the creditors in a fair and equitable fashion.(ibid).
WHEN PERFORMANCEIS IMPOSSIBLE.
After a contract has been made, performance may become impossible in an objective sense. this is known as impossibility of performance and my discharge the contract.
Impossibility of performance is a doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes objectively impossible or totally impracticable.
INVITATION T TREAT.
Some kinds of transaction involve a preliminary stage in which one party invite the other to make an offer. And confusion can sometimes arise when what would appear, in the everyday sense of the word, to be an offer is held by the law to be only an invitation to treat.(Elliot and Quinn P13,2007).
INVITATION TOTREAT IN ADVERTISEMENTS.
Advertisements for unilateral contracts.
These include advertisement such as the on in carlill v carbolic smoke ball co, or those offering rewards for the return of lost property, or for information leading to the arrest or conviction of a criminal. They are usually treated as offer, on the basis that the contract can normally be accepted without any need for further negotiations between the parties , and person making advertisement intends to be bound by it.(ibid P 14)
Advertisements for a bilateral contract.
These are advertise specified goods at a certain price, such those found at the back of news papers and magazines. They are usually considered invitations to treat, on the ground that they may lead to further burgaining. Potential buyers might want to negotiate about the price, for example and that since stocks could run out, it would be unreasonable to expect the advertises to sell to every body who applied.(Ibid)
INVITATION TO TREAT IN SHOPPING.
Price marked goods on display on the shelves or in the windows of shops are generally regarded as invitation to treat , rather than offers to sell goods at that price.(ibid)
In fisher v Bell (1960) the defendant had displayed flick knives in his shop window, and was convicted of the criminal offence of offering such knives for sale.(ibid P15).
On appeal, lord parker stated that the display of an article with a price on it in a shop window was only an invitation to treat and not an offer, and the conviction was overturned.
Where goods are sold on a self-service basis, the customer makes on offer to buy when presenting the goods at the cash desk, and the shopkeeper may accept or reject that offer.(ibid).
INVITATION TO TREAT IN PHARMACEUTICAL CASE.
In pharmaceutical society of Great Britain v Boots cash chemists (southern) ltd (1953).
Boots were charged with an offence concerning the sale of certain medicines which could only be sold by or under the supervision of a qualified pharmacist. two customers in a self-service shop selected the medicines, which were price-marked, from the open shelves ,and placed them in the shop wire baskets. The shelves were not supervised by a pharmacist, but a pharmacist had been instructed to supervise the transaction at the cash desk.(ibid)
The issue was therefore whether the sale had taken place at the shelves or at the cash desk.tha court of appeal decided the shelves display was like an advertisement for a bilateral contract, and was therefore merely an invitation to treat. The offer was made by the customers when medicines were placed in the basket, and was only accepted when the goods where presented at the cash desk.
Since a pharmacist was supervising at that point, no offence had been committed.(ibid)
There are two main practical consequences of this principle.
Shop do not have to sell goods at the marked price. So if a shop assistant wrongly marks a CD at $2.99 rather than $12.99, for example you cannot insist on buying it at that price (though the shop may be committing an offense under the trade descriptions Act1968).
A customer cannot insist on buying a particular item on display –so you cannot make a shopkeeper sell you the sweater in the window even if there are none left inside the shop.
Displaying the goods is not an offer, so a customer cannot accept it and thereby make a binding contract.(ibid)