Obligation of performance reaches to an end
Discharge by performance is occurred where both parties involve in a contract that have performed all their obligations under the contract, either perform or offer to perform, including all express and implied terms under the law. Under S 38 (1) CA, parties must perform their promises unless performance is excused under the law. Both parties have carried out what they need to perform, the contract is discharged completely. S 40 CA shows that when a party refused to perform, the other party can repudiate or terminate the contract unless he has agreed, by word or conduct, to continue. Besides that, “time clauses" are normally regarded as vital to the obligation of performance in contract. So, time is the essence of the contract whereby a slight delay will entitle the other to repudiate the contract and the contract is voidable under section 56 (1) CA.
There are two examples of the case that show discharge by performance:
Bunge Corp v. Tradax Export
A contract of 15000 ton of soya bean will shipped in 3 shipment of 5000 ton per shipment was made. The buyer provided at cargo vessel on the port. 15 days of notice was required by the buyer for the readiness of the ship. However, there was a late of 4 days that the buyer gave the notice on an occasion. The value of the soya bean reduced $60 per ton in these 4 days. The seller wanted to repudiate for breach but the buyer rejected because the buyer said no serious consequences, seller had no right to repudiate the breach. The court said the time clause was the fundamental of the contract, that they were in fact condition as to commercial certainty. Therefore, the seller had right to repudiate the breach.
Bolton v. Mahadeva
The plumber (plaintiff) installed a central heating which cost $560. However, the householder discovered some defects of the installation and the plaintiff refused to fix it. The repair cost was $174. Therefore, the defendant (householder) refuses to pay for the $560. The court said that it was a more serious breach, the plaintiff will not entitle any amount of money, while the defendant will be discharged from any obligation.
Hoening V Lsaacs
Plaintiff agreed to decorate flats for £ 750. However, plaintiff found that there have some defective works. The defendant had paid £ 400, but rejected to pay the balance due to the defective works. It would cost £ 56 to put this right. The court said that the plaintiff was entitled to the £ 350 less the £ 56 which is the cost of
There is clearly state that the 2 cases are actually very similar, but why the case of Hoenig v Isaac, the plaintiff was entitled the balance of the paid, then for the case of Bolton v. Mahadeva, the plaintiff was not entitled with any amount of money? This is because the court takes into account for:
When the nature of defection is minor and its cost of rectification is 10% or less than initial cost, the court will allow recovery for performance.[Hoenig v. Isaac]
When the nature of defection is minor and its cost of rectification is more than 10%, but not exceeding a reasonable amount, the court will allow recovery for performance.
When the nature of defection is serious and the cost of rectification is 33% or more than the initial cost, the court will not allow recovery for performance.[Bolton v. Mahadeva]
ii) Discharge by frustration
Discharge by frustration occurs when there is a subsequent change in situation where it is impossible to perform the obligations under a contract. Section 57 states that there are 2 categories of impossibility of performance: First, the impossibility of performance is occurred when the contract is made. Second, is more concern about when the contract is become impossible to have a subsequent performance.
According to the section 57-2, there are 2 situations whereby the contract may be frustrated:
A contract may be frustrated when the object of the contract becomes impossible to be performed after the contract is made.
A contract may be frustrated where the promisor could not prevent the reason of some event and the contract becomes unlawful to be performed.
Thus, the contract will automatically becomes void if meet with the situations.
There are two examples of the case that show discharge by frustration:
Taylor v. Caldwell
Plaintiff rented the hall of defendant for some concert performances, for the rate of 4 days $100. However, the hall was fired, accidentally. Plaintiff now had no hall and no income, therefore he was suffered loss. There was no this provision in the contract. The plaintiff sued the defendant for not able to provide the hall. The contract was now frustrated due to an unexpected event. The contract is subject to an implied condition that the parties will be excused if the performance becomes impossible from the perishing of the thing without default of both parties. Therefore, if the changed condition is different from what the fundamental of the contract, the contract will be terminated for frustration and both parties will be discharged from their obligation.
Davis v Fareham
Davis was a contractor to build 78 houses over 8 months. However, there was labor shortage at a period and the progress was delayed until nearly 22 months. Davis claimed a larger amount of money on Quantum Mires basis. Originally, the contract would be frustrated if there was labor shortage. However, the court said, it was not going to look into the implied term, therefore there was no frustration. Merely, there is a performance obligation more burdensome than perceive to be. Lord Reed said that 2 facts had to be considered which are the nature of the contract and circumstances surrounding the contract at the time when it is formed.
Condor V The Baron Knights
A drummer engaged to play in a pop group which under a contract and bound to work for 7 nights a week when working. After an illness, the doctor of Condor advised him that it was safer for him to work for 4 nights a week although he was willing to work for every night. It was needed to engage another drummer who could works safely for 7 nights every week. The court said that the contract of Condor had been frustrated in a commercial sense. It was impossible to do a stand in for 3 nights a week where Condor could not work whereby this involved in the music of the group’s double rehearsals.
Gamerco v ICM/Fair Warning (Agency) Ltd
The plaintiff, pop concert promoter, agreed to promote a concert that will be organized at the stadium of Spain. However, the engineer found that the stadium was not secure and the authority banned the usage of the hall for the unsafe and revoke the permit of the plaintiff to hold the concert. There was no back up site on that time and the concert had to be cancelled. To prepare the concert, both parties had incurred quite a large amount of expense; in particular the defendant had received $412500 on account from the plaintiff. The plaintiff wanted to get back the advance payment but the defendant had counterclaimed that the plaintiff breached the contract that he cannot secure the permit of the concert and they had to bear the loss.
It was an implied term that the plaintiff had contributed the best effort and reasonable endeavor to get the permit of the concert. And, when they get the permit, they could not be required to guarantee that the permit will not be withdrawn. The contract was frustrated because the unsecure of the stadium was an incident that out of the control of the plaintiff. The revocation of the permit was not a frustrating event, it is subsequent being obtained by the plaintiff, but the ban on the use of the stadium was a frustrating event. Under S1 of the 1943 act, the plaintiff was entitled to the recovery of the advance payment for $412500. The court had discretion to allow the defendant to offset their losses against it, but in all the incident of the present case, the court felt that the defendant should not make any deduction and they should dismiss the counterclaimed.
iii) Discharge by breach of contract
According to the section 40, when a party involves in a contract has refused to perform, or disabled himself from performing, his promise in its entirely, the promise may comes to an end to the contract unless he has signified, by words or conduct, his acquiescence in its continuance. When a promisor fails to perform the obligation, there is a breach of the contract which entitles the party not in breach has the option of either accepting the breach, terminate the contract and suing for the damages. However, when the failure to perform amounts to a breach of warranty, the innocent party is not entitled to repudiate the contract but simply sue for damages.
There are two examples of the case that show discharge by breach of contract:
Woodar v Wimmpey
Plaintiff sell a land to defendant, which the contract price was $850000. There was a clause in the contract state that the defendant could repudiate the breach if there is Compulsory Purchase Order (CPO) before the date of completion to transfer the land. A CPO was made to both parties. Therefore, the defendant wanted to repudiate but the plaintiff disagreed. The court said defendant was entitled to repudiate due to the clause of the contract.
Hochster v De La Tour
The defendant hired the plaintiff as the courier of the company. The plaintiff would only take up the new position after 2 months. However, 1 month later, the plaintiff received a letter that he was no longer required. Plaintiff claimed in breach of contract and sought for remedy of the breach of contract. The defendant he could not do this unless he able to show that he is willing and manage to perform at the contracted date. The court said the plaintiff can either wait until the contract date then demonstrate willing and able to perform (to sue for the breach) or immediately repudiate (incur less expenditure).
White & Carter V Mc Gregor
The plaintiff, the advertising contractor agreed with the defendant, garage proprietor to display advertisements for his garage and the duration period is 3 years. The contract is repudiated and cancelled by the defendant on the same day. However, the plaintiffs rejected to cancel and continued carried on their obligation. They claimed for the price according with the agreement. The House of Lords said, they were entitled to the full price of contract by a majority of 3:2.