DISCHARGE OF THE CONTRACT NOTES

A contract is discharged by performance when the parties have performed their obligations under the contract in accordance with its terms. In other words, performance must exactly match what the parties agreed to do. Any deviation from performance of exact contractual undertaking is breach. In Cutter v Powell (1795) C agreed to serve as second mate on ship bound from Jamaica to Liverpool. D agreed to pay him 30 guinees provided that “he proceeds, continues and does his duty from hence to the port of Liverpool”. C died before the completion of the voyage and his widow brought an action to recover the proportion of the agreed sum. Held, C’s widow could not recover anything for the work he had done since by the term of the contract the deceased was obliged to perform his entire duty before he could demand payment. Also, in Sumpter v Hedges (1898) PD for £565. He did part of the work to the value of £333 and then stopped the work due to financial difficulties. D then completed the work himself by using P’s materials that had been left on the site. Held, P could not recover the value of work done but could only recover for the materials used by D. agreed to build two houses and stables for



Similarly, in Bolton v Mahadeva (1972), P a plumber contracted to install central heating system in D’s home for £560. He installed the system but it did not work properly and P repeatedly failed to correct the serious faults in that system. The defects cost £174 to repair. Held, P was in breach of contract and could recover nothing.

It can be seen that this rule requiring precise and exact performance, sometimes leads to injustice. In practice, therefore it is subject o the following four exemptions.

10.3.1 Substantial Performance

Where one party has substantially but not entirely performed his part of the contract, he may still recover the contract price less a reduction for the deficiencies. In Hoenig v Isaacs (1952) P had agreed to decorate and furnish D‘s flat for a lump sum of £750. Upon completion of the work £350 was outstanding. D complained of faulty design and poor workmanship. The defects could have been made good for £55. Held, P had made substantial performance and he would entitle to the full contract price, less the cost of making good the defects.

It should be noted that in the Cutter v Powell, Sumpeter vHedges and Bolton v Mahadeva, discussed earlier there was in fact a failure of substantial performance.

10.3.2 Acceptance of Part Performance

If one party partially performs his obligation and the other party having an option to reject, accepts partial performance, it is possible to infer a fresh agreement by the parties that payment shall be made for the partial obligation already performed. In such cases a quantummeruit may be claimed by the party partially performing. Quantum Meruit means “how much it is worth”. A quantum meruit action is a claim for a percentage of the contract price in direct proportion to the percentage of work done. In Christy v Row (1808) P’s ship was carrying D’s coal from Shields to Hamburg. The ship was prevented by restraints of princes from arriving at Hamburg.

The master of the ship delivered some of the coal at the request of the consignee at another port. Held, P was entitled to freight pro rata.

Such a fresh contract to pay will be inferred only where the beneficiary has a genuine choice to accept or reject the benefit of the work done. It seems that in Cutter v Poweli, Sumpter v Hedges and Bolton v Machadeva, discussed earlier, D had no real choice to reject the work done. Hence the principle of acceptance of partial performance could not be applied to the circumstances of those cases.

10.3.3 Prevention of Performance

Where one party is prevented by the other from completely performing the contract, he is entitled to recover the damages for breach of contract, but alternatively he can claim on a quantum meruit Planche v Colburn (1831) PD‘s periodical. He was to be paid £100 on completion of the book. After he had collected material and wrote part of the book, D abandoned publishing the periodical. Held, P could obtain 50 guineas as reasonable remuneration on a quantum meruit (as much as he deserved). and recover reasonable remuneration for the work he has done. In agreed to write a book on costumes and ancient armour to be published in a series in

10.3.4 Severable or Divisible Contracts

Where a contract may be divided into several parts, payment for parts that have been completed can be claimed. Whether any contract is entire or severable depends upon the intention of the parties, which has to be determined by considering the express or implied terms. In Ritchie v Atkinson (1808) P, a ship owner agreed to carry a cargo of hemp, freight to be £5 per ton. He took only a part of the cargo. Held, P could recover freight proportional to the quantity carried.

Cutter v Powell, discussed earlier, on the other hand is an example of entire contract.  Take note

  The general rule relating to the performance is strict and the parties must perform the terms of the contracts entirely. To this rule there are some exceptions.

 

10.3.5 Time of Performance

Where time of performance is fixed in the contract, it must be per formed within that time, when time is of the essence of the contract. If no time for performance is agreed, performance is to be made within the reasonable time. However, by virtue of Sale of Goods Act, section12 stipulations as to time of payment are not deemed to be of the essence of the contract.

10.3.6 Tender of Performance

A tender of performance is an offer of performance. If such an offer is made but the other party refuses to accept it, the party tendering is free from liability under the contract.

10.4 Discharge by Agreement

As a contract is made by agreement, it may also be discharged by agreement. A contract may be discharged by agreement in any one of the following ways:



 

10.4.1 Provision for Discharge in the Original Contract

The original contract may contain a term providing for its termination. The most important instance of this is where the contract may contain a term giving either party a power to terminate it by notice. A contract for lease may provide that it can be terminated by notice to quit or a contract of employment may give power to either party on giving notice to end it. Also, there may be a term in the contract providing for its dissolution on non-fulfillment of a condition or the happening of an event. In Head v Tattersall (1871) D sold a horse to P. D warranted that the horse had hunted with B hounds and gave P the right to return the horse if it did not comply with the description. The horse was injured while in possession of P without any fault on his part. Then it was found that the horse in fact had never hunted with B hounds. P returned the horse within the time limit. Held, PP to terminate the contract. was entitled to cancel the contract and recover the price despite the injuries suffered by the horse. The option to return the horse was a condition subsequent which gave a right to

 

10.4.2 New Agreement

The parties may discharge their contract by a subsequent or new agreement. The basic rule,

however, is that a new agreement to discharge a contract is binding only if it is by deed or is supported by consideration. The legal position depends on whether the discharge is bilateral or unilateral.

10.4.2.1 Bilateral Discharge

Bilateral discharge can take place where the contract is either wholly or partially executory, i.e., where both parties have performance obligations outstanding. In such a case mutual abandonment of those obligations is enough to satisfy the requirement of consideration. This means that each party has agreed to release his rights under the contract in return for a similar release by the other party. Such a discharge is legally binding.

10.4.2.2 Unilateral Discharge

Where one party has completely performed all his obligations under the contract, discharge must be either by release under seal, that is, by deed or by accord and satisfaction. Theaccord is the agreement to discharge the original contract, and satisfactionis the consideration which must be provided by the party who has not performed his part of the promise. Thus an agreement of a creditor to accept lesser sum of money in satisfaction of a large sum of money is accord without satisfaction (see Foakes v Beer, discussed in lecture on consideration), but the agreement of a creditor to accept a smaller sum than due to him before the due date is accord with satisfaction and therefore legally binding.

Activity 10.1

  Ali sold goods to Balala for Shs.50, 000 and the payment was to be made after three months. After one month Ali asked Balala for payment since he had financial problems:  He accepted Shs.40,000 from Balala in full discharge of Balala’s obligation to pay shs.50,000. Later Ali sued Balala for the balance of shs.10,000.

Advise Balala

 

It must also be noted that the requirement of consideration seems to have been modified in Williams v Roffey, discussed in lecture on consideration.

 

10.4.2.3 Variation and Waiver

The performance obligations under a contract may be terminated by either variation or waiver. Variation means the change of the contractual terms by means of independent contract. If variation is for the benefit of both parties, it satisfies the requirement of consideration and the variation is legally enforceable. If, however, variation is made for the benefit of only one party the situation different. If one party accedes to the request of the other, and promises that he will not insist upon performance according to the strict letter of the contract, this is an indulgence. Arrangement of this kind is generally described as waiver or forbearance by the party who grants indulgence. The party who had granted indulgence is bound by it. W. J. Allan & Co v El Nasr Export & Import Co. (1972) concerned a contract for sale of coffee. Under the contract the price was to be paid by irrevocable letter of credit in Kenyan currency. The buyers, however, obtained a letter of credit expressed for payment in sterling pound. The sellers took no objection about payment in pound and in fact drew on the credit in part payment of the contract price. Subsequently, pound was devalued and the sellers claimed payment in Kenyan currency. Held, the sellers had waived the right to be paid in Kenyan currency by accepting the letter of credit and by drawing on it. Hence, they have to accept payment in Kenyan currency.

10.4.2.4 Novation

A contract may also be discharged by novation. Novation occurs where one party to the contract releases the other and substitutes a third party who then undertakes to perform the released person’s obligations. The terms of the contract, however, remains the same.

10.5 Discharge by Breach

Breach generally means failure to perform any promise which forms the whole or part of the contract: A breach is of two kinds:

10.5.1 Actual Breach

Actual breach occurs where a party fails to perform one of his obligations under the contract. Actual breach may take three forms:

  • Non-Performance, where a party fails or refuses to perform his obligations when the

performance is due. For example, if A hires a lorry belonging to B to carry his livestock from Nairobi to Mombasa on certain date and B never brings his lorry to A‘s place, that is a breach  of contract by non-performance.

  • Defective performance, where a party attempts to perform a contract but in a defective

manner, it is a breach of contract. Thus in the above example, if B brings his lorry to A‘s place not on the date fixed but three days late, that is a breach of contract by defective performance.  (c) Non-truth of a statement, if astatement that is term of the contract is untrue; it is a breach of

contract. Thus in the above example, where there is a term of the contract that the lorry is suitable for carrying livestock and, if in fact, it is not, that is a breach of contract.  Activity 10.2

  Owino contracted to supply 1,000 tons of maize to Ouma. Owino delivered only 600 tons and told Ouma that he would not be able to deliver any more. Advise Ouma

 

10.5.2 Breach by Anticipatory Repudiation

Breach by anticipatory repudiation occurs where one party intimates either expressly or by conduct that he does not intend to honour his obligations under the contract when they fall due in future.

For example, if A contracts on January 10th to hire a lorry from B to carry A‘s goods from March 20th, then of February 15thB tells A he will not be able to send his lorry from March 20th to carry A‘s goods. That is express orexplicit repudiation.

On the other hand, if X contracts on July 5th to give his lorry on hire to Y from September 10th , and then on August 20th sells the lorry to Z, that is repudiation by conduct or implicit repudiation. Sometimes such a breach is called anticipatory breach but since it is the announcement of intention rather than the non-performance, it should be properly referred to as breach by anticipatory repudiation.

Take Note

  Breach is of two kinds: actual breach and breach by anticipatory repudiation.

 

10.5.3 Effects of Breach

It is important to note that breach does not automatically discharge the contract. The innocent party has an option to proceed with the contract or to treat it as repudiated. In either case the breach gives rise to a secondary obligation to pay damages for any loss caused. In either case, also, the innocent party’s election is irrevocable.

Any breach of contract enables the injured party to sue for damages. In some circumstances, a breach entitles the injured party the additional right to treat the contract as repudiated or to treat himself as discharged from further performance of the contract. It is important to note that this right has often been described as “the right to treat the contract as discharged”, or sometimes “the right to rescind the contract”. However, these expressions seem to be incorrect and the more appropriate expression is either “to treat the contract as repudiated”, (see Photo Production Ltd v

Securicor Transport Ltd, 1980, discussed in lecture on contents of the contract), or “to treat himself as discharged” (see Heyman v Darwin Ltd, 1942). This is because the primary obligations do not automatically come to end and the secondary obligations under the contract exist after breach.

10.5.3.1 Effects of Actual Breach

If the injured party elects to treat the contract as repudiated his remedy depends on the term breached. If there is a breach of warranty, the injured party is only entitled to damages and has no right to treat the contract as repudiated. The term will be treated as a warranty, where the result of the breach is to cause loss to the injured party without substantially depriving him of the benefit he was intended to obtain under the contract.

Where the term breached is either a condition or where it is sufficiently serious breach or if the term itself is an innominate one, the injured party has the right to treat the contract as repudiated or to treat himself as discharged. A breach will be deamed to be sufficiently serious where it deprives the injured party of substantially all of the benefits he was supposed to receive under the contract or if the breach goes to the root of the contract.

10.5.3.2 Effect of Breach by Anticipatory Repudiation

The distinction between condition and warranty also applies to anticipatory repudiation. Where one party commits an act of anticipatory repudiation and the injured party elects to treat himself as discharged, he can sue for damages at once, and need not wait until the contract date of performance to come. In Hochester v Dela Tour (1853) D agreed in April to employ P as a courier for him from June 1. On May 11 D told P that his services would not be required. P at once brought an action for breach of contract. D argued that he was not in breach of contract and that an action could not be brought against him until the date of performance, that is, June 1. Held, P was entitled sue D immediately and need not wait until the date originally set for performance. Similarly, in Frost v Knight (1872) D promised P that he would marry her on the death of his father. D broke this promise when his father was still alive. P sued for breach of promise. Held, P was entitled to bring her action for damages at once. It is to be noted that the promise to marry is no more actionable now, but the principle of this case is still valid.

However, it is not necessary for the injured party faced with anticipatory repudiation to sue at once. He may wait until the performance date and then sue for breach of contract. In most cases he will be able to recover damages as before, but there is a risk that the contract may be overtaken by events. For example frustration may intervene to release the party at fault from further liability (see Avery v Bowden, 1855). Also, if on due date the injured party would not have been able to perform himself, he would not be able to claim damages since he would then have been in breach himself.



Activity 10.3

  1. Discuss the effects of breach on a contract

 

10.5.3.3 Affirmation of Contract

If the injured party elects to treat the contract as still subsisting and go on performing his contractual obligations without the other party’s cooperation he can claim the whole contract price. In White and Carter (Councils) v McGregor (1961) P’s business was to supply litterbins to local councils throughout Great Britain. They were not paid by the councils but by traders who hired advertising space on the bins. P agreed to advertise D’s business on the plates attached to the bins for three years, but D on the same day repudiated the contract. P refused to accept the repudiation, prepared the plates, attached them to bins and continued to display them for next three years. Held, P were entitled to full contract price.

Thus repudiation does not bring the contract to an end, the injured party has a choice whether or not to treat himself as discharged. If he chooses to affirm the contract, the contract remains in force. This rule is subject to qualification that if a plaintiff had “no substantial or legitimate interest” in completing the performance, he could only claim damages (see Clea Shipping Corporation v Bulk Oil International, 1984).

10.6 Discharge by Frustration

The traditional common law approach was that once a party had entered into a contract, he was obliged to fulfill his obligations under that contract even if performance proves to be impossible or becomes radically different than contemplated by the parties.

In Paradine v Jane (1647) P brought an action against D for rent on a lease. D argued that he had been deprived of the possession of the land by force by the king’s enemies and therefore lost profits. Held, D was bound to pay since he was bound by the contract he had made.

This earlier common law rule was very harsh and the courts gradually evolved the doctrine of frustration to mitigate the rigours of this rule. Where the doctrine of frustration operates, the parties to a contract are excused further performance of their obligations.

Frustration refers to a supervening event which occurs after the parties have made their agreement, and which could not reasonably have been contemplated by the parties. The event must either render the contract physically or legally impossible, or make it radically different from what was originally undertaken.

It must be noted that the frustrating event must occur after the contract has been formed. If the event has taken place before the formation of the contract it would not amount to frustration. For example, if A makes a contract to sell his house to B and unknown to both of them the house has already been destroyed by fire before the contract was made. In that case the doctrine of frustration will not apply but the contract would be void for common mistake or for impossibility of performance.

In order for frustration to occur the following requirements must be satisfied:



(a) An event occurs which was not contemplated by the parties when the contract was made

(Jackson v Union Marine Insurance Co (1973) which we shall discuss later in this lecture)  (b) An event occurs which makes the contract fundamentally different from the original contract

(Metropolitan Water Board v Dick, Kerr & Co. Ltd (1918), to be discussed later in this lecture.

(c) The event is one for which neither party was responsible.

It is not possible to classify circumstances to which doctrine of frustration applies, but we will consider its operation under the following heads.

10.6.1 Impossibility

A contract may become impossible in three ways:

(a) Destruction of Subject Matter

If a specific object necessary for the performance of the contract cease to exist, the contract automatically comes to an end. In Taylor v Caldwell (1863) P entered into a contract with D for the hire of D‘s music hall for four concerts on separate days. The hall was destroyed by fire before the date of the first concert. P brought an action against D to recover loss suffered by them. DD was excused from his obligation because there was impossibility of performance which arose from the destruction of the music hall. pleaded the accidental destruction of hall as an excuse for their non-performance. Held,

(b) Death or Illness

If either party to a contract of personal service dies, or becomes ill or incapacitated, it can be said that performance of the contract has become impossible and therefore the contract comes to an end by frustration. Not every illness or incapacity will bring the contract to an end. It must be serious enough to prevent the person from performing his obligation. The courts will consider the extent of illness and nature and terms of the contract. Thus, temporary illness of a person employed for a period will not generally discharge the contract. However, if the illness goes to the root of the whole contract, it will discharge the contract by frustration. The contracts covered by these rules are contracts of employment, apprenticeship and agency. In Condor v The Barron Knights LtdP was employed as the drummer in pop group under a contract for a term of five years. His contract required him to play seven nights a week. P fell ill and his doctor advised him not to play for more than four nights a week. Held, the contract was frustrated since it became impossible for P (1966) to continue it.

(a) Unavailability of the Subject-Matter

A contract is frustrated if the subject-matter of the contract is not available, through some extraneous cause. In Howell v Coupland (1876) S contracted to sell crop to B and made it clear that the crop to be sold was to be grown on specified land. The crop on that particular land failed. Held, the contract had been frustrated because of the non-availability of crop from the specified land.

Even a temporary unavailability may discharge a contract. In Jackson v union Marine

Insurance Co Ltd (1874) a ship was chartered to proceed with all possible dispatch from Liverpool to Newport and there to load a cargo for San Francisco. The vessel was stranded on way to Newport and was not ready to load until eight months later. Held, the contract was frustrated by long delay since there was an implied term that the ship should arrive at Newport within a reasonable time for completion of the contract.

It should be noted that cases such as where one of the parties become ill or is imprisoned or incapacitated also fall under this head.

10.6.2 Supervening Illegality

In some cases performance remains possible but the contract is still frustrated due to alteration of law after the formation of the contract. It is worth noting that if illegality exists before the time of contracting there is no scope for the operation of doctrine of frustration. In that situation rules relating to illegal contracts will apply. In Gemerco SA v ICM Fair Warning (Agency Ltd) (1995) a necessary licence to hold a concert was suddenly withdrawn because of previously unsuspected security problem, at the venue. As a result the concert had to be cancelled. Held, the contract to hold concert had been frustrated because the concert could not lawfully proceed without this licence.

Activity 10.4

  1.    Kabiru, sole proprietor of a business in Nairobi contracts on March 5th to import suger from Ahmed in Cairo. The contract sugar was to be sent on March 30th, on March 19th the Government of Kenya bans importation of sugar. Discuss the legal position.

 

10.6.3 Non-Occurrence of an Event which is the Foundation of the Contract

In some circumstances performance of the contract may still be possible but it may be discharged by frustration because of non-occurance of the event which was the whole basis of the contract. In Knell v Henry (1903) D hired a flat for the days on which the coronation processions of King Edward VII were scheduled to take place. The contract made no express reference to the coronation processions but both parties understood that the purpose of letting was to watch the coronation processions. D paid £25 at the time of contracting and the balance of £50 was to be paid the day before the coronation. The processions did not take place because of the illness of the King. Held, although performance of the contract was not physically impossible, it had been frustrated because the foundation of the contract had been radically altered.

But in Herne Bay Steamboat Co v Hutton (1903) D hired B‘s steamboat for the purpose of viewing the naval review and for a day’s cruise round the fleet. The naval review was part of the coronation celebrations but the naval review did not take place because of the King’s illness. The fleet however, still assembled. Held, the contract had not been frustrated.

This case is distinguishable from Krell v Henry, discussed earlier, in that the contract in this case had two purposes seeing the naval review and going round the fleet, both were equally important.

10.6.4 Government Intervention

Frustration may occur because of interference by the government in the activities of one or both of the parties, causing a fundamental change of circumstances from that contemplated by the parties when the contract was made. In Metropolitan Water Board v Dick, Kerr & Co. (1918) D agreed with P to construct a reservoir within six years. The contract provided that in the event of delays, P’s engineers may grant an extension of time. After two years the government acting under war-time statutory powers ordered D to cease work and to disperse and sell the plant. Held, the contract was discharged by frustration due to the interruption created by the government’s action; and that the delay clause did not cover the case since the interruption was of such a character and duration as to make the contract when resumed fundamentally different from that originally made.

10.6.5 Contracts Concerning Land

For many years it was doubtful whether the doctrine of frustration applied to contract relating to interests in land However, in National Carriers v Panalpina (1981) the House of Lords decided that the doctrine frustration could apply to a lease albeit in exceptional circumstances. In that case, a warehouse was demised by P to D for a period of 10 years. The local authority closed the only street allowing access by lorries to the warehouse for a period of twenty months due to some dangerous conditions. In an action by P for recovery of unpaid rent, D claimed that the lease had been frustrated since the warehouse was rendered useless for his purposes. Held, the contract had not been frustrated because after the disruption these would still be some three years of the lease to run and P was entitled to recover the unpaid rent. The majority was of the view that the doctrine of frustration was in principle applicable to leases, though in rare cases. The doctrine of frustration may also apply to contracts for the sale of land.



10.6.6 Limitations on the Operations of the Doctrine of Frustration

(a) Where the Change is not Fundamental

The doctrine of frustration will not apply to a situation where the performance would not be radically different from what was undertaken under the contract. In Davies Contractors Ltd v FarehamUDC (1956) P agreed to build 78 houses for the Council within 8 months. Owing to various difficulties with supply of both labour and materials it took 22 months to complete and the cost was far more than originally estimated. P tried to argue that their contract with the Council had become frustrated so that they could then claim higher sum for their work on a quantum meruit. Held, the contract had not been frustrated since mere hardship or inconvenience to one of the parties was not sufficient to justify discharge.

(b) Self – induced frustration

The doctrine of frustration only applies where the frustrating event is without fault of either party. A party cannot rely on self-induced frustration. In The Eugenia (1964) a ship was chartered to travel from Genoa via Blacksea to India. The route which the ship took to India was via the Suez Canal. The route taken was in breach of contract. After the ship entered into a dangerous war zone, it was trapped. Held, the contract was not frustrated, as it was the charterers fault that the ship had gone into the Suez Canal during the war-time. This rule seems also to apply where there is negligence on the part of one of the parties.

 

10.6.7 The Legal Consequences of Frustration

Frustration automatically discharges the contract and both parties are released as to future obligations. At common law the rule was that the loss lay where it fell, that is, money paid before frustration could not be recovered and money payable before the frustration remains payable unless there was a total failure of consideration (see Krell v Henry 1903).

The common law rule on the effect of frustration was regarded as harsh, and so changes were made by the Law Reforms (Frustrated Contracts) Act, 1943 in England, which is also applicable in Kenya. The position governed now by this Act is as follows:

  1. All sums paid before the frustrating event are recoverable and sums payable before the frustrating event cease to be payable. If one party has incurred expenses before the time of discharge the court may allow him to retain or recover an amount not exceeding the amount of expenses
  2. Where one party has obtained a valuable benefit (other than money) by reason of something done by the other party to the contract , that other party may recover from him a just sum not exceeding the amount of the benefit.

It is important to remember that the Act has no impact on the issue whether a contract has been frustrated.

Activity 10.5

  1.               Performance must be strictly in accordance with the terms of the  contract. However, to this rule there are some exemptions. Discuss.

2.               As a contract is made by agreement, it may also be discharged by  agreement. Explain

3.               Any breach of contract enables the injured party to sue for damages.  Where certain breaches occur, however, the injured party has a choice  to treat the contract as repudiated. Discuss

4.               What is the essence of frustration? In what circumstances will a  contract be discharged by frustration?

5.               (a) Wanjiru was engaged by Beach Hotels Ltd to sing at their hotel for  the whole night on the new year eve. She fell sick and could not  perform her obligation to sing. Beach Hotels Ltd sued her for  breach of contract.Advise Wanjiru

(b) Maina contracted to construct a house for Wasike for Shs. 3

  million. Maina completed construction of the house but some  doors and windows were defective. Wasike refuses to pay any  amount to Maina. Advise Maina

 

  • Summary Summary
  In this lecture we discussed various ways in which contracts may be discharged or come to an end. One way to discharge a contract is by performance, which occurs where both parties perform the contract strictly in accordance with its terms. To this rule a number of exceptions have evolved: (i) substantial performance, (ii) acceptance of part-performance, (iii) prevention of performance, and (iv) divisible or severable contracts.



Contract may also be discharged by agreement. If the original contract contains a term giving either party a power to terminate it, then the contract may be  discharged in accordance with that term. If there is no provision for discharge under the original contract, the contract may still be discharged by a subsequent agreement. The basic rule is that the subsequent agreement to discharge a contract is binding only if it is by deed or is supported by consideration. Discharge in that case may take one of the two forms, bilateral discharge or unilateral discharge. In bilateral discharge mutual abandonment of obligations outstanding is a good consideration and the new contract itself is binding on both parties. Where one party has completely performed all his obligations under the contract, discharge must be either by release y deed or by accord (agreement) and satisfaction (consideration). The performance obligations under the contract may also be terminated by variation or waiver. Variation is change of contractual terms by means of an independent contract. Waiver or forbearance occurs where one party to the contract promises that he will not insist upon performance strictly in accordance with the terms of the contract

A breach of contract may also terminate a contract. Breach means failure to perform any promise under the contract. It is of two kinds, actual breach and breach by anticipatory repudiation. Actual breach occurs where one party fails to perform his obligations when they are due.

Breach by anticipatory repudiation takes place when one party states before the

  time for performance arrives that he cannot or will not perform.

In case of any breach, the injured party has an option either to treat the contract as still subsisting or to treat it as repudiated. If he treats the contract as subsisting, he can go on with his contractual obligations without the co-operation of the other party. Any breach of contract entitles the injured party to sue for damages. In some circumstances, a breach gives the injured party an additional right to treat the contract as repudiated or treat himself as discharged. In case of breach by anticipatory repudiation the injured party can bring an action at once.  He does not have to wait until time of performance arrives.

Contracts may also be discharged by frustration. Frustration occurs where a supervening event occurs after the parties have made the contract which either render the contract physically or legally impossible, or make it radically different from what was originally undertaken.

There are some limitations to the doctrine of frustration. The doctrine has no application where the change is not fundamental or where the frustration is selfinduced. Frustration terminates the contract automatically.

 

 

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