Discharge of Contracts

1. Discharge of Contracts Week 9

2. Termination of a contract A contract can be brought to an end by: • Performance • Agreement • A Term of the Contract • Frustration • Breach • Operation of Law

3. Termination by Performance • Where both parties have performed their obligations, the contract is discharged • Generally, performance must be complete and exact • Re Moore and Co and Landauer & Co (Outline p 9-6)

4. Termination by Performance There are 6 exceptions • Several contracts • Acceptance of part performance • Prevention of Performance • Substantial performance • Time of performance

5. Several Contracts • Where a contract can be divided into several parts • Payment for the completed parts can be claimed • Roberts v Havelock (Outline p 9-6)

6. Acceptance of Part Performance • Where A has accepted the partial performance of B even though A has an option to reject • B can claim a percentage of the contract price in direct proportion to the percentage of the work completed • Sumpter v Hedges (Outline p 9-6)

7. Prevention of Performance • Where one party is prevented by the other from performing the contract • They can claim a percentage of the contract price in direct proportion to the percentage of the work completed • Planche v Cockburn (Outline p 9-6)

8. Substantial performance • Where a contract has been substantially performed • The party can claim the contract price less the cost of deficiencies • Hoenig v Isaacs (Outline p 9-7) • Bolton v Mahadeva (Outline p 9-7)

9. Time of Performance • Generally, time limits in contracts are not strictly enforced unless “time is of the essence” • Time is only of the essence if: • The parties expressly agree that time is of the essence (This makes the term in relation to time a condition) • A party who has delayed their performance of the contract is notified by the other party that the contract will be broken if they if not perform their part of the contract within a reasonable time • Rickards v Oppenheim (Outline p 9-7)

10. Tender of Performance • Where • one party tenders the correct goods, services or money in accordance with their obligation under the contract • The other party refuses to accept it • If money is tendered it must be “legal tender” • If the debtor sends money in the post and it is lost it will have to be paid again unless • Payment by post was requested by the creditor, and • The debtor took reasonable care

11. Tender of Performance Appropriation of Payments • Where only part of a number of debts are paid • The debtor may tell the creditor which debts are being repaid • If the debtor does not nominate the debt(s), then the creditor may appropriate payments as he sees fit • If the debtor pays the exact amount of a particular debt, then it is presumed that that is the debt being discharged • If there is a current account, then the payments are appropriated to the oldest debt first

12. Termination by Agreement • Parties to the contract agree to discharge their obligations to one another • This latter agreement will only be binding if: • There is consideration; or • Promissory estoppel arises • The contract to terminate the earlier contract is subject to usual contractual rules e.g. economic duress

13. Termination by Agreement Bilateral Discharge • Where a contract remains uncompleted by both parties • Consideration comes from both as there is a mutual release of their obligations

14. Termination by Agreement Unilateral Discharge • Where a contract remains uncompleted by only one party • Consideration • Release by one party of the other from their obligations • Fresh consideration by the other party • Called “Accord and Satisfaction”

15. Termination by Agreement Novation • A new agreement involving a third party • C agrees to pay A to release B from B’s debt to A

16. Condition Subsequent • Parties may have agreed that the contract would be terminated upon the happening or non-happening of a certain event • The term may be automatic or merely provide an option to terminate • Term may give only one party the option to terminate

17. Frustration • The general rule is that a person is not relived of their contractual obligations if they are impossible to perform • However, where: • An intervening event, • Not contemplated by the parties, • For which neither party is responsible, and • It makes performance • impossible; or • Fundamentally different to that originally contemplated

18. Frustration Examples of Frustration • If the contract relates to a specific thing that is destroyed • Taylor v Caldwell (Outline p9-9) • A change in the law • Rayneon v Fraser (Outline p9-9) • A contract for personal service where the person dies, becomes seriously ill or is called up for military service • Condor v Baron Knights (Outline p9-9)

19. Frustration Examples of Frustration • If the whole basis of the contract is the occurrence of an event that does not happen • Krell v Henry (Outline p9-9) • If the government prohbits performance for so long that the bargain is fundamentally changed • FA Tamplin Steamship v Anglo-Mexican Petroleum (Outline p9-9)

20. Frustration • There is no frustration of the contract simply becomes harder or more expensive to perform • Wilkins v Geraldine Borough (Outline p 9-10) • Frustration does not apply where: • Contract makes specific provision for the event • The party seeking to rely on frustration foresaw the event • The event was caused by the party seeking to rely on the frustration • The Eugenia (Outline p 9-10)

21. Termination by Frustration (Cont.) • Frustrated Contracts Act 1959 (Vic) • Court may order • a refund of monies paid under a frustrated contract • Compensation for any performance that occurred prior to frustration

22. Consequences of Frustration • Contract is discharged as to the future but is not made void from the beginning • At common law, the loss lay where it fell • Money payable before the frustration remained payable unless there was a total failure of consideration • Fibrosa v Fairbairn Lawson (Outline p 9-11)

23. Consequences of Frustration • Frustrated Contracts Act • Enacted in some states • Court may order • a refund of monies paid under a frustrated contract • Compensation for any performance that occurred prior to frustration

24. Assignment 1 • Supreme Court of Queensland • De Jersey (Chief JusticeMcPherson (Justice of Appeal)Atkinson (Justice) • No, because the judge didn’t write it • Appellants: Joyce Anne McEwan & OrsLawyer SC Williams QC & P KimmonsRespondent: John Luke Bowditch by his litigation guardian John Stanley Bowditch

25. Assignment 1 • Appellant: Eardley MotterdamRespondent: Garrahy & Associates • Lister v Romford Ice and Cold Storage Co Ltd (1957) AC 555 • Facts directly on the point (negligent driving of a motor vehicle) (see para 4)Australian Supreme Court decision (see para 9) • Because it is from a different court hierarchy (NSW)

26. Assignment 1 • Lister v Romford Ice and Cold Storage Co LtdCaltex Oil (Australia) Pty ltd v The Dredeg “Willemstad”Perre v Apland (see para 8 – 2nd part) • It was a natural extension of the existing law relating to the negligence driving of a motor vehicle (see para 11) • Appeal dismissed with costs to be assessed • Too short, recited the court judgement, did not give own reasons, suggestions that pregnant women should not drive a car

27. Assignment 1 Essay Problems • Poor referencing • Cited US law • Poor referencing • Descriptive with little analysis • Over-focused on • Australian constitution • rules of interpretation • Procedure for passing an Act of Parliament

28. Assignment 1 Essay • Role of Parliament • Role of Courts • Why 2 different modes of making law? • Doctrine of Separation of Powers • What? • Why? • How?