Discharging Contracts: Performance & Agreement
Discharge By Performance
If both parties fully and properly completed their obligations under the contract, the contract is discharged.
The contract might indicate that certain obligations only come into effect once the other party has performed their own obligations: Little v Courage  CLC 164.
For example, a contract might state that the buyer only has to pay on delivery. If so, the buyer is not obligated to pay until delivery occurs.
This is not the case for all obligations, however. For example, a breach of repair obligations by a landlord does not entitle the tenant to refuse rent.
‘Entire Contract’ Conditional Obligations
In some cases, the claimant’s contractual obligations may only become active when the defendant has entirely performed their own obligations. If so, the general rule is that the claimant does not have to perform until the defendant has completed all of their obligations: Cutter v Powell  EWHC KB J13. This is the ‘entire contract’ rule.
The rule is mitigated by the ‘substantial performance’ exception. This exception holds that in ‘entire contract’ cases, a party can sue for the contract price so long as they have ‘substantially’ performed the entire contract. They do this by completing the contract’s ‘main purpose’: Hoenig v Isaacs  2 All ER 176.
This can help defendants who have performed their obligations with some defects. However, extensive defects may mean that the defendant has not ‘substantially performed: Bolton v Mahadeva  1 WLR 1009.
The entire contract rule is also mitigated by the possibility of making a claim in restitution for payment for partial performance. This is not a contractual action.
Accord & Satisfaction
The parties can agree to discharge the contract, something referred to as ‘accord and satisfaction’. This agreement must amount to a contract in itself, meaning that consideration must be provided. If the parties have outstanding obligations, then the promise not to enforce each of their rights is sufficient consideration. Otherwise, additional consideration must be provided.