Contract: Performance & Agreement

Discharging Contracts: Performance & Agreement

Performance

Discharge By Performance

If both parties fully and properly completed their obligations under the contract, the contract is discharged.

Conditional Obligations

The contract might indicate that certain obligations only come into effect once the other party has performed their own obligations: Little v Courage [1995] 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 [1795] 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 [1952] 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 [1972] 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. 

Agreement

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.

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Contract Termination Quiz

Test yourself on the principles which determine when a contract is terminated.

1 / 11

The defence of frustration renders a contract voidable. True or false?

 

2 / 11

A party to the contract purports to terminate the contract because of the defendant's breach. They give an invalid reason for terminating, but unbeknownst to them, the defendant has committed some other breach which entitles the innocent party to terminate. Is the innocent party in repudiatory breach because of their actions?

3 / 11

The parties agree to a contract which stipulates that the defendant will not be paid until he performs his obligations in their entirety. Can this defendant be paid even though there is a breach of contract?

4 / 11

What are the three requirements of frustration?

5 / 11

When is an existing contract discharged? (Three answers)

6 / 11

Are sums and benefits paid prior to an event which frustrates the contract recoverable?

7 / 11

When will the breach of an innominate term entitle the innocent party to terminate the contract?

8 / 11

If a party to a contract makes objectively clear that they intend to breach the contract, when does the innocent party gain the right to a remedy?

9 / 11

If the innocent party terminates the contract in response to a breach, this renders the contract void. True or false?

 

10 / 11

The defence of frustration renders a contract void. True or false?

 

11 / 11

The parties agree to a contract which makes provision for what will happen if a particular event happens. That event happens, and makes the contract impossible to perform. Does the defence of frustration apply?

 

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