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CONTRACT DISCHARGE (Pg 179)

Discharge refers to a termination of a contract. After a contract is discharged, the parties are relieved of their obligations under the contract. There are four ways Performance, Breach, Agreement and Frustration.

Performance (Pg 179) discharging a contract by performing all obligations as stipulated in the contract
Precise Performance eneral rule is that if a contract is to be discharged by performance, the parties must perform their obligations f !!" an# $recise!"% Cutter v Powell (1795) The court held that payment was conditional upon the completion of the voyage! payment even part payment may not be made. Re Moore & Co and Landauer & Co (1921) The court held that the buyer was lawfully entitled to re"ect the shipment in bo#es of $% cans instead of the contracted &' cans based on less than full and precise performance. E&ce$'ions 'o '(e Precise Performance R !e (ver the years, the courts have ac)nowledged that this rule of full and precise performance, if applied strictly, may cause unfairness. *f the deviation in performance is microsco$ic, then the contract is deemed to have been performed fully and precisely. )(a' is microsco$ic #e$en#s on '(e fac's of '(e case . De minimis r !e Acros Ltd v E A Ronaasen & Sons (1933) The +(, held that although the staves were of merchantable -uality and could be used to manufacture cement barrels, the contract was breached because the staves did not correspond to the description of the goods. A contract may in certain circumstance be viewed as several independent obligations. These may be deemed as severable sub.contracts, e.g. /mployment 0ontracts. No' a$$!ica+!e 'o e&$ress!" s$ecifie# , m$ S m con'rac's% Boone v Eyre (1779) where a promisor has substantially performed his obligations under a contract, he can claim the agreed payment, less the amount necessary to ma)e good the defect. T)O ca 'ionar" remar-s 1. *f the contact is an entire contract 2,ump 3um contract4 and payment is made conditional upon the performance of the entire contact, then the promisor may not be able to invo)e substantial performance to claim payment. But it can be applied to contracts that are no' , m$ S m or Di*isi+!e contracts. Bolton v Mahadeva (19724 5hether a contract is an entire or divisible one is a -uestion of construction. The court of appeal refused to grant Bolton compensation on a quantum meruit basis because it held that the use of the word lump sum suggested that the contract was an entire one, and the nature and amount of the defects were such that it could not be said that the contract had been substantially performed 2not easily rectifiable4. Bolton received nothing. Hoenig v Isaa s (1952) That it was a lump sum contract does not mean that entire performance was a condition precedent to payment. The courts lean against a construction of the contract which would deprive the contractor of any payment at all simply because there are some defects or omissions. The (fficial 6eferee held that this was no' an en'ire con'ac'. Further there was substantial performance although there were some defects. +oenig was entitled to receive the amount less the cost of rectifying the defects. Dakin v Lee (191 ) Formula for substantial performance is7 Amo n' 'o Pa" . Con'rac' Price / Cos' of Rec'ifica'ion $. There is always a practical problem of determining what e#acts to 8substantial performance9. The degree of completion re-uired would again depend on the facts of the case.

Di*isi+!e con'rac's S +s'an'ia! $erformance

Pre*en'e# $erformance

5here a promisor has performed part of his obligations but is prevented by the other party from performing the rest of his obligations, the contract may be treated as discharged on the basis of prevented performance. Promisor may claim payment to commensurate with the obligations performed on the basis of -uantum meruit. !"anc#e v Co"$urn (1%31) Planche was entitled to reasonable remuneration based on quantum meruit because the contract was discharged by 0olburn9s action in abandoning the pro"ect.

Acce$'ance of Par'ia! Performance

5hen promisee *o! n'ari!" acce$'s the partial performance of the promisor, the promisor is entitled to pay the promisee the reasonable remuneration under the law of restitution. !u"#ter v Hedges (1$9$) The court did not allow 3umpter9s claim because +edges did not have a c!ear c(oice of accepting or re"ecting the partially completed wor) 2on his land, so he had to accept it4. *f +edges had clear choice, 3umpter may have succeeded.

0reac( (Pg 112) a party fails to perform all obligations under the contract
Ac' a! 0reac( An'ici$a'or" 0reac( An actual breach arises then the time of performance for the obligation has arrived and the promisor fails to perform it. An anticipatory breach arises when the time for performance has not yet arrived but the promisor, +" 3or#s or con# c', has clearly e#pressed his in'en'ion no' 'o $erform the obligation. Ho hster v %e &a 'our (1$5() The court held that De ,a Tour9s letter stating that +ochster9s services were no longer re-uired constituted a repudiatory breach entitling +ochster to sue prior to the contracted date and claim damages. :onetary compensation that is the principal common law remedy for a breach of contract. The in"ured party will a!3a"s (a*e a rig(' 'o c!aim #amages for loss resulting from breach of contract whether or not he has is entitled to terminate the contract. 2see remedies4 Re$ #ia'ion ;ot every breach result in the contract being discharged, to do so, the breach must amount to a re$ #ia'ion of '(e con'rac' the breach deprives the innocent party of substantially the whole benefit which the contract was intended to bestow on him. )%C Con rete Pte &td v !ato *ogyo (!) Pte &td + ,nother ,##eal (2--7) Ren ncia'ion !ituation 2. 5here a party, by his words or conduct, reno nces a!! o+!iga'ions under the contract, the innocent party is entitled to terminate the contract. By Produ ts 'raders Pte &td + ,nother v /,* ,lhadad + Co Pte &td (2--0) The test of whether an intention is sufficiently evinced by conduct is whether the party renunciating has acted in such a way as to lead a reasonable person to the conclusion that he #oes no' in'en# 'o f !fi! (is $ar' of '(e con'rac'. *n this case, the 3ingapore +igh 0ourt re"ected <A=9s arguments that the plaintiffs had repudiated the contract because the plaintiffs had made it clear that they still intended to purchase the properties from <A= 2thus fulfilling their obligations in the contract4 if it could prove that it was in a position to sell. Con#i'iona! 0reac( !ituation ((a). 0ondition>warranty approach where a party breaches a condition of the contract, the innocent party is entitled to terminate the contract. The nature of the term depends on the intention of the parties to so designate it. 5 n#amen'a! 0reac( !ituation ((1). the &on'kon' (ir approach where the nature and conse-uences of the breach are so serious as to ?go to the root of the contract@, the innocent party is entitled to terminate the contract. )eo )eo Lee v *n' S+ee Lan & *t#ers (2,,2) *n commercial contracts, 'ime is usually considered of essence to the contract because prices can fluctuate significantly over a short period. Performance of obligations outside the time limits specified in the contract may amount to a fundamental breach.

Damages

Re$ #ia'ion (Pg 114)

Re$ #ia'ion m s' +e ne7 i*oca! *n all cases of breach, whether actual or anticipatory, the repudiation must be une-uivocal 2clear4. An honest misapprehension as to one9s obligations under a contact which leads to non. performance would not amount to repudiation if there is underlying willingness to correct one9s understanding and fulfill those obligations. Merse- Stee" and .ron Co v /a-"or 0enson & Co (1%%1) The +(, held that there was no repudiation because :ersey 3teel was under a gen ine misa$$re(ension that they should not pay for the shipments. 2on' !o# *i v 3ertrude 3uok and Anot#er (19 ) The court held that mere non.payment of an installment or breach of one term does not necessarily put an end to a contract. +ere, the court found that the plaintiff did not evince an intention not to be bound by the contract. +ence, the defendant9s purported repudiation was wrongful. E!ec'ion /ven when a repudiatory breach is present, the contract is not automatically discharged. )%C Con rete Pte &td v !ato *ogyo (!) Pte &td + ,nother ,##eal (2--7) A repudiatory breach grants the innocent party a rig(' of e!ec'ion as to whether to terminate the contract. +e may choose to accept the repudiation or affirm the contract. H2 Metal Manu3a turing &td v 4a" 'at Hardware Co (2--5) *n either case, the innocent party should comm nica'e ne7 i*oca!!" to the other party his decision. Acce$' '(e Re$ #ia'ion Hong 6o7 )ealty Pte &td v Bi"a Invest"ent Pte &td (199() *f the innocent party accepts the repudiation, the contract is discharged and he is entitled to claim damages to put him into the position as if the contract has been performed properly. O+!iga'ions '(a' (a*e a!rea#" arisen +efore '(e #isc(arge remain naffec'e#. Affirm '(e Con'rac' *f the innocent party chooses to affirm the contract despite the repudiation, the contract remains on foot and both parties must continue to fulfil their obligations and complete the contract. The innocent party s'i!! re'ains '(e rig(' 'o c!aim #amages for the breach. Prere7 isi'es for Affirma'ion af'er An'ici$a'or" 0reac( 1. ,egi'ima'e 5inancia! In'eres' *f damages would be a sufficient compensation to the innocent party, he should not be permitted to perpetuate the contract which may result in even greater detriment to the defaulting party. To show legitimate interest, it would help to show a !a+"rin'( of financia! commi'men's ma#e in re!iance of '(e con'rac' . Clea !hi##ing Coronation v Bul7 8il International9 :'he ,las7an 'rader; (19$0) *n the absence of ?legitimate interest@, the innocent party must accept the anticipatory breach, treat the contract as discharged and claim the damages. $. O'(er $ar'"8s coo$era'ion no' nee#e# 2Anilateral4 <hite + Carter (Coun ils) &td v M 2regor (1952) After :c regor cancelled the contract to hire advertising space for & years on 5hite B 0arter9s litter bins, 5hite B 0arter elected to affirm the contract despite the anticipatory breach. The +ouse of ,ords held that it was entitled to affirm the contract because they did not need the cooperation of :c regor to carry out the contract. Ris- of 5r s'ra'ion *n affirming the contract, the innocent party places himself at ris) that a supervening event may occur, discharging the contract by frustration. Aver- v 0o+en (1%44) *t was held that Bowden9s liability for the anticipatory repudiation was relieved by war which frustrated the contract.

Re$ #ia'ion (Pg 116)

Agreemen' (Pg 199)


E&is'ing Agreemen' A contract may include a term that it would be discharged upon occurrence of a stipulated event or at the e#piration of a certain period. A contract may be discharged by parties entering into a fresh agreement to e#tinguish the earlier contract. 5hen the contract is partially or entire e#ecutory, the parties may e#ecute a mutual release which discharges each party from all their obligations under that contract. : ' a! Re!ease Li &+ee 0ui"din' Construction !te Ltd v Advanced Construction & En'ineerin' !te Ltd (2,,2) The parties may have acted in such a manner as to be construed as having abandoned the contract, such that the contract is terminated as a result of the common intention of the parties that it should no longer bind them. 5hen one party who ha performed all his obligations see)s to discharge the other party who has not performed all his obligations, then the first party may e#ecute a release in the form of a #ee#, so that no consideration is re-uired. 5hen one party purchases his release with fresh valuable consideration provided to the other party, the understanding to do so is the accord and the consideration provided is the satisfaction. This discharges the earlier contract. 5here the contract is altered by a subse-uent agreement, supported by fresh consideration. Depending on the case, the contract may be discharged entirely or amended by the subse-uent agreement. 5here one party, at or without the re-uest of the other party voluntarily grants the other party an indulgence not to perform an obligation under a contract without consideration passing, the first party has been given a waiver. Asually given in respect of s$ecific mo#es of $erformance but not usually in respect of the whole contract, e.g. an employee consistently late. /mployer can prevent by including the clause ?no waiver unless in writing@ in the employment contract. Leivest .nternationa" !te Ltd v )o5 )en Entertainment !te Ltd (2,, ) 5hen Top Ten failed to pay the costs and interests on time, ,eivest could have terminated the lease, but chose instead to accept Top Ten9s delayed che-ue payment. By its demand for and acceptance of the costs and rent, ,eivest had ?waived the breaches, and it cannot resurrect them@, and ,eivest thus could not discharge the lease agreement.

;ni!a'era! Re!ease Accor# an# Sa'isfac'ion <aria'ion

S +se7 en' Agreemen'

)ai*er of Rig('s

5r s'ra'ion (Pg 19=)


Frustration refers to the situation where a s $er*ening e*en' occurs, for which nei'(er $ar'" is res$onsi+!e, with the result that the *er" +asis of '(e con'rac' is #es'ro"e# so that the venture to which the parties now find themselves committed is ra#ica!!" #ifferen' from that originally contemplated. %avis Contra tors &td v 6areha" =r1an %istri t Coun il (1955) the +ouse of ,ords re"ected the appellant9s claim as the cos' increase #i# no' a!'er '(e si' a'ion so m c( that the tas) underta)en was radically different from what was originally contemplated by the parties. ?*t is not hardship or inconvenience or material loss itself which calls the principle of frustration into play. There must be as well such a change in significance of the obligation that the thing underta)en, would if performed, be a different thing than that contracted for.@ 5r s'ra'ing e*en's are no' +e !ig('!" es'a+!is(e#% &ee Chee <ei v 'an Hor Peow >i tor (2--7) *mprudent commercial bargains cannot be aborted or modified merely because of an adverse change of circumstances.

Des'r c'ion of s +>ec' ma''er

'aylor v Caldwell (1$5() The music hall was destroyed by a fire, thus the court held that the contract of lease for the hall was discharged by frustration. The real issue is whether the event which failed to occur could reasonably be considered to be one which both parties hold to be the very +asis of '(e con'rac' such that if the event did not ta)e place, the parties would not have contemplated entering into the contract in the first place. :Coronation Cases; 0oronation of =ing /dward C** postponed *rell v Henry (19-() The contract was fr s'ra'e# as the purpose for which the flat was rented vanished. Herne Bay !tea"1oat v Hutton (19-() The contract was no' fr s'ra'e# as a tour of the fleet was still possible although naval review was cancelled. A contract for personal services may be frustrated by personal incapacity if the incapacity affects the performance of the contract in a fundamental way. !ossard v S5iers & !ond (1%6 ) 0ourt held that the contract was frustrated because of :adam Puossard9s illness. Lau La- &on' v &e7a5i""ar !te Ltd (1993) /#cept in cases of contracts based on personal considerations, the death of a party to a contract does not affect the enforceability of the contract. Ane#pected government action or ruling which prevents the performance of a contract. Lim 8im Som v S#eri99a )ai$a# $te A$du" Ra#man (1991) The contract to buy a piece of property was frustrated following the government9s order for compulsory ac-uisition of the property under the ,and Ac-uisition Act. )sakiro'"ou (19 2) A contract to sell groundnuts which were to be shipped from 3udan to +amburg during the Anglo.French invasion of /gypt in 1DEF could not be frustrated due to the closure of the 3ueG canal. This is because the ship could still reach +amburg via 0ape of ood +ope, and which would not be so fundamentally different, but merely more e#pensive. The more foreseeable the event the more unli)ely the event will be held to frustrate a contract. +owever, mere foreseeability of the event is no bar to frustration. 8a7well Engineering &td v Energy Power !yste"s &td (2--() *ncreased costs is a highly foreseeable ris) that should be considered by a prudent contractor and is thus unli)ely to give rise to frustration. These clauses which e#pressly provide for the occurrence of events such as war or natural disasters which will normally fall within the class of events which lead to frustration. The effect of such a clause depends greatly on its construction. *f a 9orce ma:eure clause turns out to be an e#emption clause, then it would be sub"ected under the ;C)A. China )esour es (!) Pte &td v Magenta )esour es (s) Pte &td (1997) The 3ingapore 0ourt of Appeal held that the force ma"eure clause applied and that the A336 embassy letter, although not strictly complying with the clause, was the 8ne#t best thing9 and hence ade-uate evidence of the force ma"eure. *f a frustrating event is the result of voluntary action of one of the parties, then there is no frustration. Mariti"e 4ational 6ish v 8 ean 'rawlers (19(5) The privy council held that the unavailability of a license for the use of otter trawls on its ships were due to the allocative decision of :aritime ;ational. +ence the Privy 0ouncil held that there was no frustration because the event was self.induced.

Non/ occ rrence of e*en'

S $er*ening E*en's (Pg 194)

Persona! Inca$aci'"

Go*ernmen' In'erference

O '+rea- of 3ar?(o s'i!i'ie s

5oreseea+i!i'"

5ac'ors ,imi'ing 5r s'ra'ion (Pg 197)

5orce :a>e re C!a se

Se!f in# ce# fr s'ra'ion

Frustration automatically discharges a contract, is effective immediately and re-uires no communication or advice from one party to the other. Effec's of 5r s'ra'ion (Pg =91) 6rustrated Contra ts , t (6C,) 1. All future obligations cease (i$rosa Case $. :oney paid 2less e#penses4 prior to time of discharge is recoverable s2(2) &. :oney payable ceases to be payable s2(2) %. Caluable benefit 2non.financial4 conferred prior to time of discharge is recoverable . s2(3)