7.

0 DISCHARGE OF CONTRACT: PERFORMANCE & AGREEMENT

(OTHER WAYS TO END A CONTRACT ARE: OPERATION OF LAW, BREACH AND
FRUSTRATION)
Definition: Ending a valid contract, determining, discharging, and cancelling. The contract
is no longer on foot. No further contractual obligations imposed upon the parties.

Termination:
• Contract is o.k. to the point of termination, e.g., if title passed new owner gets good title,
terminating a valid contract
• Discharged prospectively (everything after the termination)
• Rights and obligations acquired under the contract continue
Surviving clauses, when a party terminates a contract:
• exclusion clauses, confidentiality clauses, restraint of trade clauses, agreed damages clauses,
dispute resolution clauses, force majeure clauses
Heymans v Darwin
Vitiating Factors:
• Contract not o.k. from the beginning, e.g., title cannot pass, purchasing party not get good title
(innocent third party without notice may get good title)
• Discharged retrospectively i.e. (got into a contract based on vitiating factor, want to get to

7.(a) DISCHARGED BY PERFORMANCE

When service has been performed, payment made the contract is discharged.

2 types of contracts:
1. Entire performance (lump sum)
 One party must complete performance of obligation entirely and only gets benefit when
performance complete
 Difficult to apportion consideration (contract price)
 EXACT and ENTIRE performance contract principle Cutter v Powell (1795)
2. Divisible (severable) performance
• Consideration capable of apportionment according to the work done.
Exceptions to the Entire Performance Rule
To argue that the rule shouldn’t apply:
1. Severable/Divisible Contracts
Performance of less than whole contract may give performing party a right to demand part of agreed
return performance. Government of Newfoundland v Newfoundland Railway
2. De Minimus Rule
If party falls short of exact performance by an insignificant amount, the law will not concern itself
with trivialities. Shipton, Anderson & Co v Weil
3. Substantial Performance
Where there has been substantial performance, but not enough to invoke the de minimus rule, the
defaulting party may still be permitted to retain and enforce all rights conferred by the contract.
Test: “unless innocent party would have right to terminate for breach, then there has been
substantial performance”
Bolton v Mahadeva Court held performance not substantial enough to demand pro-rata payment as
in breach of contract.
4. Acceptance of Partial Performance
Legally, the parties abandon the original contract and substitute with a new one, where the partial
performance, is actually the full performance. Sumpter v Hedges Conduct equates to repudiation or
abandonment. Work of no value to the defendant.
5. Obstruction
A party entitled to be paid if they have started to perform, but something has obstructed them to
SUMMARY
completingEFFECT OF PERFORMANCE
the performance.
 Performance:
Startup entitled
v Macdonald to the no
P under contract
furtherprice
obligation to attempt delivery and could sue for damages.
 Failure to perform = Breach
 If contract is entire = no entitlement to contract price
 Substantial performance: under a lump sum contract where obligation is not entire, contract price
less set off for the cost of rectification.
 Substantial performance of a divisible contract = contract price for divisible part less set off for
rectification of defects.
 Part Performance: difficult to get a remedy.