(Notes) Contract - Discharge and Breach

(Notes) Contract - Discharge and Breach - CONTRACT...

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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 – General rule is that if a contract is to be discharged by performance, the parties must perform their obligations fully and precisely. 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 reject the shipment in boxes of 24 cans instead of the contracted 30 cans based on less than full and precise performance. Exceptions to the Precise Performance Rule Over the years, the courts have acknowledged that this rule of full and precise performance, if applied strictly, may cause unfairness. De minimis rule If the deviation in performance is microscopic , then the contract is deemed to have been performed fully and precisely. What is microscopic depends on the facts of the case . Acros Ltd v E A Ronaasen & Sons (1933) – The HOL held that although the staves were of merchantable quality and could be used to manufacture cement barrels, the contract was breached because the staves did not correspond to the description of the goods. Divisible contracts Contract may be viewed as several independent/divisible obligations - viewed as severable sub-contracts that can be discharged separately e.g. Employment Contracts. Not applicable to expressly specified Lump Sum contracts. Substantial performance 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 make good the defect. TWO cautionary remarks 1. If the contact is an entire contract (Lump Sum contract) and payment is made conditional upon the performance of the entire contact , then the promisor may not be able to invoke substantial performance to claim payment. But it can be applied to contracts that are not Lump Sum or Divisible contracts. Bolton v Mahadeva (1972 ) – Whether a contract is an entire or divisible one is a question 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 (not easily rectifiable). Bolton received nothing. Hoenig v Isaacs (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 Official Referee held that
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