Discharge by performance exact performance rule

Discharge by performance
Exact performance rule (general rule): Performance must be exact and precise
and in accordance with what the parties have agreed. ( Sec. 38(1) )
- When the contract is fully performed: both parties will be discharged by
performance
- When performance is not complete/defective:
i) The innocent party may not want to pay until the work is
completed according to the contract.
ii) The innocent party may want to claim for the loss suffered as a
result of the incomplete/defective work.

- Bolton v Mahadeva
The plaintiff agreed to fix the central heating system in the defendant’s
house. Due to the inefficiency of the plaintiff’s work which caused the
central heating to worsen, the defendant refused to make payments.
Held: The plaintiff was not entitled to claim for the payment on the
ground that the plaintiff’s performance was not complete.
- Principle of unjust enrichment: The party benefiting from the work done
should provide payment even though the work is incomplete or
imperfect.
Exceptions which help mitigate the harshness of the exact performance rule
have been recognised by the law.
1. Entire and divisible contracts
- Entire contracts:
- A contract which can only be fulfilled as a whole , so that
failure in any part is failure in the whole.
- Where consideration is one and entire/it is stated/can be
gathered that no consideration is to pass from one party till
the whole of the obligations of the other party have been
completed .
- Complete performance is a prerequisite for payment.
- Right to payment does not arise until the contract has been
completely performed.
- Divisible contracts:
- A contract of which the performance can be separated, so
that failure in one part affects the parties’ rights as to that
part only.
- The contract resolves itself into a number of considerations
for a number of acts, such as periodical payments for a
number of services.
- Where payments are made progressively.
- Right to payment arises as each part of the contract is
performed.
- Whether a contract is a divisible contract or an entire contract
depends on the intention of the parties .

- KP Kunchi Raman v Goh Bros Sdn Bhd
The plaintiff, a contractor, agreed to lay water pipes complete with
specials and valves. Under the agreement, the defendant
undertook to supply the pipes at the site of the work and the
plaintiff was to supply all labour and other equipment for laying
the pipes. The plaintiff also agreed to perform the work of
reinstate of a cycle track. There was a dispute as to the completion
of the work and the payment due. The issue was whether the
agreement was a divisible or an entire contract.
Held: Generally such contract will not be entire, but could be
entire if that is the clear intention of the parties. It was a contract
for specified works and the price had to be ascertained and paid
according to a schedule of rates. The agreement was interpreted
as a whole, and it was found that it expressed a clear intention
that the contract should be an entire contract.