CONTRACT LAW - DISCHARGE BY PERFORMANCE

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)

7.(a) DISCHARGED BY PERFORMANCE 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) 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 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 Minimu Minimus s Rule amount, the law will not concern itself  If party falls short of exact performance by an insignificant amount, with trivialities. Shipton, Anderson & Co v Weil 

3. Substantial Performance Performance rule, the Where there has been substantial performance, but not enough to invoke the de minimus rule, defaulting party may still be permitted to retain and enforce all rights conferred by the contract. Test: “unless “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 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. Obstructio Obstruction n A party entitled to be paid if they have started to perform, but something has obstructed them to

SUMMARY OF PERFORMANCE completingEFFECT the performance.

 Performance: entitled to theno contract Startup v Macdonald P Macdonald  P under 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: performance: under a lump sum contract contract where obligation is not entire, contract contract price less set off for off for the cost of rectification. off for  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.