Contract Law: (8) Discharge
Discharge by Frustration: Consequences: Common Law: whilst the Act governs most instances of frustrated contract, the common law remains important for three reasons (3)
(a) Where the contract contains provisions dealing with the consequences of frustration, the Act will apply only to the extent that it is consistent with the contract (s 2(3)). It is therefore possible for contracting parties to exclude the operation of the Act by prior agreement. (b) Certain types of contracts are not governed by the Act (s 2(5)), and would therefore still be subject to the common law. (c) Understanding how the common law addressed frustrated contracts will help in understanding the rationale behind some of the provisions in the Act.
Discharge by Agreement: this may occur in one of which two ways (2)
1. Discharge by a Subsequent Binding Contract Between the Parties; 2. Discharge by the Operation of a Term in the Original Contract
Discharge by Frustration: Performance is "Radically Different": this may occur for what three reasons (3)
1. Performance is Impossible; 2. Performance is Illegal or Prevented by Government Intervention; 3. The Common Purpose of the Contract is Frustrated
Discharge by Performance: Defences to Allegations of Failure to Perform: two possible defences that a party being accused of failing to perform his obligations can potentially draw on (2)
1. Tender of Performance; 2. Performance by a Third Party
Discharge by Frustration: Performance is "Radically Different": 3. Common Purpose is Frustrated: a recent case where Mr Justice Smith found that there was no common purpose regarding the lease of HQ premises in Canary Wharf; and that the parties in fact had _ purposes; as Brexit had not been taken into account at the time of making the commercial arrangement, the _ of the bargain had therefore not fundamentally changed for both parties so there was no discharge by frustration
Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019]; divergent; nature
Discharge by Performance: the Entire Obligations Rule: key case
Cutter v Powell [1796]
Discharge by Frustration: Limitations: 1. Merely an Increase in Expense/Onerousness: key case where the court held that the contract was not frustrated, even though the contractors incurred an additional cost £17,600 (on top of the £92,400 contract price) due to a number of reasons including material shortage and an exceptionally long frost as it was still possible to perform, but more onerous
Davis Contractors v Fareham Urban District Council [1956]
Discharge by Frustration: The modern definition of frustration is provided by Lord Radcliffe in what case; "frustration occurs whenever the law recognises that, without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing _ _ from that which was undertaken by the contract. ...It was not this that I promised to do."
Davis Contractors v Fareham Urban District Council [1956]; radically different
Discharge by Frustration: Performance is "Radically Different": 2. Performance is Illegal / Prevented by Government Intervention: b) Government Intervention: case where contractors were required by a government order to stop work to construct a reservoir and sell the plant, and it was held that the delay clause was not intended to apply to such a fundamental change in the nature of the contract
Dick Kerr and Co v Metropolitan Water Board [1918]
Discharge by Frustration: Limitations: 3. Which the Parties Could Reasonably Have Contemplated: Rix LJ summarised the relationship of foreseeability to the doctrine of frustration in which case; principle
Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd, The Sea Angel [2007]; if you could have foreseen an event, but failed to make provision for it in your contract, the doctrine of frustration will be less likely to apply
Discharge by Frustration: Performance is "Radically Different": 1. Performance is Impossible: case where the court made clear that the amount of time left to run in the contract is the starting point only in establishing frustration; a _ approach should be adopted when assessing whether unavailability was sufficient to amount to frustration
Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd, The Sea Angel [2007]; multifactorial
Discharge by Frustration: Performance is "Radically Different": 2. Performance is Illegal / Prevented by Government Intervention: a) Change in the Law (Supervening Illegality): a classic example is where war breaks out, and to continue performance would mean trading with the enemy (case example)
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943]
Discharge by Frustration: Consequences: Common Law: Issue: Advanced Payments: case which held that where there had been a total failure of consideration, then money already paid could be recovered and money due and payable (but not yet paid) need not be paid; Lord Goff set out the test for "total failure of consideration" in which case; two significant problems with this law (2)
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943]; Stocznia Gdanska SA v Latvian Shipping Co [1998]; 1. where the failure of consideration is only partial, the suppler can retain the advanced payment even though a substantial part of the contract has not been performed, 2. the recovery of an advanced payment arguably imposes an injustice on the supplier if they have incurred expenses on the basis of receipt
Discharge by Frustration: Consequences: Consequences under Statute: the Law Reform (Frustrated Contracts) Act 1943: s 1(2): extends the decision in what case by providing that money paid before the frustrating event (the time of discharge) can be recovered, even though the failure of consideration may only be partial; also provides that money payable _ to be payable
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943]; ceases
Discharge by Frustration: Limitations: 3. Which the Parties Could Reasonably Have Contemplated: case where the Court ruled that consistent levels of civic unrest and violence in Greece were not enough to frustrate a contract relating to a theatre production; the parties were deemed to have had the _ to deal with the risk and allocate responsibility for it - the Court refused to do this by deeming the contract frustrated; however, case where Mr Justice Smith said the key test is whether the event would have informed the manner in which the parties assessed the risk - a party cannot be criticised for failing to take into account highly theoretical risks
Flying Music Company Limited v Theater Entertainment SA [2017]; opportunity; Canary Wharf (BP4) T1 Ltd v European Medicines Agency
Discharge by Frustration: Consequences: Consequences under Statute: the Law Reform (Frustrated Contracts) Act 1943: s 1(2): key case which demonstrates how a judge decides (within the parameters) when it would be just to allow the supplier to retain
Gamerco SA v ICM/Fair Warning (Agency) Ltd [1995]
Discharge by Breach: Anticipatory Breach: Key case where the C sued the D for telling him a few weeks before he was due to start work that this services (courier on foreign tours) were no longer required, and the court held in favour of the C
Hochster v De la Tour (1853)
Discharge by Performance: the Entire Obligations Rule: Exceptions: b) Substantial Performance: Key Cases (Contrasting): case where it was held that the contract, of redecorating and refurnishing the D's one-bedroom flat, had been substantially performed and all that was left were 'defects and omissions' that did not go to the root of the contract, so the C was entitled to the contract price less (£750) less the deduction for the repairs (£55); case where the C was not entitled to recover any of the contract price as the central heating system he installed did not function adequately (which was the purpose of the contract) and moreover produced harmful fumes - however, if the C had offered to remedy the defects (worth £174 when the cost of contract was £560) then he would be justified in claiming the contract price
Hoenig v Isaacs [1952]; Bolton v Mahadeva [1972]
Discharge by Breach: Effect of Terminating a Contract for Repudiatory Breach: this remedy is only available in exceptional cases, made clear by which test; this says that to acquire the right to terminate at common law for breach the breach should do what; the discharge from remaining rights and obligations is _ only - any rights and obligations which have accrued before termination remain enforceable
Hong Kong Fir test [1962]; 'deprive the injured party of substantially the whole benefit of the contract'; prospective
Discharge by Breach: the Right of Election: Limits on Affirmation of a Contract: A claimant is not entitled to affirm a contract if a) The co-operation of the breaching party is required for continued performance of the contract: it has been confirmed by Megarry J in what case that cooperation in this context means passive as well as active cooperation
Hounslow London Borough Council v Twickenham Garden Developments Ltd [1970]
Discharge by Breach: the Right of Election: Limits on Affirmation of a Contract: which judge in White v McGregor qualified his decision by stating that a C would not be entitled to affirm and would be confined to a claim in damages for the repudiatory in two instances; what are these two instances (2)
Lord Reid; a) the co-operation of the breaching party is required for continued performance of the contract, b) The innocent party has no 'legitimate interest, financial or otherwise' in affirming the contract and continuing with performance
Discharge by Frustration: Limitations: 2. Caused by the Default of a Party: key case where it was held that the charterparty was not frustrated because it was the D's own act which prevented the St. Cuthbert from being licensed for fishing with an otter trawl - the D was liable for the hire and therefore had to pay the C
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935]
Discharge by Frustration: Lord Simon described frustration further in what case; which tells us four things that do not constitute a frustrating event (4)
National Carriers Limited v Panalpina (Northern) Limited [1981]; (a) Caused by the default of a party (b) Provided for in the contract; (c) Which is merely an increase in expense / onerousness; (d) Which the parties could reasonably have contemplated
Discharge by Breach: Effect of Terminating a Contract for Repudiatory Breach: Damages Where a Party is Relying on an Agreed Termination Clause to Terminate the Contract: Key case authority, which held that if a termination letter communicates clearly a decision to terminate only under an express contractual right to terminate that has arisen irrespective of breach, then it then it cannot be said that the contract was terminated for a breach and, in those circumstances, a claim for damages for loss of bargain at common law cannot run.
Phones 4U Ltd (in administration) v EE Ltd [2018]
Discharge by Performance: the Entire Obligations Rule: Exceptions: d) Wrongful Prevention of Performance: Where one party performs part of the agreed obligation, and is then prevented from completing the rest by some fault of the other party, he will be entitled to payment despite not having completed the rest of the obligation (case authority)
Planche v Colborn
Discharge by Performance: Defences to Allegations of Failure to Perform: 2. Performance by a Third Party: case where the D had agreed to keep a carriage in repair for 5 years and to paint it - it was held by the court that he was not entitled to delegate performance of the contract to this partner as this was a contract of personal service; this case can be contrasted with which case, where it was permissible for a contract to let out railway wagons and keep them in repair for 7 years was able to be performed by someone else (judge emphasised that the work was of ordinary nature which could be accomplished by the average workman)
Robson and Sharpe v Drummond [1831]; British Waggon Co v Lea & Co [1880]
Discharge by Breach: the Right of Election: The innocent party is allowed a period of time in order to decide between these two alternatives (affirm or terminate)
Stocznia Gdanska SA v Latvian Shipping Co (No 3) [2002]
Discharge by Performance: the Entire Obligations Rule: Exceptions: a) Acceptance of Partial Performance: key case, where the C agreed to build two houses and stables on the D's, but had to stop after completing around 2/3 of the work due to lack of sufficient funds; the court held what; for such acceptance to have occurred, the innocent must have had the option to do what
Sumpter v Hedges [1898]; there had not been a voluntary acceptance of partial performance; to take or not to take the benefit of the work done
Discharge by Frustration: Limitations: the doctrine of frustration must be "applied within very narrow limits" (Viscount Simonds in what case); while Lord Roskill remarked that 'the doctrine is not lightly to be invoked to relieve contracting parties of the normal consequences of imprudent commercial bargains' (case
Tsakiroglou Co Ltd v Noblee Thorl GmbH [1962]; Pioneer Shipping Ltd and others v BTP Tioxide Ltd, The Nema [1981]
Discharge by Breach: Definition: Anticipatory Breach
Where a party indicates he will not perform his contractual obligations in advance of the date for performance.
Discharge by Breach: Definition: Repudiatory Breach
Where one party has breached a term of the contract which is either a condition, or an innominate term which is to be treated as a condition, entitling the other party (in principle) to treat the contract as terminated.
Discharge by Breach: the Right of Election: Limits on Affirmation of a Contract: the decision in what case has been heavily criticised; as it encourages _ _ ; and may cause _ _ to the repudiating part
White v McGregor; wasteful performance; undue hardship
Discharge by Agreement: 2. Discharge by the Operation of a Term in the Contract: a contract may contain a term providing for the discharge of obligations arising from the contract. There are two types of such a term (2)
a condition precedent; a condition subsequent
Discharge by Agreement: 2. Discharge by the Operation of a Term in the Contract: A Condition Precedent: what is this
a condition which must be satisfied before any rights come into existence
Discharge by Performance: the Entire Obligations Rule: Exceptions: b) Substantial Performance: Where a contract has been substantially performed, it may be possible for the party who rendered such substantial performance to obtain the contract price subject to what; when considering such a plea, the court considers the _ and _ of the defect, which is done by measuring the cost of remedying the defect against the contract price; if the defect is too serious, the party who rendered the defective performance will not be entitled to recover any money - however, if substantial performance is found to have been rendered, then the party will be entitled to what; in defining what is 'substantial performance', the court takes a similar approach to when deciding whether has been a repudiatory breach of contract: the question is whether the defect goes to what
a deduction to reflect the cost of remedying the 'defect' (ie the aspect which has not been performed); nature, extent; the contract price subject to a deduction; 'to the root of the contract'
Discharge by Agreement: 2. Discharge by the Operation of a Term in the Contract: A Condition Subsequent: two common examples (2)
a term which provides the right for one or both parties to end the agreement by giving notice to the other party; a termination clause specifying that the contract will come to an end upon the occurrence of specified events (such when a particular date occurs)
Discharge by Performance: the Entire Obligations Rule: Exceptions: four exceptions that mitigate the harsh effect of the entire obligations rule (4)
a) Acceptance of partial performance; b) Substantial performance; c) Divisible obligations; d) Wrongful prevention of performance
Discharge by Performance: the Entire Obligations Rule: Exceptions: d) Wrongful Prevention of Performance: the innocent party has which two options (2)
a) To sue for damages for breach of contract; b) To claim a quantum meruit
Discharge by Breach: the Right of Election: the Benefits of Affirmation: there may be many commercial reasons why this is a better option than termination for the innocent party - for example, in a contract relating to a major project, affirming and giving the contractor an opportunity to finish may be better than _ it altogether and having to sue for damages and find another contractor
abandoning
Discharge by Agreement: 1. Discharge by a Subsequent Binding Contract Between the Parties: for this to be effective, which two elements must be present (2)
accord (agreement to release obligation); satisfaction (consideration for the obligation)
Discharge by Breach: the Right of Election :Where a person has a right to elect whether to _ or to _ the contract, he will only be bound by the course he takes if, in deciding upon that course, he was aware not only of the facts giving rise to the right to elect, but also that the right existed; case authority
affirm, terminate; Peyman v Lanjani [1985]
Discharge by Frustration: Definition by Lord Radcliffe in Davis Contractors v Farham Urban District Council: from this, we understand that frustration is about events that occur _ the formation of the contract; and which render performance _ _ from that which was agreed to at the time the contract was formed
after; radically different
Discharge by Frustration: if a contract is frustrated, it is brought to an end _ - the parties have no choice in the matter
automatically
Discharge by Breach: the Right of Election: Where there has been a repudiatory breach of contract, the contract is terminated only if the aggrieved party makes the election (meaning _ ) to treat the breach as repudiating the contract - ie putting an end to all unperformed primary obligations; the innocent party must make his decision to terminate the contract known to the party in default (case)
choice; Vitol SA v Norelf Ltd, The Santa Clara [1996]
Discharge by Frustration: Limitations: 4. Provided for in the Contract: Force Majeure Clause: a clause that states what will happen to the contractual relationship between the parties should a particular set of _ (which could otherwise amount to frustrating events) materialise; often refer to what (3); the inclusion of a force majeure clause enables the parties to _ _ in relation to these events at the outset and may allow for the continuance of the contractual relationship in circumstances that would otherwise amount to frustration of the contract.
circumstances; acts of terrorism, war, Acts of God; allocate risks
Discharge by Agreement: 1. Discharge by a Subsequent Binding Contract Between the Parties: Accord & Satisfaction: Difficulties arise in relation to the necessity for _ where one party has performed his obligations in their entirety but something remains to be done by the other party; one way of resolving this issue is that the party to whom the obligation is owed may release the other party by a subsequent agreement under _ ; alternatively, the party to whom the obligation is owed may provide consideration by agreeing with the other party to accept _ _ in place of the former obligation, for example the accelerated payment of a sum payable in instalments
consideration; deed; something different
Discharge by Breach: the Right of Election: Limits on Affirmation of a Contract: A claimant is not entitled to affirm a contract if b) The innocent party has no 'legitimate interest, financial or otherwise' in affirming the contract and continuing with performance: The Dynamic [2003]: Simon J stated here that: a) the burden is on the _ _ to show that the innocent party has no LE in affirming the contract rather than claiming damages; b) this burden is not discharged merely by showing what ; c) this exception only applies where an election to keep the contract alive is _
contract breaker; that the benefit to the other party is small in comparison to the loss to the contract breaker; unreasonable
Discharge by Frustration: Limitations: 1. Merely an Increase in Expense/Onerousness: in other words...
contracts which become more difficult or expensive to perform
Intro: where the obligation of one party is discharged, the _ _ of the other party is extinguished
corresponding right
Discharge by Breach: If the breach is a breach of warranty, then the usual remedy for the innocent party is what; as shown in what case, a party does not always acquire a right to terminate the contract as a result of breach of contract
damages only; Poussard v Spiers & Pond [1876]
Discharge by Breach: If the breach is a breach of condition, then the usual remedy for the innocent party is what
damages plus right of election
Discharge by Frustration: Performance is "Radically Different": 1. Performance is Impossible: Impossibility might be extended to situations of _ or _ of one of the parties in a personal contract, especially where a specified individual is engaged to render a particular service; clearly death renders performance impossible, but what about _ because of illness or other reasons?; case where the drummer in a music group was taken ill and only capable of working 3/4 nights a week - the group had engagements for 7 nights a week, so the contract was frustrated because the drummer was not capable of performing the contract in the way intended
death, illness; unavailability; Condor v The Barron Knights Ltd [1966]
Discharge by Breach: the Right of Election: the Benefits of Affirmation: the innocent party may calculate that if the contract can be performed such that a right to change the contractual charges as a _ will arise, then it will put itself in a better and more certain financial position than if it terminates the contract and brings a claim for unliquidated damages (which are v uncertain)
debt
Discharge by Frustration: Consequences: Consequences under Statute: the Law Reform (Frustrated Contracts) Act 1943: s 1(2): also gives the court a _ _ to order such retention or recovery of money as it thinks just in all the circumstances to account for expenses incurred by the payee; normally who; the expenses incurred by the payee must be _ related to an attempt to perform the contract.; the amount retained or recovered is _ and cannot exceed: (i) the actual expenses incurred and (ii) the amount paid or payable prior to the frustrating event
discretionary power; the supplier; directly; capped
Discharge by Frustration: Performance is "Radically Different": 1. Performance is Impossible: Impossibility can also apply where the frustrating event destroys an asset that does not form the subject matter of the contract in question, but rather is _ for the performance of the contract; case example, where a contract to install and maintain machinery in a factory was frustrated when the factory was destroyed by fire - the factory was not the subject matter of the contract, but was nevertheless essential to its performance
essential; Appleby v Myers [1867]
Discharge by Breach: Effect of Terminating a Contract for Repudiatory Breach: The risks of wrongful termination: This uncertainty of the Hong Kong Fir test combined with the risks described above often leads commercial parties to inject certainty into their contracts by _ agreeing a list of breaches which will give rise to a right to terminate
explicitly
Discharge by Frustration: Limitations: 4. Provided for in the Contract: in other words...
express contractual provision
Discharge by Frustration: Limitations: 4. Provided for in the Contract: The doctrine of frustration cannot override _ and _ contractual provisions for the frustrating event; commercial contracts often contain what is known as a _ _ clause
express, unambiguous; force majeure
Discharge by Performance: the Entire Obligations Rule: Held: the action _ ; the contract was said to be _ ; Cutter was obliged to perform the given duty _ before he could demand payment - as the contract had not been completely performed the widow was entitled to nothing
failed; entire; fully
Discharge by Frustration: Limitations: 2. Caused by the Default of a Party: The doctrine will not apply where the event was induced by one of the parties. The party alleging self-induced frustration must prove that the other party is at _
fault
Discharge by Frustration: Performance is "Radically Different": 1. Performance is Impossible: Taylor v Caldwell: the subject matter of the contract (a Hall) was destroyed by _ the day before the first concert; it was held that the contract should be construed as subject to an implied condition that the parties shall be excused if, before breach, performance becomes impossible because of the ' _ ' of the thing without default of the either side; accordingly, _ would be excused from using the gardens and paying the money; _ would be excused from their promise to give the use of the Hall and Gardens
fire; perishing; Taylor; Caldwell
Discharge by Performance: the Entire Obligations Rule: Exceptions: c) Divisible Obligation: Some contracts are clearly intended to be divided into parts eg the payment of a salary under a _ contract of employment; if this is the case, then the performing party is entitled to payment for _ _ which is performed; however, the question as to whether a contract is divisible or entire depends upon the _ of the parties
fixed; each part; intention
Discharge by Frustration: Limitations: 3. Which the Parties Could Reasonably Have Contemplated: in other words...
foreseeable events
Discharge by Frustration: Consequences: Consequences under Statute: the Law Reform (Frustrated Contracts) Act 1943: the Act does not apply to what, as under common law these are automatically discharged
future obligations
Discharge by Breach: Effect of Terminating a Contract for Repudiatory Breach: The risks of wrongful termination: It is generally no excuse for the aggrieved party, A, to plead that they acted in _ _ believing that B's breach justified the remedial action that was taken
good faith
Discharge by Breach: Breach of Condition: in certain circumstances, the innocent pay may in addition treat the contract have what; case
having been terminated for repudiatory breach; Bettini v Gye [1876]
Discharge by Performance: the Entire Obligations Rule: Exceptions: a) Acceptance of Partial Performance: Where one party has given only partial performance of the contractual obligations, it is possible that the _ party, rather than reject the work done, might accept that part of the performance; however, it should be noted that such an acceptance of partial performance is at the _ of the innocent party
innocent; discretion
Discharge by Performance: Defences to Allegations of Failure to Perform: 1. Tender of Performance: in relation to payment of a debt, a plea of tender does not discharge the debt, however it would prevent the creditor from claiming what (2) on that debt subsequent to the tender of performance
interest, damages
Discharge by Frustration: Consequences: Common Law: when a frustrating event occurs, the contract is terminated at the date of the frustrating event, _ of the wishes of the parties, and therefore the parties are discharged from all future obligations
irrespective
Discharge by Breach: the Right of Election: the Benefits of Affirmation: if a party does affirm a contract, it is important to note that the innocent party will retain a claim for damages arising from the breach but cannot terminate as a result of it - so the damages would not include compensation for_ _ _ of the contract as a whole
loss of performance
Discharge by Agreement: 1. Discharge by a Subsequent Binding Contract Between the Parties: for example, the contract may be discharged by a _ _ ; this is a new contract by which each party agrees to what what; see what case example ; this type of arrangement is v common in _ situation
mutual waiver; waive their rights under the old contract in consideration for being released from their obligation under the old contract; the Hannah Blumenthal [1983]; commercial
Discharge by Frustration: Consequences: Consequences under Statute: the Law Reform (Frustrated Contracts) Act 1943: s 1(3): this section may be of some assistance where the benefit conferred before the frustrating even occurs is what; it provides that a party who has gained a valuable benefit under the contract before the frustrating event may be required to pay a _ sum for it; the leading case on the interpretation of s 1(3) is what
non-monetary benefit; just; BP Exploration Co (Libya) Ltd v Hunt (No.2) [1982]
Discharge by Frustration: Performance is "Radically Different": 3. Common Purpose is Frustrated: however, there must be an absolute _ of the event which is the common purpose/foundation of the contract - if some part of the contract remains possible to perform then the contract will not be frustrated; case where the the CoA held that the D was not discharged from his obligations to rent a steamboat by the postponement of the Naval review
non-occurence; Herne Bay Steamboat Co Ltd v Hutton [1903]
Discharge by Breach: Anticipatory Breach: this is where a party indicates he will _ _ his contractual obligations in advance of the date for performance; a party who, by words or conduct, leads a reasonable person to conclude that he does not intend to perform his part of the contract, is said to have ' _ ' the contract; the innocent party has an immediate right to ' _ ' the renunciation and to treat the contract as terminated
not perform; renounced; accept
Discharge by Agreement: 2. Discharge by the Operation of a Term in the Contract: A Condition Precedent: Where the coming into existence of a contract is subject to the _ of a specific event, the contract is said to be subject to a condition precedent; the contract is _ until the condition is satisfied
occurrence; suspended
Intro: four ways a contract might be discharged (4)
performance; agreement; breach; frustration
Discharge by Breach: Effect of Terminating a Contract for Repudiatory Breach: this is a _ remedy that not only puts an end to all primary obligations of both parties remaining unperformed, but also the innocent party can claim damages arising from the specified breach and the loss of the contract as a whole
powerful
Discharge by Breach: the Right of Election: Limits on Affirmation of a Contract: A claimant is not entitled to affirm a contract if b) The innocent party has no 'legitimate interest, financial or otherwise' in affirming the contract and continuing with performance: the application of the 'legitimate interest' exception has proved to be _ and it remains unclear what will constitute a LE in affirming the contract; the most recent authority is which case; in which Simon J said that it will only be in _ cases that the innocent party will not have a LE in affirmation
problematic; Ocean Marine Navigation Ltd v Koch Carbon Inc (The Dynamic) [2003]; extreme
Discharge by Frustration: Performance is "Radically Different": 3. Common Purpose is Frustrated: Krell v Henry [1903]: the CoA held that the contract (to hire a third-floor flat on Pall Mall) was frustrated, even though no express mention of the _ of hiring the room was made in the contract; the court held that there was a necessary _ from the circumstances, recognised by both parties, that the coronation procession, and the relative position of the rooms, was the foundation of the contract which was frustrated by the King's illness
purpose; inference
Discharge by Performance: the Entire Obligations Rule: Exceptions: a) Acceptance of Partial Performance: If the innocent party voluntarily accepts partial performance, then the party in default will be entitled to payment on a _ _ basis; this means what, and is a remedy whereby the C may be able to claim a reasonable sum so that the D is not unjustly enriched; the court will assess the value of a quantum meruit award on an _ basis using the information available to it, for example the usual market price for goods or services
quantum meruit; as much as he deserves; objective
Discharge by Breach: the Right of Election: the Benefits of Affirmation: if a party has _ the contract, the innocent party can still affirm the contract, perform his own obligations and claim the sum due under the contract in due course; key case which illustrates this, where the HoL held that the contract remained unaffected by the unaccepted repudiation and the appellant company (who advertised the Ds business on litter bins for three years) was entitled to recover the sums due under the contract
renounced; White and Carter (Councils) Ltd v McGregor [1962]
Discharge by Frustration: Limitations: 2. Caused by the Default of a Party: in other words...
self-induced frustration
Discharge by Performance: Defences to Allegations of Failure to Perform: 2. Performance by a Third Party: Where a contract involves the performance of a _ , it is possible that this can be provided by a third party to the contract (but this is not always permitted)
service
Discharge by Performance: the Entire Obligations Rule: Cutter v Powell [1796]: Facts: the C agreed to serve on a _ from Jamaica to Liverpool; the D, Powell, agreed in return to pay Cutter 30 _ (which was four times the going rate) 'provided he proceeds, continues and does his duty... from hence to the port of Liverpool''; Cutter died at sea some _ weeks into the voyage and nineteen days short of Liverpool; Cutter's _ brought an action to recover a proportion of the agreed contract price
ship; guineas; 7; widoww
Discharge by Agreement: 2. Discharge by the Operation of a Term in the Contract: A Condition Subsequent: this is a term providing for the termination of the contract and the discharge of obligations outstanding under the contract, in the event of a _ _ ; case authority
specific occurrence; Head v Tattersall [1871]
Discharge by Frustration: Performance is "Radically Different": 3. Common Purpose is Frustrated: Where the common purpose for which the contract was entered into can no longer be carried out because of some _ event, the contract may be frustrated despite the fact that it is still physically possible to carry out the contract; this is demonstrated by a number of cases known collectively as what; key case in particular here
supervening; the Coronation Cases; Krell v Henry [1903]
Discharge by Breach: the Right of Election: the Benefits of Affirmation: If the innocent party elects to affirm the contract, the contract _ ; and the rights of the innocent party are _
survives; preserved
Discharge by Breach: Discharge by Breach: Breach of Condition: the innocent party may elect to _ (as provided for by the contract); or it may elect to _ the contract in which case the right to terminate the contract is waived by election
terminate; affirm
Discharge by Frustration: Consequences: the common law set out these consequences, but the common law position was significantly altered by what Act
the Law Reform (Frustrated Contracts) Act 1943
Discharge by Performance: A contractual obligation is discharged by a complete performance of the obligation. The promisee is entitled to the benefit of complete performance exactly according to the promisor's 'undertaking'. A promisor who only performs part of their obligation is not discharged from that obligation. This is known as what rule
the entire obligations rule
Discharge by Agreement: 1. Discharge by a Subsequent Binding Contract Between the Parties: the essence of this concept is what
the formation of a new contract
Discharge by Frustration: Consequences: Consequences under Statute: the Law Reform (Frustrated Contracts) Act 1943: s 1(2): Gamerco SA v ICM/Fair Warning (Agency) Ltd [1995]: Mr Justice Garland held that the burden of proof is on whom (the party seeking to retain or recover their expenses from the sum of money paid or payable in advance); also, the court has a ' _ _ ' when considering whether and how much to allow the payee to retain or recover to account for his expenses under s 1(2) (provided it does not exceed the actual expenses incurred or the sums paid or payable in advance of the frustrating event)
the payee; broad discretion
Discharge by Frustration: Performance is "Radically Different": 1. Performance is Impossible: Case law shows that the doctrine of frustration may be invoked in circumstances where the contract becomes impossible to perform due to the _ or _ _ of some object necessary to the performance of the contract; key case law
total, partial destruction; Taylor v Caldwell [1863]
Discharge by Agreement: 2. Discharge by the Operation of a Term in the Contract: A Condition Precedent: Where a condition precedent is not fulfilled, there is no _ _ because the rights and obligations under the contract were contingent upon an event which did not occur, ie the rights and obligations never came into existence in the first place; case authority
true discharge; Pym v Campbell [1856]
Discharge by Frustration: Performance is "Radically Different": 1. Performance is Impossible: the concept of _ is common in shipping contracts; even _ _ may discharge a contract if the interruption is such as to make performance substantially different from what was originally undertaken; case where contract was frustrated as a ship was requisitioned for 5 months out of a year's charterparty; however, case where court held that requisitioning of a ship (for war) in Feb 1915 did not frustrate a 5-year charterparty that was to last until Dec 1917 as they though the war would be over soon and therefore a considerable proportion of the charterparty would remain
unavailability; temporary unavailability; Bank Line v Arthur Capel & Co [1919]; Tamplin SS Co Ltd v Anglo-Mexican Petroleum Co [1916]
Discharge by Performance: Defences to Allegations of Failure to Perform: 1. Tender of Performance: In an action for breach of contract for failing to perform an obligation, it is a good defence for the D to show that he 'tendered performance'. In order for a plea of tender to be successful, the promisor must show that he _ _ to perform his obligations in accordance with the terms of the contract, but that the promisee refused to accept such performance
unconditionally offered
Discharge by Breach: the Right of Election: How a Contract is Affirmed: There must be evidence of a very clear and _ commitment to continuing with the contract; case authority; a party who chooses to affirm the contract is not required to _ their loss (White v McGregory) what other two things happen (2)
unequivocal; Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia [1996]; mitigate; contractual obligations remain, entitled to damages
Discharge by Frustration: Consequences: Consequences under Statute: the Law Reform (Frustrated Contracts) Act 1943: s 1(3): BP Exploration Co (Libya) Ltd v Hunt (No.2) [1982]: Issue: key question here was whether the _ _ gained by Hunt was the value of the work carried out by BP (ie the value of finding and developing the oilfield) or the value of the end benefit received by Hunt (significantly less, because the oil field was significantly devalued by having been expropriated by the Libyan Government)
valuable benefit
Discharge by Breach: Effect of Terminating a Contract for Repudiatory Breach: The risks of wrongful termination: A party (A) who gives notice to terminate its contract with another (B) on the grounds of a breach which it believes to be a breach of a condition and therefore repudiatory involved a high degree of risk as if the court later finds that the breach was of a _ ; then A's wrongful notice will be regarded as a ' _ ' of future performance and may be accepted by B as repudiating the contract; this can be _ commercially ; the risks for the terminating party are exacerbated by the fact that unless the term which has been breached has been defined as a condition then categorisation depends on application of which test which sets a high bar
warranty; rununciation; disastrous; Hong Kong Fir test
