Discharge of a Contract

Discharge of a Contract

There are four ways in which a contract may be discharged.

Ø Agreement.

Ø Performance.

Ø Frustration.

Ø Breach.

1. DISCHARGE BY AGREEMENT.

A contract can be discharged in precisely the same way it was formed.

Notice that there must be consideration from both sides.

2. DISCHARGE BY PERFORMANCE.

Complete and proper performance will discharge both parties.

The original rule was that performance must be precise and exact.

Re Moore & Co Ltd and Landauer & Co [1921] 2 KB 519.

A contract was drawn up for the sale of tinned fruit stating that the

tins were to be packed 30 tins to a case. When the goods arrived,

although the correct number of tins was delivered, they were packed in

cases of only 24 tins.

This could lead to unjust results.

Cutter v Powell (1795) 6 Term Rep 320.

The defendant agreed to pay Cutter 30 guineas provided he executed his

duties as second mate on a voyage from Kingston, Jamaica to Liverpool.

Cutter began the voyage but died when the ship was 19 days short of

Liverpool. Cutter’s widow claimed a portion of the wages.

The courts have established a number of equitable principles with the

aim of

achieving justice between the parties.

(a) Substantial Performance.

If the contract has been substantially performed the innocent party

cannot treat himself as discharged but may be able to counter-claim

his loss sustained by reason of the incomplete performance. What

amounts to substantial performance is a question of degree – a

question of fact dependent upon the circumstances.

Dakin v Lee [1916] 1 KB 566.

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...rties’ rights and obligations arising under the

contract, to the detriment of the consumer.

Director General of Fair Trading v First National Bank [2001] UKHL 52.

This case was decided under the predecessor of these regulations.

Lord Bingham stated that substantive unfairness was complimented by

the requirement of good faith, which was evidenced by fair and open

dealing. Openness requires that terms should be expressed fully,

clearly and legibly, containing no pitfalls or traps, with prominence

being given to terms which might operate disadvantageously to the

consumer. Fair dealing required that the supplier should not, whether

deliberately or unconsciously, take advantage of the consumer’s

necessity, indigence, lack of experience, unfamiliarity with the

subject matter of the contract or weak bargaining position.