LAW OF CONTRACTS: Your Sword, Your Shield 10

Hello.

Today, I will be writing about how a contract can be discharged.

A contract is said to be discharged when it has been brought to an end or regarded as concluded, thereby discharging the parties of any further duties, obligations or rights thereto.

Discharge of a contract can occur by:

1. Performance

2. Breach

3. Frustration

4. Agreement

5. Lapse of time

6. Operation of the law

 

1. Discharge by Performance

A contract is said to be discharged if both parties to that contract have performed their respective obligations under it.

Where a small part of the contract has not being fully performed but is substantially completed with a small part still not done or badly done, the party is entitled to the amount agreed, less deductions to remedy the part not done or badly done.

Where the performance falls substantially below what was agreed, the defaulting party may be unable to claim any remuneration for his partial performance, except accepted by the other party.

See the cases of:

Cutter v Powell (1795) 

 
Facts
A seaman who was to be paid his wages after the end of a voyage died just a few days away from port. 

His widow was not able to recover any of his wages because he had not completed performance of his contractual obligation. 

However, this situation is now provided for by the Merchant Shipping Act 1970.

Planche v Colburn (1831)

 
Facts
The plaintiff was to write a book on 'Costume and Ancient Armour' for a series and was to receive £100 on completion of the book. 

After he had done the necessary research but before the book had been written, the publishers abandoned the series. 

He claimed alternatively on the original contract and on a quantum meruit.

Held
The court held that:

• the original contract had been discharged by the defendants' breach;
• no new contract had been substituted; and 
• the plaintiff could obtain 50 guineas as reasonable remuneration on a quantum meruit. 
• This claim was independent of the original contract and was based on quasi-contract.

 
Dakin v Lee [1916] 1 KB 566

Facts
The defendants promised to build a house according to specification and failed to carry out exactly all the specifications, for example, concrete not four feet deep as specified, wrong joining of certain rolled steel joists and concrete not properly mixed. 

Held
The Court of Appeal held that the builders were entitled to recover the contract price, less so much as ought to be allowed in respect of the items found to be defective.

2. Discharge by Breach

A contract will be discharged by breach where a party fails to fulfill or intimates the other party that he does not intend to fulfill his obligations under the contract.

 

 

3.   Discharge by Frustration

A contract will be automatically discharged if during the life of a contract, some event, due to no fault of either party, occurs to render further performance of the contract impossible or illegal, or completely changes the circumstances under which it may be performed. 

Examples of such events are:

• Fire outbreak 
• Storm 
• Ship wreck 
• Riot 
• Strike actions 
• Death or incapacity of the parties 
• War outbreak
• And other man made calamities.

However, self induced frustration or foreseen events will not discharge the contract.

 

 

Taylor v Caldwell (1863) 

 
Facts
Caldwell agreed to let a music hall to Taylor so that four concerts could be held there. Before the date of the first concert, the hall was destroyed by fire. 

Taylor claimed damages for Caldwell's failure to make the premises available.

Held 
The court held that the claim for breach of contract must fail since it had become impossible to fulfill. 

The contractual obligation was dependent upon the continued existence of a particular object. 

Condor v The Baron Knights

Facts
A drummer engaged to play in a pop group was contractually bound to work on seven nights a week when work was available. 

After an illness, Condor's doctor advised that it was only safe to employ him on four nights a week, although Condor himself was willing to work every night.

It was necessary to engage another drummer who could safely work on seven nights each week. The court held that Condor's contract of employment had been frustrated in a commercial sense. 

It was impracticable to engage a stand-in for the three nights a week when Condor could not work, since this involved double rehearsals of the group's music and comedy routines. 

Phillips v Alhambra Palace Co

 
Facts
One partner in a firm of music hall proprietors died after a troupe of performers had been engaged. 

The contract with the performers was held not to be frustrated because the contract was not of a personal nature, and could be enforced against the surviving partners. 

 

Graves v Cohen (1929) 

Facts 
The court held that the death of a racehorse owner frustrated the contract with his employee, a jockey, because the contract created a relationship of mutual confidence. 

 

Krell v Henry [1903] 

Facts
Henry hired a room from Krell for two days, to be used as a position from which to view the coronation procession of Edward VII, but the contract itself made no reference to that intended use. 

The King's illness caused a postponement of the procession. 

Held
It was held that Henry was excused from paying the rent for the room. 

The holding of the procession on the dates planned was regarded by both parties as basic to enforcement of the contract. 

Herne Bay Steamboat Co v Hutton [1903]

 
Facts 
Herne Bay agreed to hire a steamboat to Hutton for a period of two days for the purpose of taking passengers to Spithead to cruise round the fleet and see the naval review on the occasion of Edward VII's coronation. 

The review was cancelled, but the boat could have been used to cruise round the assembled fleet. 

Held
It was held that the contract was not frustrated. The holding of the naval review was not the only event upon which the intended use of the boat was dependent. 

The other object of the contract was to cruise round the fleet, and this remained capable of fulfillment. 

 

4.  Discharge by Agreement

This will occur when parties to a contract decide to vary the terms of agreement by undoing the previous contract with another contract or completely discharge the contract.

The conditions for this kind of discharge to be effective must be valid.

Hochster v De La Tour (1853)

 
Facts
An employer told his employee (a travelling courier) that before the time for performance arrived that he would not require his services. 

The courier sued for damages at once. 

Held
The court held that he was entitled to do so. 

5.  Lapse of Time

Soon after limitation period of a contract, the contract gets discharged.

Example: 

There is a contract of loan between A and B. Her limitation period is 3 years.

After the completion of 3rd year, the discharge of contract takes place and debtor – creditor relationship comes an end. 

Thus it becomes time bad debt which cannot be recovered by means of legal proceedings. 

This depends on the terms of the contract.

  

6.  Operation of law

This will arise as laid down by the law in the following instances:

 

Material alteration:

When a contract is contained in a written document and one party alters it in material particular without the consent of the other party, the effect of alteration would be the same as that of cancellation of the document.

Example.:

Example. Adamu contracted to sell his plot of 500 sq. yards to Balogun for N1,000,000. 

The sale deed was executed in possession of A. 

Before the registration of the sale deed, Adamu altered the deed and made it a deed for sale of 300 sq. yards plot for N1,000,000. 

In this case, the contract is discharged and Balogun is not bound to purchase the plot.

Insolvency.:

Sometimes a person is declared insolvent by the Court of Law. In such cases, he is discharged from all liabilities and debts incurred prior to the court orders.

Death of a Promisor:

Where a contract involves personal skills or qualifications of the promisor himself, in such cases, the contract is discharged on the death of promisor.

Example :

Example Ada, an expert, agreed with Bobo to translate some part of book from French to English. 

Ada died before the translation work started. In this case, the contract is of personal nature as it involves the personal qualification of the promisor and thus, the contract is discharged on the death of A.

Merger of rights:

The inferior rights and the superior rights coincide and meet in one and the same person. 

In such cases, the inferior rights merge into the superior rights. On merger, the inferior rights vanish and are not required to be enforced.

Example.:

Akin gave his land on lease to B. 

Subsequently, Bayo bought the land which he was holding under the lease. 

In this case, Bayo becomes the owner of the property and his rights as a lessee merge into his rights as the owner. 

Thus, his rights as a lessee vanish, and are not to be enforced.

I will stop here for now. In my next post, I will write about the remedies available for an aggrieved party in a contract and that will be the final topic in the series of law of contracts.