Discharge of contract: discharge by performance (and the rules on part performance), by breach (including anticipatory breach), by frustration, and by agreement.

What this dot point is asking

This dot point covers discharge of contract: the ways a contract is brought to an end. There are four: by performance, by breach (including anticipatory breach), by frustration, and by agreement. You need the rules for each, especially the entire obligations rule and its exceptions for performance, and the doctrine of frustration with its limits and statutory effects. WJEC tests both explanation with cases and application to scenarios.

The answer

Discharge by performance

The strict rule is softened by exceptions that allow recovery:

• Substantial performance: where the contract is substantially performed, the price is recoverable less the cost of remedying defects (Hoenig v Isaacs).
• Severable (divisible) obligations: payment is due for each completed part.
• Prevention of performance: where one party prevents the other from completing, the latter may claim for work done (Planche v Colburn).
• Acceptance of part performance: where the other party freely accepts partial performance, a reasonable sum is payable (but not where there is no real choice, Sumpter v Hedges).

Discharge by breach

Discharge by frustration

Frustration discharges a contract where, after formation, an unforeseen event beyond the parties' control makes performance impossible, illegal, or radically different from what was agreed. Frustrating events include destruction of the subject matter (Taylor v Caldwell, a music hall burned down), unavailability, supervening illegality, and failure of the sole purpose (Krell v Henry, a room hired only to view the coronation; contrast Herne Bay Steam Boat, where another purpose remained). It does not apply to mere hardship or a bad bargain (Davis Contractors), self-induced frustration (Maritime National Fish v Ocean Trawlers), or foreseen events. The Law Reform (Frustrated Contracts) Act 1943 governs the effects: money paid before the event is recoverable and money payable ceases to be due, subject to an allowance for expenses, and a party who received a valuable benefit may have to pay for it.

Discharge by agreement

The parties may simply agree to bring the contract to an end. This requires consideration (each party giving up rights) or a formal deed.

Examples in context

Frustration is best seen through the coronation cases. In Krell v Henry a room was hired specifically to watch the coronation procession; when the King fell ill and the procession was cancelled, the sole purpose of the contract failed, so it was frustrated. But in Herne Bay Steam Boat a boat hired both to view the naval review and to cruise the fleet was not frustrated when the review was cancelled, because the second purpose, cruising round the fleet, remained possible. Taylor v Caldwell shows the simplest case, impossibility: when the hired music hall burned down, neither party was at fault and performance was impossible, so the contract was discharged. The limits matter just as much: Davis Contractors shows that a contract merely made more onerous (here by labour shortages) is not frustrated, and Maritime National Fish shows that a party cannot rely on a frustration it brought about itself.

Try this

Q1. State the entire obligations rule and a case illustrating it. [2 marks]

• Cue. Performance must be complete and exact before payment is due (Cutter v Powell).

Q2. Give two events that can frustrate a contract. [2 marks]

• Cue. Destruction of the subject matter (Taylor v Caldwell) and failure of the sole purpose (Krell v Henry).

Q3. Explain the ways in which a contract may be discharged. [12 marks]

• What the marker wants. Performance (the entire obligations rule and its exceptions), breach (including anticipatory breach), frustration (the test, limits and the 1943 Act) and agreement, with cases.