Discharge of Contracts

• Pages: 238-259

CHAPTER 13

DISCHARGE OF CONTRACTS

DISCHARGE BY PERFORMANCE

Performance must be complete

The general rule is that a promisor is not discharged from his contractual obligations

unless he has completely and precisely performed the exact thing he has agreed to

do. Where he has only partially carried out his obligations, there is no discharge.

For instance, if a seller delivers to the buyer less than the agreed quantity of goods,

the buyer may reject them;

1 similarly, where the seller delivers more than the

quantity ordered, the buyer may reject the whole consignment, and cannot be

required to select the correct quantity from the bulk delivered.

2 And where B agreed

to purchase 3,000 cans of fruit from S, to be packed in cases containing 30 cans, and

on delivery it was discovered that part of the consignment had been packed in

cases containing 24 cans, B was held to be entitled to reject the entire consignment,

notwithstanding that the correct quantity of cans had been delivered.

3 Also,

failure by a party to observe a time stipulation may entitle the other party to

repudiate the agreement. Thus, for example, where a contract for the sale of a fl at

required the purchase price to be tendered by ‘5pm’ on a certain day, and

the purchaser tendered it at 5.10 pm, it was held by the Privy Council that the

vendor was entitled to repudiate the agreement and retain the deposit paid by the

purchaser.

4

Further, a party who has only partially performed his obligations cannot recover

anything for the work he has done. Thus, for example, a building contractor who has

agreed to construct a house for a lump sum, and who abandons the work after

erecting 80 per cent of the building, is not entitled to any remuneration,

5 unless the

contract provides otherwise. The leading case is Cutter v Powell . 6 Here, the defendant

agreed to pay Cutter 30 guineas provided that he ‘proceeded, continued and did his

duty’ as second mate on a ship sailing from Jamaica to Liverpool, England. The

voyage began on 2 August. Cutter died on 20 September, 19 days before the ship

arrived at Liverpool. An action by Cutter’s widow to recover a proportion of the

money failed, as Cutter had not completely performed his obligations under the

contract.

1 See, for example, s 30(1), Sale of Goods Act (Jamaica); s 31(1), Sale of Goods Act, Ch 337 (The

Bahamas); and s 31(1), Sale of Goods Act, Cap 393 (Antigua and Barbuda).

2 See s 30(2), Sale of Goods Act (Jamaica); s 31(2), Sale of Goods Act, Ch 337; and s 31(2), Sale of

Goods Act, Cap 393 (Antigua and Barbuda).

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

4 Union Eagle Ltd v Golden Achievement Ltd [1997] 2 All ER 215.

5 See Sumpter v Hedges [1898] 1 QB 673; Bolton v Mahadeva [1972] 2 All ER 1332.

6 [1775–1802] All ER Rep 159.

Chapter 13: Discharge of Contracts 239

Exceptions to the rule of complete performance

Divisible (severable) contracts or obligations

Where the parties intended their contract to be divided into two or more separate

parts, each part is a separate contract which can be discharged separately; for

example, where there is an agreement for the delivery of goods by instalments,

payment is due from the buyer upon delivery of each instalment, and the buyer is

not entitled to defer payments until delivery of all the instalments, unless the contract

so provides;

7 similarly, in a building contract, where the work and services to be

performed by the contractor are itemised, the terms of the contract may show that

each service is to be paid for when performed.

8

Such a divisible contract is to be distinguished from an ‘entire’ contract, which is

one in which complete performance by one party is a condition precedent to the liability

of the other party. Under such a contract the consideration is usually a lump sum which

is payable only upon complete performance by the other party. A partial performance of

an entire contract by a party will normally entitle him to nothing, because the payment

is not due under the contract, nor is any smaller sum for the value of his partial perfor-

mance due, since the court has no power to apportion the consideration.

9

Prevention of performance

Where a party is prevented from completing his part of the bargain by some act or

omission of the other party, he may recover payment for the work he has done on a

quantum meruit , or alternatively he may sue the other party for breach of contract.

For example, where P agreed to write a book for D, to be published in a series called

‘The Juvenile Library’, payment of £100 to be made on completion and, after about

half of the book had been written, D abandoned the series, it was held that P could

recover £50 as reasonable remuneration on a quantum meruit. 10

Substantial performance

Rigorous application of the rule in Cutter v Powell 11 might lead to great injustice if, for

instance, in a building contract, a relatively minor defect of workmanship on the part

of the contractor entitled the building owner to refuse to make any payment. To

avoid such an unfair result, the courts have developed the doctrine of ‘substantial

performance’, which is that if the contract has been substantially, though not

completely or precisely performed, the ‘injured’ party is not discharged from his

obligation to pay, though he will be able to counterclaim for damages to remedy any

7 Nigerwest Steel Co Ltd v Eyiowuawi [1978] NCLR 335. See also Bolton v Mahadeva, n 5 above.

8 A Jamaican example is Madden v PC Reynolds Ltd (2001) Court of Appeal, Jamaica, Civ App No 21

of 2000, unreported [Carilaw JM 2001 CA 67], where the contract had eight separate and severable

portions.

9 Chitty on Contracts , Vol 1, 24th edn, para 1278; cited by Langrin JA in Madden v PC Reynolds Ltd, ibid.

10 Planche v Colburn [1824–34] All ER Rep 94.

11 Above, n 6.