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Discharge (By Performance, Breach, Frustration) Notes

Irish BCL Notes > Irish Contract Law Notes

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Discharge by Agreement/Performance Condition Precedent: A condition that must be performed before the accruing of a right. Concurrent Condition: A condition that is to be performed by one party at the same time that a mutual condition is to be performed by another party. The Hannah Blumenthal (HoL 1982) Facts

* The parties had contracted for the sale of a ship and the contract contained a clause for arbitration in London.

* Following the emergence of faults in the ship, the buyers made a complaint against the defendants, but didn't actually take the case to arbitration for three years.

* Upon their resumption of the proceedings, the sellers took a case, seeking a declaration that the arbitration agreement had been terminated. Issue

* Dischage by agreement - Silence Judgment

* Lord Diplock (concurring)

* Adandonment of a contract which is still executory, is effected by the parties entering into a 'contract of abandonment' by which each party promises to release the other from his primary contractual obligations.

* The ordinary principles of contract apply to the contract of abandonment - i.e. the communications of the parties are assessed with regard to what the reasonable man would have understood them to mean.

* This arises from the principle that where somebody is led to believe something by the other party and that belief is reasonable, the former will not suffer damage by relying on his reasonable belief.

* Even if this was a case where a belief in the determination of the arbitration clause was reasonable, the fact that the plaintiffs did not have such a belief is good grounds to hold that the clause is still binding - the parties did not rely on its termination, thus there was no injurious reliance on their part.

* Lord Keith of Kinkel (concurring - in full with Lord Brandon)

* Lord Roskill (concurring)

* Lord Brandon of Oakbrook

* The sellers could only establish that the arbitration had been abandoned by apparent inaction of the buyers, on which the sellers relied to their detriment, if they could prove that the buyers' conduct was such as to induce a reasonable belief that they intended to abandon the arbitration and the sellers in fact held such a reasonable belief.

* In the alternative, the conduct of the parties may be such that an agreement to terminate the contract could be implied from it.

* In the sellers in this case clearly did not believe the arbitration clause had been abandoned - their solicitors were continuing to seek witnesses for the hearing right up to the time of the resumption of proceedings.

* Lord Brightman (concurring) Cutter v Powell (KB 1795) Facts

* The plaintiff was the executor of the estate of a man to whom the defendant had promised 30 guineas to be paid after the man had performed all his duties in in

*

return for services rendered on his ship. The man had failed to abide by his contractual obligations for the entire journey, and the plaintiff sought money from the defendants on a quantum meruit basis for the services discharged up to that point.

Issue

* Termination of Contract - Performance Judgment

* Lord Kenyon CJ

* Ashhurst J

* The contract was for services to be performed for the duration of the voyage - this condition was not met, and thus there is no contract under which the defendant owes his estate anything - considering that the defendant offered him considerably more for this more onerous obligation there is no reason not to enforce it.

* Grose J

* Lawrence J Sumpter v Hedges (CA 1898) Facts

* The plaintiff was a builder who had contracted with the defendant to erect buildings on his land for a lump sum.

* Having done part of the work, the plaintiff abandoned it and the defendant completed the buildings. Issue

* Discharge of Contract - Performance Judgment

* AL Smith LJ

* Where there is a contract to do something for a lump sum, the price can not be recovered until the work is completed.

* In the absence of a fresh contract, the plaintiff could not recover from the plaintiff on a quantum meruit basis.

* Chitty LJ (concurred)

* Collins LJ

* The plaintiff abandoned the contract - if the plaintiff had broken his contract and the defendant proceeded to complete the buildings, then the plaintiff may have been able to sue on the basis that the defendant had taken the benefit of the work done - in that case a new contract would have been implied.

* In this case, the defendant had no option to take or refuse the benefit of the work already done - he could not leave the buildings in their unfinished state.

* As there was no fresh contract, the plaintiff can not recover. Coughlan v Moloney (Ir CA 1905) Facts

* The plaintiff had agreed to build a house for the defendants for a lump sum before a deadline, although the defendant did pay a number of installments.

* The house was not completed by the deadline, and the defendants took possession of the unfinished building, refused to allow the plaintiff access to it and refused to pay him the balance.

Issue

* Discharge of Contract - Performance Judgment

* Lord Ashbourne C

* The plaintiffs could not recover on a quantum meruit merely becaue the defendants had received the benefits of a part performance, unless the existence of a contract to pay for the work done could be inferred from the circumstances.

* In this case, there was no evidence from which one could infer such a contract.

* Walker LJ (concurred)

* Holmes LJ

* This case was argued on the basis that the defendant could recover from the original contract, not on the ground that a new contract existed - no such contract existed anyway. Hoenig v Isaacs (CA 1952) Facts

* The plaintiff was an interior decorator who agreed to decorate and furnish the defendant's flat for PS750, the terms of payment being, "net cash as the work proceeds and balance on completion."

* The installments were paid and the defendant occupied the flat, but refused to pay the balance on the ground that certain work done and furniture supplied was defective.

* On reference to an arbitrator, it was found that there had substantial compliance with the contract, despite the defects. Issue

* Discharge - Subtantial Performance Judgment

* Somervell LJ (concurring)

* In the case of a contract for a lump sum payable on completion, the defendant can not repudiate liability on the ground that the work, though substantially performed, is in some respects not in accordance with the contract - thus the defendant is liable for the balance, minus a deduction for the cost of making good the defects.

* The question is whether the term breached is one collateral to the main purpose - this case is on the border line, but by using the articles provided (articles which he could have avoided using) he forfeited the opportunity to repudiate his liability.

* Denning LJ (concurring)

* The question in this case is whether the complete performance a condition precedent to payment on the true construction of the contract.

* In the case where a lump sum is payed, complete performance is usually construed as a term and not a condition of the contract - thus not every breach absolves the employer, but only such a breach that goes to the root of the matter.

* If the parties wish to make performance an absolute condition they must expressly state it.

* In this case, even if perfect performance was a condition precedent, then the

*

absence of a refusal of the furniture on the part of the defendant was a waiver of that condition. Romer LJ (concurring)

* There was sufficient evidence for the referee to find that there was substantial performance.

* In the alternative, the defendant waived his right to repudiate liability. Frustration Paradine v Jane (QB 1647)

Facts

* The plaintiff sued the defendant for a debt, which the defendant had been unable to pay as his lands had been overrun during the English Civil War. Issue

* Frustration Judgment

* Where an individual takes a contractual obligation on himself, he must observe it regardless of any circumstance - any instance for which he wished to exclude liability could have been set out by him in the contract. Taylor v Caldwell (QB 1863) Facts

* The plaintiff and defendant contracted that the plaintiff should have the use of a Music Hall.

* The Hall burnt down before the time for completion came and the contract had no express stipulations as to the obligations of the parties in such a situation. Issue

* Frustration Judgment (Blackburn J)

* Where, from the nature of the contract, the parties must have known that execution of the contract is dependent on the continued existence of some thing then, in the case of that thing ceasing to exist when the time for execution comes, without fault on the part of the contractor, the contractual obligations will cease to have effect, unless there is an expressed or implied condition guaranteeing the thing's continued existence.

* This is merely recognising what must have been the intentions of the parties at the time of contracting.

* An analogy can be drawn with contracts regarding living things - the death of a horse that is to be sold excuses both parties from performance.

* Thus, the music hall having ceased to exist, the parties in this case are excused from their contractual obligations. Davis Contractors v Farham UDC (HoL 1956) Facts

* The plaintiffs contracted with the defendants to build a number of houses for them.

* Without fault on the part of either party, the contract was completed late, partly as a result of inadequate availability of workers.

*

The plaintiffs sued for a sum of money on a quantum meruit basis, on the grounds that the contract had been frustrated.

Issue

* Frustration Judgment

* Viscount Simonds (concurring)

* If the doctrine of frustration rests on an implied term to the effect that the parties will not be bound if a certain event does or does not happen, the parties in this case would not have agreed to such a term.

* If it rests on the principle that the law intervenes where a certain event would make it unfair for both parties to be held to their obligations, it applies within very narrow limits, outside of which this case, not being covered by authority, falls.

* The contract had not been frustrated - the fact that circumstances had rendered the contract more onerous than expected, was not a grounds for relieving the plaintiffs of their obligations and allowing them to recover on a quantum meruit basis.

* Lord Morton of Henryton (concurring)

* Lord Reid (concurring)

* The doctrine of frustration lies not on adding implied terms but in giving a true construction to the terms which are in the contract read in the light of the nature of the contract and the surrounding circumstances - the court must look to the situation and ask whether the terms are wide enough to include it.

* In a contract of this kind the contractor undertakes to do the work for a definite sum and assumes the risk of the cost turning out to be more or less than expected - that the obligations turn out to be more onerous than expected does not render the contract to be of a wholly different kind than originally anticipated.

* Lord Radcliffe (concurring)

* 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 radically different from that which was undertaken by the contract.

* Two things preclude this contract from being frustrated - A) the circumstances were reasonably forseeable and could have been the subject of express contractual terms and B) time does not have the same significance for both sides and the owner protected himself against the possibility of going over time.

* Lord Somervell of Harrow (concurring)

* The risk of going over time is put on the builder - a number of terms in the contract attest to this. Chandler v Webster (CA 1904) Facts

* The defendant agreed to let to the plaintiff a room for the purpose of viewing the coronation procession.

* The procession was postponed as a result of the King's illness, and the plaintiff wished to recover the deposit, despite its becoming due before the time the procession was to take place. Issue

*

Frustration - Effects

Judgment

* Collins MR (concurring)

* The plaintiff was not entitled to recover the deposit he was paid and the defendant was entitled to recover the balance inasmuch as his right to that payment had accrued before the procession became impossible - if the contract bound him to pay before that date, then he can not use his failure to pay it at the appropriate time as justification for not paying it.

* The doctrine of frustration does not destroy the contract ab initio, it only releases the parties from future performance of their obligations.

* Romer LJ (concurring)

* Matthew LJ (concurring) Fibrosa v Fairbarn (HoL 1942) Facts

* The plaintiffs, who were based in Poland, agreed to purchase machinery from the defendants, who failed to deliver following the invasion of Poland by the Germans. Issue

* Frustration - Effects of Frustration Judgment

* Viscount Simon LC (concurring)

* Just because frustration does not render a contract void ab initio does not mean that the payer of money, for which he has not received the expected consideration, is entirely without remedy - the law will give a remedy for restitution in quasi-contract.

* Lord Atkin (concurring)

* Chandler was not based on authority - the rule is that a man who pays money in expectance of consideration and gets none is entitled to recover that money.

* Lord Russell of Killowen (concurring)

* An issue such as this does not arise A) where no money has been paid over in respect of the future consideration nor B) if the person paying has received some part of the consideration expected.

* However in this case, the money paid for consideration which had failed was recoverable.

* Lord MacMillan (concurring)

* English law takes a middle ground between complete restitution and letting the loss fall where it lies - where there is a total failure of consideration, the law will allow moneys paid in respect of it to be recovered.

* Lord Wright (concurring)

* In the case of unjust enrichment, the law implies a quasi-contractual obligation to repay money - this applies in cases of frustration, as the payment of money is conditional and the right to retain the money is extinguished when that condition fails.

* The resititution is dependent on entire consideration and total failure.

* Lord Roche (concurring)

* It is well settled that where there is a total failure of consideration for money paid, the money is recoverable.

* Lord Porter (concurring)

* The failure of consideration must be total to recover, although if the

consideration is severable, the total failure of a severable part will allow money to be repaid. What Constitutes Frustration?
Taylor v Caldwell (QB 1863) Facts

* A and B contracted that A should have the use of Music Hall.

* The Hall burnt down before the time for completion came and the contract had no express stipulations as to the obligations of the parties in such a situation. Issue

* Frustration - Impossibility/Destruction of Subject Matter Judgment (Blackburn J)

* Where, from the nature of the contract, the parties must have known that execution of the contract is dependent on the continued existence of some thing then, in the case of that thing ceasing to exist when the time for execution comes, without fault on the part of the contractor, the contractual obligations will cease to have effect, unless there is an expressed or implied condition guaranteeing the thing's continued existence.

* This is merely recognising what must have been the intentions of the parties at the time of contracting.

* An analogy can be drawn with contracts regarding living things - the death of a horse that is to be sold excuses both parties from performance.

* Thus, the music hall having ceased to exist, the parties in this case are excused from their contractual obligations. Kearney v Saorstat & Continental Shipping Co (Cir C 1942) Facts

* The plaintiff sued for the death of a sailor who had been rescued after the sinking of his ship but died while aboard his rescuers' craft. Issue

* Frustration - Impossiblity/Destruction of Subject Matter Judgment (Davitt J)

* The sailor's employment terminated with the sinking of the ship and accordingly, his death was not an accident arising out of and in the course of employment as per the Act - this accords with the ordinary law of contract and the doctrine of frustration. Fibrosa v Fairbarn (HoL 1943) Facts

* The plaintiffs, who were based in Poland, agreed to purchase machinery from the defendants, who failed to deliver following the invasion of Poland by the Germans. Issue

* Frustration - Illegality Judgment

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