Discharge of Contract – law notes for legal and accounting students from Holland Condon solicitors

Discharge of Contract = Contract is at an end; rights & obligations of parties terminated/cancelled/discharged 6 ways.

1.  Discharge by Performance = if parties do exactly & precisely their terms = contract extinguished e.g. Cutter v Powell. If a party does not, then, offender may be sued for breach (see below).
2. Discharge by Notice = Contract can be terminated by 6 weeks notice eg lease, agency .
3. Discharge by Agreement = 4 examples

• Waiver of Contract; where neither party has done anything & both agree to cancel ( known as “bilateral discharge”);
• Release of non-performing side by other party who had done all or part of their obligations (“unilateral discharge” & here non-performer must give consideration for cancellation);
• Novation = old contract not performed at all & parties substitute it with new one.
• Conditional Contract = the contract has a condition allowing cancellation e.g. buy site subject to getting planning = if no planning got =sdeal off

4.   Discharge by Breach of Contract

*Repudiatory Breach = an actual breach of a condition not a warranty gives rise to right of injured party to decide to terminate the contract (repudiate) or continue; and/or sue for damages ; so it’s serious/fundamental breach e.g. Dundalk Shopping Centre v Roof Spray Ltd  ;  Robb v James non payment for fabric within the 24hour agreed time frame entitled owner to repudiate & sell to 3^rd Party;

*Anticipatory breach – offending party says in advance that it won’t perform its obligations e.g. Hochster v De La Tour: Plaintiff due to work for Defendant as courier from 1^st On 11^th May Defendant says contract now being cancelled.  On 22^nd May Plaintiff sues but Defendant says case not actionable until 1^st June.  Held: Plaintiff was entitled to sue when “anticipatory breach” happened on 11^th May.

5. Discharge by Operation of Law e.g. mental illness/insanity ;minor ; insolvency; bankruptcy.

6. Discharge by Frustration = something beyond the parties control & foresight that renders it impossible to perform the contract by one or both sides. The event or action occurs after the contract and must involve: –

• unforeseeable event;
• causes radical change in obligations;
• completing contract made impossible;
• not caused by either party

Remember – element of outside parties control & unforeseen; see Ocean Trawlers case & Mulligan v Browne

Examples: –

• Destruction of subject matter (impossibility) e.g. Taylor v Caldwell
• Contract now made illegal by Law e.g. Ross v Shaw
• Sickness, death or incapacity e.g. Robinson v Davison
• Non-occurrence of a condition e.g. Krell v Henry

— Consequences of Frustration

Contract automatically comes to an end! Old rules “the loss lies where it falls” so from the date of frustration any payments beforehand could not be recovered and money owed after the date no longer is owed   =>  unfair results ————-> so money paid beforehand (before frustration) can be recovered if nothing given for it e.g. Fibrosa case.

There is NO frustration: –

• If event provided for in contract (e.g. sickness of singer);
• foreseen;
• event only amounts to an inconvenience;
• there is an alternative means of performing contract

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Remedies for Breach of Contract

At Common Law: – actual right of Plaintiff to Remedy

• Damages
• Specific sum in Contract
• Quantum Meruit

At Equity: – Courts discretion to give remedy & only used where common law remedies not adequate.  Not automatic right to these remedies.

• Specific performance
• Injunctions
• Rectification of Contract
• Recission

 

Damages = put Plaintiff in position as if contract performed (compensation)

* Liquidated Damages – Specific sum detailed in contract

* Unliquidated Damages – Court decides

2 Stages involved in deciding on damages

• Damages which are remote will not be recovered = foreseen losses will be compensated e.g. Rowan case;
• How much = “reliance loss” or “expectation loss”

Rider =  Plaintiff must mitigate their loss (minimise your loss) e.g. BIM v Scallon

Quantum Meruit = “as much as has been deserved or merited”.  You could claim damages or ask Court to assess amount you deserve. This is an alternative to damages

Recission = one party seeks to have contract set aside by court and everyone put in the position they were in BEFORE the contract was performed.

• Can claim recission & not damages
• May not also award damages
• Equitable

Specific Performance = wrongdoer to complete deal

• Equitable remedy
• Rules/maxims of equity apply
• Court never grants specific performance in 5 situations?
• May also award damages
• Equitable

Injunction = order a party to do or not to do something so as to rectify their breach

• Mandatory
• Prohibitory e.g. Wagner
• Starts as as Interlocutory Injunction – to keep status quo temporary, AND later it may become Permanent
• Equitable remedy
• Maxims of equity apply
• No injunction if damages are an adequate remedy
• Equitable

Rectification = where dispute arises and upon investigation the Court can clearly see an error in the contract, it may rectify it e.g. $ used in contract when it should have been €.

 

1^st Question (in all claims for legal remedies/ legal problems addressed to you, whether its contract or what area of the law is involved ) = Is the claim statute barred generally 6 yearsfrom time of wrongdoing/breach  (if Deed( =a special  legal document) is involved then 12 years limit);