Four ways in which a contract may be discharged.

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There are four ways in which a contract may be discharged.

  • Agreement.
  • Performance.
  • Frustration.
  • Breach.


A contract can be discharged in precisely the same way it was formed. Notice that there must be consideration from both sides.


Complete and proper performance will discharge both parties.

The original rule was that performance must be precise and exact.

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

A contract was drawn up for the sale of tinned fruit stating that the tins were to be packed 30 tins to a case. When the goods arrived, although the correct number of tins was delivered, they were packed in cases of only 24 tins.

This could lead to unjust results.

Cutter v Powell (1795) 6 Term Rep 320.

The defendant agreed to pay Cutter 30 guineas provided he executed his duties as second mate on a voyage from Kingston, Jamaica to Liverpool. Cutter began the voyage but died when the ship was 19 days short of Liverpool. Cutter’s widow claimed a portion of the wages.

The courts have established a number of equitable principles with the aim of

achieving justice between the parties.

(a) Substantial Performance. 

If the contract has been substantially performed the innocent party cannot treat himself as discharged but may be able to counter-claim his loss sustained by reason of the incomplete performance. What amounts to substantial performance is a question of degree – a question of fact dependent upon the circumstances.

Dakin v Lee [1916] 1 KB 566.

Dakin contracted to carry out certain repairs toLee’s house for £1500. When Dakin requested payment on completion, the defendant refused to pay on three grounds. The underpinning of a wall was 2ft thick instead of 4ft, four inch solid columns had been used instead of 5 inch hollow ones and the joists over the bay window were not bolted as stipulated. The cost of remedying these “defects” was £80.

        Hoenig v Isaacs [1952] 2 ALL ER 176.

An interior decorator contracted to refurbish a flat for £750. The defendant had paid £400 in advance, but then refused to pay the outstanding £350 arguing that the design and workmanship were defective. The court agreed that there were problems but that these would cost £56 to remedy.

Bolton v Mahadeva [1972] 1 WLR 1009.

A contractor agreed to install a central heating system for £560. When the work was done, it was found that it was unable to heat the house properly and emitted fumes. The cost of repair was £174. The claimant sued for the contract price less this cost of repair.

  1. Partial Performance. 

The usual rule is that if one party only partially performs the contract, he is not entitled to recover anything. However, he may be entitled to remuneration if the innocent party accepts partial performance. This doctrine of partial performance however applies only if the innocent party has a genuine choice either to accept or reject partial performance.

Sumpter v Hedges [1898] 1 QB 673.

 Sumpter agreed to erect certain buildings on the defendant’s land for £65. He did part of the work and then abandoned the contract. The defendant completed the buildings himself using materials left on the site by the claimant. Sumpter sued to recover the value of the word done and of the building materials used.

Prevention of Performance:

If an innocent party is prevented from completing his contractual obligations by      the default of the other party, he can either recover damages for breach or seek reasonable remuneration on a quantum meruit basis for the work already done.

  1. Severable Contracts.

Many of the difficulties which may arise with partial or substantial performance, may be avoided if the court decides that the contract consists of a number of divisible or separate obligations.


For example, take a contract for the delivery of 120 tons of wheat for £12,000 to   be delivered 10 tons per month from January to December. If the contract gives no specification with regard to the time of payment, it could be divided, or severed, into 12 contracts, each for the delivery of 10 tons of wheat at £1,000.

  1. Time. 

If the time of performance is of the essence then non-performance gives the   innocent party the right to terminate.

Time is of the essence where:

  • The parties so stipulate.
  • The nature of the subject matter or surrounding circumstances requires it.
  • A party subject to unreasonable delay gives notice making it so.



After the conclusion of the contract, but before performance, the circumstances so change that there is no longer a workable agreement. The parties are released from their contractual obligations.

(a) Destruction of the contract’s subject matter.

Taylor v Caldwell (1863) 3 B&S 826.

The defendant agreed to hire a music hall for the purpose of entertainment. Before the day of the performance, the hall was destroyed by fire. The claimant sued for breach of contract.

(b) The death of either party in a contract which requires personal performance.

(c) The non-availability of one of the parties.

Condor v Barron Knights Ltd [1966] 1 WLR 87.

 A drummer was contracted to play for the Barron Knights, but he had a nervous breakdown. The doctor advised that continuing to perform was likely to cause a major breakdown.

(d) The non-occurrence of a particular event which forms the basis of the contract.

Krell v Henry [1903] 2 KB 740. 

The defendant contracted to hire a flat for 26th and 27th June 1902 (Kings Coronation). The contract made no reference to the coronation but it was due to take place and the procession was to pass the flat. The procession was cancelled because of the King’s illness. The claimant sued for unpaid rent.

Herne-Bay Steamboat Co v Hutton [1903] 2 KB 146.

The defendant chartered a ship to see the coronation naval review and to tour the fleet. The review was cancelled but the fleet was still in port.

(f) Supervening Illegality. 

This will arise where, between the completion of the contract and the performance of it, it becomes illegal to perform it.

Avery v Bowden [1855] 5 E&B 714. 

A contract for the loading of a cargo in Odessa became illegal because of the outbreak of the Crimean war.

Fibrosa Spalka Akeyjna v Fairnbairn Lawson Combe Barbour Ltd [1943] AC 32.

In July 1939 an English company agreed to supply machinery to a Polish company, delivering it to Gdansk.  War broke out between Germany and Britain on 3rd September 1939 and Gdansk was occupied by the Germans on 23rd September.

(g) A contract will not be frustrated simply because it has become more onerous or expensive to perform than originally envisaged.

Davis Contractors v Fareham UDC [1956] 3 WLR 37.

The claimant contracted to build 78 houses over eight months and at a cost of £94,000. The work however took twenty-two months and cost £115,000. Despite the delay the defendants were willing to pay the contract price but this did not cover the claimant’s costs. The claimants argued that the contract was frustrated alleging that labour shortages made performance fundamentally different.  

Limits to Frustration.

The doctrine will not apply if the risk is provided for by the contract – a force majeure clause is such an express provision.

“A party shall not be liable in the event of non-fulfilment of any obligations arising under this contract by reason of Act of God, disease, strikes, lock-outs, fire and any accident or incident of any nature beyond the control of the relevant party.”

Self-induced frustration.

Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524. 

The defendant chartered a trawler from the plaintiff, intending to operate it with an otter trawl. Both parties knew that an otter trawl could not be used without a licence.  The defendants applied for five licences but got only three. They used these for other trawlers they operated and argued that the charterparty with the plaintiffs was frustrated.


J Lauritzen AS v Wijsmuller BV [1990] 1 Lloyd’s Rep 1.

Super Servant 1 and 2 were barges designed to transport oil rigs. The defendants agreed to transport the claimant’s oil rig using either 1 or 2. Before performance the defendants allocated 2 to the contract with the claimant and 1 to other concluded contracts.  2 then sank. He contract was performed by a more expensive mode of transport. The claimant sued for breach because the defendant had failed to transport the rig in the agreed manner.

The Effects of the Doctrine of Frustration.

At common law, the contract was terminated automatically and immediately and both parties were then released from their future obligations. The parties were however obliged to fulfil any obligations that arose prior to the frustrating event, the view being  that the “loss lay where it fell”.

Appleby v Myers (1867) LR 2 CP 651.

The plaintiff contracted to erect machinery on the defendant’s premises, the price to be paid upon completion of the whole. After some portions of the work had been finished the premises, with all the materials thereon, were destroyed by an accidental fire.

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Chandler v Webster [1904] 1 KB 493.

The defendant agreed to let a room, for the purpose of viewing the coronation procession, for £141. Under the contract the full price was payable before the date the procession became impossible. In fact the hirer had paid £100.

The Fibrosa [1942] 2 All ER 122.

An English company agreed to make machinery for a Polish company. The price was £4800 of which £1600 was to be paid in advance. After £1000 of this had been paid the contract was frustrated ...

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