Lauren Garrett 110043067 Discharge concerns the process whereby a valid and subsisting contract is brought to an end,
thereby releasing the parties to it from all further obligations to perform.1 Unless discharge
occurs, the contract remains on foot and either party may enforce its primary obligations.2
Under the Frustrated Contracts Act 1988 contractual performance is the performance by a
party of contractual obligations and includes anything done by the party preparatory to the
performance of a contractual obligation.3 What is required by way of performance depends
on the nature of the contractual obligations, the type of contract, the terms of the contract
and the construction of those terms.4
The nature of contractual liability is strict and thus in regards to discharge by performance,
the contract must be exactly and completely performed,5 as intended by the parties, to allow
for the discharge of the parties’ mutual obligations and to ensure neither party is liable to the
other.6 However, the notion of strict liability may create “injustices”7 within contract law.
Consequently the courts seek to construe the contract to give rise to primary rights for the
breaching party, under the doctrine of substantial performance.8
In respect to discharge by performance, performance is evaluated through its various stages,
exact performance, partial performance, substantial performance and non-performance.9
These varying levels of performance are determined on the basis of factual objectivity and
thus performance is essentially ascertained as a matter of construction by the trial judge.10
EXACT PERFORMANCE
1
G.H. Treitel, An Outline of: The Law of Contract (Oxford University Press, 6th Ed, 2004) 312.
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed. 2009)
395.
3
Frustrated Contracts Act 1988 (SA) s 3.
4
Jeannie Paterson, Andrew Robertson and Arlen Duke, Principles of Contract Law (Thomson Reuters, 3rd ed,
2009) 303.
5
Clarke, Clarke and Zhou, Contract Law: Commentaries, Cases and Perspectives, (LexisNexis Butterworths,
2008).
6
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed. 2009)
395.
7
The term “injustices” used cautiously and in reference to ibid 395.
8
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 561.
9
John W. Carter, David J. Harland, Kevin E. Lindgren, Contract Law in Australia (Butterworths, 2nd ed. 1996)
612.
10
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 566.
2
1 Lauren Garrett 110043067 Contractual duties are positive and thus the nature of liability is strict. Hence, discharge of
performance is to specifically perform the obligations of the contract in its entirety and thus
in relation to exact performance, each parties’ performance must be exactly as was required
by the contract.11 ‘The vast majority of contracts are discharged by exact performance,’12 as
governed by the Sale of Goods Act 189513 in regards the sale of goods.
At times the courts have rigorously enforced the nature of exact performance,14 such as in
the case of Moore & Co v Landauer & Co.15 In this case the defendants agreed to purchase
from the plaintiffs 3,100 tins of Australian canned fruit. The fruit was to be packed in cases
of 30 tins. However, when the goods were delivered, a considerable part of the consignment
was packed in cases of 24 tins. It was held that this did not constitute satisfactory
performance, as the nature of the contractual liability was strict, and thus the defendants
were entitled to reject the whole consignment.16
Similarly, in the case of Cutter v Powell17 the High Court found that if ‘work is done under a
special contract no payment can be recovered under the contract until work is complete.’18
In the case of Cutter v Powell19 exact performance relates to an entire contract, in which
complete performance is a condition precedent of the obligation to pay,20 as opposed to
divisible contracts, where the consideration and the payment thereof is ‘apportioned or is
capable of apportionment according to the work being done.’21 Steele v Tardiani22 represents
a relevant High Court case in regards to divisible contracts.
11
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed.
2009) 395.
12
Ewan Mckendrick, Contract Law (Palgrave Macmillan Law Masters, 7th ed, 2007) 386.
13
Sale of Goods Act 1895 (SA).
14
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 564.
15
Moore & Co and Landauer & Co [1921] 2 KB 519.
16
Moore & Co and Landauer & Co [1921] 2 KB 519.
17
Cutter v Powell (1795) 101 ER 573.
18
Jeannie Paterson, Andrew Robertson and Arlen Duke, Contract, Cases and Materials (Thomson Reuters,
11th ed, 2009) 721.
19
Cutter v Powell (1795) 101 ER 573.
20
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 566.
21
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed.
2009) 395.
22
Steele v Tardiani (1946) 72 CLR 386.
2 Lauren Garrett 110043067 However, Exact performance and its corresponding nature of strict liability creates potential
“injustices”23 where the substandard of performance is the result of something outside the
reasonable control of the breaching party.24
THE DE MINIMIS RULE
In some situations, a party may under perform their contractual obligations by an
insignificant margin, thus being liable for breach. The maxim “de minimis non curat lex”25
may be invoked in these circumstances to amend the consequences for breach of exact
performance, allowing courts to ‘disregard trifling departures from a contractual
obligation.’26 This form of performance is indicated in Shipton, Anderson & Co v Weil Bros
& Co27 where the vendors were to supply a maximum of 4950 tons to the purchasers under
the contract but rather delivered 4950 tons 55 pounds. The purchasers refused to accept to
consignment on the grounds that the vendor’s performance was not exact.28 The court held,
through the application of the de minimis rule, that the purchasers could not refuse delivery,
as the weight was so trivial ‘as to be insignificant when taken against the consignment as a
whole.’29
ACCEPTANCE OF PARTIAL PERFORMANCE
Partial performance, or partial discharge is ‘a variation of a subsisting contract. It requires
consideration and is subject to the ordinary requirements of contract law.’30 Essentially
partial performance entails one party accepting partial performance in full satisfaction and in
exchange,31 the other party accepts a lesser reciprocal performance.32 However, this is only
available if the party freely and willingly accepts the partial performance. If the party is
unwilling, or has no opportunity to reject the partial performance then strict liability will
23
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed.
2009) 395.
24
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 566.
25
See, Shipton, Anderson & Co v Weil Bros & Co [1912] 1 KB 574.
26
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed.
2009) 397.
27
Shipton, Anderson & Co v Weil Bros & Co [1912] 1 KB 574.
28
Ibid.
29
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed.
2009) 397.
30
Peter Butt, David Hamer, Concise Australian Legal Dictionary (LexcisNexis, 4th ed, 2011) 427.
31
Henry W. Ballantine, ‘Acceptance of offers for unilateral contracts by partial performance of service
requested’ (1920) 5 Minn. L. Rev. Minnesota Law Review, 94.
32
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed.
2009) 397.
3 Lauren Garrett 110043067 apply in regards to exact performance and will give rise to reciprocal rights.33 As such, in
Sumpter v Hedges34 Collins LJ stated, ‘There mere fact that a defendant is in possession of
what he cannot help keeping, or even has done work upon, affords no grounds for such an
inference [inference of a new contract].’35
SUBSTANTIAL PERFORMANCE
The doctrine of substantial performance concerns the performance of contracts, ‘which
allows a plaintiff to recover the contract price despite a minor failure in performance by the
plaintiff.’36 The distinction between substantial performance and the de minimis rule is a
matter of factual objectivity in regards to the degree of compliance, and is thus such a matter
for the trial judge.37 Substantial performance represents the breaching parties’ primary right
to be paid under the contract, reduced by the cost of rectifying the under performance.38 If
the defects are too great, part performance or restitution is available, however the innocent
party must freely accept the benefit of the breaching party as mentioned previously. It was in
the early case of Dakin v Lee39 that Pickford L.J. recognized that bad performance did not
necessarily constitute failure to perform a condition precedent, giving rise to the doctrine of
substantial performance,40 which was later confirmed in Young v Thames Properties Ltd.41
Hoenig v Isaacs42 is a case regarding substantial performance where by the plaintiff was
engaged to refurbish the defendant’s flat for seven hundred and fifty pounds. On completion
the defendant refused to pay the balance owed to the plaintiff, arguing that the work was
inadequately done. The plaintiff brought an action under the contract for the remaining
balance and the defendant counter-argued that the contract was entire and required exact
performance. The court held that the plaintiff was entitled to the contract price, minus the
cost of rectifying the defects, as to hold the plaintiff to exact performance would ‘deprive
33
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 566.
Sumpter v Hedges [1898] 1 QB 673.
35
Ibid.
36
Peter Butt, David Hamer, Concise Australian Legal Dictionary (LexcisNexis, 4th ed, 2011) 563.
37
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 565.
38
Jeannie Paterson, Andrew Robertson and Arlen Duke, Principles of Contract Law (Thomson Reuters, 3rd ed,
2009) 303.
39
Dakin v Lee [1916] 1 KB 566.
40
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 565.
41
Young v Thames Properties Ltd [1972] 2 All ER 1322.
42
Hoenig v Isaacs [1952] 2 All ER 176. 34
4 Lauren Garrett 110043067 the contractor of any payment at all simply because there [were] some defects or
omissions.’43
Contrastingly, the case of Bolton v Mahadeva44 was a claim in regards to work and materials
under a contract for plumbing and central heating installation. The Court of Appeal refused
to apply substantial performance as the fitted system gave out much less head than was
required, and caused fumes to emanate in one of the rooms. Although the complete system
had been fitted in its entirety, it did not fulfill its primary function of heating the house, and
thus the installer was not allowed entitled to recover. Cairns L.J. defined substantial
performance by “whether the defects… were of such a character and amount that the
plaintiff could not be said to have substantially performed his contract.”45
In order to amount to substantial performance, ‘the actual performance must conform so
closely to the terms of the contract that the variance therefrom is relatively immaterial and
that the adversary party has received for practical purposes the benefits for which he
contracted.’46 However, ‘the essence of the doctrine of substantial performance is that it
depends on the nature of the contract and all the circumstances which arise in the present
case.’47 It is a matter of the construction of the contract, ‘consideration of the subject matter
and the circumstances in which it was made and the provisions to which the parties have or
have not agreed’,48 to determine whether performance has satisfied what was intended by
the parties as giving rise to a reciprocal obligation to perform.49 It was determined in Hoenig
v Isaacs50 that the ‘promise to complete the work is, therefore, construed as a term of the
contract, but not as a condition.’51
NON-PERFORMANCE
43
Hoenig v Isaacs [1952] 2 All ER 176.
Bolton v Mahadeva [1972] 1 WLR 1009.
45 Bolton v Mahadeva [1972] 1 WLR 1009. 46
William Herbert Page, The Law of Contract (2nd ed, 2008).
47
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 565.
48
Ibid.
49
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed.
2009) 399.
50
Hoenig v Isaacs [1952] 2 All ER 176.
51
Hoenig v Isaacs [1952] 2 All ER 176.
44
5 Lauren Garrett 110043067 Non-performance in regards to a valid and subsisting contract occurs when a party simply
does not perform their contractual obligations, thus inferring a breach of contract.52 Nonperformance can by identified by an unwillingness to perform contractual obligations,
sufficiently serious to give the promisee a right to terminate.53 This is also known as
repudiation.54 In Hochster v De la Tour55 Crompton J observed that ‘when a party
announces his intention not fulfill the contract, the other side may take him at his word and
rescind the contract. That word “rescind” implies that both parties have agreed that the
contract shall be at an end as if it has never been.’56 The notion of repudiation was further
ascertained in in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd.57
CONCLUSION
In regards to discharge of performance, the level of and exact nature of performance is a
matter of factual objectivity and construction in regards to the intentions of the parties to the
contract. Performance may be evaluated through its various stages, exact performance,
partial performance, substantial performance and non-performance, but essentially
performance will be determined by the trial judge.
52
Richard Stone, The Modern Law of Contract: Seventh Edition (Routledge-Cavendish, 7th ed, 2008) 565.
Peter Butt, David Hamer, Concise Australian Legal Dictionary (LexcisNexis, 4th ed, 2011) 506.
54
Stephen Graw, An Introduction to the Law of Contract (Thomson Legal & Regulatory Australia, 6th ed.
2009) 399.
55
Hochster v De la Tour (1853) 2 E & B 685.
56
Hochster v De la Tour (1853) 2 E & B 685.
57
Koompahtoo Local Aboriginal Land Council & Anor v Sanpine Pty Ltd [2007] HCA 61. 53
6