8.

Discharge by frustration, performance and breach

Discharge by frustration (http://www.lawhandbook.sa.gov.au/ch10s02s13s03.php)

According to The Frustrated Contracts Act 1988 (SA) its provides that in some
circumstances, partial frustration of a contract need not result in the failure of the whole
contract. Discharge by frustration is the principle is commonly known as the doctrine of
absolute liability. In this principle if a party promises to carry out a particular act, their
promise will be hold by the law. The doctrine was demonstrated in case Cutter v Powell.

Cutter v Powell [1795] 101 ER 573

Fact:

In this case, if Cutter would sail as second mate in a vessel from Jamaica to Liverpool,
Powell agreed to pay Cutter 30 guineas. The price that Powell offer to Cutter was higher than
a normal rate for such a voyage. But unfortunately Cutter died at sea before he completed the
voyage. In attempt to recover the proportion, Cutter’s widow agreed to sum of 30 guineas.

Held:

The widow failed in her claim because Cutter did not done what he promise to serve as
second mate for the whole of the voyage. The contract was not divisible as the payment was
supposed to be full payment upon completion of the whole voyage. The widow has no right
of any part of salary because Cutter did not perform his promise to Powell.

The contract legally or physically impossible of performance if a contract is frustrated when

there is a change in the circumstances. Section 57(2) of the Contracts Act 1950 provides,
contract to do act afterwards becoming impossible or unlawful. This contract is a contract to
do an act which become void when the act become impossible or lawful after the contract is
made, become impossible, unlawful, or by reason of some event which the promisor could
not prevent.
Effects of frustration

The effect of frustration event is to discharge only as the future and discharge contract
immediately. Its only void from the time of the frustrating event but not void ab initio. In this
contract, any obligations that arise must be fulfilled for the period that the contract valid. The
money is paid under the term of the contract for example, by the way of deposit, before the
frustrating event occurs cannot be recovered, because the money was paid when the contract
still valid. In the case of Fibrosa Spolka Akcyjna v Fairburn Lawson Combe Barbour Ltd, in
order the money to be recovered, a total failure of consideration would need to be established.

Fibrosa Spolka Akcyjna v Fairburn Lawson Combe Barbour Ltd [1943] AC 32

Fact:

Polish company paid a considerable sum of money in advance as an English firm agreed to
sell and deliver machinery to Polish company. Because of the war and the occupation of
Poland, the contract between the English firm and Polish company has been frustrated. In
order to get their money back, the Polish company claimed the right to recover the deposit
that they paid prior to the frustrating event.

Held:

There was a total failure when the English firm cannot delivered the machinery to Polish
company and the Polish company was entitled to refund of their deposit that they paid to
English firm. Under section 57(2) of the Contracts Act 1950 states that that such a contract
becomes void because when the contract is discharged by frustration, the contract does not
become merely voidable but is brought to an end forthwith.
Discharge by performance

For discharge by performance to occur, the contract must be exactly or substantially

performed, to allow for recovery of the contract price. In partial performance does not allow
for recovery of the contract price but payment may be recovered in restitution for the work
and the failure to perform a contract according to its terms will be a breach of the contract.
The performance of a contract must be precise and exact and should be in accordance with
the parties and promise as a general rule. The parties to a contract must either perform or
offer to perform their respective promises according to Section 38(1) of the Contract Act
1950, unless such performance has been dispense with by any law.

In Section 56 of the Contracts Act, 1950 regulates the position when time is the essence of
the contract. It reads:

1) The option of the promises become voidable, if the intention of the parties was that
time should be of the essence of the contract when a party to a contract promises to do
a certain things at or before a specified time, or certain things at or before specified
times, and fails to do any such thing at before the specified time.

2) The promise is entitled to compensation from the promisor for any loss occasioned to
him by the failure but if it was the intention of the parties was that time should be of
the essence of the contact, the contract does not become voidable by the failure to do
the thing at or before the specified time.

3) The promise cannot claim compensation for any loss occasioned by the non-
performance of the promise at the time agreed, unless, at the time of the acceptance,
he gives notice to the promisor of his intention to do so if in case the contract is
voidable on account of the promisor’s failure to perform his promise at the time agree
and the promise accepts performance of the promise at any time other than that
agreed.
Discharge by breach (http://www.insitelawmagazine.com/ch14discharge.htm)

The right of the innocent party to treat the contract as discharged arise only where there has
been a breach of condition or a repudiators breach in the case of an intermediate term but it is
always possible to sue for damages for breach of contract.

There are in breach of contract where a party fails to perform their obligations as agreed. A
breach can occur in some ways including:

 failure to comply with a term of the contract.

 where the party in default repudiates either before performance is due anticipatory
breach or before the contract has been fully performed.
 where the time is the essence in the contract is delay in the performance.

The party said to have repudiate or renounced the contract, where one of the parties indicate
to the other either by conduct or in clear terms an intention not to go on with the contract. A
refusal to perform a contract may occur during the time of performance itself or before the
time for performance is due. A contract is discharged only if the disability to perform is
brought about through the fault of the party concern. The contact maybe discharged through
frustration if the disability is cause through the occurrence of some other event.

Effects if breach

The effect if breach is, the innocent party is entitled to treat the contract as ended from the
time of the terminating event and may recover damages if one party fails to perform their
obligations under contract or breaches a condition. The contract is not treat as void ab initio.
After the date the contract was discharged, the parties are only relieved of the obligation to
perform.

The innocent party must restore any benefits which he may receive from the party is the
effect of an innocent party putting an end to the contract. The innocent party may recover a
reasonable sum for such services or goods rendered if the innocent party has rendered
services or had supplied goods. The innocent party may be entitled to recovered the paid sum
if he has paid money under contract. The party in default cannot terminate the contract which
he himself had broken because it is the general rule.