LAWS104 Lecture Notes - Lecture 9: Executory Contract, Contract, Condition Precedent
12 Jun 2018
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LECTURE - DISCHARGE BY AGREEMENT,
DISCHARGE BY PERFORMANCE
DISCHARGE BY AGREEMENT
Implied agreement to discharge
• Relatively rare
• Abandonment
o Parties have abandoned their agreement, they may have made an agreement but
then one or both party has not done anything.
o Courts will look at where there is an inordinate time between the formation of
contract and where there has been silence - can be inferred the contract has been
abandoned if enough time lapses where there is no communication where neither
party will try keep the contract alive.
o Both parties need to give consideration.
o If there is a deed no consideration is needed.
▪ Typical one is deed of release - one party has done everything but the other
party has not. Dud contract - it wasn't performed the way it should have been
performed - consideration is forbearance to sue (I promise not to sue you).
Express agreement to discharge
• Discharge by original contract
o Contractual right to terminate (express term)
▪ If a certain type of breach occurs, then the other party has the right to
terminate - a mortgage - if you don't keep up with your payments then the
bank can sue and terminate the contract.
o Condition precedent to formation
▪ Term of contract that states the contract will not come into existence or
effect at all, unless a certain event occurs.
▪ Sale of land - will not commence unless the purchasers finance is proved -
common one.
o Condition precedent to performance
▪ A term of the contract that states that a parties obligation to perform does not
arise unless a certain event does.
o Condition subsequent
▪ If something is not right - buying a boat saying it will reach a certain speed,
but it actually does not, then the contract can be discharged.
Discharge by subsequent agreement
• Consideration for the discharge is seen as a mutual promise by the parties not to sue
each other for non-performance of the original contract.
o The consideration would be where it is not fully performed.
o Exchange of promise to not sue each other.
o No requirement for it to be in writing.
• Contracts that have to be evidenced in writing may be discharged orally, but must be
varied in writing for the variation to be enforceable.
• Whether parties have discharged or varied will depend on their true intention - and the
degree of the variation.
Discharge of executory contracts:
find more resources at oneclass.com
find more resources at oneclass.com
• If parties want to terminate the original contract, the subsequent agreement does not
have to be in writing, even if the original contract itself was a type that had to be
evidenced in writing to be enforceable.
Discharge of contract (not variation) usually done by Novation or Merger.
• Merger where you merge a contract into a formal one (deed).
Consideration is the main issue where the contract is executory. This is satisfied by:
• Accord and Satisfaction is required (McDermott v Black (1940) 63 CLR 161)
o Note that accord and satisfaction should be distinguished from 'accord executory'
and 'conditional accord and satisfaction'
o Accord is the agreement to discharge the obligation.
o Satisfaction is the legal consideration that binds the parties to agreement.
• Deed (such as a deed of release).
• Both parties must provide consideration - execute a deed, or promise to not sue.
• Where one party has fully performed and one has not - contract remains exempt. Must
show valid accord and satisfaction - valid bilateral contract.
The intention of parties in entering into the subsequent agreement will result in one of three
of the following outcomes:
• Termination of the original contract, sometimes referred to as discharge simpliciter;
• Variation of the original contract; or
• Termination of the original contract and entry into a new contract.
Unilateral discharge needs accord and satisfaction.
Alternative causes of action - where there is no deed, satisfaction
• Equitable estoppel
o If the facts allow it. Breaking the promise to not sue. Waltons case.
o Reliance on the promise.
• Misleading or deceptive conduct
o If in trade or commerce - can take action on s 18 ACL to not break the promise to
sue.
o Likely to mislead deceive etc. Injunction can be available on ACL to enforce
original contract.
Doctrine of waiver
• If a party has waived a right or remedy, they will lose the right to later pursue that right
or remedy.
• Where the contractual obligation have been discharged will depend on if one of the
parties have consciously relinquished the right to sue.
• Abandons the right to, but acting inconsistently with the right.
• Commonwealth v Verwayen (1990) 170 CLR 394.
o Australian military vessels which collided, 89 Navy personnel killed. 1964.
suffered physical and psychological injuries over years.
o Commonwealth (who were responsible) for many years asserted it would not
allow the certain limitation period if the soldiers were to sue. A lot of them
developed conditions later on, they said they could sue later on when the damage
arises (not allowing the certain limitation period).
o One guys symptoms changed over time - the Commonwealth then changed their
policy (1990), 20 years after the event, imposed the time limitation to sue.
o Verwayen won the case. Commonwealth acted inconsistently. Waiver - other
party waived the right (Cth).
DISCHARGE BY PERFORMANCE
Where one party has not done what the contract asks for.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
If there is a deed no consideration is needed: typical one is deed of release - one party has done everything but the other party has not. Dud contract - it wasn"t performed the way it should have been performed - consideration is forbearance to sue (i promise not to sue you). Express agreement to discharge: discharge by original contract, contractual right to terminate (express term) If something is not right - buying a boat saying it will reach a certain speed, but it actually does not, then the contract can be discharged. If parties want to terminate the original contract, the subsequent agreement does not have to be in writing, even if the original contract itself was a type that had to be evidenced in writing to be enforceable. Discharge of contract (not variation) usually done by novation or merger: merger where you merge a contract into a formal one (deed).
