LWZ118 Lecture Notes - Lecture 7: Tricontinental, Rescission, Aust
Lecture 7
Contracts
Discharge of the Contract - Where one or both parties are excused from further performance of their
obligations under the contract. In particular - Discharge by Performance and Discharge by Agreement
Discharge by Performance – A contract becomes discharged through performance where both parties
have fully performed their contractual obligations. If one party does not fully perform the contract this will
amount to a breach of contract and the other party may have a claim for damages unless the contract has
been frustrated. If the non-performance amounts to a repudiatory breach (breach of condition) the other
party will be released from their obligations.
Where a contract is one where the price is payable on completion, then completion is generally required in
order to discharge the contract. This is often expressed in the terms of being a condition precedent.
Completion triggers the requirement of payment: no completion, no payment. Cutter v Powell [1795]
EWHC KB J13.
Where the parties perform some, most or all of their obligations, there are issues that can arise. These
include:
The question of the time for performance: a failure to perform on time may constitute a
breach of contract leading to an award of damages.
The issue of the order of performance: does one party have to perform before the other?
The possibility of a contractual promise having been only partially fulfilled, whether through
choice or external obstruction.
Reasonable Time for Performance - To be determined in light of the circumstances existing at the time
when performance takes place or when the party demanding performance asserts it should have taken
place: Handley v Gunner at [97].
Peregrine Systems Ltd v Steria Ltd [2005] EWCA Civ 239 approving Astea (UK) Ltd v Time Group LTD [2003]
EWHC 725 (TCC) at [144]. It is a broad consideration, taking into account factors such as:
Any estimate given by the performing party of how long it would take them to perform;
Whether that estimate has been exceeded, and if so, why;
Whether the party for whose benefit the obligation was performed needed to participate in
the performance (i.e. did the involvement of a 3rd party cause delay?)
The exact causes of the delay to performance.
Example: Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288 - Electronic entered into a contract
with David Jones for installation and demonstration TVs as an attraction to draw customers to the store.
Before the commencement date fixed by parties, a serious coal strike began in NSW resulting in a
considerable drop in footfall. Thus, David Jones informed Electronic and asked to postpone the
demonstration until another date could be fixed. Electronic agreed to the postponement. Electronic then
requested David Jones to indicate dates to comply with its obligations. David Jones declined at such a late
date as such an attraction would overcrowd the store. Electronic treated the contract as repudiated by
David Jones and sued for damages. David Jones submitted that due to the removal of the fixed date, upon
which the contract depended, it should be inferred that the contract was uncertain and insufficient to form
a binding and enforceable contract.
The issue was Whether David Jones were obliged to set a time for the actual performance of the
contract.
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Lecture 7
Contracts
The High Court held that David Jones was obliged to set a reasonable time for Electronic to enter
the premises to comply with their obligations.
Order of Performance
Question of the construction of the contract to ascertain the intention of the parties as to the order in
which obligations are to be performed: Burton v Palmer [1980] 2 NSWLR 878 at 895.
In this case, the court was required to consider whether a company gave financial assistance for
purchase of its shares in breach of section 67 of the Companies Act 1961 (NSW). The shareholder selling
the shares made it a condition of the sale that the company pay an amount that was presently owed to the
shareholder by the company. Mahoney JA did not consider this as ‘financial assistance’ but considered the
meaning of 'assistance' in 'financial assistance' as ‘co-operation’. Mahoney JA held that, u/s 67 of
the Companies Act 1961 (NSW), ‘financial assistance’ meant furnishing of something which is needed, or at
least, wanted in order that the transaction be carried out.
Independent obligations require performance regardless of order of performance – Party A can
therefore call upon Party B to perform whether or not Party A has done so. Some examples include:
Sale of Goods Act 1972 (NT) s 51(2) and equivalent legislation – allows seller to recover price
of goods if buyer’s promise is to pay for the goods on a particular date irrespective of actual delivery.
Obligation of tenant to pay rent and that of landlord for quiet enjoyment: Edge v Boileau
(1885) 16 QBD 117
Dependant obligations: e.g. Employment contract. Employer’s obligation to pay wages depends upon the
employee performing work for relevant pay period. If employee does not perform, the employer is not
obliged to pay: Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 465.
Where parties need to co-operate in order to achieve performance of their respective contractual
obligations? See Electronic Industries v David Jones.
If such provision for co-operation is not express may have to be implied. Secured Income Real Estate (Aust)
Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 per Mason J, citing earlier case: ‘It is a general rule
applicable to every contract that each party agrees, by implication, to do all such things as are necessary on
his part to enable the other party to have the benefit of the contract.’
PERFORMANCE PREVENTED - Where one party prevents the other from performing obligations this
prevention will often discharge contract. There may be express term or court may imply term to that
effect: CSS Investments Pty Ltd v Lopiron Pty Ltd (1987) 76 ALR 463.
PARTIAL PERFORMANCE - This doctrine provides that where the plaintiff has partly carried out the
contract, relying on the defendant’s promise, equity may enforce the contract despite non-compliance
with formalities.
In Regent v Millett (1976) 133 CLR 679, The Regents' bought a house. Shortly afterwards - by an oral
agreement - they sold it to their daughter and son-in-law, the Milletts. Consideration involved making
mortgage payments and paying a lump sum of $1,000. The Milletts went into possession and began
paying the mortgage. They also made repairs to the house with the knowledge and acquiescence of
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Document Summary
Discharge of the contract - where one or both parties are excused from further performance of their obligations under the contract. In particular - discharge by performance and discharge by agreement. Discharge by performance a contract becomes discharged through performance where both parties have fully performed their contractual obligations. If one party does not fully perform the contract this will amount to a breach of contract and the other party may have a claim for damages unless the contract has been frustrated. If the non-performance amounts to a repudiatory breach (breach of condition) the other party will be released from their obligations. Where a contract is one where the price is payable on completion, then completion is generally required in order to discharge the contract. This is often expressed in the terms of being a condition precedent. Completion triggers the requirement of payment: no completion, no payment.
