Lecture on Discharge of Contracts

Introduction

• Discharge of contracts refers to the ways parties are freed from mutual rights and obligations under a contract.
• Four main ways of discharge:
  • By performance
  • By agreement
  • By frustration
  • By breach

Discharge by Performance

• Performance refers to the fulfillment of contractual obligations by both parties.
• Importance of performance:
  • Contracts are meant to be binding and must be obeyed.
  • When one party performs their obligation, they are discharged and may have legal rights against the other party.

Performance and Breach

• Performance and breach are interconnected:
  • One party performs and is discharged; the other party fails and breaches, leading to potential legal action.

Precision Rule of Performance

• General rule: performance must be precise and exact ("precision rule").
• References to Shakespeare’s "Merchant of Venice" to illustrate the precision rule.
• Cutter v. Powell case example:
  • The sailor's widow couldn't claim wages as her husband did not complete the voyage.

Exceptions to Precision Rule

1. Divisible or Severable Contracts

   • Contracts can be split, allowing payment for completed parts.
   • Roberts v. Havelock: No full payment required until completion unless divisible.

2. Acceptance of Partial Performance

   • If partial performance is accepted, payment for that part is required.
   • Sumpter v. Hedges: No payment unless acceptance of partial work with the option to reject.

3. Prevention of Performance

   • If one party prevents the other from completing their obligations, the latter can claim damages or payment for work done.

4. Substantial Performance Doctrine

   • If obligations are nearly complete with minor defects, payment is due with deductions.
   • Honing v. Isaac: Payment subject to deduction for defects.

5. Time of Performance

   • Time is essential if specified by parties, failure to meet can lead to breach.
   • Charles Richards Ltd v. Oppenheim: Time extensions and final notices when deadlines aren’t met.

Discussion

• Debate on whether the precision rule is fair or harsh.
• Various student opinions were shared.

Conclusion

• Discharge by performance explored with exceptions to the precision rule.
• Upcoming class will cover discharge by breach and agreement, concluding the topic.
• Questions and further discussions to be held in the next class.