11 Discharge, breach of contract and remedies
1 Discharge
Overview
1.1 A contract can be discharged in a number of ways. The method of discharge may amount to a breach of contract and hence give rise to a claim for damages. However, there are other methods of discharging a contract that will not give rise to a breach of contract claim namely discharge by
(a) Agreement
(b) Performance.
1.2 Agreement
(a) Agreement means that both parties agree that the contract be discharged. Some contracts provide for discharge by agreement for example by expressly stating that the contract can be discharged by notice.
Alternatively:
(b) The contract can be discharged by a completely new agreement e.g. where one party agrees to accept a change in the other's performance (a 'variation' agreement). To be binding such agreements themselves must be supported by consideration.
1.3 Performance
(a) This is the most common way in which a contract is discharged. It is important that performance occurs as without it there will be a breach of contract. It would also be inequitable to allow one party to sue another for breach if he himself has not performed the terms of the contract exactly and completely. This is known as the rule in Cutter v Powell.
(b) Sometimes the rule is Cutter v Powell can act harshly and hence some exceptions to the rule have developed for example where non-performance has been caused by the other party.
1.4 Breach
(a) Contracts can be discharged by fundamental breaches of contract.
(b) Breach of condition:
(i) Straightforward breach is easy enough to understand. One or both parties are not complying with the conditions of the contract. Remember the injured party may only bring the contract to an end if there has been a breach of condition.
(ii) Anticipatory breach is where one party indicates that he does not intend to complete his part of the contract. The innocent party (the claimant) can sue on notice.
But claimant can elect to ignore the breach, complete his part of the contract and then sue: White and Carter (Councils) Ltd v McGregor
If the claimant so elects he must complete his part properly or he himself will be liable for breach.
Actions for anticipatory breach should be started at once otherwise factors may intervene which mean the contract is automatically discharged (e.g. on outbreak of war that would render the contract illegal).
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