LAW OF CONTRACT - DISCHARGE OF CONTRACT BY (1) AGREEMENT & (2) BREACH [ RECOMMENDED FOR LLB ]

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DISCHARGE BY AGREEMENT

Consideration essential:- Accord and Satisfaction

(iii) Bilateral – applies to executor agreements. X and Y mutually release one another from their obligations.
(iv) Unilateral – if X has performed his part of the C/T a promise from him to excuse Y’s performance will not bind him unless Y provides consideration – Pinnel’s Case.

NB. Promissory estoppels!


D. DISCHARGE BY BREACH

Innocent party can always sue for damages for breach of contract but can terminate C/T and regard himself as discharged only if:

(i) Party in default repudiates either before performance is due (anticipatory breach) or before the C/T has been fully performed; or
(ii) The defaulting party has committed a breach of condition or breach of intermediate term with serious consequences.

Breach in itself does not discharge the innocent party from his obligations, he must accept the breach. If he doesn’t the contract remains in being for the future on both sides. Accept either by communications accepting or performing unequivocal act consistent with acceptance of which party repudiating is aware – Vital SA v Norelf Ltd [1996] 3 AII ER 193

Can cause particular problems in the case of –

Anticipatory Breach

Innocent party may accept breach immediately and sue for damages, or may refuse to accept breach and wait until due date for performance, hoping other party will change mind.

Hochester v De La Tour [1853] 2 E & B 678

In April def. agreed to engage pl. as courier during foreign tour starting 1st June. On 11 May def. wrote to pl. informing him of change of mind and that his services would no longer be required. Pl. entitled to sue for damages immediately.






However

It may be dangerous for the innocent party to wait for the due date for performance as the contrast continues at the risk of both parties.

Avery v Bowden [1855] 5 E & B 714

B chartered A’s ship and agreed to load her with cargo at Odessa within 45 days. After a while B told A he had no cargo and advise him to leave. Instead, A waited at Odessa hoping B would find cargo. Before end of 45 days Crimean War broke out between England and Russia and performance of C/T became illegal.

Held.

NB. There are some difficulties surrounding the relationship between anticipatory breach and damages due to the decision in White & Carter (Councils) Ltd v McGregor [1961] 3 AII ER 1178. There will be considered in the later lecture on Remedies.