Contract Law: Performance, Breach, and Discharge
Contract Performance
Divisible Contracts
In divisible contracts, payment can be claimed for each completed stage. The intention to create divisibility can be implied from payment by installments, such as in construction contracts.
Substantial Performance
If a contract is substantially performed, with only minor elements remaining, the performing party can claim the contract price minus deductions for outstanding work or remedies.
Partial Performance and Acceptance
If one party accepts partial performance, it may imply a new contract and a claim for quantum meruit (as much as earned).
Prevention of Performance
If one party prevents the other from performing, the prevented party can claim for partial performance or sue for breach of contract.
Contract Discharge
Agreement
Contracts can be discharged by subsequent agreements with consideration, such as:
- Automatic termination upon certain events or after a fixed period
- Termination clauses with notice periods
Breach
Anticipatory Breach
Occurs when one party indicates an inability or unwillingness to perform before the performance date. The innocent party can treat the contract as ended or wait for the actual breach.
Repudiatory Breach
Occurs when one party fails to perform on the performance date. The consequences depend on whether the breach is of a condition (allowing discharge) or a warranty (allowing damages).
Frustration
Frustration occurs when unforeseen events make contract performance impossible or radically different. Legal elements include:
- Unforeseen and uncontrollable events
- No fault of either party
- Substantial difference in performance
Frustration excuses further performance but does not apply if:
- Performance becomes more difficult or expensive
- The event was foreseeable or provided for in the contract
- One party is responsible for the event
Misrepresentation
Misrepresentation occurs when a false statement of fact induces someone to enter a contract. Types of misrepresentation include:
- Common mistake: Both parties have a mistaken understanding of the contract, rendering it void (e.g., Couturier v Hastie)
- Unilateral mistake: One party is mistaken about the other’s identity, making the contract voidable (e.g., Cundy v Lindsay)
- Misrepresentation of fact: A false statement of material fact that induces the contract (e.g., Smith v Land House Property Corporation)
- Misrepresentation by conduct: Actions that misrepresent the truth (e.g., Shum Kong v Chui Ting Lin)
- Innocent misrepresentation: A false statement made without knowledge of its falsity (e.g., Leaf v International Galleries)
Duress and Undue Influence
- Economic duress: Illegitimate pressure to enter a contract (e.g., Universe Tankships Inc v International Transport Workers Federation)
- Undue influence: One party’s excessive influence over the other, making the contract voidable (e.g., Diners Club International v Ng Chi Sing)
Case Studies
- Cutter v Powell: Entire contract principle – full performance required for payment
- Hoenig v Isaacs: Substantial performance allows for payment minus deductions
- Taylor v Caldwell: Frustration due to destruction of subject matter