Contract - Discharge

Discharge

Contract creates obligations. These obligations however do not exist indefinitely. Until these obligations are discharge however they will continue to exist. In this part of contract we looked at some of the rules that determined the discharge of contractual obligations.

The first very simply is the discharge of the obligation by performance. That is doing what you were suppose to do according to the contract in the first place. In performing your obligation the law states that you have to perform the obligations precisely. This is known as the doctrine of precise performance. This rule however has several exceptions namely – the de minimis principle, divisible contract, substantial performance, prevented performance and acceptance of partial performance.

The next is the event of a breach of the original obligation. By breaching the obligation, the original contractual obligation is discharged but may give rise to a subsequent liability to compensate the other party in damages.

The next is by agreement and here we look at instances where parties agree to the discharge either by an existing term in the contract that may allow a party to “exit” a contractual obligation by say – giving notice or paying a certain sum of monies. Alternatively parties may enter into a subsequent agreement to discharge themselves from further obligations in the contract.

Finally we looked at Frustration as a means of discharging contractual obligations. Frustration is an event that both parties were unable to foresee – it is very much a freak incident that frustrates the performance of a contract – making it impossible. According to Davies Contractors v Fareham UDC a frustrating event is one that both parties could not have foreseen and were not responsible for and had made the performance of the contract impossible. Once frustrated the situation is dealt with by the Frustrated Contract Act or the common law position in Fibrosa Spolka.