lecture 9 discharge and termination

8/3/2019 Lecture 9 Discharge and Termination

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Privity

As a general rule, only the parties to the contractcan acquire rights and incur liabilities under it

CASE: Beswick v Beswick [1968]

CASE: Trident General Insurance Co Ltd v

McNiece Bros Pty Ltd (1988)

No right of action in contract exists against aperson who is not a party to a contract (but a

third party who knowingly and intentionallyinduces a breach of contract may commit a tort)

CASE: Lumley v Gye [1843-60]



Methods of Discharge

Discharge

Performance Agreement Frustration OperationOf law

Breach Virtue ofterm

Lapse oftime



Types of Performance

Types of Performance



Discharge by Performance

2. Partial PerformanceGenerally, payment does not automatically followunless the contract is divisible (a matter ofconstruction)

CASE: Cutter v Powell (1795)

although there are exceptions: if there has been free and willing acceptance of

partial performance by the party receiving thebenefit

there has been substantial performance and thecost of rectification is smallCASE: Hoenig v Isaacs [1952]

if one party is prevented from performing



Discharge by Agreement

A contract created by agreement can be undone byagreement (cont):

Substitution

where the parties wish to continue with a contractual relationshipbut on terms differing from those in the original agreement, anew agreement can be substituted

Accord and Satisfaction

where one party has performed their obligations and thedefaulting party is relieved of their obligations by doingsomething different to that which they were bound to do underthe original contract



Discharge by Frustration

The doctrine of frustration offers exceptions to the doctrineof absolute liability.

To be operative, frustration can only arise where:

an unforeseen event outside the control of the parties hassignificantly changed the obligations of the parties;

neither party caused the supervening event;

neither party contemplated the supervening event; and

it would be unjust to hold the parties to their original contract.CASE: National Carriers v Panalpina (Northern) Ltd [1981]




Cases involving this doctrine fall into 5 categories:

Physical impossibility because of destruction ofthe subject matter

CASE: Taylor v Caldwell (1863)

Physical impossibility under a contract ofpersonal services

Change in the law rendering performance

impossibleCASE: Horlock v Beal [1916]




The effect of frustration is to discharge thecontract but only as to the future

CASE: Fibrosa Spolka Akcyjina v Fairburn Lawson

Combe Barbour Ltd [1943]

Victoria has modified the common law position: Frustrated Contracts Act 1959 allows expenses

incurred before frustration to be recovered




The Effect of Frustration



Discharge by Operation of Law

This can happen via:

bankruptcy;

material alteration;

merger;

death if the contract is for personal services;and

discharge by lapse of time

CASE: Ballas v Theophilos (No 2) (1957)



Discharge by Breach

Where one party fails to perform their obligations asagreed, they are liable for breach of contract.

Breach may be:

Actual breach where a party fails to perform at the

time required by the contract; or Anticipatory breach where a party threatens not to

perform prior to the time required by the contract

CASE: Foran v Wright (1989)

The effect of breach depends on the importance ofthe term that is broken.

The remedies available to the injured party willdepend on the nature of the breach.

lecture 9 discharge and termination

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