Discharge of Contract through Performance: Analysis of Principles

This document analyzes the principles of discharge of contract through performance and its exceptions. It discusses the issues faced by Anderson Construction Ltd, Howe Heating Ltd, and Brian Gabriel in this scenario. The document also provides information on divisible/severable contracts, substantial performance, acceptance of partial performance, tender of performance, and performance prevented by the promisee. Bibliography is also included.

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The first issue that is present in this scenario is related to the performance of contract by
Anderson Construction Ltd. Anderson construction left of work incomplete and Brian had to ask
Jethro Builders to complete the work by paying £500,000. However while completing the work,
Jethro uses materials worth £20,000 that was left behind by Anderson construction Ltd.
Another issue that is present in this scenario is related with the cost of £500 that is required for
getting the defects repaired that are present in the central heating system installed by Howe
Heating Limited.
One more issue that arises on the basis of this scenario is related with the refusal of Brian to pay
£100,000 to Kate. Kate was hired by Brian to act as his tour manager. However later on Brian
decided to cancel the South American tour and instead decided to finish off his new album.
In order to deal with the issues mentioned above the principles related with the discharge of
contract have to be analyzed. In construction cases related with contract locked damages are
awarded in accordance with the common law principles of common law. According to the
common law, a contract can be described as a promise or a set of promises that is going to be
enforced by the law or will be recognized by the law in some manner. Given the reason that a
promise lies at the heart of contract, it is only logical that comparing the performance of the
promise, or in other words forcing the person making the promised to keep its word, should be
the main aim of the common law principles related with contract. However the reality is that the
common-law remedies are not directed at forcing the party is making the promise to fulfill their

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promise not to prevent the breach of contract but instead these remedies are aimed at providing
relief to the other party for the breach of contract. The purpose here is consistent with the
principles of free market economy. According to this theory, bargaining for contracts should
allocate the available resources in most socially efficient way. This theory believes that each
goods or service should be consumed by other persons who value it the most and the production
factors should be used in such a way that the most valued output can be produced. Hence the
contracts that have been created voluntarily throw bargaining between the parties and where the
parties have exchanged their assets.
Discharge through Performance: it can be said that the content has been discharged through
performance when both the parties to the contract have completely perform their obligations
imposed by the contract. On the other hand if one party has failed to completely perform its
obligations under the contract it will be treated as a violation of contract and opposite party may
claim damages unless contract becomes frustrated. If the non-performance of the contract
amounts to repudiatory breach (violation of a condition of the contract) the other party will be
released by the law from its requirements. In case of a contract where the price is going to be
paid on the completion of the contract, the completion is generally required for the purpose of
discharging the contract. Generally this is mentioned as being a condition precedent. Completion
results in the need of payment. On the other hand if there is no completion of the contract and
payment required to be made. This is a general rule that was provided by the court in Cutter v
Powell1 and in some cases this rule may result in injustice.
The result is that the severity of this rule related with the discharge of contract through
performance has been alleviating by creating certain exceptions to this general rule.
1

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Divisible/Severable Contracts: the rule related with the discharge of contract to full performance
is applicable where an entire contract is present. On the other hand, where it is possible to divide
the contract include different parts, for example that it is agreed that a particular sum is going to
be paid every week, then the courts may award the sum for different parts of the contract that
have been finished.2
Substantial performance: another exception that is present in case of the above-mentioned rule is
that there are court is satisfied that there is a substantial performance of the contract the court
may grant contract price and subtract the sum which reflects the sum of the content that has not
been performed. However, if it has been held that the performance does not sum to considerable
performance, the other party is not permitted to anything. Sometimes problem arises regarding
what can be considered as substantial performance. There has been no exec limit prescribed by
the law but it has to be decided on the basis of the facts of each case. In this regard a competitor
needs to be made between Bolton v Mahadeva3 and Hoenig v Isaacs.4 In Bolton v Mahadeva
[1972] central heating was installed by the claimant in the house of the defendant. The price
agreed by the parties for the contract was £560. However the defendant was not satisfied with the
effort done by the claimant and therefore declined to shell out the price. The defects that were
present in the work amounted to £174. However the action initiated by the claimant for enforcing
the payment as a result that it was held by the court that substantial performance did not exist.
On the other hand in Hoenig v Isaacs [1952] it was agreed that the claimant was going to
decorate and furnish the flat for the price of £750 that was going to be paid in two installments
and the balance was going to be paid on the completion of the contract. The work was completed
by the complainant but the defendant was not satisfied regarding some of the furnishings. Under
2 Ritchie v Atkinson (1808) 10 East 295
3 Bolton v Mahadeva [1972] 1 WLR 1009
4 Hoenig v Isaacs [1952] 2 All ER 176

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these circumstances the defendant refused to pay the entire final installment. The price of the
defects that are present in the furniture amounted to £56. Therefore in this case it was held by the
court that the claimant had substantially execute the contract and as a result the claimant was
entitled to the contract price and by deducting the cost of the defects.
There are other exceptions present to the rule mentioned above. These include:
Acceptance of partial performance: according to this exception, where one party has really
decided to admit part performance, then an amount is going to be paid for the work that has been
completed under the contract. In this case the major issue is related with free acceptance of
partial performance. In Sumpter v Hedges5 it was agreed that the claimant was going to build two
houses and stables. The parties agreed that on the completion of the work, an amount of £565
was going to be paid. Therefore performance was started by the claimant but very soon the
claimant ran out of money and could not complete performance under the contract. However the
claimant had performed just over half of the contract. The rest of the work was completed by the
defendant himself. Under these circumstances the claimant brought action for recovering £333
which was the value of the work completed by the claimant. In this context the claimant claimed
that by finishing the work himself, it can be stated that the defendant admitted part performance
and had also stopped the claimant from completing its obligations under the contract. However
in this case, the action initiated by the claimant could not succeed. It was stated by the court that
the defendant did not have any other choice but to admit part performance as the defendant had a
half completed house erected on his property.
Tender of performance: according to this exception, when a party to the contact wants to perform
its obligations under the contract and has tried to tender performance but the other party has not
accepted the performance then in such a case the party who wants to tender performance is
5 Sumpter v Hedges (1898) 1 QB 673

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discharged from the contract and the party that has refused to accept the performance is liable to
pay damages for non-acceptance. The leading case in this regard is Startup v Macdonald.6 In this
case, it was mentioned in the contract that 10 tons of oil was going to be delivered to the
defendant within the last 14 days of the month of March. The oil was delivered by the claimant
on 8:30 PM Saturday which was 31st of March. However the defendant declined to admit the
delivery of the oil on account of the lateness of time. In this case, the court stated that
performance was tendered by the claimant within the approved contractual time and therefore the
claimant was entitled to receive damages for non-acceptance.
Performance prevented by the promisee: the law provides that when the promisee has prevented
the conclusion of the performance, in such a case the promisor is permitted to receive payment
for the job that has been finished. In Planche v Colburn,7 the claimant arranged to write the book
for the defendant on costume and armor as a part of the series. The price of the content was
agreed to be £100 and it was payable on completion. The claimant began writing the book and
finished a major part when the series was canceled by the defendant. The defendant refused to
pay the claimant even if it an undertaking was made by the defendant and also the fact that the
claimant was still ready to complete the book. Under these circumstances, action was initiated by
the claimant for enforcing payment. The court stated that the claimant was permitted to receive
£50 due to the reason that the performance was prevented by the defendant.
In the present case, regarding the contract created between Brian Gabriel and Anderson
Construction Ltd. it can be said that the while the general rule provides that in case of the
substantial performance of the obligations imposed by the contract, the party can claim the price
of the contract minus the amount regarding the work that has been left incomplete. However the
6 Startup v Macdonald (1843) 6 Mann & G 593
7 Planche v Colburn [1831] EWHC KB J56

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presentation cannot be said that Anderson construction Ltd. had made a substantial completion of
the work. Therefore the company cannot be allowed to claim the amount of the work done by it.
Regarding the content that was created with Howe Heating Ltd. it can be said that in this case the
work has been substantially completed. Move the result is that Howe Heating can claim the
contractual price minus the price that is required for repairing the defects.
In the same way, in case of the contract that was created between Brian and Kate, it can be said
that in this case the performance of the contract has been prevented by Brian while Kate is still
ready to perform its obligations imposed by the contract. As a result in this case, Kate can
recover the price under the contract.
The reason is that in such cases it is provided by the law that where the promisee and prevented
the completion of the performance of the contract in such cases the promisor is allowed by the
law to play the payment for the work that has been completed. Therefore in the present case also,
Kate is ready to complete its part of the contract but Brian had prevented Kate from doing so has
he had decided to cancel his South American tour and work for the completion of his new album.
In view of the circumstances it can be said that Brian had prevented Kate from performing its
part under the contract.
Bibliography
Bolton v Mahadeva [1972] 1 WLR 1009
Cutter v Powell [1795] EWHC KB J13
Hoenig v Isaacs [1952] 2 All ER 176
Planche v Colburn [1831] EWHC KB J56
Ritchie v Atkinson (1808) 10 East 295

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Startup v Macdonald (1843) 6 Mann & G 593
Sumpter v Hedges (1898) 1 QB 673