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Cases On Discharge of Contract

1. PERFORMANCE

THE GENERAL RULE

Re Moore and Landauer [1921] 2 KB 519

There was an agreement for the sale of 3,000 tins of canned fruit packed in

cases of 30 tins. When delivered it was discovered that half the cases contained

only 24 tins although the total number of tins was still 3,000. The market value

was not affected. The Court of Appeal held that notwithstanding that there was

no loss to the buyer, he could reject the whole consignment because of the

breach of s13 of the Sale of Goods Act (goods must correspond with the

description).

Cutter v Powell (1795) 6 Term Rep 320

A seaman who was to be paid his wages after the end of a voyage died just a

few days away from port. His widow was not able to recover any of his wages

because he had not completed performance of his contractual obligation. However,

this situation is now provided for by the Merchant Shipping Act 1970.

MODIFICATION OF THE GENERAL RULE

Sumpter v Hedges [1898] 1 QB 673

The plaintiff agreed to erect upon the defendant’s land two house and stables

for £565. He did part of the work to the value of about £333 and then

abandoned the contract. The defendant completed the buildings. The Court held

that the plaintiff could not recover the value of the work done, as he had

abandoned the contract.

Roberts v Havelock (1832) 3 B. & Ad. 404

A shipwright agreed to repair a ship. The contract did not expressly state

when payment was to be made. He chose not to go on with the work. It was held

that the shipwright was not bound to complete the repairs before claiming some

payment.

Note: GH Treitel, The Law of Contract, states (at p702): In such cases the

question whether a particular obligation is entire or severable is one of

construction; and where a party agrees to do work under a contract, the courts

are reluctant to construe the contract so as to require complete performance

before any payment becomes due. “Contracts may be so made; but they require

plain words to shew that such a bargain was really intended”: Button v

Thompson (1869) LR 4 CP.

Christy v Row (1808) 1 Taunt 300

A ship freighted to Hamburg was prevented ‘by restraint of princes’ from

arriving. Consignees accepted the cargo at another port to which they had

directed it to be delivered. The consignees were held liable upon an implied

contract to pay freight pro rata itineris (ie, for freight at the contract rate

for the proportion of the voyage originally undertaken which was actually

accomplished). A contract was implied from their directions re alternative port

of delivery.

Planche v Colburn (1831) 8 Bing 14

The plaintiff was to write a book on ‘Costume and Ancient Armour’ for a

series, and was to receive £100 on completion of the book. After he had done

the necessary research but before the book had been written, the publishers

abandoned the series. He claimed alternatively on the original contract and on a

quantum meruit.

The court held that: (a) the original contract had been discharged by the

defendants’ breach; (b) no new contract had been substituted; and (c) the

plaintiff could obtain 50 guineas as reasonable remuneration on a quantum meruit.

This claim was independent of the original contract and was based on

quasi-contract.

Dakin v Lee [1916] 1 KB 566

The defendants promised to build a house according to specification and

failed to carry out exactly all the specifications, for example, concrete not

four feet deep as specified, wrong joining of certain rolled steel joists and

concrete not properly mixed. The Court of Appeal held that the builders were

entitled to recover the contract price, less so much as ought to be allowed in

respect of the items found to be defective.

Startup v M’Donald (1843) 6 M&G 593

The plaintiffs agreed to sell 10 tons of oil to the defendant and to deliver

it to him ‘within the last 14 days of March’, payment to be in cash at the end

of that period. Delivery was tendered at 8.30pm on 31 March. The defendant

refused to accept or pay for the goods because of the late hour. The court held

that the tender was equivalent to performance and the plaintiffs were entitled

to recover damages for non-acceptance. Today note s29(5) SGA 1979: Demand or

tender of delivery may be treated as ineffectual unless made at a reasonable

hour; and what is a reasonable hour is a question of fact.

2. AGREEMENT

No cases.

3. BREACH

Hochster v De La Tour (1853) 2 E&B 678

An employer told is employee (a travelling courier) before the time for

performance arrived that he would not require his services. The courier sued for

damages at once. The court held that he was entitled to do so.

Avery v Bowden (1855) 5 E&B 714

A charterparty provided that a ship should proceed to Odessa and there take a

cargo from the charterer’s agent. The ship arrived at Odessa and the master

demaned a cargo, but the agent could not provide one. The ship’s master

continued to ask for one. A war broke out. The charterer sued. The court held,

inter alia, that if the agent’s conduct amounted to an anticipatory repudiation

of the contract, the master had elected to keep the contract alive until it was

discharged by frustration on the outbreak of war.

Panchaud Freres SA v Establissments General Grain Co [1970] 1 Lloyd’s Rep 53

Buyers of maize rejected it on a ground which was subsequently found to be

inadequate. Three years later, they discovered that the grain had not been

shipped within the period stipulated for in the contract. They, therefore,

sought to justify their rejection on this ground. The Court of Appeal held that

they were not entitled to do so. Lord Denning MR stated that the buyers were

estopped by their conduct from setting up late delivery as a ground for

rejection because they had led the sellers to believe they would not do so.

Federal Commerce & Navigation v Molena Alpha [1979] AC 757

Clause 9 of a charter provided that the charterers were to sign bills of

lading stating the freight had been correctly paid. After a dispute arose

concerning deductions made by the charterers, the shipowners withdrew this

authority contrary to the terms of the charter. The master was instructed not to

sign bills of lading with the indorsement ‘freight pre paid’ or which did not

contain an indorsement giving the shipowners a lien over the cargo for freight.

This meant that the charterers were put in an impossible position commercially.

The charterers treated the owner’s actions as a repudiation of the charter.

The House of Lords held that although the term broken was not a condition,

the breach went to the root of the contract by depriving the charterers of

virtually the whole benefit of the contract because the issue of such bills was

essential to the charterers’ trade. Therefore, the owner’s conduct constituted a

wrongful repudiation of the contract.

Woodar Investment v Wimpey Construction [1980] 1 WLR 277

Wimpey contracted to buy land for £850,000 and agreed to pay £150,000 on

completion to a third party, Transworld Trade Ltd. The contract allowed the

purchaser to rescind the contract if before completion a statutory authority

‘shall have commenced’ to acquire the property by compulsory purchase. At the

date of the contract both parties knew that a draft compulsory purchase order

had been made. Wimpey purported to terminate relying on this provision, and

Woodar sought damages alleging that this amounted to a wrongful repudiation.

Their damages claim included the loss suffered by the third party (as to which,

see Privity of Contract).

The House of Lords held, by a majority of 3:2, that in order to constitute a

renunciation of the contract there had to be an intention to abandon the

contract and instead of abandoning the contract Wimpey were relying on its terms

as justifying their right to terminate.

4. FRUSTRATION

Taylor v Caldwell (1863) 3 B&S 826

For facts, see below. Blackburn J stated: “The principle seems to us

to be that, in contracts in which the performance depends on the continued

existence of a given person or thing, a condition is implied that the

impossibility of performance arising from the perishing of the person or thing

shall excuse the performance.”

Davis Contractors v Fareham UDC [1956] AC 696

For facts, see below. Lords Reid and Radcliffe stated that the ‘radical

change in the obligation’ test required the court to:

1. Construe the contractual terms in the light of the contract and

surrounding circumstances at the time of its creation.

2. Examine the new circumstances and decide what would happen if the existing

terms are applied to it.

3. Compare the two contractual obligations and see if there is a radical or

fundamental change.

Taylor v Caldwell (1863) 3 B&S 826

Caldwell agreed to let a music hall to Taylor so that four concerts could be

held there. Before the date of the first concert, the hall was destroyed by

fire. Taylor claimed damages for Caldwell’s failure to make the premises

available. The court held that the claim for breach of contract must fail since

it had become impossible to fulfil. The contractual obligation was dependent

upon the continued existence of a particular object. See above for the quote of

Blackburn J.

Condor v The Baron Knights [1966] 1 WLR 87

A drummer engaged to play in a pop group was contractually bound to work on

seven nights a week when work was available. After an illness, Condor’s doctor

advised that it was only safe to employ him on four nights a week, although

Condor himself was willing to work every night. It was necessary to engage

another drummer who could safely work on seven nights each week. The court held

that Condor’s contract of employment had been frustrated in a commercial sense.

It was impracticable to engage a stand-in for the three nights a week when

Condor could not work, since this involved double rehearsals of the group’s

music and comedy routines.

Phillips v Alhambra Palace Co [1901] 1 QB 59

One partner in a firm of music hall proprietors died after a troupe of

performers had been engaged. The contract with the performers was held not to be

frustrated because the contract was not of a personal nature, and could be

enforced against the surviving partners.

Graves v Cohen (1929) 46 TLR 121

The court held that the death of a racehorse owner frustrated the contract

with his employee, a jockey, because the contract created a relationship of

mutual confidence.

Krell v Henry [1903] 2 KB 740

Henry hired a room from Krell for two days, to be used as a position from

which to view the coronation procession of Edward VII, but the contract itself

made no reference to that intended use. The King’s illness caused a postponement

of the procession. It was held that Henry was excused from paying the rent for

the room. The holding of the procession on the dates planned was regarded by

both parties as basic to enforcement of the contract.

Herne Bay Steamboat Co v Hutton [1903] 2 KB 683

Herne Bay agreed to hire a steamboat to Hutton for a period of two days for

the purpose of taking passengers to Spithead to cruise round the fleet and see

the naval review on the occasion of Edward VII’s coronation. The review was

cancelled, but the boat could have been used to cruise round the assembled

fleet. It was held that the contract was not frustrated. The holding of the

naval review was not the only event upon which the intended use of the boat was

dependent. The other object of the contract was to cruise round the fleet, and

this remained capable of fulfilment.

Metropolitan Water Board v Dick Kerr [1918] AC 119

Kerr agreed to build a reservoir for the Water Board within six years. After

two years, Kerr were required by a wartime statute to cease work on the contract

and to sell their plant. The contract was held to be frustrated because the

interruption was of such a nature as to make the contract, if resumed, a

different contract.

Denny, Mott & Dickinson v James Fraser [1944] AC 265

A contract for the sale and purchase of timber contained an option to

purchase a timber yard. By a wartime control order, trading under the agreement

became illegal. One party wanted to exercise the option. It was held that the

order had frustrated the contract so the option could not be exercised.

Re Shipton, Anderson and Harrison Brothers [1915] 3 KB 676

A contract was concluded for the sale of wheat lying in a warehouse. The

Government requisitioned the wheat, in pursuance of wartime emergency

regulations for the control of food supplies, before it had been delivered, and

also before ownership in the goods had passed to the buyer under the terms of

the contract. It was held that the seller was excused from further performance

of the contract as it was now impossible to deliver the goods due to the

Government’s lawful requisition.

Jackson v Union Marine Insurance (1873) LR 10 CP 125

A ship was chartered in November 1871 to proceed with all possible despatch,

danger and accidents of navigation excepted, from Liverpool to Newport where it

was to load a cargo of iron rails for carriage to San Francisco. She sailed on 2

January, but the next day ran aground in Caernarvon Bay. She was refloated by 18

February and taken to Liverpool, where she underwent extensive repairs, which

lasted till August. On 15 February, the charterers repudiated the contract.

The court held that such time was so long as to put an end in a commercial

sense to the commercial speculation entered upon by the shipowner and the

charterers. The express exceptions were not intended to cover an accident

causing such extensive damage. The contract was to be considered frustrated.

LIMITATIONS OF THE DOCTRINE

Davis Contractors v Fareham UDC [1956] AC 696

The plaintiff agreed to build 78 houses in eight months at a fixed price. Due

to bad weather, and labour shortages, the work took 22 months and cost £17,000

more than anticipated. The builders said that the weather and labour shortages,

which were unforeseen, had frustrated the contract, and that they were entitled

to recover £17,000 by way of a quantum meruit. The House of Lords held that the

fact that unforeseen events made a contract more onerous than was anticipated

did not frustrate it.

Maritime National Fish v Ocean Trawlers [1935] AC 524

Maritime chartered from Ocean a vessel which could only operate with an otter

trawl. Both parties realised that it was an offence to use such a trawl without

a government licence. Maritime was granted three such licences, but chose to use

them in respect of three other vessels, with the result that Ocean’s vessels

could not be used. It was held that the charterparty had not been frustrated.

Consequently Maritime was liable to pay the charter fee. Maritime freely elected

not to licence Ocean’s vessel, consequently their inability to use it was a

direct result of their own deliberate act.

Walton Harvey Ltd v Walker & Homfrays Ltd [1931] 1 Ch 274

The defendant’s granted the plaintiffs the right to display an advertising

sign on the defendant’s hotel for seven years. Within this period the hotel was

compulsorily acquired, and demolished, by a local authority acting under

statutory powers. The defendants were held liable in damages. The contract was

not frustrated because the defendant’s knew, and the plaintiffs did not, of the

risk of compulsory acquisition. They could have provided against that risk, but

they did not.

EFFECTS OF FRUSTRATION

Gamerco v ICM/Fair Warning (Agency) Ltd [1995] 1 WLR 1226

The plaintiffs, pop concert promoters, agreed to promote a concert to be held

by the defendant group at a stadium in Spain. However, the stadium was found by

engineers to be unsafe and the authorities banned its use and revoked the

plaintiffs’ permit to hold the concert. No alternative site was at that time

available and the concert was cancelled. Both parties had incurred expenses in

preparation for the concert; in particular the plaintiffs had paid the

defendants $412,500 on account. The plaintiffs sought to recover the advance

payment under s1(2) Law reform (Frustrated Contracts) Act 1943, and the

defendants counterclaimed for breach of contract by the plaintiffs in failing to

secure the permit for the concert.

It was an implied term of the contract that the plaintiffs would use all

reasonable endeavours to obtain a permit, yet once the permit was granted they

could not be required to guarantee that it would not be withdrawn. The contract

was frustrated essentially because the stadium was found to be unsafe, a

circumstance beyond the control of the plaintiffs. The revocation of the permit,

subsequent to its being obtained by the plaintiffs, was not the frustrating

event; the ban on the use of the stadium was. Under s1 of the 1943 Act, the

plaintiffs were entitled to recover advance payments made to the defendants. The

court did have a discretion to allow the defendants to offset their losses

against this, but in all the circumstances of the present case the court felt

that no deduction should be made in favour of the defendants and their

counterclaim should be dismissed.


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