To Discharge By Performance

Transcription

1 To Discharge By Performance Requirements Start by looking at the contract to see if it has a term that of entire performance. If not then the exceptions may apply. 1. ENITRE PERFORMANCE RULE - The general rule is that performance must exactly match the requirements laid down in the contract, and this is known as entire performance. If the first party fails to perform entirely, the other party need pay nothing at all, even if the shortfall in performance actually causes no hardship. This rule can also allow parties who wish to escape from an unprofitable contract do so by taking advantage of the most minor departures from its terms. - Cutter v Powell legal principle = if a contract requires entire performance and a party fails to perform the contract in its entirety he or she is entitled to nothing under the contract from the other party. (Sailor dying half way through a voyage, widow could not claim for his wages as he had not completed the voyage) - Re Moor & Co Ltd v Landauer & Co Contract said 30 cans of fruit in each case, only 24 cans in some, made no difference to the market value of the goods, but buyers pointed out the sale was covered under legislation, which states that goods sold by description must correspond with that description. Buyers could reject the whole consignment. - Arcos Ltd v E A Ronaasen & Son Performance to the conditions of the contract must be strictly adhered to. Any microscopic deviations are usually ignored UNLESS it is stipulated the range of error allowed (Highmist). - Appleby v Myers (1867) LR 2 CP 651 Plaintiff had contracted to undertake an entire performance for a specific sum of money. The contract was however, frustrated because fire damaged the premises and the machinery. - Cunliffe v Harrison the oversupply of goods. Indicates that the buyer may reject the whole consignment. (It is difficult to see if this would ever be significant unless the seller was trying to make the purchaser pay for the additional supplies. 2. EXCEPTIONS TO THE ENTIRE PERFORMANCE RULE This is to be able to mitigate the harshness of the entire performance rule. a. SUBSTANTIAL PERFORMANCE Not contractual price, but the price of the work actually done less any monies needed to repair the work done. Cannot be applied where the claimant has breached a CONDITION of the contract. Was established in Boone v Eyre (1779) allows a party who has performed with only minor defects to claim the price of the work done, less any money the other party will have to spend to put the defects right. However, the costs need to be looked at carefully. Because if the cost of repair is a large proportion of the initial cost of the promise, then NO substantial performance. i. Highmist P/L v Tricare Ltd there was a CONDITION in the contract that performance was to be exact. NO substantial performance (3% difference exactly not 3.105%). ii. Hoenig v Isaacs Cost to repair the decorating of a flat did not equate

2 to much. Defendant had to pay the remaining amount of the decorating less the cost of repairing the defective work. Restitutionary claim iii. Bolton v Mahadeva (1972) the cost of the defects of installing the heater was too great to hold that there had been substantial performance. b. SEVERABLE or DIVISIBLE CONTRACTS Said to be severable or divisible when payments come due at various stages of performance, rather than in ONE LUMP SUM when performance is complete. If the contract is a LUMP SUM contract, then this exception does NOT apply. i. Usually building contracts, with installments due as various stages of construction are completed. ii. The price for each stage can be claimed when that stage is completed even though the party concerned may be in breach of the contract for not completing subsequent stages. That is if they finish the first stage they must be paid even if they do not finish the next 5 stages!! GEC Marconi Systems v BHP Information Technology P/L (2003) FCA 50 iii. Severable or divisible contracts are a matter of construction. c. VOLUNTARY ACCEPTANCE OF PARTIAL PERFORMANCE while a contract may not have originally intended to be divisible, one party may agree to accept and pay for part-performance from the other. If the agreement can be inferred from the circumstances, the claimant sues on a quatum meruit, to recover the cost of such performance that has been provided. But these have to be freely accepted. i. Sumpter v Hedges Builder agreed to construct two houses and a stable on the defendants land. He abandoned the project after completing just 333 worth of the job. The defendant completed the project himself, he did so using the materials that were left behind by the builder. The builder claimed on quantum meruit for the work done and materials supplied. The claim for the work failed because the defendant was not choosing to accept part-performance and finish the job himself, that is he had no real alternative but to complete the building. However, he did not have to use the materials left behind, so the builder was allowed to claim for these. ii. Free acceptance ONLY occurs under this exception. In the above case he had no choice or practical alternative but to finish the work himself on the houses and the stable because pulling them down was not an option. However, he had free choice to use the materials that the builder left behind. iii. Steele v Tardiani This is the free acceptance principle. In order to recover, it needs to be established that the defendant had obtained the benefit of the works and that they had acquiesced (accepted something reluctantly but without protest) in the works with the result that the defendant then incurred an obligation to pay the value of the work done (NOT the contractual price). In Steele, the deficient performance (wood not cut to the correct length) was occurring along the way. It was in the currency of the performance. They had also had real benefit from the performance. The could have protested the incorrect work initially and the outcome may have been different. iv. Pavey and Matthews v Paul There was no enforceable contract on foot. The builder carried out the work and satisfactorily completed

3 it. The true basis of the claim was having done the work and the defendants acceptance of the work without paying the agreed remuneration. Plaintiff recovered a quantum meruit or a restitution based on unjust enrichment arising from the acceptance of benefits that accrued from the other party s performance in circumstances where there was either no contract or an unenforceable one. d. DE MINIMUS NON CURAT LEX RULE merely means that the law does not concern itself with trivialities. i. Margonaronis Navigation Agency v Henry W Peabody & Co of London (1962) 2 QB 444 stated that the court will not regard matters that are trivial or of a trifling nature in regards to performance under a contract. ii. Attorney-General (Botswana) v Aussie Diamond Products P/L (No 3) (2010) WASC 214 whether a breach falls under the de minimus rule depends on the nature and extent of the breach, as well as the nature and the details of the term breached, is a determination under construction as to the intention of the parties. e. TIME FOR THE PERFORMANCE OF OBLIGATIONS If performance has taken place within the time, the contract has been discharged properly within that time; if the performance (or even the appearance of performance) occurs too late, then it could lead to a breach of the contract. If there is a breach of the time condition found, then it may entitle the innocent party to sue for damages or to terminate the contract depending on the exact extent of the breach or the classification of the time condition that is how essential time is to the contract. If the delay means that there is a substantial failure to perform, or if time is of the essence (perishable goods). If no time can be definitely implied or inferred then a party who does not perform will not be in breach (as there is no failure to perform within time). The court will try to find the basis for the implication of a reasonable time for the performance of the contract. Two main ways that time can be classified as being important or of the essence 1 it is written directly in the contract. 2 it is inferred from the nature of the contract (perishable goods, prices fluctuate). 3- Time is of the essence i. Reid v Moreland Timber Co P/L (1946) 73 CLR 13 the implication of performance within a reasonable time is in general, made UNLESS there are specific indications to the contrary. ii. Handley v Gunner (2008) NSWCA 113 A reasonable time is determined by the circumstances existing at the time when performance takes place or when it should have taken place. NOT THE TIME OF THE CONTRACT. iii. Peregrine Systems Ltd v Steria Ltd (2005) EWCA Civ 239 Involves consideration, with hind sight as a benefit, and viewed from the time at which one party states that a reasonable time for performance has been exceeded. (EG could be implied from an order of bananas that are perishable and the price fluctuates if the contract is not performed within a certain time).

4 iv. Electronic Industries v David Jones Ltd (1954) 91 CLR 288 In store demonstration was postponed. Plaintiff agreed to postponing the demo. The first time passed as was agreed. No time was agreed upon, and no variation of the initial contract was completed. The plaintiff treated the contract as repudiated by the defendant and sued for damages. The defendant decided he didn t want the demo anymore and he was not bound to the agreement because there had been no time specified in the contract, he also contended that the time stipulated for performance term was removed as they had agreed to postpone the demo. The court held that the plaintiff was allowed to make requests for when the demo will take place, he had not rescinded the contract, all he had done was agree to changing the time of the demo. All the plaintiff had done was to make reasonable requests of the defendant as to a time when his store would be available for the demonstration. Which he is entitled to do. Despite the time of original performance passing, the contract was still alive and on foot, so the defendant was in breach by not stipulating a time for the demonstrations. THE ORDER OF PERFORMANCE OF CONTRACTUAL OBLIGATIONS To ascertain if a party is in breach or has in fact discharged its contractual obligations, it is sometimes necessary to ascertain the order for performance. Bruton v Palmer (1980) 2 NSWLR 895 The order of performance of contractual obligations by the parties is normally determined by the terms of the contract. If the contract is silent on this matter, it becomes a question of construction of the contract to ascertain the intention of the parties as to the order in which obligations are to be performed. Determining the order of performance, the courts distinguish between independent and dependant obligations. If the parties' obligations are independent of each other, then the order of performance is irrelevant. Segboer v A J Richardson Properties Pty Limited (2012) NSWCA 82 whether an obligation is dependant or independent, is a question of construction of the instrument. Independent obligations are rarely found in contemporary times. An example of independent obligation occurs in the sale of goods legislation in all Australians jurisdictions, which allow a seller to recover the price of the goods if the buyer s promise to pay for the goods on a particular date irrespective of actual deliver. Another example is the obligation for the tenant to pay rent and that of the landlord for quiet enjoyment Edge v Boileau (1885) 16 QBD 117. Dependant obligation are more likely to be found. One party s obligation to perform will depend upon the performance of the other party, unless they have agreed to perform their obligations concurrently. Automatice Fire sprinklers Pty Ltd v Watson (1946) 72 CLR 465 the contract of an employer to pay an employee s wages. The employer is not obliged to make payment if the employee has not performed. Concurrent obligation is where the obligation to perform occur at the same time. For example in relation to contracts for the sale of land. The vendor has an obligation to hand over the titles and deeds to a property on the same day

5 that the purchaser is obliged to pay the purchase price on the day of settlement to complete the transaction. If on party is not ready, willing and able to perform their obligation the other party is relieved from their obligation to perform, provided they are ready, willing and able to perform. CO-OPERATION, GOOD FAITH AND PERFORMANCE