DISCHARGE OF CONTRACT




DISCHARGE OF CONTRACT
Contract is discharged when it is terminated in one of these ways:
            1. By performance.
            2. By consent or agreement between the parties
            3. By impossibility (frustration)
            4. By breach.

BY PERFORMANCE.
  Performance must be strictly in accordance with terms of the contract.
  Sec 38 (1) - parties to a contract must either perform or offer to perform their respective promises unless such performance has been dispensed with by any law.
  When time is of the essence - Sec 56
  Performance by third party - Sec 41
Terms of contract that requires personal  performance must be done by promissory
LETCHUMI AMMAL v. NAM FONG HOUSING SDN BHD (1982) 2 MLJ 19
The Federal Court applied Section 41 of Contract Act and ruled that a contract that the appellant would get RM6,000 if she herself would demolish or deliver possession of the house by a certain date to the owner of the land was to be performed personally.
If a promisee accepts performance from a third party, cannot afterwards enforce it against promisor
HAJI NIK ISHAK v. NIK ZAINAB [1975] 2 MLJ 82.
In this case, the parties agreed to transfer land each other, the consideration for the appellant's parcel being $25,000 and that of the respondent's, $14,000. It was also agreed that the difference of $11,000 would be settled by two sons of the respondent; one would be paid and the appellant thereupon claimed payment from the respondent. The claim was dismissed by the court of first instance and on appeal, the Federal Court, dismissing the appeal, held that as the appellant had agreed to accept performance of the promise from the third party, he could not under section 42 of the Contracts Act 1950 enforce it against the respondent.
 BY CONSENT OR AGREEMENT
Contract created by consent can be extinguished by consent either  express or implied. Express consent may be given at time of contract or subsequent to that.
  E.g. discharged at the occurrence of an event.
                            Waiver, release, novation or rescission.
  Sec 63 - if the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.
  Sec 64 - every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.

 BY IMPOSSIBILITY / FRUSTRATION
Two categories of impossibility of contract:
1. When impossibility is at the time of making the contract - an agreement to do an act impossible in itself is void.
2. A contract is frustrated when there is a change in the circumstances which renders a contract legally or physically impossible of performance – not merely difficult or more onerous
Sec 57(2) - a contract to do an act which after the contract is made becomes impossible, or by reason of some event which the promisor could not prevent, becomes void when the act becomes impossible or unlawful.
In applying the rule - court will examine the circumstances surrounding the frustration  including whether it is self induced or not.
A contract may be discharged in any of the following circumstances:
  Destruction of the subject matter - Taylor v. Caldwell-there must be total destruction - not partial due to Sec 12 of SRA
TAYLOR V. CALDWELL 3 B. & S. 826, 122 Eng. Rep. 309 (1863)
Defendants Caldwell & Bishop owned Surrey Gardens & Music Hall, and agreed to rent it out to the plaintiffs, Taylor & Lewis, at the rate of £100/day. The plaintiffs had planned to use the music hall for four concerts for four different dates during the summer of 1861, and had intended to provide a variety of extravagant entertainments, including a singing performance by Sims Reeves. According to the contract the parties had signed, the defendants were to provide most of the performers. The plaintiffs were to receive the gate receipts and advertise for these events. Then, on June 11, 1861, a week before the concert was to be given, the music hall burned to the ground. The plaintiffs sued the music hall owners for breach of contract for failing to rent the music hall. There was no clause within the contract itself which allocated the risk to the underlying facilities, except for the phrase “God’s will permitting” at the end of the contract.
Judge Blackburn began his opinion by stating that the agreement between the parties was a contract, despite their use of the term “lease”. Blackburn reasoned that the rule of absolute liability set forth in Paradine v. Jane only applied to positive, definite contracts, not to those in which there was an express or implied condition underlying the contract. Blackburn further reasoned that the continued existence of the Music Hall in Surrey Gardens was an implied condition essential for the fulfillment of the contract. The destruction of the music hall was the fault of neither party, and rendered the performance of the contract by either party impossible. Blackburn cited to the Civil code of France and the Roman law for the proposition that when the existence of a particular thing is essential to a contract, and the thing is destroyed by no fault of the party selling it, the parties are freed from obligation to deliver the thing. He further analogized to a situation in which a contract requiring personal performance is made, and the party to perform dies, the party’s executors are not held liable under the common law of England. Blackburn thus held that both parties were excused from their obligations under their contract.

  Supervening event defeat the whole purpose / object of the contract -  Henry v. Krell.
       KRELL. V. HENRY
The defendant, C.S. Henry, agreed by contract on June 20, 1902, to rent a flat located at 56A Pall Mall from the plaintiff, Paul Krell, for the purpose of watching the coronation procession of Edward VII scheduled for June 26 and 27. The housekeeper of the premises informed Henry that he would have an excellent view of the procession from the room. The parties agreed on a price of £75, but nowhere in their written correspondence did either of them explicitly mention the coronation ceremony. Henry paid a deposit of £25 to Krell for the use of the flat, but when the procession did not take place on the days originally set (on the grounds of the King’s illness), Henry refused to pay the remaining £50. Krell brought suit against Henry for the remaining balance, and Henry countersued for his deposit of £25. The judge determined that given the affidavits of the parties, Krell had only granted Henry a license to use the rooms for a particular purpose (watching the coronation). He analogized the situation to one in which a man hired a taxicab to take him to a race. If the race did not occur on the particular day the passenger had thought, he would not be discharged from paying the driver; but unlike the situation in this case, the cab did not have any special qualification, as the room here did (its view of the street). Furthermore, the cancellation of the coronation could not reasonably have been anticipated by the parties at the time the contract was made.

  Death or personal incapacity especially in regards of personal obligation.
  Supervening illegality - LEE KIN v. CHAN SUAN ENG.
LEE KIN V. CHAN SUAN ENG. (1933) MLJ 197
A lease for five year yearly renewals was held to be frustrated by the enactment of a new law prescribing annual renewal of such leases.
Effect of frustration - automatically end the contract
  Sec 66 CA provides for restitutionary remedy.

4. BY BREACH
Sec 40 - ‘When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.
Party not in breach has the option of continuing with the contract and claim damages or repudiate the contract.
Sec 65 - ‘when a person at whose option a contract is voidable rescinds it, the other thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit there under from another party to such contract, restore the benefit, so far as may be, to the person from whom it was received.’
Cases :           
CHOO YIN LOO V. VISUVALINGAM (1930) 7 FMSLR 135
The plaintiff contracted to perform certain work on the defendant’s land. It was agreed that the work should be done expeditiously by having 30 workers on the land at all times. If on any day there should be less than 30 workers, the plaintiff should be paid $1 per day for every worker short of the stipulated numbers. The defendant agreed to pay fortnightly 70 percent of the value of work completed. Work commenced and regular payments were made for a time but the defendant later ceased further payment on the allegation that there was shortage of the stipulated number pf workers which entitled him to damages amounted to $3,845.  The plaintiff who to date have employed only a total of 3,355 workers when he ought to have employed 7,200, stopped work on account of the non-payment. He then proceeded to sue the defendant for damages, claiming that he had been prevented by the defendant’s default from completing the contract. The defendant counter claimed for damages. It was held that since the plaintiff had agreed to carry out the work expeditiously, his action in employing less than half the number of workers constituted a breach which entitles the defendant to put an end to the contract.
BAN HONG JOO MINE LTD.  V. CHEN & YAP LTD (1969) 2 MLJ 83
The Federal Court ruled that the deliberate refusal of the appellant to make fortnightly payments for work already done and their order to the respondents to stop work left the latter with no option but to treat the contract as having been repudiated, and to sue for payment of work that have been done.
DISCHARGE OF CONTRACT DISCHARGE OF CONTRACT Reviewed by Kamaruddin Mahmood on 9:20:00 PTG Rating: 5

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