Lecture 9 Discharge and Termination
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Transcript of 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]
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Methods of Discharge
Discharge
Performance Agreement Frustration OperationOf law
Breach Virtue ofterm
Lapse oftime
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Types of Performance
Types of Performance
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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
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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
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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]
8/3/2019 Lecture 9 Discharge and Termination
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Discharge by Frustration
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]
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Discharge by Frustration
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
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Discharge by Frustration
The Effect of Frustration
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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)
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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.