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Discharge of Contract (Methods of discharge (Agreement (Before all…
Discharge of Contract
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Methods of discharge
Notice
A contract may contain clause allowing one/both parties to end the contract upon giving the other party period of notice.
Agreement
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Bilateral discharge: both parties have not completed their obligations and agree to terminate early.
Unilateral discharge: one party has completed their obligations, other is satisfied and agree to end the contract. The party that failed to comply must give fresh consideration to the other party for agreeing to discharge early.
Performance
When each party has performed their rights and obligations as required under their contract, precisely and exactly in accordance with the terms of the contract.
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Breach of contract
One party fails to perform at least one of contractual obligations properly, by
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Does not automatically discharge a contract, the injured party’s right to repudiate the contract will depend on the seriousness of the breach
Serious breach -> breach of a condition -> the contract may be discharged; the injured party can claim damages
(repudiatory breach)
Less serious breach -> breach of warranty -> the contract continues; the injured party can claim damages
Anticipatory breach – when a party tells the other party in advance of commencing their obligations under the contract that they cannot perform the contract.
Operation of the Law
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Examples:
• One of the parties dies or becomes mentally/physically incapacitated
• Insolvency/bankruptcy
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Frustration
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There exists a change in circumstances, after the contract was made, which is not the fault of either of the parties, which renders the contract either impossible to perform or deprives it of its commercial purpose. => Each party is discharged from future obligations under the contract and neither party may sue for breach.
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