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Week 6 Termination by performance or agreement (TERMINATION BY AGREEMENT …

- - - - Severable or divisible contracts
        
        the contract is severed, or divided, into the part which was performed, and the part which was not; and the party is paid only for that part of the contract which was performed.
        
        Steele v Tardiani (1946) 72 CLR 386,
        contract was “infinitely divisible” because it was a contract for payments per ton of wood, not a single payment in return for an entire job done. In other words, at the very least, the internees should have been paid for so much of the wood as they did cut to the proper length.
      - The “de minimus” rule
        means that the law does not concern itself with trifles
        
        for instance, if I were to make a contract with another person for them to wash my car, and the contract stipulated that the car was to be “clean” after the car was washed, I would not be able to claim the contract had been breached simply because I was able to find a single speck of dirt somewhere on the vehicle
      - Part performance
        If a party freely and voluntarily accepts something less than full performance of the contract, then it would hardly be fair for them subsequently to go back and claim that the contract had been breached.
        for this rule to work the acceptance on the part of the innocent party must truly and genuinely be voluntary
        
        Sumpter v Hedges [1898] 1 QB 673
        
        In this case, Sumpter contracted to build stables for Hedges. Work began, but Sumpter ran out of money and was unable to complete the job. He abandoned the contract, leaving behind building materials. Hedges then used those building materials to complete the job himself. One question for the court was whether, by doing so, Hedges was accepting Sumpter’s partial performance of the contract.
        The court found that he had not so accepted. In short, the court’s reasoning was that Hedges had no real options in this situation: a half-built stable was of no use to him, and he could not get Sumpter to complete the work. Removing the stable and starting anew was equally ridiculous. Under these circumstances, it could not be said that Hedges had voluntarily accepted part performance. As a result, while Sumpter was paid for the materials he had purchased, he was not paid that part of the contract which related to his labour. This seems rather self-evidently like good common sense.
      - Substantial performance
        
        Hoenig v Isaacs [1952] 2 All ER 176
        
        In this case Hoenig was an interior decorator, who contracted to furnish and decorate a flat. The overall price of the contract was £750, and Hoenig had been paid £400 in part payments along the way. When the job was purportedly complete, Isaacs found fault with two items – a wardrobe and a bookcase. The defects could be fixed for about £50, however Isaacs seized upon the defects and claimed that the contract had been breached, so he refused to pay the outstanding £350.
        The court didn’t let Isaacs get away with it. The ratio, in short, was that the contract had been substantially performed and that while Isaacs should certainly be entitled to the £50 required to rectify the issue, he was not entitled to withhold the remaining £300.
      - Obstruction
        where Party A tries to complete their side of the contract, but Party B prevents them from doing so
        
        Planche v Colburn (1831) 172 ER 876
        
        Planche was an author, and was contracted to write a small volume on the history of armour, for publication as part of a series called The Juvenile Library. He was to be paid £100 for doing so. Planche began working on the article, and went to some expense (including an expedition to a museum specializing in armour). Meanwhile, the publishers ceased publication of The Juvenile Library and refused to accept the article for publication as part of that series. Planche was therefore unable to complete his end of the bargain, because he could hardly submit the book for publication in a series which no longer existed.
        The publisher sought to rely on the fact that the article had not been completed, as a reason for not paying. However the court found that the author should, at least, be paid for the effort he had made in attempting to execute the contract. This is known as a quantum meruit. The author was therefore paid £50.
      - Time
        If a contract establishes that obligations must be performed by a certain time, but those obligations are performed a very brief time after that deadline, what should be the effect upon the contract
        
        The court will therefore consider whether time is “of the essence” of the contract. In other words, is the breach of the deadline a mere technicality which ought to entitle the innocent party to damages (if even that – remember the de minimus rule); or is the breach of the deadline likely to have such a substantial impact that the breach effectively denies the innocent party their benefit under contract.
- - - - For a real case example of a condition precedent, you could consider virtually any real estate sales contract, because most of these are made subject to finance. If the buyer is unable to obtain finance, the contract does not proceed.
        Have a look at Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 for a case along these lines.
    - - Geipel v Smith (1872) LR 7 QB 404,
        in which a shipping company contracted to transport coal by sea from England to Germany. After the contract had been signed, but before the ship has departed, war broke out between France and Germany. As a tactic in this war, France imposed a naval blockade upon Germany, thereby threatening to capture or sink any vessel attempting to take supplies to Germany. Naturally, the transport company did not depart for Germany. The declaration of a naval blockade was considered to be a condition subsequent with the effect of terminating the contract.
      - A condition subsequent should be contrasted with a contractual condition stipulating that one or both parties may terminate ‘at will’ or ‘for convenience’. In such circumstances, there is a general, unfettered and express right to terminate a contract. Rather than arising only upon the occurrence of a specified event, this right may be exercised at any time and for any reason whatsoever.
  - - - the two parties simply agree to release one another from any outstanding obligations under the contract. Just as the two parties agreed to the contracting in the first place, the two parties may agree to end the contract for whatever reason they please.
    - - one party has completed their obligations under the contract and the other party has not. If the party which has completed their obligations chooses to release the other party from any further obligations, this release will be effective (if consideration is given for the release (simple contract) or the contract is in solemn form (ie. a deed) see Carter [06-480]. Usually the release will take the form of a Deed of Release).
        
        Finally, a word of caution in relation determination by release: remember the rule in Pinnel’s Case. The payment of a lesser amount of money cannot be good consideration for the release of a larger financial debt.