DISCHARGE

(when both parties want to end the contract)

If both parties want contract to end  discuss discharge
If parties just want to claim $$  discuss breach of contract
If parties want contract to end and there is a breach  discuss discharge by breach.

Advise the party legal rights and obligations in relation to ____.

We have to first identify whether the contract formed between ___ and ____ can be
discharged and through which avenue it can be discharged.
A discharge of a contract is defined as a valid contract being brought to an end. Thereby,
this carries the implied assumption that a contract between ___ and ____ has to be formed.
(explain briefly that a contract is formed) Since, a valid contract is formed. This allows us to
move on to the next issue as to what form of discharge is applicable to the contract formed
between ____ and _____.

A valid contract that is not tainted by any vitiating factor may be brought to an end or
“discharged” by one of following:
(1) Mutual agreement between parties (by agreement) or by operation of contractual
clauses (by contract)
(2) Where parties have fully performed their obligations under the contract (discharge
by performance)
(3) Where one party committed a repudiatory breach and the other party elects to
terminate the contract (discharge by breach)
(4) Where an unforeseeable event has caused performance of the contract to be
impossible or substantially different from what the parties have originally intended
(discharge by frustration)

DISCUSS ALL DISCHARGE ACTIONS

Discharge by agreement
(mutual agreement between parties)
- Just as the parties are free to agree to enter into a contract, they are also free to
agree to discharge of the contract. The effect is that both parties lose the right to sue
for damages for non-performance of the discharged future obligations. -

Firstly, there must be a mutual agreement between both parties to release each other from
their contractual obligations.
Secondly, the agreement to discharge the contract must also have sufficient consideration
from both party. (where both parties owe outstanding obligations, the promise by each party to
release the other party from further performance would constitute the necessary consideration.)
By examining the case, discharge by agreement is a valid/not valid option for ___ and ___ as
there is evidence/no evidence provided in the case which points towards both parties
coming to a mutual agreement on brining the contract to an end and freeing each other of
their contractual obligations.
Discharge by contractual term
(by operation of contractual clauses)
A contract can be discharged by contractual terms when the contract contains terms
allowing one or both parties to bring the contract to an end. The contract contains a term
that clearly lists the occurrence of events which will permit the innocent party to terminate
the contract and when an event listed has occurred, a party may terminate.

By examining the contract, there is evidence/no evidence of such clauses. Hence, discharge
by contractual term is inapplicable to the contract enforced between ___ and ___.

Discharge by performance
(full performance by all parties of their contractual obligations)
A contract can be discharged by performance only once both parties have fully discharged
his/her contractual obligations by performing them, then he/she is not liable for breach of
contract. However, if the party is due to perform his/her contractual obligations and have
not fully done so, he/she may be liable for breach of contract.

Firstly, we must examine the contract terms to identify the contractual obligations for ____
and ____ respectively.

(a) ____’s contractual obligations:

(b) ____’s contractual obligations:

Next, we must examine whether ___ and ___ have performed their individual contractual
obligations.
………

Discharge by breach
(breach of a term of the contract giving the innocent party a right to terminate the contract)
(see table)

Classify whether the person committed an anticipatory breach or actual breach first.
Repudiatory breach  when one party renounces his/her obligations under the contract.

1. Anticipatory breach
For an anticipatory breach to occur, ___ must have evinced intention not to be
bound by the contract, or to perform the contract in a specific way or on conditions
not agreed to beforehand. This can be communicated orally, in writing or implied
from conduct i.e when the party puts himself in a position that makes performance
impossible (disablement).

According to the passage, ………….

The doctrine of anticipatory breach allows plaintiff to sue the defendant

immediately, without having to wait and see if the defendant actually fails to
perform on the agreed date of performance.
 Universal Cargo Carriers Corporation v Citati (1957) shows that due to the
defendant’s own delay, there is clearly insufficient time left for the performance to
be rendered. Hence, it can clearly conclude that the defendant had committed an
anticipatory breach.

2. Actual breach
Actual breach occurs when the party fails to perform his/her obligations when the
performance is due. In order to determine whether the innocent party has the right
to terminate the contract depends on the nature of the term breached.

Determine if parties intended term to be a condition or if parties clearly stated that there is
no right of termination (express warranty). / if parties did not clearly intend for clause to be
a condition or express warranty, take the innominate term approach.

A condition is when parties intend that such a term if breached, gives rise to the right to
terminate regardless of the severity of breach.
A warranty is the converse of a condition.
A innominate term is when parties intend for such a term to give rise to the right to
terminate only if the result of the breach is to deprive the innocent party of substantially the
whole benefit he was intended to receive under the contract.

In this case, …….. (explain in context). Thus, _____ is a condition/warranty/innominate term.

Remedies:
in the event where a repudiatory breach occurs, the plaintiff has the option to terminate the
contract or to keep it alive.
(i) The option to terminate the contract is exercised by the giving of notice evincing
clear and unequivocal intention to bring the contract to an end. Any conduct or
even inactivity which clearly evinces such an intention will also suffice. As
termination is irreversible, once terminated the contract cannot be revived.

(ii) The contract will be kept alive if the aggrieved party does not exercise his right to
terminate or if he positively affirms the contract. if the innocent party had by
their conduct allowed the breaching party to believe that the contract would be
performed as per normal, notwithstanding the breach, such conduct by the
innocent party may be taken to be an affirmation of the contract. This
affirmation waivers the right to terminate. Once the contract is affirmed, the
right to terminate is lost and cannot be exercised. Since affirmation of the
contract only extinguishes the right to terminate, the aggrieved party still retains
the right to claim damages.

Affirmation must be done with knowledge of the breach and of his right to
choose. It must be total (cannot affirm part of the contract and terminate the
rest).
The effect of termination releases the parties from all future obligations under the contract
and it does not affect the plaintiff’s right to claim damages for loss if any.

In the event where the contract is affirmed, plaintiff can claim for the losses suffered by that
one instance of breach.
In the event where the contract is terminated, plaintiff can claim for losses as a result of
having to find a replacement for the rest of the contractual term + losses suffered by that
breach.

Discharge by frustration
(occurrence of an unforeseeable event beyond the control of any party, making
performance impossible or essentially different from that original envisaged by parties)

Next, we have to consider whether the contract formed between ___ and ___ can be
discharged by frustration.
The definition of frustration provided by Lord Radcliffe in Davis Contractors v Fareham UDC
(1956) is that “Without default of either party, a contractual obligation has become
incapable of being performed because the circumstances in which performance is called for
would render it a thing radically different from that which was undertaken by the contract”.

For frustration to exist, four conditions must be fulfilled.

(1) a supervening event had occurred +
(2) The contract did not expressly provide for the supervening event +
(3) Neither party is at fault +
If one party is at fault, he/she is likely to have breached an implied or express
term of the contract.
(4) Contractual performance is, because of the change in circumstances, rendered
impossible, illegal, or radically different from that which was undertaken by the
contract.

In the passage, “an unforeseeable…. event occurred” which constitutes a supervening event
that could not be predicted. Since it was unforeseen, we can assume that the contract did
not expressly provide for the supervening event.
In addition, if at the time of contracting, the event was clearly foreseeable and reasonably
foreseeable, it will not lead to frustration. This is because if the event was clearly
foreseeable to a party, he ought to provide in the contract what happens when the event
occurs. As such, when the event had occurred in the future, he cannot then rely on that
event to claim that the contract is frustrated since at the time of contracting, parties are
free to contractually provide for eventualities and the doctrine of frustration should not be
used by contracting party to get out of a bad bargain.

Next, we have to determine whether neither party is at fault and this is very critical.
Frustration should not be due to the act or election of the party seeking to rely on it and
that a party to a contract cannot rely on self-induced frustration which is frustration due to
his own conduct or the conduct of those for whom he is responsible. The onus of proving
that frustration was self-induced lies with the party who asserts that it is so.
*From the passage, we know that both parties were not at fault as they did not intend for
the supervening event to occur…….(describe in context)

Lastly, we have to classify whether the contractual performance is rendered impossible,

illegal or radically different.
1. General impossibility
(a) Destruction of subject matter of the contract
Total destruction not necessary. As long as the thing is so seriously damaged
that, for commercial purposes, it has become something else or that destruction
of a part of the subject matter defeats the main purpose of the contract. the
destruction of something which is not the subject matter of the contract but is
nevertheless necessary for its performance such as the building in which the
machinery is to be installed, will also frustrate the contract.

(b) Death or incapacity

(contract of a personal nature, in which the promisor has to perform the
obligations personally, is frustrated by the promisor’s death or incapacity)
(c) Unavailability
(d) Failure of source of supply
(e) Method of performance impossible

2. Illegality
Where at the time of contract the performance is one which is already prohibited by
law, the contract is void for illegality. The contract is not enforceable because, as of a
matter of public policy, the law will not give assistance to parties to an illegal
transaction.

3. Radical change (?)

(a) Frustration of purpose
(b) Delay, unavailability
(c) Impracticability, increased cost

Since all 4 elements of a frustration are met, we can conclude that there is indeed
frustration for the contract. Since frustration applies, the contract comes to an end
immediately from the time of the supervening event without the need for any party to do
anything. Under the Frustrated Contracts Act which alters and adds to the common law,
existing and future payment obligations are cease, sums already paid to seller are
recoverable, expenses incurred by seller are recoverable and benefit conferred on any party
is also recoverable.

As such, (explain in context)……..

 REMEDIES
The first issue is whether a contract is formed between ___ and ___. For a contract to be
formed, the 4 elements of a contract must be present: offer, acceptance, consideration and
the intention to create legal relations. According to the case, an offer was made by ___ to
_____. There was also an acceptance of the offer by ____ as _______. There was also
sufficient consideration in which _________. Also, there is an intention to create legal
relations since _____. Therefore, there is a contract between ___ and ___ and a breach of
the contract will allow the innocent party to claim damages.

(after identifying that there is a breach and is able to claim damages from ___)

-Liquidated damages-
The next issue to discuss is whether there is a liquidated damages clause stipulated in the
contract. A liquidated damages clause is an express contractual clause which parties insert
in the contract providing for a genuine pre-estimate of loss. The clause is to be upheld no
matter the actual amount of loss that was actually suffered. Where the parties have pre-
agreed on the compensation to be paid on the occurrence of a breach, the claim is for
liquidated damages. The issue is whether the pre-agreed sum is a genuine pre-estimate of
the plaintiff’s anticipated loss. If the pre-agreed sum is a genuine pre-estimate of the
plaintiff’s anticipated loss, the court will award compensatory damages based on the agreed
sum. However, if the pre-agreed sum exceeds (largely) genuine pre-estimate of the
anticipated loss, the term is classified as a penalty clause which is unenforceable. As such,
the damages will be assessed based on the unliquidated damages.

In the contract, …….. hence, there was/was no liquidated damages clause stated in the case.

(if there is no liquidated damages, ____ can sue for unliquidated damages)

-unliquidated damages-
For unliquidated clause, we will look into the type of losses that ___ can sue ___ for.

The first type of losses is expectation loss.

Expectation loss is the loss that innocent party suffered by not being in a position that they
would have been in had the contract been performed/carried out as expected.
(1) Diminution in value can be adopted if the innocent party has only entered into the
contract for economic gains which must not be speculative.
The loss profit must not be speculative which means that there is a fixed sum
of expected profit that was loss.
(2) Cost of cure can be adopted if innocent party intends to or has already spent money
to mitigate his loss and is most likely adopted for losses of personal gain.

If both (1) and (2) cannot be adopted, then ____’s losses cannot be classified under
expectation loss.

The second type of loss is reliance loss.

Reliance losses are expenses incurred in preparation to perform or in partial performance of
the contract and would not have been incurred if there was no contract.
The last type of loss is incidental loss.
(when a breach of the contract is made, and the losses incurred cannot be classified as either
expectation or reliance loss)
Incidental losses are losses which cannot be classified as an expectation or reliance loss but
would not have been incurred had the contract been performed properly. As such, ___ can
sue ___ for incidental losses.

The next issue to discuss is whether there are any limitations to the unliquidated damages
that ____ can claim. There are 4 limitations to claiming unliquidated damages which are
non-pecuniary (non-financial) losses, causation, remoteness and mitigation.

For non-pecuniary losses, innocent party generally cannot claim. Such losses include
emotional losses or damage to reputation, unless damage to reputation caused financial
loss. However, innocent party can claim for mental distress arising from personal injury or
physical inconvenience caused by the breach of contract or if there is loss of
amenities/enjoyment if the purpose of the contract was to provide such enjoyment.

For causation, the defendant is only responsible for the plaintiff’s loss if it was caused by the
former’s breach. In order to determine if causation applies, can apply the “but for” test in
which it is to test if the plaintiff would have suffered alleged loss if the defendant had not
breached the contract. if the plaintiff would still have suffered alleged loss even if the
defendant had not breached the contract, there is no causation. However, if the plaintiff
would not have suffered alleged loss if the defendant had not breached the contract, then
there is not causation. From the context, ___________.

Even if the plaintiff’s loss is factually caused by the defendant’s breach, it does not
automatically follow that damages are recoverable. Under the limitation of remoteness,
any loss that is too remote is not compensable. (test of foreseeability)
Hadley v Baxendale (1854) shows that for the test of remoteness of loss, there are two
limbs: “the damages should be such as fairly and reasonable be considered either arising
naturally, ie, according to the usual course of things, from such breach of contract itself, or
such as may reasonably be supposed to have been in the contemplation of both parties, at
the time they made the contract, as the probable result of the breach”
Under the first limb, it is the knowledge of what happens in the ordinary course of things
which is imputed to the parties whether or not they knew about it. Second, is actual
knowledge of special circumstances outside the ordinary course of things but that was
communicated to the defendant or otherwise known by the parties. From the context, the
loss incurred is/is not reasonably foreseen……..

For mitigation, any loss in respect of which the plaintiff could have taken reasonable steps
to mitigate, but did not, is not compensable. The plaintiff is not expected to do more than
what is reasonable to mitigate his loss.
Tan Soo Leng David v Lim Thian Chai Charles (1998) the party in default who has brought
about the situation which calls for measures to mitigate loss, he is in no position to be
astute in criticizing the adequacy of the mitigating steps taken by the innocent party. The
burden of showing that the plaintiff has failed to take reasonable steps to mitigate his loss is
with the defendant. From the passage, we know that ____ has/has not taken reasonable
steps to mitigate his loss, hence, _____ is/is not able to claim for the losses.

(in the event where there are both liquidated and unliquidated damages  discuss both
sides of the LD damages and unLD damages)
Under the no double recovery rule, the innocent party cannot claim unliquidated damages
in addition to the liquated damages which were designed to deal with the loss that has
occurred.

In the event where ____ decides to claim for liquidated damages, ____ cannot claim for
unliquidated damages for _____ in addition to the liquidated damages she had claimed.
However, had ___ not claim for losses under liquidated damages, ____ can claim for
unliquidated damages.