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1 Ways by which contract may be discharged 2 Discharge by performance 3 Discharge by agreement 4 Discharge by frustration 5 Discharge by operation of law 1 Ways by which contract may be discharged (1) Discharge by performance (2) Discharge by agreement (3) Discharge by frustration (4) Discharge by operation of law 2 Discharge by performance 2.1 Normal way of performance (1) Depending on nature of the contract: Services rendered Goods delivered Cash paid Or their combination (2) This is the ideal way of discharge a contract. 2.2 Tender of performance (1) In the form of legal tender: silver coin $10, (2) It is OK whether accepted or rejected by other party. Case illustration: • S agrees to sell $ 1000 worth of flour to B, cash on delivery. Before delivery flour price rises substantially. S wants to avoid the contract and hearing a rumor that B is in financial difficulty. He uses this as pretext for terminating contract. B of course wishes to go through with the deal at agreed price. B takes the contract to the bank and borrows sufficient cash in legal tender. B then tenders the money to S in the presence of C. If S doesn’t deliver flour, B may sue S for breach of contract. 3 Discharge by agreement 3.1 Waiver 3.2 Substituted agreement (1) Material alteration of the terms (2) Accord and satisfaction: si liao (in Chinese) (3) Novation: third party steps in 3.3 Contract term provides for its own dissolution (1) Condition precedent Case illustration: A located in Moncton writes to B in Winnipeg offering him a good position. B replies by letter that he will take it if A will first find satisfactory living accommodation for his family. A accepts B’s counter offer by mail. A’s act of finding specified living accommodation is a condition precedent. (2) Condition subsequent Case illustration: • Norton, holder of a baseball season’s ticket, got the tickets on the terms that he must watch his conduct at games due to some of his habits known to the management. He attended a game and his conduct was annoyance and nuisance not only to the operator of ballpark, but also to other fans and to those selling tickets. • The management cancelled his season ticket and tenders him a refund for remaining games. Norton sued the management for violation contract. Norton’s objectionable conduct was condition subsequent, he couldn’t win the action. 4 Discharge by frustration 4.1 Definition For reasons beyond the control of the parties, the performance becomes impossible or purposeless after execution of the contract. 4.2 True frustration v self-induced frustration Case illustration: • A contracts to transport earth for B. Upon realizing it has made bad bargain, A sells all their dump truck and claims that it can’t fullfil the contract due to frustration. Obviously this is a self-induced frustration. • A contracts to transport earth for B in an isolated northern community. After execution, its truck is stolen and wrecked. The contract is therefore discharged by frustration. Case illustration: • A contracts to transport earth for B. Its dump truck breaks down due to employee’s negligence. There will be long delays in its repair as it is in a small isolated northern community. Since A is attributable for the delay, it will be liable for the contractual breach. Case illustration: • Howard rented a room to Kennedy along the route scheduled for emperor’s procession for the day on which the Royal family would appear in Halifax. The rent was payable at the time of procession. Howard redecorated the room. Later it was announced that the route had been changed and wouldn’t pass Howard’s building. Kennedy refused to pay the rent for the room. Howard sued for the rent. Should Howard win? 5 Discharge by operation of law (1) The debtor becomes bankrupt. (2) Lapse of the prescription: time limit.
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