CONTRACTUAL TERMS

Whether a statement made during the pre-contractual stage becomes a term of the contract
depends on the intention of the parties. The first step in determining the terms of a contract is to
establish what the parties said or wrote. Statements made during the course of negotiations may
traditionally be classed as representations or terms and if one turns out to be wrong, the plaintiff's
remedy will depend on how the statement is classified:

A representation is a statement of fact made by one party which induces the other to enter into
the contract. They do not form a part of the contract agreed upon between the parties and if these
statements turn out to be incorrect the innocent party may sue for misrepresentation.

A term on the other hand forms a part of the contract and where there is breach of a term of the
contract, it entitles the injured party to claim damages and, if he has been deprived substantially
what he bargained for, he will also be able to repudiate (reject or retract) the contract.

In determining whether a statement is a representation or a term, the courts will usually consider
the following factors:

Timing
The court will consider the lapse of time between the making of the statement and the
contract's conclusion: if the interval is short the statement is more likely to be a term:

Routledge v McKay [1954] - in this case on 23 October, the defendant told the plaintiff
that a motorcycle was a 1942 model. On 30 October, a written contract for the sale of the
bike was made, without reference to its age. The bike was actually a 1930 model. It was
held that the statement about the date was a pre-contractual representation and the
plaintiff could not sue for damages for breach of contract.

Importance of the Statement

The court will consider the importance of the truth of the statement as a pivotal factor in
finalizing the contract. The statement may be of such importance that if it had not been
made the injured party would not have entered into the contract at all:

Bannerman v White (1861) in this case, the defendant wanted to by hops for brewing
purposes and he asked the plaintiff if they had been treated with sulphur. On the basis of
the plaintiffs false statement that they had not been so treated, he agreed to buy the hops.
When he discovered later that they had been treated with sulphur, he refused to accept
them. The court held that the plaintiffs statement about the sulphur was a fundamental
term of the contract and, since it was not true, the defendant was entitled to repudiate the
contract.
 Couchman v Hill [1947] in this case, a heifer was put up for sale at an auction but no
warranty was given as to its condition. The claimant asked the defendant whether the
heifer was in calf and stated that he was not interested in purchasing it if it was. He was
told that it was not in calf. Approximately seven weeks after the purchase the heifer
suffered a miscarriage and died. The claimant brought an action for breach of contract.
The statement that the heifer was not in calf was held to be a term of the contract because
of the importance attached to it by the claimant.

Reduction of Terms to Writing

The court will consider whether the statement was omitted in a later, formal contract in
writing. If the written contract does not incorporate the statement, this would suggest that
the parties did not intend the statement to be a contractual term: Routledge v McKay
[1954].

Special Knowledge/Skills
The court will consider whether the maker of the statement had specialist knowledge or
was in a better position than the other party to verify the statement's accuracy:

Oscar Chess v Williams [1957] in this case the courts held that the defendants
statement as to the age of the car was not a term of the contract but a mere representation.
The claimants, who were care dealers, were in at least as good a position as the defendant
to know the true age of the car.

Dick Bentley Productions v Harold Smith Motors [1965] in this case it was held
that, the defendants statement as to the car mileage was a term of the contract; the
defendants, being car dealers, were in a better position than the claimant to know whether
their statement was true.

Form of Terms

Terms may be:

(1) Expressed Terms: these are terms that are expressed by the parties in words and are
usually, contained within the body of the contract;

(2) Implied Terms these terms do not appear within the body of the contract, but are held
by the courts to exist, just as if the parties had agreed upon them at the time of making the
contract.

Terms may be implied:

 By Custom or usage - This is where a term is implied as a matter of law because certain
terms are always implied into certain types of contracts: e.g. employment contracts or
landlord and tenant contract: Hutton v Warren.

As a matter of Fact, where the courts look at the intention of the parties: The Moorcock.

By Statute Sale of Goods Act which implies five major terms into all contracts for the
sale of goods.

Types of Terms

Terms may fall into one of three types. These are:

(1) Conditions these are very important terms that go to the heart or root of the contract
and where a party breaches them, the other party can terminate the contract and seek
redress from the courts: Poussard v Spiers and Pond (1876)

In Poussard v Spiers, the plaintiff had contracted with the defendants to sing in an opera
that they were producing. Due to illness, she was unable to appear on the first night and
for some nights thereafter. When Mme Poussard recovered, the defendants refused her
services, as they had hired a replacement for the whole run of the opera. The courts held
that her failure to appear on the opening night had been a breach of a condition and the
defendants were at liberty to treat the contract as discharged.

(2) Warranties: these terms are very important, but do not go to the root of the contract and
where they are breached, the contract cannot be terminated. Only compensation
(damages) can be sort by the injured party: Bettini v Gye

In Bettini v. Gye (1876), B contracted with G (who was a director of an opera company)
for B's exclusive services as a singer. One of the terms was that B should be available for
rehearsals for at least six days before the beginning of the opera season. B turned up in
London only two days beforehand and, therefore, G rescinded the contract.

HELD: That, in view of the length of the engagement, and all other circumstances, it
could not reasonably be inferred that it was the intention of the parties that six days for
rehearsals was a vital ingredient of the agreement. It was, therefore, only a warranty, and
G was not entitled to rescind the contract.
 (3) Intermediate or Innominate Terms these arise where no distinct remedy has been
identified if they are breached. Such terms may be either conditions or warranties, based
on the wording of the contract and the intention of the parties.

Exclusion and Limiting Clauses

A clause may be inserted into a contract which aims to exclude or limit one party's liability for
breach of contract or negligence. However, the party may only rely on such a clause if (a) it has
been incorporated into the contract, and if, (b) as a matter of interpretation, it extends to the loss
in question. Its validity will then be tested under (c) the Unfair Contract Terms Act.

INCORPORATION
The person wishing to rely on the exclusion clause must show that it formed part of the contract.
An exclusion clause can be incorporated in the contract by signature, by notice, or by a course of
dealing.

By Signature (signed documents)

If the plaintiff signs a document having contractual effect containing an exclusion clause, it will
automatically form part of the contract, and he is bound by its terms. This is so even if he has not
read the document and regardless of whether he understands it or not: L'Estrange v Graucob
[1934].

However, even a signed document can be rendered wholly or partly ineffective if the other party
has made a misrepresentation as to its effect: Curtis v Chemical Cleaning Co [1951].

By Notice (unsigned documents)

The exclusion clause may be contained in an unsigned document such as a ticket or a notice. In
such a case, reasonable and sufficient notice of the existence of the exclusion clause should be
given. For this requirement to be satisfied:

(i) The clause must be contained in a contractual document, ie one which the reasonable person
would assume to contain contractual terms, and not in a document which merely acknowledges
payment such as a receipt: Parker v SE Railway Co (1877) ;Chappleton v Barry UDC [1940].
(ii) The existence of the exclusion clause must be brought to the notice of the other party before
or at the time the contract is entered into: Olley v Marlborough Court [1949].

(iii) Reasonably sufficient notice of the clause must be given. It should be noted that reasonable,
not actual notice is required: Thompson v LMS Railway [1930].
What is reasonable is a question of fact depending on all the circumstances surrounding the
transaction and the situation of the parties. The courts have repeatedly held that attention should
be drawn to the existence of exclusion clauses by clear words on the front of any document
delivered to the plaintiff, for example there may be a statement on the front of the document
which reads: "For conditions, see back". It seems that the degree of notice required may
increase according to the gravity or unusualness of the clause in question.

Custom or Previous Dealings

Even where there has been insufficient notice, an exclusion clause may nevertheless be
incorporated where there has been a previous consistent course of dealing between the parties on
the same terms: McCutcheon v MacBrayne [1964] 1 WLR 125.

As against a private consumer, a considerable number of past transactions may be required:

Hollier v Rambler Motors [1972].

Even if there is no course of dealing, an exclusion clause may still become part of the contract
through trade usage or custom: British Crane Hire v Ipswich Plant Hire [1974].

THE UNFAIR CONTRACT TERMS ACT Chap 82:37

Even though an exclusion clause may have been properly incorporated into a contract, the basic
purpose of UCTA is to test the reasonableness of such a clause, where one party is attempting to
invoke the said clause to avoid some act of negligence on his part.

VITIATING FACTORS

Mistake

For a mistake to affect the validity of a contract it must be an "operative mistake" - a mistake
which operates to make the contract void.

At common law, when the mistake is operative the contract is usually void ab initio - from the
beginning. Therefore, no property will pass under it and no obligations can arise under it.
Even if the contract is valid at common law, in equity the contract may be voidable on the
ground of mistake. Property will pass and obligations will arise unless or until the contract is
avoided. However, the right to rescission may be lost.

Common Mistake

A common mistake is one when both parties make the same mistake as to the surrounding
circumstances of the transaction. The cases may be categorised as follows:

(A) res extincta

A contract will be void at common law if the subject matter of the agreement is, in fact, non-
existent or in other words it no longer exist: Couturier v Hastie (1856) 5 HL Cas 673.

(B) res sua

Where a person makes a contract to purchase that which, in fact, belongs to him, the contract is
void: Cooper v Phibbs (1867) LR 2 HL 149.

(C) mistake as to quality

A mistake as to the quality of the subject matter of a contract has been confined to very narrow
limits. It will not necessarily render a contract void: Leaf v International Galleries. However,
according to Lord Atkin: "A mistake will not affect assent unless it is the mistake of both parties,
and is as to the existence of some quality which makes the thing without the quality essentially
different from the thing as it was believed to be." This means that if you intended to purchase a
race horse but you and the seller both make the same mistake and believe a mule to be the race
horse, then the contract would be void, since a mule cannot do what a race horse could do: Bell
v Lever Bros Ltd [1931] All ER 1.

Remedies

Where a contract is void for identical mistake, the court exercising its equitable jurisdiction, can:

(i) Refuse specific performance

(ii) Rescind any contractual document between the parties
(iii) Impose terms between the parties, in order to do justice.

Rescission for mistake is subject to the same bars as rescission for misrepresentation.
Mutual Mistake

Where a mutual mistake occurs, there is a misunderstanding between the parties as to each
others intentions and they are said to be at cross-purposes. A mutual mistake negates consent
and therefore no agreement is said to have been formed at all.

Mutual mistake as to the identity of the subject matter

Where there is ambiguity as to the understanding of the agreement, the contract will be deemed
void. In determining this, the court applied an objective test asking whether a reasonable third
party would take the agreement to mean what one party thought it meant, or what the other party
thought it meant.

In the case of Raffles v Wichelhaus(1864), the court held that there was no agreement as the
parties were thinking of two different ships when they entered into the agreement and it was
therefore too ambiguous to enforce.

This can be contrasted with the case of Smith v Hughes(1971) where the mistake related to the
quality, not the identity of the subject matter and the court held that the agreement was valid.

Mutual mistake in equity

Where a contract is void on the grounds of mutual mistake, the court will refuse specific
performance in equity and if necessary, rescind the contract.

Unilateral Mistake

The case of unilateral mistake is where only one party is mistaken while the other party knows
the truth or is in a position to know the truth.

This type of mistake may arise where there is:

(A) mistake as to the terms of the contract

Where one party is mistaken as to the nature of the contract and the other party is aware of the
mistake: Hartog v Colin & Shields [1939] 3 All ER 566

(B) mistake as to identity

Here one party makes a contract with a second party, believing him to be a third party (ie,
someone else). This may arise:

Where the parties are not physically in each others presence, eg, they are dealing by
correspondence, and one party is mistaken as to the identity, of the other and intends instead to
deal with some identifiable third party, and the other knows this, then the contract will be void
for mistake: Cundy v Lindsay (1878) 3 App Cas 459

Where the parties are face to face there is a presumption that the mistaken party intends to deal
with the other person who is physically present and identifiable by sight and sound, irrespective
of the identity which one or other may assume. For such a mistake to be an operative mistake
and to make the agreement void the mistaken party must show that:

(i)they intended to deal with someone else;

(ii) the party they dealt with knew of this intention;
(iii) they regarded identity as of crucial importance; and
(iv) they took reasonable steps to check the identity of the other person

Even where the contract is not void, it may be voidable for fraudulent misrepresentation but if
the goods which are the subject-matter have passed to an innocent third party before the contract
is avoided, that third party may acquire a good title. The main cases are as follows: Phillips v
Brooks [1919] 2 KB 243

Misrepresentation

Ingredients of Misrepresentation

A Capable Representor (party who makes the statement)

A Capable Representee (party to whom the statement is made)
A false statement of fact passing between the parties, which induced one of the parties, to
enter into the contract due to relying on the said statement.

Definition of Misrepresentation: A misrepresentation is a false statement of fact made by one

party to another, which, whilst not being a term of the contract since these are pre-contractual
statements that are made before the legally binding agreement (contract) is created between the
parties, but all the same, it induces the other party to enter the contract.
For an Actionable Misrepresentation to arise, all the ingredients of the definition of
Misrepresentation must be satisfied. That is:

There must be a false statement of fact

In most situations coming before the courts, a false statement is readily proven. However, in
some instances, a measure of consideration must be given before the statement in question can be
deemed false:

Where the statement is a Half-Truth: Dimmock v Hallett

Where the statement was true when made, but has subsequently become false before the
contract was concluded, the change must be notified to avoid misrepresentation: With v
OFlanagan.

The misrepresentation must have induced the contract

The false statement must have induced the representee to enter into the contract. The
requirements here are that (a) the misrepresentation must be material and (b) it must have been
relied on.

The misrepresentation must be material, in the sense that it would have induced a
reasonable person to enter into the contract. However, the rule is not strictly objective:

In Museprime Properties v Adhill Properties [1990] 36 EG 114, the judge referred, with
approval, to the view of Goff and Jones: Law of Restitution that, any misrepresentation which
induces a person to enter into a contract should be a ground for rescission of that contract. If the
misrepresentation would have induced a reasonable person to enter into the contract, then the
court will presume that the representee was so induced, and the onus will be on the representor to
show that the representee did not rely on the misrepresentation either wholly or in part. If,
however, the misrepresentation would not have induced a reasonable person to contract, the onus
will be on the misrepresentee to show that the misrepresentation induced him to act as he did.

The representee must have relied on the misrepresentation. There will be no reliance if
the misrepresentee was unaware of the misrepresentation: Horsfall v Thomas [1862] 1
H&C 90.

There will be no reliance where:

The representee does not rely on the misrepresentation but on his own judgment or
investigations: Attwood v Small (1838) 6 CI & F 232.
 The misrepresentee is given an opportunity to discover the truth but does not take the
offer up. The misrepresentation will still be considered as an inducement: Redgrave v
Hurd (1881) 20 Ch D 1.

The misrepresentation was not the only inducement for the representee to enter into the
contract: Edgington v Fitzmaurice.

The effect of an actionable misrepresentation

This makes the contract voidable, giving the innocent party the right to rescind the contract
and/or claim damages. Even though a party might have the option to rescind the contract, that
person may choose to affirm the contract and continue the transaction in question in the face of
the misrepresentation, but may claim damages for the inconvenience or losses suffered as a result
of the misrepresentation.

What is not Misrepresentation

A false statement of opinion is not a misrepresentation of fact: Bisset v Wilkinson [1927]

AC 177.

However, where the person giving the statement was in a position to know the true facts
and it can be proved that he could not reasonably have held such a view as a result, then
his opinion will be treated as a statement of fact: Smith v Land & House Property
Corp. (1884) 28 Ch D 7.

Some expressions of opinion are mere puffs. Thus, in Dimmock v Hallet (1866) 2 Ch
App 21, the description of land as 'fertile and improvable' was held not to constitute a
representation.

A false statement by a person as to what he will do in the future is not a misrepresentation

and will not be binding on a person unless the statement is incorporated into a contract.

A false statement as to the law is not actionable misrepresentation because everyone is

presumed to know the law. However, the distinction between fact and law is not simple:
Solle v Butcher [1950] 1 KB 671.

Generally, silence is not a misrepresentation. The effect of the maxim caveat emptor
(meaning buyer beware) is that the other party has no duty to disclose problems
voluntarily. Thus if one party is labouring under a misapprehension there is no duty on
the other party to correct it: Smith v Hughes (1871) LR 6 QB 597.
Types of Misrepresentation:

Once misrepresentation has been established it is necessary to consider what type of

misrepresentation has been made. There are three types of misrepresentation: fraudulent,
negligent and wholly innocent. The importance of the distinction lies in the remedies available
for each type.

Fraudulent Misrepresentation

Fraudulent misrepresentation was defined by Lord Herschell in Derry v Peek (1889) 14 App
Cas 337as a false statement that is made (i) knowingly, or (ii) without belief in its truth, or
(iii) recklessly, careless as to whether it be true or false." Therefore, if someone makes a
statement which they honestly believe is true, then it cannot be fraudulent.

N.B. The burden of proof is on the plaintiff - he who asserts fraud must prove it. Tactically,
it may be difficult to prove fraud, in the light of Lord Herschell's requirements.

The remedies - are rescission (subject to exceptions discussed later) and damages in the tort of
deceit.

Negligent Misrepresentation

This is a false statement made by a person who had no reasonable grounds for believing it to be
true. There are two possible ways to claim: either under common law or statute.

NEGLIGENT MISSTATEMENT AT COMMON LAW

The House of Lords have held that in certain circumstances damages may be
recoverable in tort for negligent misstatement where financial loss is suffered by
the party to whom the statement was made to: Hedley Byrne v Heller [1964] AC
465.

Success depends upon proof of a special relationship existing between the parties. Such a duty
can arise in a purely commercial relationship where the representor has (or purports to have)
some special skill or knowledge and knows (or it is reasonable for him to assume) that the
representee will rely on the representation: Esso Petroleum v Mardon [1976]
The remedies are rescission (subject to exceptions discussed later) and damages in the tort of
negligence.

NEGLIGENT MISREPRESENTATION: UNDER s2(1) MISREPRESENTATION

ACT 1967:

Section 2(1) of the Misrepresentation Act 1967 provides: This provision does not require the
representee to establish a duty of care and reverses the burden of proof. Once a party has proved
that there has been a misrepresentation which induced him to enter into the contract, the person
making the misrepresentation will be liable in damages unless he proves he had reasonable
grounds to believe and did believe that the facts represented were true. This burden may be
difficult to discharge as shown in: Howard Marine & Dredging Co v Ogden & Sons [1978]
QB 574.

Remedies: recent case-law has shown that the remedies available are as those available in fraud
unless the representor discharges the burden of proof. In particular, damages will be based in the
tort of deceit rather than the tort of negligence.

Innocent Misrepresentation

This is a false statement which the person makes honestly believing it to be true. The remedy is
either

rescission with an indemnity, or

damages in lieu of rescission under the courts discretion in s2(2)

Misrepresentation Act 1967.

Remedies for Misrepresentation

Once an actionable misrepresentation has been established, it is then necessary to consider the
remedies available to the misrepresentee.

Rescission

Rescission, which is setting aside the contract, is possible in all cases of misrepresentation. The
aim of rescission is to put the parties back in their original position, as though the contract had
not been made.
The injured party may rescind the contract by giving notice to the representor. However, this is
not always necessary as any act indicating repudiation. Example: notifying the authorities may
suffice: Car & Universal Finance v Caldwell [1965] 1 QB 525.

Bars to Rescission:

Rescission is an equitable remedy and is awarded at the discretion of the court. The injured party
may lose the right to rescind in the following four circumstances:

Affirmation of the Contract

The injured party will affirm the contract if, with full knowledge of the misrepresentation and of
their right to rescind, they expressly state that they intend to continue with the contract, or if they
do an act from which the intention may be implied: Long v Lloyd [1958] 1 WLR 753.

Note that in Peyman v Lanjani [1985] Ch 457, the Court of Appeal held that the plaintiff had
not lost his right to rescind because, knowing of the facts which afforded this right, he proceeded
with the contract, unless he also knew of the right to rescind. The plaintiff here did not know he
had such right. As he did not know he had such right, he could not be said to have elected to
affirm the contract.

Lapse of Time

If the injured party does not take action to rescind within a reasonable time, the right will be lost.

Where the misrepresentation is fraudulent, time runs from the time when the fraud was, or with
reasonable diligence could have been discovered. In the case of non-fraudulent
misrepresentation, time runs from the date of the contract, not the date of discovery of the
misrepresentation: Leaf v International Galleries [1950] 2 KB 86.

Restitution in Integrum Impossible

The injured party will lose the right to rescind if substantial restoration is impossible, ie if the
parties cannot be restored to their original position: Vigers v Pike (1842) 8 CI&F 562.

Third Party Acquires Rights

If a third party acquires rights in property, in good faith and for value, the misrepresentee will
lose their right to rescind: Phillips v Brooks [1919] 2 KB 243 under Mistake.

Excluding Liability for Misrepresentation

Any term of a contract which excludes liability for misrepresentation or restricts the remedy
available is subject to the test of reasonableness. Section 3 of the Misrepresentation Act 1967, as
amended by s8 of UCTA 1977, provides that:

"If a contract contains a term which would exclude or restrict: a) any liability to which a party to
a contract may be subject by reason of any misrepresentation made by him before the contract
was made; orb) any remedy available to another party to the contract by reason of such a
misrepresentation, that term shall be of no effect except insofar as it satisfies the requirement of
reasonableness as stated in s11(1) of the Unfair Contract Terms Act 1977; and it is for those
claiming that the term satisfies that requirement to show that it does."

(Section 11(1) UCTA 1977 provides that " the term shall have been a fair and reasonable one
to be included having regard to the circumstances which were, or ought reasonably to have been,
known to or in the contemplation of the parties when the contract was made.").

~~o0o~~
 DISCHARGE OF A CONTRACT

The terms of a contract impose obligations on the parties. When these obligations are discharged
they cease to exist. This can happen in four ways:

By agreement;
By performance;
By frustration; and
By breach.

Discharge By Agreement

Where the parties assume obligations upon having entered into the contract, they are free to
make a second contract under which they agree to discharge each other from their obligations
under the original contract. However, since this second agreement forms the basis of a contract,
some form of consideration must pass between the parties. These being:

Release

If one party releases another from his/her obligations, there is, normally, no consideration for the
act. This applies where the party releasing the other has fully performed all his/her obligations,
while the other has not. If both of them still have obligations to perform, the consideration for
each foregoing his/her rights is the foregoing by the other. However, if there is no consideration,
a unilateral release can be effective only if it is under seal. You will remember that a contract
under seal is valid even if no consideration is present.

Accord and Satisfaction

Provided consideration is present, a contract can be discharged by agreement, even though only
one party has fulfilled all his/her obligations. This is called "accord and satisfaction". The
"accord" is the agreement; the "satisfaction" is the consideration. Provided that the satisfaction is
valuable consideration (in exactly the same way as the consideration for the valid formation of a
contract must be valuable), all is well. In this context, it can, of course, be some other
performance than that of the original obligation.

You will remember earlier, we discussed the rule in Pinnel's Case. This states that the payment
of a smaller sum in satisfaction of a larger is not a good discharge of a debt. However, if the
payment of the smaller sum is made in a different way, or at a different time from that prescribed
for the larger sum, this difference constitutes adequate consideration to support the agreement for
discharge of the whole debt. This is an example of discharge by accord and satisfaction.

Rescission

While a contract is still executory, that is, it has not been fully performed by both sides, it can be
discharged by mutual agreement, the consideration for the agreement being the mutual giving-
up of rights under the contract. In the court context, the remedy is rescission: it recognises and
enforces the contract termination.

The effect of joint repudiation is that the contract is discharged and rights under it cannot
afterwards be revived, although money paid in respect of an agreement that has proved abortive
can be recovered by an action for "money had and received" (quasi-contract). By the same
token, a contract can always be varied by agreement. Here, the terms of the contract are altered,
but the original contract still subsists. Whether such an action is, in reality, a variation or
whether it amounts to rescission of the original, followed by a new contract incorporating the
altered terms, is a question of construction and scope.

In Morris v. Baron & Co. (1918), there was a contract for the sale of cloth. A dispute arose, and
legal action started. The parties then agreed to stop their legal action, that an extension of time
for payment should be given to the buyer, and that, instead of having to take delivery of the
balance of the cloth, he should have an option to take it only if he wished.

HELD: This amounted to a discharge of the original contract, followed by a substituted contract.
However, in Berry v. Berry (1929), a husband and wife separated, and the husband agreed to
pay a certain annual maintenance. His income proved insufficient, so both parties agreed that the
sum should be reduced.

Provision Contained in the Contract Itself

This is fairly obvious. If the contract provides for its discharge in certain circumstances, then
this is an agreed contractual term. The question of consideration does not apply, as it is part of
the consideration for the contract.

Discharge By Performance

There are a number of rules affecting the performance of a contract. The cardinal one is that a
person must perform exactly what he/she has promised to do. Doing something different from
that agreed to, even though it may be commercially more valuable to the other party, is not
performance in law.

In Re Sutro& Co. and Heilbut Symons & Co. (1917), it was held that a contract of carriage of
goods by sea from Singapore to New York, with liberty to transship at other ports, was not
performed by carrying them partly by sea and partly by rail.

Even the slightest deviation from the agreed terms will entitle the other party to claim that the
contract has not been performed and to sue for damages or, in certain cases, to treat the contract
as discharged by reason of the breach.

This rule is, however, subject to the "de minimis" rule that is, the law will not take note of trivial
matters or indifferences.

If a contract entails no personal skill, a contracting party may get someone else to perform it on
his/her behalf (although he/she, of course, remains liable). However, if it envisages the personal
performance of the promisor, whether expressly or by implication, then he/she alone must
perform it.

Time of Performance

However, time is a condition in the following situations:

Where the parties expressly state in the contract that time is of the essence or must be
strictly complied with. The form of words used is not significant, provided the intention
is clear;
 Where the circumstances of the contract or of the subject matter show that strict
compliance with stipulations as to time was intended or should necessarily be implied;
Where time was not originally of the essence, but because of undue delay, one party has
given notice that the contract must be performed by a specified reasonable date.

In Charles Rickards Ltd v. Oppenheim (1950),Oppenheim ordered a Rolls Royce chassisin

early 1947. In July, Rickards agreed that the body should bebuilt for it "within six or at most
seven months". Seven months later, it was not completed; so, Oppenheim agreed to the company
taking a further three months. At the end of this time, it was still not ready. Oppenheim served
notice on Rickards that, if the car was not ready in four weeks, he would cancel the order. It was
not so he cancelled. Three months later, the finished Rolls Royce was tendered, but Oppenheim
refused to accept it.

Held: He was entitled to do so. Time was not, originally, of the essence, but because of
Rickards' breach, the notice requiring completion in four weeks served to make time of the
essence.

Part Performance

Almost all contracts cease to exist when the parties fully perform their contractual obligations.
As a general rule, performance requires complete and exact performance of the obligations in the
contract: Cutter v Powell [1795].

However, there are four exceptions to the general rule requiring complete performance. These
are:

Where the contract is divisible: Bolton v Mahadeva [1972];

Where the contract is capable of being fulfilled by substantial performance: Hoenig v

Isaacs [1952];

Where performance has been prevented by the other party: Planche v Colburn [1831];
and

Where partial performance has been accepted by the other party.

Discharge By Frustration
Frustration operates by way of law, in some circumstances, where some form of impossibility
arises after formation of the contract.

A contract will be discharge by reason of frustration:

Where destruction of the subject-matter of the contract has occurred: Taylor v Caldwell
[1863];

Where government interference, or supervening illegality, prevents performance: Re

Shipton, Anderson & Co [1915];

Where a particular event, which is the sole reason for the contract, fails to take place:
Krell v Henry [1903];

Where the commercial purpose of the contract is defeated: Jackson v Union Marine
Insurance Co [1847];

Where, in the case of a contract of personal service, the party dies or becomes otherwise
incapacitated: Condor v Barron Knights [1966].

Situations in which Frustration does not apply

Where the parties have made express provision in the contract for the event which has
occurred;

Where the frustrating event is self-induced: Maritime National Fish Ltd [1935];

Where an alternative method of performance is still possible: Tsakiroglou& Co v Noblee

and Thorl [1962];

Where the contract simply becomes more expensive to perform: Davis Contractors v
Fareham UDC [1956].

The legal effect of Frustration in the UK

The contract comes to an end as soon as the frustrating event occurs. The Law Reform
(Frustrated Contracts) Act 1943 makes the following rules:

Money owing under the contract ceases to be payable;

Money either paid or payable at the time of the frustrating event is recoverable.
However, the court has a discretion to allow some of this money to be retained to cover
expenses incurred;

If one of the parties to the contract has received a valuable benefit under the contract, the
court can order that a fair amount is paid to compensate for this. The case law suggests
that this benefit should be valued immediately after the frustrating event.

Discharge By Breach

A breach of contract occurs where a party to a contract fails to perform, precisely and exactly, his
obligations under the contract. This can take various forms for example, the failure to supply
goods or perform a service as agreed. Breach of contract may be either actual or anticipatory.

Actual breach occurs where one party refuses to form his side of the bargain on the due date or
performs incompletely. Anticipatory breach occurs where one party announces, in advance of the
duedate for performance, that he intends not to perform his side of the bargain. The innocent
party may sue for damages immediately upon the breach being announced.

Therefore, a breach of contract may occur:

Where a party, prior to the time of performance, states that they will not fulfill their
contractual obligation;

Where a party fails to perform their contractual obligation; or

Where a party performs their obligation in a defective manner.

Anticipatory Breach

As mentioned above, this occurs where a party indicates before performance of the contract, that
he will not perform his contractual obligations. Such breaches may be:
 Expressed (where the party actually says he will not carry out his obligations: Hochster v
De La Tour [1853]; or

Implied where the party carries out some act that makes performance impossible:
OmniumDEnterprises v Sutherland [1919].

When faced with an anticipatory breach, a party has two options:

Accept the breach and sue for damages;

Keep the contract open wait to see if the other party actually performs (however, the
party bears the risk of losing the right to sue to some other intervening event as
frustration).