Privity

As a general rule, only the parties to the contract can acquire rights and incur liabilities under it
CASE: Beswick v Beswick [1968] CASE: Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988)

No right of action in contract exists against a person who is not a party to a contract (but a third party who knowingly and intentionally induces a breach of contract may commit a tort)
CASE: Lumley v Gye [1843-60]

Methods of Discharge

Discharge

Performance

Agreement

Frustration

Operation Of law

Breach

Virtue of term

Lapse of time

Types of Performance

Types of Performance

Discharge by Performance
Two Types of Performance
1. Actual Performance The parties must carry out as closely as practicable the terms of the contract CASE: Shipton, Anderson & Co v Weil Brothers & Co [1912] CASE: Re Moore & Co Ltd and Landauer [1921]

Discharge by Performance
2. Partial Performance Generally, payment does not automatically follow
unless the contract is divisible (a matter of construction)
CASE: Cutter v Powell (1795)

although there are exceptions:

if there has been free and willing acceptance of partial performance by the party receiving the benefit there has been substantial performance and the cost of rectification is small
CASE: Hoenig v Isaacs [1952]

if one party is prevented from performing

Discharge by Agreement

A contract created by agreement can be undone by agreement:

Mutual Discharge

where both parties abandon their original agreement while the contract is still executory

Release

where one party has performed their obligations and there is a unilateral discharge of the agreement

Waiver

where one party leads the other party to reasonably believe that strict performance will not be insisted upon

Discharge by Agreement

A contract created by agreement can be undone by agreement (cont):

Substitution

where the parties wish to continue with a contractual relationship but on terms differing from those in the original agreement, a new agreement can be substituted

Accord and Satisfaction

where one party has performed their obligations and the defaulting party is relieved of their obligations by doing something different to that which they were bound to do under the original contract

Discharge by Frustration

The doctrine of frustration offers exceptions to the doctrine of absolute liability. To be operative, frustration can only arise where:

an unforeseen event outside the control of the parties has significantly changed the obligations of the parties; neither party caused the supervening event; neither party contemplated the supervening event; and

it would be unjust to hold the parties to their original contract. CASE: National Carriers v Panalpina (Northern) Ltd [1981]

Discharge by Frustration

Cases involving this doctrine fall into 5 categories: Physical impossibility because of destruction of the subject matter
CASE: Taylor v Caldwell (1863)

Physical impossibility under a contract of personal services Change in the law rendering performance impossible
CASE: Horlock v Beal [1916]

Discharge by Frustration

Impossibility due to non-occurrence of an event basic to the contract

CASE: Krell v Henry [1903] CASE: Hearne Bay Steam Boat Co v Hutton [1903]

Where the particular state of affairs ceases to exist

CASE: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982)

Discharge by Frustration

The effect of frustration is to discharge the contract but only as to the future
CASE: Fibrosa Spolka Akcyjina v Fairburn Lawson Combe Barbour Ltd [1943]

Victoria has modified the common law position:

Frustrated Contracts Act 1959 allows expenses incurred before frustration to be recovered

Discharge by Frustration

The Effect of Frustration

Discharge by Operation of Law

This can happen via:

bankruptcy; material alteration; merger; death if the contract is for personal services; and discharge by lapse of time
CASE: Ballas v Theophilos (No 2) (1957)

Discharge by Breach

Where one party fails to perform their obligations as agreed, they are liable for breach of contract.

Breach may be: Actual breach where a party fails to perform at the time required by the contract; or Anticipatory breach where a party threatens not to perform prior to the time required by the contract
CASE: Foran v Wright (1989)

The effect of breach depends on the importance of the term that is broken.

The remedies available to the injured party will depend on the nature of the breach.