Performance (OCR A-Level Law): Revision Notes
Performance
Introduction to discharge by performance
Discharge of a contract occurs when a contract comes to an end, releasing both parties from their contractual obligations. Under the OCR specification, contracts can be discharged in three ways: performance, breach, or frustration. This note focuses specifically on discharge by performance.
Under the OCR specification, there are three ways a contract can be discharged:
- Performance (covered in this note)
- Breach
- Frustration
The general rule of performance
For a contract to be discharged through performance, every obligation under the contract must be fulfilled. The leading case of Cutter v Powell (1795) established that performance must be exact and complete in accordance with the contract's terms.
This strict rule means that if one party fails to fully perform their contractual obligations, the other party can sue for breach of contract. The requirement is absolute—partial or incomplete performance does not discharge the contract under the general rule.
Application of the general rule
Case Example: Cutter v Powell (1795)
Facts: A sailor agreed to serve on a ship for an entire voyage in return for payment. He died partway through the voyage, and his widow attempted to claim a proportion of the payment for the work he had completed.
Held: The court held that no payment was due because the contract required complete performance of the entire voyage. Since this had not been achieved, the contract was not discharged and no payment could be recovered.
Significance: This demonstrates the harshness of the strict rule, but it ensures certainty in contractual relationships and protects parties who rely on complete performance.
Exceptions to the general rule
The courts have developed several exceptions to soften the harshness of the strict rule. These exceptions recognise that in certain circumstances, it would be unjust to deny any payment where some performance has been given.
Tender of performance
Tender of performance occurs when one party offers to perform their contractual obligations, but the other party refuses to accept that performance. In such cases, the offering party's obligations are discharged, even though actual performance did not take place.
Case Example: Startup v Macdonald (1843)
Principle: A party who has made a genuine offer to perform is protected from being sued for non-performance if that offer is rejected by the other party.
Rationale: This prevents the absurdity of a party being in breach simply because the other side refused to accept what was offered.
Severable (divisible) contract
A severable contract (also called a divisible contract) is one where the obligations are divided into separate, independent parts. Each separate obligation can be singularly enforced, meaning payment can be claimed for each completed portion.
Case Example: Taylor v Webb (1937)
Held: Where a contract is structured in divisible sections, payment can be recovered for each section completed, even if other sections remain unperformed.
Effect: This exception allows for proportionate payment based on the structure of the agreement itself.
For a contract to be severable, it must be clear from its terms that the parties intended the obligations to be divisible rather than forming one entire obligation.
Substantial performance
The doctrine of substantial performance applies where a party has largely fulfilled their contractual obligations, with only minor or insignificant defects remaining. In such cases, payment may be enforced, though the innocent party can claim damages for the incomplete or defective work.
Case Example: Daken v Lee (1916)
Principle: If substantial performance has been achieved, it would be unjust to deny all payment simply because of minor defects.
Remedy: The performing party can claim the contract price, subject to a deduction for the cost of remedying any defects or completing the remaining work.
This exception requires that:
- The contract has been largely performed
- Only minor defects or omissions remain
- The defects do not go to the root of the contract
Key Question
The key question is whether the work done substantially corresponds to what was contracted for, despite minor shortcomings.
Acceptance of part-performance
Where one party has partially performed their obligations and the other party has genuinely and voluntarily accepted that part-performance, payment can be enforced for the work actually completed.
Case Example: Sumpter v Hedges (1898)
Facts: A builder partially completed work on the defendant's land and then abandoned the contract. The defendant completed the work using materials left by the builder.
Held: The court held that the builder could not claim payment because the defendant had not genuinely accepted the part-performance—he had no real choice but to complete the work himself as the partially built structure was on his own land.
Principle: Mere acceptance of part-performance is not sufficient on its own. The acceptance must be genuine and voluntary, not forced upon the innocent party by circumstances.
For this exception to apply:
- Part-performance must have occurred
- The innocent party must have had a genuine choice whether to accept it
- Acceptance must be voluntary and clear
Delayed performance
Where a party performs their obligations late, this will usually constitute a breach of warranty rather than a fundamental breach. This means the innocent party can claim damages for the delay but cannot repudiate (cancel) the entire contract.
However, where time is of the essence of the contract, failure to perform on time will allow the innocent party to repudiate the contract entirely. Time is of the essence when:
- Both parties made this expressly clear in the contract terms
- The subject matter of the contract dictates it—for example, contracts for perishable goods or time-sensitive commercial transactions
- A time extension has been granted with clear notice that if the new deadline is not met, the contract will be terminated
If time is not originally of the essence, a party can make it so by giving reasonable notice of a new deadline and stating that failure to meet this deadline will result in repudiation.
Exam technique
Answering Exam Questions on Discharge of Contract:
- Identify which method of discharge is relevant to the scenario
- Do not discuss all methods of discharge unless the question requires it
- Focus your answer on the specific type of discharge indicated by the facts
- Apply the relevant legal rules and cases to the scenario
- For performance issues, identify whether the general rule or an exception applies
- Support your conclusions with clear case authority
Remember!
Key Points to Remember:
- The general rule requires exact and complete performance—partial performance does not discharge the contract (Cutter v Powell 1795)
- Tender of performance—offering to perform but being refused discharges obligations (Startup v Macdonald 1843)
- Severable contracts allow payment for each completed divisible section (Taylor v Webb 1937)
- Substantial performance permits payment for largely completed work, minus deductions for defects (Daken v Lee 1916)
- Part-performance must be genuinely and voluntarily accepted before payment can be enforced (Sumpter v Hedges 1898)
- Time is of the essence when expressly stated, dictated by subject matter, or imposed by reasonable notice—breach allows repudiation, not just damages