Análisis Confirmatorio de Resultados

The complete performance of an entire contract is, normally, a condition precedent to any liability on the other party - e.g. to make payment. The courts cannot apportion the consideration - so, unless the contract is completed, nothing is due on account of it. The classic example is Cutter v. Powell (1795). A seaman was engaged for a lump sum on completion of the voyage. He died part way through the voyage, and it was held that his executors could not claim any wages for the time prior to his death.

The common law rule on entire contracts was largely developed by building or “work and materials” contracts. So, unless the contract provided for stage payments, if a builder failed to complete a house, he could recover nothing, even though the owner would have derived substantial benefit from the work that had been done, and materials provided (modern building contracts ALWAYS provide for stage payments!).

Likewise, a ship-owner cannot recover freight if the goods are not carried to the agreed destination (bills of lading, therefore, always provide for freight to be payable, “cargo lost or not lost”!). From these two examples, you will see that, by express words, a contract can allow for partial

payment in the event of incomplete performance. In addition, to alleviate what could be an absurdity, the doctrine of “substantial performance” has evolved. This says that, if a person has completed the contract in all but an insignificant or unimportant part, he is entitled to payment for the whole, less any amount for the uncompleted work. What is “substantial performance” is a question of fact, depending on the circumstances and the details of the contract.

“Substantial performance” can be excluded by express words in the contract.

If a contract is, however, only partially completed, and the circumstances are such that the court can reasonably imply it, then it may imply a fresh contract to accept what has been performed, and pay on a “quantum meruit” - i.e. for what has been done. This is likely to occur by implication where the innocent party has actually accepted some benefit under the contract. For example, in contracts for sale of goods, a buyer is not compelled to accept a different quantity from that ordered. However, if he does accept them, he must pay at the contract rate for what he takes.

A similar principle applies where an employee performs only part of his contract, e.g. as part of some industrial action. In Miles v. Wakefield Metropolitan District Council (1987) a Superintendent Registrar of Births, Marriages and Deaths refused to perform marriage ceremonies on Saturday

mornings. His employers deducted from his salary the time spent on such refusal. He challenged the validity of the deductions.

HELD: The employers had behaved properly. They were not bound to choose between dismissing him and paying for incomplete work.

This principle was taken further in Wiluszynski v. Tower Hamlets London Borough Council (1989). Here the employer issued all employees working to rule (withholding specific duties) with a notice rejecting their part performance of the contract, and informing them that they would not be required to work at all unless they were prepared to do all that their contract required. The Council also stated that if the employees wished to enter the offices and work, such work would therefore be deemed to be voluntary and unpaid. Whereas in Miles the employer had merely deducted a proportion of the salary representing the work not done, here the Council sought to avoid payment completely. HELD: As the employees were offering only part performance the employer was within its rights to reject the part performance and refuse to pay at all.

On the other hand, if a contract is not “entire” but it is divisible, the court can treat each part as entire. Those divisible parts which are completed must be paid for.

Payment

A contract may provide for payment in a certain manner or at a certain time - and, if complied with, this serves to discharge the obligation to pay.

If there is no specific provision, the strict rule is that payment must be made in legal tender. If the creditor accepts a cheque, bill of exchange, or other negotiable instrument, he is, in reality, agreeing to a variation of the contract. However, if such a negotiable instrument is dishonoured, the creditor has two remedies - he can sue for the value of the dishonoured cheque or other instrument, or he can revert to the original contract, and sue for payment under it. In practice, it is, usually, simpler to sue in respect of the instrument, as then no proof is required that the contract has been performed, and the money due.

Should payment be made by a third party who is not jointly liable under the contract, then the debt is not discharged unless the third party pays as agent for the debtor, and with his authority.

However, if the creditor requests the debtor to make payment to a third party, this - when made - discharges the debt.

The time of payment is a question of the construction of the contract. It may be expressly stated, or to be necessarily inferred from the terms. However, if nothing is stated or to be inferred, the debtor must pay when the work is completed and he has had a reasonable opportunity to inspect it. Money which is stated to be “payable on demand” must be ready and handed over when demanded.

The place of payment is, unless otherwise stated in the contract, or to be inferred from it, the place of business or residence of the creditor. It is the debtor’s job to seek out the creditor and pay him. Proof of payment may be given in any way. A “receipt” is only prima facie evidence of payment.

Tender

“Tender” is the act of attempted performance. It applies to both parties. One party may tender work in performance of his promise; the other may tender payment.

If the one party tenders work, and the other refuses to accept it, the tenderor may elect to treat the contract as repudiated, and sue for damages. On the other hand, if a debtor tenders payment, and the creditor refuses to accept it, the debt is not discharged. The debtor must continue and remain ready to

pay the debt. Should the creditor sue, the debtor can plead that he duly tendered it - but he must still pay the money into court.

As we said before, unless the contract provides otherwise, strictly speaking, tender of payment must be in legal tender. The creditor is not bound to accept a cheque or other instrument of payment. That is the old rule but nowadays, in commercial transactions, any recognised method of transferring money which gives the creditor immediate use of the funds will suffice.

Note: Specific rules as to payment and performance apply to contracts for the sale and supply of goods (see later).

B. DISCHARGE BY AGREEMENT

You would think that, as a contract comes into existence only by agreement, its discharge, or ending, could equally easily be effected by agreement. Up to a point, this is true but, in the same way as there are various technical rules governing the valid formation of the contract, so there are rules, some rather artificial, governing its discharge.

There are four ways in which a contract can be discharged by agreement - by “release”; by “accord and satisfaction”; by “rescission”; and by some provision contained in the contract itself. Let us look at these in some detail.

Release

If one party releases another from his obligations, there is, normally, no consideration for the act. This applies where the party releasing the other has fully performed all his obligations, while the other has not. If both of them still have obligations to perform, the consideration for each foregoing his 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.

An agreement not to sue in perpetuity has always amounted to a “release”. However, such a covenant for a limited time only was at common law not a valid release. Equity, however, would interfere to grant an injunction to prevent a party suing in breach of his agreement not to. Hence, as equity prevails, an agreement not to sue is, in effect, a valid release, whether it be in perpetuity or for a limited time - provided, of course, the agreement is either for valuable consideration or under seal.