LAW OF CONTRACT II

TOPIC: DISCHARGE OF CONTRACT

A contract is discharged when the mutual obligations of the parties are brought to an end. This can be
in any one of the following ways:

1. Performance,
2. By express agreement,
3. By breach,
4. Frustration.

1. PERFORMANCE

A contract is discharged by performance when both parties have performed their respective obligations
under the contract. As a general rule, performance must be in strict compliance with the terms of the
agreement if it is to amount to a discharge. Partial performance does not suffice. Thus in Cutter v.
Powell (1795) 6 Term Rep. 320., a sailor was hired for a voyage from Jamaica to England. He was to
be paid the sum of 30 guineas upon completion of the journey. He did the job for 50 days and died 19
days to the end of the journey. His widow sued for the value of the work done before his death. Held,
the defendants promise to pay was for the entire journey and thus nothing was recoverable by the
widow since he did not complete the journey.

This rule worked a lot of injustice, thus courts developed some exceptions to the rule.

a) Severable contract: where the contract is severable, partial performance of the contract will
entitle the plaintiff to recover to the extent of the contract actually performed. This is usually
applicable to instalmental contracts where payments are intended to be made at such times
when particular acts are performed. Whether a contract is divisible depends on the intention of
the parties which may be gathered from the words used and the circumstances of the contract.
In Ulierboom v. Chapman (1844) 13 M. and W. 230., a shipowner agreed to carry cargo from
Batavia to Rotterdam. He only carried it to Mauritius. Held, the contract was for the whole
journey and the shipowner was not entitled to any freight. In Ritchie v. Atkinson, (1808) 10,
East. 295, a shipowner agreed to carry a cargo of hemp, freight to be at the rate of £5 per ton.
He only carried part of the cargo, it was held that the contract was severable and he could
recover freight for the quantity carried.

b) Substantial Performance: where there is no express indication to the contrary in an agreement,

a party who has substantially performed can claim the value of work done. In Dakin and Co
Ltd v. Lee (1916) 1 K. B. 566, a builder who had substantially performed the contract was held
entitled to recover the price less a reduction for the defective work. Also in Hoenig v. Isaacs,
(1952) 2 All E.R. 176, the plaintiff entered into a contract with the defendant to decorate and
furnish an apartment for the sum of £750. The terms of payment were “net cash, as the work
proceeds, and balance on completion”. The defendant paid two instalments of £150 each
whilst work was in progress. Upon completion of the work, he complained of faulty design and
bad workmanship and paid a further instalment of £100 and moved into the flat using the
furniture provided by the plaintiff. In an action for the balance, the court held that in a contract
for work and labour for a lump sum, payable on completion, the employer cannot repudiate
liability on the ground that the work, when substantially performed is in some respect not in
accordance with the contract. The employer is liable for the balance due under the contract less
the cost of making good the defects or omissions.

c) Acceptance of partial performance: Where a party has only partially performed a contract and
the other party accepts the work when he has a choice to either accept or reject, then he would
be bound to pay the value of the accepted portion. A new promise to pay would be inferred.
The plaintiff can claim on quantium meruit basis. See Christy v. Row (1808) 1 Taunt, 300. A
ship carrying coal from Shield to Hamburg could not reach Hamburg, delivered some of the
 coal before Hamburg at the cargo owner’s request. Held, He is entitled to freight. However, if a
party abandons a contract thereby compelling the other party to complete the contract, the
former party has no right to sue for the value of work done before the abandonment as no new
promise to pay would be inferred. In Sumpter v. Hedges (1898) 1 Q. B. 673, the plaintiff
agreed to undertake a building project but abandoned the project halfway, forcing the
defendant to finish it on his own account. It was held that the plaintiff could not succeed in a
claim for the value of work done.

d) Prevention of performance: A party who prevents the other from completely executing a
contract may be liable for the cost of partial performance. E.g. a painter that been contracted to
paint a house with paint to be supplied by the owner of the house. If the owner fails to supply
the necessary material, then the painter would be entitled to payment for the work done aside
from other remedies he may have. See Planche v. Colburn, (1831) 5, C. and P. 58. The
plaintiff agreed to write a book to be published by the defendants in a series called the Juvenile
Library. He was to be paid on completion of the book. He collected materials and wrote part of
the book, the defendant then abandoned the series. Held that the plaintiff was entitled to
payment on a quantium meruit basis.

Suggested Approach to Performance Difficulties

Problems involving performance revolve around construction of the contract. The suggested approach
is as follows:

(i) Is the contract an entire obligation requiring precise performance? If it is, nothing less will do e.g.
Re Moore & Re Moore & Co Ltd v Landauer& Co Ltd [1921] 2 KB 519 .This will be unusual except
in sale of goods cases.

(ii) If precise performance is not required, are the contractual obligations divisible?

(iii) If not, has there been substantial performance, acceptance of partial performance or prevention of
performance?

There remains for consideration two further aspects relating to performance:

Time of Performance

(i) When the contract doesn't stipulate a time within which the contractual obligations must be
performed, performance must be within a reasonable time.

(ii) When there is a time stipulation in the contract then that is the time for performance.

(iii) In either case what is the effect of late performance? This depends upon whether time is of the
essence of the contract or not i.e. in the nature of a condition or not. See United Scientific Holdings
Ltd v Burnley BC [1977] 2 All ER 62 . The House of Lords stated that time is of the essence of the
contract if such is the genuine intention of the parties, and such intention may be expressly provided
for or inferred from the nature of the subject matter or the surrounding circumstances.

An interesting consideration of the problem can be seen in Charles Rickards v Oppenheim [1950] 1
KB 616. D purchased a Rolls Royce chassis from P. P contracted to build a body to go on the chassis,
the work to be completed by March 20th at the latest. It was not completed by that date, but the
defendant continued to press for delivery. However, on June 29th D wrote to the plaintiffs and said
that he wouldn't take delivery after July 25th. P didn't deliver by July 25th and the defendant treated
the contract as repudiated. The Court of Appeal HELD that he was entitled to do so. The original date
of the 20th March had been of the essence of the contract, but the defendant had waived it as such by
his conduct. But, he had given reasonable notice of a new date, July 25th as being of the essence of the
contract.

Tender of Performance

If one party makes a valid tender of performance and the other party refuses to accept it, he is freed
from liability for non-performance provided that the tender is made under such circumstances that the
other party has a reasonable opportunity of examining the performance tendered in order to ascertain
conformity with the contract.

Startup v MacDonald [1843] 6 Man & C 593The parties contracted for the sale of ten tons of linseed
oil to be delivered “within the last 14 days of March.” The plaintiff delivered the oil at 8.30 pm on
Saturday, 31st March and the defendant refused to accept delivery because of the lateness of the hour.
It was HELD that the tender of the oil in the circumstances was equivalent to performance and the
plaintiff was entitled to damages for non-acceptance.

Essentials of a Valid Tender

1. It must be unconditional
2. It must be made at the proper time and place
3. It must be for the entire obligation as contained in the contract
4. The tenderer must be able to perform it then and there
5. The tender must be made to the proper person.
6. Tender of goods must be made in such a manner that a reasonable opportunity is available to
the buyer to inspect.

If there are more than one promisee, then tender may be made to any one of them.

2. EXPRESS AGREEMENT

Since parties enter into a contract by their freewill, they are also free cancel the contract completely or
partially or change the terms of the agreement and replace it with another one. This can come about in
several ways:

i) By provision for discharge in the contract itself. The contact may contain a term for its
termination on the non-fulfilment of a condition, happening of an event or the exercise by one
of the parties of the power to terminate it. It could be condition precedent or condition
subsequent In Head v. Tattersall(1871) L. R. 7 Ex. 7, T sold a horse to H warranting that it had
hunted with the b hounds an gave H the right to return the horse by a certain date if it does not
comply with the warranty. The Horse had not hunted with the B hounds and H returned within
the stipulated time, though it had been injured. Held, H was given the right to terminate the
contract and T had to accept the injured horse.

ii) By accord and satisfaction

Just as a contract is formed by agreement so it can be discharged or varied by agreement; BUT – just
as consideration is essential to agreement so it is substantially necessary for discharge or variation,
unless the release is executed by deed. The process is known as ACCORD AND SATISFACTION;
the accord is the agreement and the satisfaction the consideration. There are two forms of discharge by
agreement:

(a) Bilateral (b) Unilateral.

(a) Bilateral
Applies to executory agreements. X and Y mutually release one another from their obligations.
(b) Unilateral
 If X has performed his part of the contract a promise from him to release Y from further
performance will not bind him unless Y provides consideration. Pinnel's Case (1602) 5 Co Rep
117a, Elton Cop Dyeing Co Ltd v Robert Broadbent & Son Ltd (1920) 89 LJKB 186

Bilateral Discharge

Bilateral discharge occurs whenever both parties to the contract have some right to surrender, e.g.
where there has been non-performance by either party, or is partly performed by one or both parties.

The agreement by the parties to discharge their contract may be designed to have one of several
effects:

i) Accord and Satisfaction

The parties may intend to rescind their present agreement and nothing more. Where there is
an agreement mutually to release the other from the obligations under the first agreement,
there is an accord and satisfaction.The accord is the agreement between the parties which
discharges the defaulting party from his obligations under the contract while the
satisfaction is the consideration furnished by the defaulting party to make the agreement
operative.Where a party failed to perform his obligation in a contract, he can get a release
from his obligation if he is able to furnish consideration acceptable to the other party for
such release. See the cases of Adekunle v. A.C.B. , AlhajiSanusiDere v. Pacific
Insurance Co. (Nig) Ltd. (Pages 543 and 544 of Sagay)

ii) Rescission and Substitution ( Novation)

The parties may intend rescission of the original contract and substitution of a new contract;
this is known as “novation”.

Novation takes place:

i) where a new contract is substituted for an existing one between the same parties or
ii) a contract between two parties is rescinded in consideration for a new contract being
entered into on the same terms between one of the parties and a third party.

For example where a creditor agrees at the request of the debtor to take another person as his
debtor in place of the original debtor, and the consideration for the new contract is a discharge
of the former contract. In this example for novation to take place all the parties (the creditor,
the original debtor and the new debtor) to the contract must mutually agree to the terms of the
new contract i.e. a tripartite consent of the parties must be obtained. Novation should take
place before the expiration of the performance of the original contract otherwise a breach of the
original contract will occur.

iii) Rescission
The agreement to mutually rescind the contract may take place either before its breach by a
party or after its breach.Rescission of a contract takes place when the parties to a contract
decide that they should forget the contract and should not bring a new contract into existence to
replace it. A promise not to demand performance from each other becomes the mutual
consideration for discharge of the contract.

iv) Variation
The parties may agree on the variation of an existing contract, i.e. modifying or altering the
terms of the original agreement. Variation takes place when one or more of the terms of a
contract is/are modified by the mutual consent of the parties, consequently the old terms so
modified are discharged. Where a contract is by law required to be written, such a contract can
be rescinded by an oral agreement but it cannot be varied or modified in any way by an oral
 agreement. Modification to the original agreement can only be by another written agreement
with the consent to of the parties. See the case of Goss v. Nugent (1833)5 B & Ad 58 ( see
also page 534 of Sagay)

Novation and variation are similar but are different in the following ways:

i) In novation the changes made to the original contract is substantial, but in variation it is
less than that
ii) In novation the parties to the contract may change but in alteration the parties remain
the same.

v) Remission
It means acceptance of a lesser fulfillment of promise made e.g. acceptance of a lesser sum
than what was contracted for, it is a discharge of the whole of a debt. It is not necessary that
there must be some consideration for the remission or the part of the debt. It is a one sided
concession given under a mutual agreement between the parties.

Unilateral Discharge

Unilateral discharge takes place where only one party has rights to surrender. Where one party has
entirely performed his part of the agreement, he is no longer under obligations but has rights to compel
the performance of the agreement by the other party. For unilateral discharge, unless the agreement is
under seal, consideration must be furnished in order to make the agreement enforceable.

Example of unilateral discharge is a waiver. Where one party voluntarily accedes to a request by
another to forbear his right to strict performance of the contract, or where he represents to another that
he will not insist upon his right to strict performance of the contract, the court may hold that he has
waived his right to performance as initially contemplated by the parties.A waiver involves a promise
not to insist on the mode of performance fixed by the contract, rather the substance of the
contract.There appears to be no difference between a waiver and promissory estoppelsimpliciter as
both allows the promisee to carry a less onerous or reduced obligation than he would have under the
original contract. Waiver involves the renunciation, abandonment or surrenders of some claim and
privilege in a contract or the opportunity to take advantage of some defect, irregularity or wrong. A
waiver is essentially unilateral, resulting from act or conduct of the promisori.e, the party against it
operates, with no corresponding promise or act.A waiver is similar to remission but it is a one-sided
concession given by a unilateral declaration of renunciation of rights, privileges or benefits under a
contract. Strictly speaking, waiver is not a method of discharge by mutual agreement.

3. DISCHARGE BY BREACH

A breach occurs when a party refuses to perform obligations imposed on him under the contract. He
may either expressly repudiate his liability before the date fixed for performance or during the
performance which is referred to as actual breach, or he may by his act make it impossible for himself
to perform the contract. For example if he transfers something which he had earlier contracted to
transfer to one person to someone else. Actual breach may be by non performance, defective
performance or non truth of a statement (i.e. misrepresentation) which is a term of the contract.
In the case of repudiation before the performance is due, which is generally called anticipatory breach.
Oputa J.S.C in Ajayi V. Texaco Ltd. (1987) 3 N. W. L. R. 577 (pt. 62) 577 (SC) at pp. 598-599. defines
anticipatory breach as follows: “An anticipatory breach of a contract occurs if before the time arrives
at which a party is bound to perform a contract, he express an intention to break it or acts in such a
way as to lead a reasonable person to the conclusion that he does not intend to fulfil his part or
disables himself from doing so. It is then that it can be said that there been an anticipatory breach of
contract”.
Anticipatory breach could be express repudiation or implied repudiation. Express repudiation occurs
where one party informs the other of his unwillingness to perform his obligations under the contract.
In Hochester v. De la Tour(1853) 2 E&B 678 the defendant employed the plaintiff as a courier, his
services to start on 1st June, on May 11, he informed the plaintiff that he did not require his services
before June 1 arrived. Held, the plaintiff could bring an action.

Implied repudiation occurs where a party makes it impossible for himself to perform the contract. In
anticipatory breach, the other party may either accept the repudiation and treat the contract as
discharged and sue for damages immediately or discountenance the repudiation and sue for specific
performance when the time is due. In Frost v. Knight (1872) L.R. Ex 111, the defendant agreed to
marry the plaintiff when his father died. While his father was still alive, he broke the engagement, and
the plaintiff sued. Held, that the plaintiff was entitled to accept the repudiation and bring her action for
breach of promise at once.

In Omnium D’Enterprises and Ors v. Sutherland, (1919) 1 K.B. 618, the defendant agreed to hire his
steamboat to the plaintiff for a certain period and to pay the 2 nd plaintiff some prescribed commission.
Subsequently, the defendant sold the ship to a purchaser and the agreement with the purchaser was
free from the liability contained in the agreement with the plaintiff. It was held that the sale by the
defendant amounted to a repudiation of the agreement with the plaintiffs. In Synge v. Synge (1894) 1
Q.B. 466 a man agreed before marriage to settle a house on his wife after marriage. He subsequently
conveyed the house to a third party. It was held that his wife could bring an action for breach of
contract.

A breach always entitles the aggrieved party to sue for damages but does not always discharge the
contract. To cause a discharge, the breach must be either the whole of the contract or of a fundamental
term in the contract.

N.B. It may be dangerous for the innocent party to wait for the due date for performance as the
contract continues at the risk of both parties.

Avery v Bowden (1855) 5 E & B 714B chartered A's ship and agreed to load her with cargo at Odessa
within 45 days. After a while B told A that he had no cargo and advised him to leave. Instead, A
waited at Odessa hoping B would find a cargo. Before the end of the 45 days the Crimean War broke
out between England and Russia and performance of the contract became illegal. HELD: The refusal
by B to provide a cargo was an anticipatory breach and A could have sued immediately. When he
chose not to do so the contract remained on foot until performed. However, in the meantime both
parties were discharged from the contract by frustration (subsequent illegality in this case) due to the
outbreak of war. Thus, B was not liable to A for breach of contract.

4. DISCHARGE BY FRUSTRATION

The doctrine of frustration operates in situations where, due to subsequent change in circumstances,
the contract is rendered impossible to perform, or the contract is deprived of its commercial purpose
by an intervening event not due to the act or default of either party.

Frustration is not to be confused with initial impossibility, which may render the contract void ab
initio. See Couturier v Hastie (1856) 5 HL Cas 673. If a contract is undertaken to perform an
impossibility, it is void ab initio. The rule is based on the following maxims

i. Lexicon cogit ad impossibilia, i.e. the law does not recognize what is impossible
ii. Impossilium nulla obligato est i.e. what is impossible does not create an obligation.

Before the recognition of the doctrine of frustration, the general rule is that if a person contracts
absolutely to do a thing, the contract is not discharged and he is liable in damages, even if performance
proves to be impossible. This is the rule in Paradine v. Jane (1674), Aleyn 26 at 27 where the court
said that:
“…When a party by his own contracts creates a duty or charge upon himself, he is bound to
make it good, if he may, notwithstanding any accident by inevitable necessity because he
might have provided against it by his contracts.”

This means that no eventuality would discharge an obligation unless it had been anticipated and
provided for in the contract. The severity of this rule is however mitigated by the doctrine of
frustration. If the doctrine applies, the contract would be automatically discharged.

Frustration has been judicially defined by Viscount Simon in Cricklewood Property and Investment
Trust Ltd v. Leighton’s Investment Trust Ltd (1945) A.C. 221 at 228
The premature determination of an agreement between parties, lawfully enters into and in the
course of operation at the time of its premature determination owing to the occurrence of an
intervening event or change of circumstances so fundamental as to be regarded by the law
both as striking at the root of the agreement and as entirely beyond what was contemplated by
the parties when they entered into the agreement.

In other words, the occurrence of an unexpected event which affects the whole basis of a contract as to
make it substantially different from the original contemplation of the parties will cause the contract to
be discharged. The doctrine of frustration makes provision for the discharge of a contract where
subsequent to its formation, a change of circumstances makes it legally, physically or commercially
impossible to fulfill the contract. See Davies Contractors Ltd. v. Farehan U. D. C. S. (1958) A. C.
696 AT 729.

However, a contract will not be declared to be frustrated merely because it has become more onerous
or less profitable than originally anticipated, or because it becomes impossible. Tsarilogou & Co. Ltd
v. NobleeThorl etc (1962)A.C. 93. In a C.I.F contract for the sale of groundnuts to be shipped to
Hamburg, the sellers failed to ship the goods as result of the closure of the Suez Canal. The shipment
could have been taken via the cape of Good Hope which was almost twice as long and more
expensive. The court held that the contract was not frustrated. See also Olunloyo v. The Polytechnic
(1974) NMLR 142 and Maritime National Fish Ltd. v. Ocean Trawlers Ltd. (1935) A. C. 154.Joseph
Constantine SS Line V. Imperial Smelting Corpn. (1942) A. C. 154.

The doctrine of frustration is generally believed to be inapplicable to leases since a lease creates not
only a contract but an interest in land. Thus, in London and Northern Estate Coy v. Schlesinger (1916)
1 K. B. 20. It was held that the lease of a flat was not terminated by the fact that the tenant had become
an alien enemy and was therefore prohibited from residing on the premises. However in Cricklewood
Trust Ltd. v. Leightons Trust (1945) A. C. 221 there was a division of opinion among the judges of the
House of Lords on the matter. The Supreme Court in Araka v. Monia Construction Ltd. (1978) Vol. 9-
10 S C. 9. had to pronounce upon the matter. The Supreme Court reviewed the authorities in England
and other commonwealth countries to hold that the doctrine of frustration may, in certain
circumstances, apply to a lease of land and that such circumstances were present here. Consequently
the lease was determined by frustration; the supervening event being the civil war which forced the
expatriate tenant to vacate the house on orders of the then government. Accordingly, the landlord was
not entitled to recover rent.

The House of Lords in National Carrier Ltd. v. Panalpina (1981) 2 WLR 45 by majority of four to one
held that the doctrine of frustration was, in principle, applicable to lease though the cases in which it
could properly be applied were likely to be rare and exceptional and applying the formulation to the
facts before them, the majority held that the loss of use for a maximum of two years out of a ten years
lease did not amount to one of the exceptional cases in which the doctrine of frustration would apply.
The doctrine of frustration will not apply where the parties have expressly provided for the
contingency which has occurred or where the frustrating event was self induced. See Maritime
National Fish Ltd v. Ocean Trawlers Ltd (1935) A. C. 524.

Apart from cases of strict liability, a contract will be frustrated in any of the following circumstances.
1. Fundamental change of circumstances: A vital change of circumstances which strikes at the root
of the contract and which was not contemplated by the parties will cause a contract to be
frustrated. Such changes occurred during the two world wars and also during the Nigerian-
Biafran war. Any interference by government, either by seizure of subject matter of the contract
or by a prohibition for an indefinite period of an act enjoined by the contract, will if the seizure
or prohibition strikes at the root of the contract, cuase the contract to be discharged. In
Metropolitan Water Board v. Dick Kerr & Co, (1918) A.C. 119, the defendant undertook to build
a large reservoir for the plaintiff within six years. On the outbreak of war, the government
prohibited the continuance of the work. Held, the intervention is substantial enough to cause the
termination of the contract.
2. Subsequent illegality: a subsequent change in law which makes the performance of the contract
illegal will cause the contract to be discharged.
3. Destruction of the subject matter: The accidental destruction of the subject matter will result in a
discharge of the contract. Taylor v. Caldwell (1863) 3 B & S 826. Destruction of the music hall
which was the subject matter of the contract was held to have discharged the contract. See also
Bentworth Finance (Nig.) Ltd v. AlhajiSaniBakori (unreported) where the destruction of the lorry
the subject matter of a hire purchase agreement in an accident was held to have discharged the
contract.
4. Personal incapacity: In contracts of personal service, subsequent illness, death, internment or
compulsory call-up for military service will discharge the contract. In Robinson v. Davidson,
(1871) L.R. 6 Exch. 269 A pianist who was under contract to play at a concert took ill and could
not play on that day. Held contract was frustrated. Also in Unger v. Preston Corporation,(1942)
1 All E.R. 200, a German refugee was employed as a School Medical Officer. On the outbreak of
war with Germany, he was interned as an enemy alien as was not released until ten months after.
Held the contract of employment was discharged upon his internment.
5. Non occurrence of an event: If the occurrence of a particular event is vital to the contract, the
non occurrence of that event will discharge the contract. In Krell v. Henry (1903) 2 K.B. 740. An
agreement to rent a flat to view the Coronation procession of Edward III was discharged as a
result of the cancellation of the procession due to the king’s illness. If however the event is not
the sole purpose of the contract, the contract will not be discharged. In Herne Bay Steamboat Co.
v. Hutton, (1903) 2 K.B. 683, a steamboat was hired to view the naval review and to cruise, the
cancellation of the review was held insufficient to discharge the contract.

Effect of frustration

(i) The frustrating event discharges the contract immediately. The contract is terminated as to the
future only and unlike a contract vitiated by mistake, it is not void ab initio.
(ii) At common law, the contract was terminated automatically and immediately, and both parties were
released from their future obligations under the contract; however, they were required to fulfil any
obligations which fell due before the occurrence of the frustrating event i.e. the loss lies where it falls.

In other words the contract was not void right from the outset, but only from the occurrence of the
frustrating event (cf the effect of mistake which overrides the contract right from the beginning).

This led to unfortunate consequences: Appleby v Myers [1867] LR 2 CP 651 In this case, P undertook
to erect machinery upon the D's premises, the work to be paid for upon completion. When the work
was almost completed both the premises and the machinery already erected were destroyed by fire. It
was HELD that the contract was frustrated; however, the plaintiff could recover nothing for the work
done since the obligation to pay didn't arise until completion.

Chandler v Webster [1904] 1 KB 493 Here, P agreed to hire from D a room in Pall Mall to watch
Edward VII's coronation procession. The price was £141, payable immediately. The plaintiff paid
£100, but before he could pay the balance the procession was cancelled. P sought to recover the £100
paid. The Court of Appeal HELD that not only did he fail to recover his £100, but also he was liable to
pay the balance of £41, an obligation which fell due before the occurrence of the frustrating event.

Chandler v Webster in particular provoked much judicial criticism, and was eventually overruled to
some extent in The Fibrosa [1942] 2 All ER 122 The respondents contracted with the appellants, a
Polish company, to manufacture certain machinery and to deliver it to Gdynia. Part of the price was to
be paid in advance, and the appellants paid £1,000. However, the contract was frustrated by the
occupation of Gdynia by hostile German forces in September 1939. The appellants requested the
return of their £1,000. This request was refused on the basis that considerable work had already been
done on the machinery.

Clearly, if Chandler v Webster had been followed then the £1,000 would have been irrecoverable
because it had already been paid at the time of the frustrating event. However, the House of Lords
HELD that the appellants could recover their £1,000. The basis for this was not the contract which had
ceased to exist, but an action in what is known as quasi-contract for the restitution of money paid
where there has been total failure of consideration. Consideration in quasi-contract does not have the
same meaning as the consideration necessary to formation of contract; thus, if the party paying the
money has received no part of the performance for which he bargained (i.e. none of the machinery had
been delivered) there is total failure of consideration.

Despite the decision in the Fibrosa case, however, two difficulties are yet to be resolved- (a) The rule
in Fibrosa case being one founded on a total failure of consideration does not permit the recovery of
an advanced payment if the consideration has only partly failed i.e., if the payer had received some
benefit, though perhaps a slender one, for his money and (b) the payee while he may be compelled to
repay the money because the payer has received no benefit, he may himself in a partial performance of
the contract have incurred expenses for which he has no redress. These two difficulties have been
removed by legislative intervention. For Lagos State, the law is to be found in the Law Reform
(Contract) Law Cap. L. 63 (Vol.5) 2003 Laws of Lagos State, sections 4(2) and 4(3). For the former
Western Region, see Section 6-12 of the Contracts Law, Cap 25 of the Laws of Western Nigeria, 1959.
Section 4(2) provides that
1. Any money paid before the frustrating event is recoverable
2. Any money payable before the frustrating event ceases to be payable
3. A party to whom money has been paid may recover the value of his expenses or retain the
value of the expenses from money he had received, if any. However, if nothing is paid or payable,
before the frustrating event, he will not get any refund for any expenses at all.
Under section 4(3), a person can receive, on quantum meruit the value of any valuable benefit
conferred on the other party to the contract by him before the frustrating event occurred, the valuable
benefit not being a payment of money made under S.4(2)

5. LAPSE OF TIME

As a general rule, a contract is not discharged by lapse of time unless the contract contains stipulation
that time is of the essence of the contract. Notwithstanding the general rule, lapse of time may affect
the enforcement of one’s right. The Limitation Act stipulates the time within which certain contractual
actions may be brought. The Act does not affect the contract itself but merely bars the remedy for the
breach.

Test Questions
1. Oyedele Enterprises placed an order for the supply of kitchen utensils to Just Kitchen Ltd (JKL).
JKL undertook in the terms of the contract that all the items required for supply would be made
available to Oyedele Enterprises by 30th November 2010. However by 18th November 2010, JKL
wrote a letter to Oyedele Enterprises seeking to repudiate theirobligation to supply under the contract
on the ground that their international supplier disappointed them. Oyedele Enterprises in their reply
insisted that the contract must be executed. JKL however failed to supply as agreed on 30th November
2010. Advise Oyedele Enterprises on the legal issue(s) involved. Would it have made a difference if
Oyedele Enterprises had agreed to the repudiation of JKL’s obligations under thatcontract?

2.‘A party who does not perform the whole of the contract is not entitled to any payment.’ Discuss.

3. In January Temmy contracted with Doris, Ethel and Percy respectively. The contracts were as
follows:

Doris : to renovate her flat for N200,000 payable on completion.

Ethel : to supply and construct a new greenhouse for N100,000 payable on completion.

Percy : to install a new toilet and bathroom suite for N200,000 payable on completion.

In March, Temmy claimed to have completed his work for Doris and Ethel. However, in Doris' case he
had given the flat only one coat of paint instead of the two agreed and the new door didn't fit properly.
In Ethel's case he had used Texlon rather than Texcoat glass, and the replacement cost would have
been N50,000.

In April, Temmy had installed the new toilet and almost completed the bathroom suite, though the
work contained several minor defects, when Temmy abandoned the work and went to work on
anOffshore oil-rig.

Advise Doris, Ethel and Percy.

4. Drake and Scott were friends who had spent many happy hours together touring the Badagry Beach
in Drake's narrow-boat. In June, Scott agreed to hire Drake's narrow-boat for a fortnight's family
holiday in August touring the Kuramo Lakes and the Snake Island; total hire charge N300,000,
N100,000 payable in advance. Drake didn't normally hire out his boat, but did so because Scott and his
family were his friends and he didn't want to deny them the opportunity of exploring the exceptionally
beautiful Kuramo Lakes.

Drake spent considerable time and money converting his boat for family usage and by the beginning
of August it was ready. However, two days before Scott's hire was due to begin an all-out strike of
Kuramo Lakes' workers was called, rendering the Kuramo Lakesunnavigable for an indefinite period.
Scott repudiated the contract claiming frustration and a beautiful friendship came to an end. Advise
Drake.