DISCHARGE OF A CONTRACT

To some scholars, to discharge a contract is to end it. There are therefore as many kinds of
discharge as there are different ways of ending a contractual obligation. The simplest form
of discharge is the performance of a contract on both sides, sometimes called dis- charge by
performance. Conversely, there is the "discharge by breach" since a breach may end the
contractual relationship, though of course it does not terminate the legal remedies. Thirdly,
we speak of a discharge where the deed or document containing the agreement is fatally
altered or destroyed; or where performance is terminated by such things as impossibility,
illegality or the statute of limitations. Finally, a contract is discharged where the parties
expressly agree to this effect or agree to compose or compromise their respective claims
and remedies. Indeed, there now exist various methods by which such a discharge can be
obtained, as the parties may terminate an existing contract either by parole or under seal, or
after performance or while the contract is still executory, or before or after a breach.

A contract is discharged when parties are released or freed from their obligations under the
contract. This freedom depends on any of the following four modes of discharge identified
above, namely:
1. By performance
2. By breach
3. By express agreement
4. By frustration

DISCHARGE OF A CONTRACT BY PERFORMANCE

The general rule is that a person who performs a contract according to the terms of the
contract is released from his obligations under the contract. But under common law,
performance must be total and complete, and failure to complete a task is interpreted as
breach. This is known as the Perfect Tender Rule. In Cutter v Powel, 1795, 6 TR 320, Cutter
was employed as second mate on a ship that was sailing from Jamaica to Liverpool. The
agreement was that he was to receive 30 guineas when the journey was completed. Before
the ship reached Liverpool, Cutter died and his widow sued Powell, the ship’s master, to
recover a proportion of the wages due to her husband. It was held that the widow was
entitled to nothing, as the contract required complete performance. This was unfair, hence
the intervention of equity with the doctrine of Quantum Meruit (to be paid as much as he
deserved - payment for work done).

However the doctrine of Quantum Meruit may encourage others to avoid perfoming the
contract due to laziness, shortage funds or poor planning. Thus for Quantum Meruit to
apply, the following conditions must be met:
a. The contract must have included part-performance as one of the terms. For example
in Sumpter v Hedges, 1898, 1 QB 673, a builder was hired to construct a house and
stable for the horse, but could not complete the work as he run short of money. The
land owner used the materials left to complete the work. The builder sued for the
contractual price but could only recover money spent on the materials and not for the
work done. It was held that part-performance was not part of the contract and the
builder could be paid for work done.
 b. If the contract is divisible, each portion may be treated and discharged separately.
For example in Taylor v Webb, 1937, 2 KB 283, premises were leased to a tenant and
a term in the lease required the landlord to keep premises in good condition. When
the landlord failed in this obligation, the tenant refused to pay rent. It was held that
the two were in breach of the contract and their actions could be treated separately:
the failure by the landlord was addressed by an action for damages by the tenant and
not withholding rent. The refusal to pay rent could also be addressed on its own.

In Bolton v Mahadeva, 1972, 1 WLR 1009, the plaintiff agreed to install a central
heating system for the defendant at £560, and cost him another £174 to correct the
defect, recovered only £174 in a quantum meruit claim because he had not
substantially done the work, and court as a matter of policy wanted to discourage bad
workmanship. It would also be unfair to allow those who breached contracts by not
completing them to be paid pro-rata for work done. So he lost the contract price of
£560 pounds.

c. If one party is prevented from performing by the other, the party prevented from
performing may claim for percentage of contract price under quantum meruit action.

d. If parties expressly referred to time as being of essence to the performance of

the contract, failure to perform within a reasonable time is a breach of a condition
and the contract will be treated as discharged. In Rickards v Oppenheim, 1950, 1 KB
616 (CA), the
contract for the sale of the car provided that delivery would be on March 20, but the
seller delayed. On June 29 the buyer told the seller that he should have the car by
July 25 latest. It was held that the buyer could not refuse delivery just because the
original date had not been complied with. But he was justified in refusing delivery
beyond July 25 because he had given the seller reasonable time in which to deliver
the car.
e. Most of the work should have been done for one to claim payment on basis of the
quantum meruit. In Hoenig v Isaacs, 1952, 2 ALL ER, 176 Hoenig was employed by
Isaacs to decorate his flat. The contract price was £750, to be paid as the work
progressed. Isaacs paid a total of £400, but refused to pay the remainder, as he
objected to the quality of the work carried out. Hoenig sued for the outstanding £350.
It was held that Isaacs had to pay the outstanding money less the cost of putting right
the defects in performance. These latter costs amounted to just under £56.

Tender of performance
If the obligation under the contract is to deliver goods and services, refusal to accept the
goods and services discharges the tenderer and entitles him to damages. If money is
tendered, it must be legal tender and the exact amount. If a debtor sends money in post and
is lost, he has to pay again unless this method was requested for by the creditor or the debtor
took reasonable care, such as registering the mail [Planche v Colburn, 1831, EWHC KB J
56].

DISCHARGE OF A CONTRACT BY AGREEMENT

This means that the contract is still running but parties agree to bring it to an end. A contract
is formed by agreement and may likewise be ended by agreement. Parties agree to discharge
each other from further obligations, but this must be supported by adequate consideration or
the agreement executed by deed.
There are four ways of discharging a contract by agreement, namely by unilateral
discharge, bilateral discharge, by novation and by condition subsequent.

A unilateral discharge is where one party buys release from his obligations under the
contract through a fresh agreement (accord) for which new consideration (satisfaction) must
be given. For example, where Bwalya is due to pay Mulenga Kwacha 100,000= in a week's
time for work done, but Mulenga agrees to accept Kwacha 90,000 if Bwalya pays on an
earlier date (refer to the Rule in Pinnel's Case).

But in Blake's Case, 1605, 6 do. Rep. 43b, it was specifically objected that a mere accord
and satisfaction could not bar an action based on a covenant. In that case, the plaintiff
claimed damages for the breach of a covenant to repair. The court distinguished between the
"certain duty" to pay a fixed or liquidated sum and the breach of covenant giving rise to
unliquidated damages; so that while a formal release was (and remains) necessary to
extinguish the bond between debtor and creditor, an informal accord and satisfaction was
enough to settle unliquidated claims, whether arising from breach of covenant or from
trespass, waste, ravishment or other wrongs.

A bilateral discharge is the ending of the contract by mutual agreement when neither party is
yet to perform his obligations under the contract (executory contract). In this case, each
party supplies consideration for the agreement.
Novation is the substitution of a new contract for the one already existing. For example
where Bwalya owes Rupiah Kwacha 1 million and Rupiah owes Chali Kwacha 1 million.
The parties may agree that Bwalya pays directly to Chali. Condition subsequent is where the
discharge is based on happening of an event.

DISCHARGE OF A CONTRACT BY BREACH

Breach of contract is failure to perform the contract according to the terms of the contract. It
may imply not completing or performing the task badly, which means that breach does not
necessarily discharge parties as they may be ordered to rectify their performance for the
contract to sand. But if they do not, then the contract is terminated. Where the innocent party
elects to treat the contract as continuing instead of repudiating it, this is known as
“affirmation” of the contract. When affirmation is communicated to the other party, it is
irrevocable,1 but does not extinguish the innocent party’s claim for damages sustained as a
result of the breach.2 Thus if the innocent party is unable to complete the contract with the
party at default, his remedy is to sue for damages and not the contractual sum. Affirmation is
related to “waiver” – waiving ones right to treat the contract as repudiated. There are two
types of waiver in this sense, waiver by election and waiver by estoppel. Waiver by election
is abandonment of the right to regard the contract as existing, and waiver by estoppel is
where the innocent party agrees with the defaulting party that he will not exercise his right
to treat the contract as repudiated.

1
Hain S.S Co. Ltd v Tate & Lyle Ltd (1936) 41 Com Cas.
350, 355.
2
Bentsen v Taylor, Sons & Co. (1893) 2 Q.B 274.
Breach may be anticipatory (renunciation), where one party prior to the actual date of
performance a party by words or conduct communicates his intention not perform or
expressly declares that he will be unable to perform his obligations under the contract in
some essential respect, the other party may entitle himself discharged from the contract 3; or
by omission/disablement. For example, where the seller who is also the manufacturer fails to
manufacture goods or obtain them from a supplier. This amounts to anticipatory breach by
the seller when approached by the buyer. For the innocent party to treat himself as
discharged, he must accept the repudiation by communicating to the party in default the
decision to terminate the contract. The communication does not need to be made by the
innocent part but any third party, such as an unauthorized broker or other intermediary. 4
Until the repudiation is accepted, the contract continues in existence for “an unaccepted
repudiation is a thing writ in water.”5 Anticipatory breach may be express or implied from
conduct.
If both parties are in breach, and each breach would give rise to the right to terminate, the
court has to consider the order in which the breaches occurred. If party A breaches a
contract, followed by a breach by B with the same effect, it will depend on whether B
accepts to exercise his right to repudiate and if A accepts the repudiation. The injured party
may sue for damages.
Damages
Damages refers to the monetary compensation, whether loss is pecuniary or not. It is the
main remedy for breach of contract. It exists as a right (legal remedy) and is automatically
awarded upon proof of breach by the plaintiff. Equitable remedies are also available for
breach, but these are discretional, can be denied or awarded if the plaintiff convinces the
court of existence of breach. They include Quantum Meruit, Specific performance,
injunction, rescission, an action for agreed price and repudiation. But even if the plaintiff has
proved loss, damages are not a full recompense and there are limitations to recovery, making
it impossible for him to recover all he has lost. There are two rules regarding damages on
this issue, namely the mitigation rule and the remoteness rule discussed below.
There are two types of damages: Liquidated and unliquidated damages. Liquidated
damages is the amount parties anticipate the breach to be worth and include it in the
contract. This must not be confused with a penalty clause, because liquidated damages
represent a genuine estimate of loss arising out of the breach, while a penalty clause is a
preventive measure against breach, and is not a genuine estimate but some exaggerated
amount to threaten parties into complying with their obligations.
Remoteness of damage rule
Remoteness of damage refers to legal test used to decide the type of loss caused by breach,
which may be compensated by an award of damages. The rule states that the plaintiff will
recover for loss only if it arose in the ‘the usual course of things’ or loss contemplated by the
parties at the time of making the contract.6 The rule was stated Alderson B. in Hadley v
Baxendale, 1854, EWHC J 70 that damages will only be awarded when loss arises naturally
from the course of things, that is, from a breach, or that both parties reasonably
contemplated this at the time the contract was made. Hadley, a miller, engaged the defendant
to take a sample of the mill-shaft which had broken down to the manufacturers, so that they
make a new one. Owing to the delay by the defendant in delivering the shaft, the mill was
not operational for a longer period than would have been, and the miller sued the defendant
3
Sir Anthony Main’s Case (1596) 5 Co. Rep. 21a.
4
Heyman v Darwins Ltd. (1942) A.C 356, 361.
5
Howard v Pickford Tool Co. (1951) 1 K.B 417, 421.
6
Rodocanachi v Milburn (1886) 18Q.B.D 67,78.
for the profit he would have made, had the mill started again without the delay. It was held
that it was not a natural consequence of the delay that the mill was shut, but due to the
broken shaft. The rule in Hadley v Baxendale has been restated in two cases 7 whose
combined effect is, “ a type or kind of loss is not too remote a consequence of breach of a
contract if, at the time of contracting (and on the assumption that the parties actually foresaw
the breach in question) it was within their reasonable contemplation as a not unlikely result
of that breach”.

The Mitigation of damage rule

The Law imposes a duty on the plaintiff must take reasonable steps to minimize loss caused
by the breach of contract, and debars him from claiming compensation for losses or
expenses he could have avoided, or which is due to his neglect. 8In British Westinghouse
Electric and Manufacturing Co. v Underground Railways Co. of London, the defendants
(British Westinghouse Electric and Manufacturing Co Ltd) supplied the plaintiffs
(Underground Electric Railways Co of London Ltd) with turbines which, in breach of
contract, were deficient in power. The plaintiffs accepted and used the turbines but reserved
their right to claim damages. Later they replaced the turbines with others which were far
more efficient than those supplied by the defendants would have been, even if they had
complied with the contract. The plaintiffs claimed to recover the cost of the substitute
turbines as damages.
It was held that assessing the damages for the breach any loss sustained by the plaintiffs had
to be balanced against any gain to them arising directly out of the steps they had taken to
lessen the consequences of the breach. Although the plaintiffs had not been bound to buy the
new machines, having done so the consequential gain in profits and saved expenses had to
be brought into account. The savings exceeded the cost of the machines and so the plaintiffs
recovered nothing under this head.
Giving the leading judgment, Viscount Haldane LC, said, ‘the quantum of damage is a
question of fact’. He set out the principles for determining the measure of damages:
“ The first is that, as far as possible, he who has proved a breach of a bargain to supply what
he contracted to get is to be placed, as far as money can do it, in as good a situation as if the
contract had been performed. The fundamental basis is thus compensation for pecuniary loss
naturally flowing from the breach; but this first principle is qualified by a second, which
imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent
on the breach, and debars him from claiming in respect of any part of the damage which is
due to his neglect to take such steps.”
The duty to mitigate is not to ‘take any step which a reasonable and prudent man would not
ordinarily take in the course of his business.’ Only reasonable steps.
Whether the plaintiff has failed to take reasonable steps to mitigate loss is a question of fact
dependent upon circumstances of each case, and the burden of proving failure by the
plaintiff to mitigate loss rests with the defendant. But where the attempt to prove failure of
the plaintiff to take reasonable steps to mitigate loss would amount to embarking on a
complex and hazardous legal journey, the defendant may ignore that path. In Pilkington v
Wood, 9 the plaintiff was dubiously sold a house and given a defective title. The defendant’s
lawyer argued that the plaintiff should have mitigated loss by taking proceedings against the
7
Victoria Laundry(Windsor) Ltd. v Newman Industries
Ltd (1949) 2 K.B 528, and Koufos v C Czarinkow Ltd.
(The Heron) II (1969) 1 A.C 350
8
, (1912), A.C 673.
9
(1953) Ch. 770
vendor. It was held by Harman, J., the plaintiff was unlikely to succeed as the action
involved complicated litigation because of a new and difficult provision in the Law of
Property Act, 1925. The plaintiff was therefore not under a duty to mitigate loss.
This rule has four sub-rules
a. That the plaintiff cannot recover damages for the defendant’s breach, which the
plaintiff could have avoided by taking reasonable steps.
b. If the plaintiff in fact avoids or mitigates his loss consequent upon the defendants
breach, he cannot recover for such avoided loss, even though the steps he took were
more than could be reasonably required of him.
c. Where the plaintiff incurs loss or more expenses while taking reasonable steps to
minimize loss, the plaintiff may recover this from the defendant.
d. The plaintiff will not recover losses that were not unlikely to occur in the usual
course of things, if the defendant could not reasonably be regarded as assuming
responsibility for losses of a particular kind suffered. 10 In Transfield Shipping Inc v
Mercator Shipping Inc (The Achilleas), a ship was returned late at the end of its
charter party. This caused the next charterer to cancel his contract. During the few
days after delivery was due, the price of charter parties dropped significantly. The
issue at hand was could the first charterers be liable for the loss of profit due to the
change in price of charter parties for the extent of time of the second scheduled
charter party? No, because it was not within the contemplation of the parties when
the first charter party was being negotiated to be considering the proceedings in the
next charter party. Such an extreme drop in the market price was unforeseeable, and
the loss of profits in the next charter was not within the rule in Hadley v Baxendale.

Non-pecuniary damages
Pecuniary damages are damages that have a discernible, quantifiable monetary amount
attached to them. Non-pecuniary damages are damages that are not as discernible and
quantifiable. Examples of non-pecuniary loss includes injured feelings or disappointment,
pain and suffering, mental distress, loss of reputation and financial loss consequent upon
loss of reputation, etc. The general rule is that damages are not recoverable for loss of
reputation or injury to feelings according to Addis v Gramophone Co. Ltd, 1909.11 In this
case Mr. Addis was wrongfully dismissed from his post as the defendant’s manager in
Calcutta. He sought additional damages for the harsh and humiliating manner of his
dismissal. It was held that the plaintiff was entitled to damages for loss of salary and
commission but not for the manner of dismissal, which injured his feelings. Lord Loreburn
LC said that an employee cannot recover damages for the manner in which the wrongful
dismissal took place, for injured feelings. Lord Atkinson stated that an aggrieved party to a
contract ‘is to be paid adequate compensation in money for the loss of that which he would
have received had his contract been kept, and nothing more.’

However, damages may be awarded for non-pecuniary loss for

(a) pain and suffering, mental distress consequent on physical inconvenience and loss of
enjoyment or amenity. Damages can be recovered for pain and suffering for breach
of contract which causes personal injury. In Godley v Perry, 196012, a young boy
bought a toy catapult from the defendant, which turned out to be defective and
injured the plaintiff, losing his eye. The plaintiff recovered damages for breach by
the defendant, which took into account the plaintiff’s pain and suffering.
10
(2008) UKHL 48.
11
A.C 488
12
1 WLR 9
 (b) physical inconvenience caused by the defendant’s breach of contract, and such
damages extent to mental suffering directly related to the inconvenience. In Watts v
Morrow, 13 the defendant omitted certain defects from the survey report upon which
the claimants relied in purchasing a house. Damages were awarded for the
inconvenience and directly related distress of living in the house while under repair.
(c) Distress or vexation if the object of the contract was to provide enjoyment, security,
comfort or sentimental benefit. In Jarvis v Swan Tours Ltd (1973) Q.B 233, the
plaintiff booked a holiday through the defendant travel tour company. He claimed
damages after the holiday failed to live up to expectations. Lord Denning said: ‘In a
proper case damages for mental distress can be recovered in contract, just as
damages for shock can be recovered in tort. One such case is a contract for a holiday
or any other contract to provide entertainment and enjoyment. If the contracting
party breaks his contract, damages can be given for the disappointment, the distress,
the upset and frustration caused by the breach. I know that it is difficult to assess in
terms of money, but it is no more difficult than the assessment which the courts have
to make every day in personal injury cases for loss of amenity. Take the present case.
Mr. Jarvis has only a fortnight’s holiday in the year. He books it far ahead and looks
forward to it all that time. He ought to be compensated for the loss of it. Here Mr.
Jarvis’s fortnight’s winter holiday has been a grave disappointment. It is true that he
was conveyed to Switzerland and had meals and bed in the hotel. But that is not what
he went for. He went to enjoy himself with all the facilities which the defendant said
he would have. He is entitled to damages for the lack of those facilities and for his
loss of enjoyment.’
(d) Loss of future wages in an action for wrongful dismissal, employee may recover
damages if the dismissal makes it difficult to get another job. In Malik v BCCI
(1998) A.C 20, “stigma damages” were recoverable by former employees of a bank
that had collapsed as a result of corruption and dishonesty in which the employees
were involved. Damages are recoverable where the effect of the breach is “positively
damage” the job prospects of the plaintiff.

Measure of damages
Measure of damages is the principle upon which damage is evaluated and quantified in
terms of money. The court may be faced with a choice of how to measure loss. For example,
where the performance is defective, should loss be measured by the cost of correcting the
defect or by the difference in value of performance? The two produce different results, and
the answer lies with the claimant. Measure of damages therefore goes beyond strict
compensation. Damages are intended to compensate the victim of the breach for the
financial loss due to the breach. They are not meant to punish and must not be greater than
the actual loss (unjust enrichment). The aim is to put the injured party in the position he
would have been in had the breach not occurred (restitution in integrum). In this light, the
following rules are observed:
a. if the breach relates to a contract for the sale of goods, damages are assessed in
line with the market rule (prevailing market price)
b. the injured party is under a duty to mitigate loss- to take reasonable steps to
minimize loss
Equitable Remedies
1. Quantum meruit

13
1991 1 WLR 1421 at 1445.
This is a claim for work done. Under common law, failure to complete a task was treated as
a breach of contract, and the defaulting party was entitled to nothing. But equity demands
that a party may claim for wages for work if substantial work is done.

2. Specific performance
This is an order of the court which compels a party to do that which he promised to do under
the contract. It is awarded if the common law remedy of damages is not adequate, for
example where goods have been identified and the price agreed upon (ascertained goods),
court may award an order of specific performance. This requires the party to do ones'
obligation under the contract. Specific performance is also discretionary, and the party
seeking this relief must convince the court; the court will grant it if it does not amount to
miscarriage of justice; and if it is just and equitable, as per Lord Parker in Stickney v Keeble
(1915) A.C 386 at p. 419.
3. Injunctions
This is an equitable remedy - an order of the Court compelling one party to fulfill his
obligations under the contract. There are four types of injunctions:
a. Mandatory injunction is an order of the court to the one responsible for the breach
to undo the breach, for instance to remove an advertising sign erected in breach of a
contract.
b. Prohibitory injunction orders the person not to do the breach.
c. Mareva injunction is an international injunction which orders the defendant not to
remove specified assets from a given jurisdiction. The name Mareva comes from the
case where such remedy was first given, that is Mareva Compania Naviera v
International Bulk Carriers, 1975, 2 Lloyd’s Rep. 509.
d. Anton Pillar Order authorizes inspection and copying of documents. It comes from
the case where this remedy was first given, Anton Piller v Manufacturing Processes,
1976, 1 ALL ER 779.

DISCHARGE OF THE CONTRACT BY FRUSTRATION

In the beginning, contractual duties were regarded as absolute and there was no excuse for
non-performance. If someone contracted to do something, he was not discharged just
because the task had become burdensome or had proved impossible to perform. This
common law rule was established in Paradine v Jane, 1647, EWHC KB J5. A tenant was
sued for rent and her defence was that she was unable to take possession of the property for
two years because of war. It was held that she was bound by the contract, and had to pay
rent even if she did not occupy the property she had leased. The court stated that if a party
by his or her own contract creates a duty upon himself or herself, he or she is bound to make
it good irrespective of an inevitable accident or necessity.
But this was unfair and this severe rule laid down in Paradine v Jane is mitigated by the
exceptions to this general rule, laid down in the doctrine of frustration. Frustration
automatically discharges the contract due to supervening impossibility of performance due
to the following and other reasonable circumstances:
a. where the subject matter or part of the subject matter of contract has been
destroyed: in Taylor v Caldwell, 1863, 3 B & S 826, Caldwell agreed to let a hall
to the plaintiff for several concerts, but before the event, the hall was gutted by
fire, though the Gardens remained. It was held the destruction of the hall made it
impossible to perform and therefore the defendant was not liable under the
 contract. In Asfar & Co. v Blundell, 1896, 1 QB at 128, a cargo of dates was sunk
and was affected by water and sewage, so that the cargo became something else
for business purposes, though it was still sold for £2, 400. The cargo-owner’s
liability to pay freight was discharged because the merchantable character of the
cargo was destroyed.

However, destruction of the subject matter will not frustrate contracts governed
by rules of risk of loss or damage. For example, contracts for the sale of goods
and building contracts.

In sale of goods contracts, the general rule is that risk of loss or damage passes
with property. It is possible for property to pass before delivery, so that the risk
in the goods remains with the seller. If goods are destroyed after the risk has
passed, the contract is not frustrated and the buyer has to pay the price, while the
seller is discharged from his duty to deliver. If insured, then the goods may
survive the frustration due to destruction.
Under building contracts, risk of the work is, unless otherwise agreed, on the
builder until the agreed work is completed. The contract is not frustrated by
destruction of the incomplete building.

b. by a supervening law: a new law may render the contract illegal and therefore
impossible to perform. In Re Shipton, Anderson and Co. 1915 3 KB 676, a contract
was made for the sale of wheat stored in a warehouse in Liverpool. Before the seller
could deliver, it was requisitioned by the Government under the wartime emergency
powers. It was held that the seller was excused from performance.
c. where a particular event on which the contract was based fails to take place: in Krell
v Henry, 1903, 2 KB 740, Krell let a room to the defendant for the purpose of
viewing the coronation of King Edward VII. When the procession was cancelled,
Krell sued Henry for the due rent. It was held that the contract was discharged by
frustration since the sole purpose of the contract was cancelled.
d. where the commercial purpose of the contract is defeated, for example where the
plaintiff’s ship that was chartered run aground, was damaged and needed repairs for
some time. It was held that the delay had put an end to the commercial sense of the
contract.
e. Certain personal contracts, such as employment and apprenticeship, are discharged
by the death or incapacitation of either party. Thus a contract to write a book would
be frustrated by the supervening insanity of the author. In Jackson v Union Marine
Ins Co Ltd, 1874 L.R 10 C.P 125 at 145, the plaintiff ship owner, contracted under a
charter party to proceed with all possible dispatch to Newport. He insured the cargo.
The ship ran aground before the cargo could be collected, and was delayed. The
charterers threw up the charter party and contracted elsewhere for the delivery of the
goods. The plaintiff claimed under his insurance.
It was held that the delay had been so long as to put an end to the contractual
obligations. The charterers were therefore not obliged to load the cargo, and the loss
constituted a loss of the chartered freight by perils of the sea. It was the happening of
the event and not the fact that the event was the result of a breach by one party of his
contractual obligations that relieved the other party from further performance of his
obligations.
Frustration will not discharge a contract in the following situations:
1.where the frustrating event is self-induced
2.where an alternative method of performance is still possible
3.where the contract simply becomes expensive to perform: in Davis Contractors v
Fareham Urban District Council, 1956, AC 696, the plaintiffs were contracted to build
78 houses in 8 months at £94.000. Due to labour shortage, it took 22 months at
£115,000. The plaintiffs sought to set the contract aside as having been frustrated and
claim on quantum meruit basis. It was held that that the contract was not frustrated by
shortage of manpower. Plaintiffs were bound by the contract at the agreed price.
5. where parties have provided for a contingency, that is when they have allocated
risk.
The effect of frustration
The effect of frustration at common law renders the contract void from the time of the
frustrating event. This means that each party has to perform any obligations that have
become due before the frustrating event. Secondly, loss lies where it falls, which means that
money paid before frustration cannot be recovered, and money pending before frustration
remains payable unless there is total failure of consideration. This rule was stated in Fibrosa
v Fairbairn, 1942, AC 32. A purchaser of machinery to be delivered in Poland, costing
£4800 paid £1000 upon order. But war broke out and Germany occupied Poland, making it
impossible to deliver the machinery. The plaintiff was able to recover £1000 because of total
failure of consideration.

But in Zambia, the effect of frustration is controlled by statute, the Law Reform (Frustrated
contracts) Chapter 73 of the Laws of Zambia. Section 3 of that statute states that if the
contract has become impossible of performance or is frustrated, and the parties thereto have
for that reason been discharged from further performance of the contract, money paid before
the frustrating event is recoverable and money payable before the frustrating event ceases to
be payable. If a party has incurred expenses, they can be recovered. If a party has obtained a
valuable benefit from the contract, he may pay a just amount for it.