Express Provisions under the Contract for Reliefs

1. In some instances, the contract contains express or implied provisions for its own
discharge. It can be in the form of a condition precedent or a condition subsequent.

a) Condition precedent:
 A condition that has to be fulfilled for any rights to be operative. When the
existence of a contract depends on the happening of an event, it is deferred till
the condition is fulfilled.

 If the condition precedent is not fulfilled, there is no actual discharge because

the responsibilities and rights never really came into existence.

 This can be supported by the case of Pym v Campbell1 in which a written

agreement was signed by Pym and Campbell stating that the latter would
purchase the benefits of the invention of the plaintiff if it gets an approval from
the engineer, however, it was not approved.

 The court held that it cannot be regarded as a concluded contract as the

engineer did not approve the invention.

b) Condition subsequent:
 It can be defined as the conditions which arise after the contract has been
formed. The occurrence of a condition subsequent might nullify a contract that
is, till that point of time, completely valid and binding on the parties to the
contract.

 This gives a chance to one or both parties to terminate the contract before the
complete performance.

 This can be supported by the case of Head v Tattersall2 in which the parties
entered into contract of selling and buying of a horse respectively. An area of
the description states that the horse had been hunting with the Hounds.

 Seller told the buyer if the information furnished by him in the description

1
Pym v Campbell (1865) 119 ER 903
2
Head v Tattersall (1872) LR 7 Ex. 7
 proves to be incorrect, he could give back the horse within one week which
constituted the break clause. The buyer was informed that the horse had never
been hunting with the Hounds, despite which he bought the horse.

 After few days, the horse met with an accident and lost one of its limps.
Thereafter, the buyer took the horse back to the seller and claimed a refund as
the description was incorrect in stating that horse had been hunting with the
Hounds, bringing into the notice of the seller- the break clause. Seller refused
to take the horse back as it was injured.

 It was held that the seller by including the break clause in the contract has
accepted the risk of the horse being injured in the meanwhile. Hence, the buyer
could return the horse and end the contract by using the break clause.

2. One can discharge a contract by creating a subsequent binding contract. It can be in

three forms i.e., mutual waiver backed with consideration, accord and satisfaction and
equitable waiver not backed with consideration.

a) Mutual waiver backed with consideration:

 If the obligations of both the parties remain unfulfilled, they can mutually agree
to enter into a new contract through which their rights are waived under the old
contract in consideration of being released from the obligations.

 This can be supported by the case of the Hannah Blumenthal3 in which there
was a contract for sale of a ship between the parties, it contained a provision for
arbitration in London in case any dispute arises.

 Plaintiff on finding some defects in the ship complained against the defendant
but failed to bring it to the notice of the arbitrators for three years.

 When the proceedings were resumed, sellers presented a case stating the
termination of the arbitration agreement.

 It was held by the court that the contract cannot be considered to be frustrated.
Both the parties were at fault as they did not apply to the arbitral tribunal for

3
Hannah Blumenthal [1983] 1 AC 854
 directions to avoid unnecessary delay.

b) Accord and satisfaction:

 If one party fulfills his obligation but the other party fails to perform his part of
the contract, then the former may release the latter from his obligations by a
subsequent agreement. For example, a deed.

 On the other hand, one party may also agree to accept something else in place
of the previous obligation. Accord can be equated with subsequent agreement.

 This can be supported by the case Foakes v Beer4 in which the Respondent
provided a loan to the Appellant. When the latter failed to pay the same, the
former received a judgment in her favour to recover the amount due. After some
time, both the parties entered into an agreement where the respondent would not
enforce the judgement against appellant in consideration of payment of some
considerable amount in the beginning and on condition that the payment would
be done on six – monthly basis till the whole amount is repaid. Foakes paid the
entire amount except for the interest which was provided for under the statute.

 In the aforementioned case, it was held by the court that the promise of not
enforcing the judgement was not binding as it was not backed with good
consideration and appellant has only done what he was contractually bound to
do.5

 When one party only agrees to something else because he has been threatened
by the other party that he will not get anything otherwise, then there exists no
true accord and hence, the actual obligation has not been discharged.

 This can be supported by the case D & C Builders v Rees6 in which the builders
demanded for payment against the construction work and the material supplied
to Rees for repairs and alterations done in Rees’s shop. However, Rees did not
make the payment even when the work was continued, and a second bill was

4
Foakes v Beer [1884] UKHL 1
5
All Answers ltd, 'Foakes v Beer – Case Brief' (Lawteacher.net, March 2019)
<https://www.lawteacher.net/cases/foakes-v-beer.php?vref=1> accessed 21 March 2019
6
D & C Builders v Rees [1965] EWCA Civ 365
 issued. A reduced lumpsum payment was offered to the builders by Rees with
the condition that if the given payment is not accepted, they would get
absolutely nothing. Dreaded by the condition, the builders agreed to it and a
receipt was issues to the builders stating that the accounts were settled against
the full amount. Builders later filed a suit against Rees.

 In the aforementioned case, it was held that it constituted an invalid agreement

as no consideration was provided in favor of the builders for paying lesser
amount to them.

 Satisfaction can be equated with new consideration which is enough. For

satisfaction to be there, a new consideration must be given otherwise no new
agreement will be created and the previous agreement will also not be
discharged.

c) Equitable waiver not backed with consideration:

 Contract can be discharged when the conduct of one party makes the other party
to believe that they are not going to enforce or waive their rights for a particular
period of time.

 This can be explained through two cases Birmingham and District Land v
London & North Western Railway7 and Brikom Investments v Carr8.

 In the first case, it was held that if the person who possess certain contractual
rights against others depict by their action or behavior to the other party to make
them believe that either such rights would be kept in abeyance or would not be
enforced for a specified time period, those persons would not be allowed to
impose the rights till such time has lapsed.

 In the second case Brikom, owner of some flats offered the flats on lease to the
tenants and gave them an assurance that he would bear the costs of repairing the
roof top of the flats. Tenant agreed to take up the lease but later the landlord
sought contribution in the cost of repairing the roof from the tenants in

7
Birmingham and District Land Co v London and North Western Railway (1886) 40 Ch. D 268
8
Brikom Investments Ltd v Carr [1979] 2 All ER 753
 accordance with the original agreement.

 In this case, it was held that the landlord cannot recover the costs from the
tenants and hence, was estopped from the same.

REMOTENESS OF DAMAGE:

 As per section 73 of the Indian Contract Act 1872, one of the essential
requirements for the grant of damages is that the damage or loss is caused in
usual course of things due to such breach or the parties had the knowledge,
when they made the contract that the resultant damage could be done from the
breach of it.

 Thus, the defendant cannot be made liable for the loss which are caused by a
remote or far away cause to the breach of contract.

 It also serves as a legal test which is used to determine those kinds of losses
suffered by breach of contract which may be compensated by way of granting
damages.

 If the parties can contemplate the damage as being one of the possible
consequences of breach of contract, then it is regarded not too remote.
However, if it cannot anticipate the damage as being one possible consequence
of the breach, then it can be regarded as too remote.

 The principle of remoteness of damage has been laid down in the landmark
case of Hadley v. Baxendale9 in which the rule was laid down that only those
damages can be recovered by the injured parties that either should
“reasonably be considered...as arising naturally, i.e., according to the usual

9
Hadley v. Baxendale [1854] EWHC Exch J70
 course of things” from the breach, or may “reasonably be supposed to have
been in the contemplation of both parties, at the time they made the
contract, as the probable result of the breach of it.”10

 In this case, Hadley was the owner of the mill possessing a broken crankshaft.
He hired Baxendale to transport the broken crankshaft to the repair shop and
bring it back. There was an error on the part of the defendant as he could
transport the crankshaft back only after one week later than what was agreed.
Meanwhile, the mill was wound up. They were alleged for professional
negligence and loss of profit as a result of that.

 The court held that since Baxendale could not have reasonably foreseen the
results of delay and was also not informed by Hardley about that earlier, he
cannot be made liable for the loss of profit as the damage was too remote.11

 This decision has laid down two important rules, i.e., general damages and
special damages. It also depicts that no recovery of special damages can be
made when special circumstances are not known to the other party and if the
special circumstances are already within the knowledge of the contract
breaker, then communication to him may not be necessary.

 General damages: It can be referred as the damages that occurs naturally in the
usual course of things from the breach itself. To put it differently, the
defendant is liable only for all that which happens naturally in the usual course
of things after the breach.12

 Special damages: It can be referred to the damages that arise due to unusual
circumstances affecting the plaintiff. They cannot be recovered unless the
special circumstances are communicated to the defendant so that the parties
can contemplate the possibility of the special loss.

 Furthermore, by the decision given in Transfield Shipping Inc v Mercator

10
Hadley v. Baxendale [1854] EWHC Exch J70
11
All Answers ltd, 'Hadley v Baxendale – 1854' (Lawteacher.net, March 2019)
<https://www.lawteacher.net/cases/hadley-v-baxendale.php?vref=1> accessed 21 March 2019
12
Avtar Singh, Contract and Specific Relief (12th edn, Eastern Book Company 2016).
 Shipping Inc,13 it was made clear that the test for remoteness is tied in with
determining the extent of implied obligations by the defendant in the contract.
It thus demands an assessment of the common belief about the scope or extent
of liability of the defendant.

13
Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48