NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL

AB1301 - BUSINESS LAW

AUG 2018

Worksheet 7: Discharge of Contract

Key Learning Points:

1. Understand the various ways that a contract can come to an end (performance, breach,
agreement and frustration)
2. Understand the respective rights and obligations of the parties in each of the ways the contract
is discharged

MCQs
1. “If a shoe maker agrees to make a pair of shoes, he cannot offer you one shoe and ask you
to pay half the price”. In law, such a contract is called:
(a) an entire contract
(b) a divisible contract
(c) a lump sum contract
(d) a unilateral contract

2. Not all lump sum contracts are entire contracts. The characteristic feature of an entire contract
is that:
a) the obligations under the contract are divisible
b) the doctrine of substantial performance always applies
c) the entire performance of the contract is a condition precedent to payment
d) microscopic deviations will prevent the contract from being completely
performed

3. A contract is NOT discharged by frustration in one of the following situations:

a) destruction of the subject matter of the contract
b) death of the employee under a contract of employment
c) the event which frustrates the contract arises from the act or election of a
party not to perform the contract
d) performance of the contract would render it radically different from that
which was undertaken by the contract

4. Renunciation is:
a) where both parties agree to abandon the contract
b) where one party shows a clear intention that he no longer wants to carry on
with the contract
c) where one party, through his own act or default, incapacitates himself from
performing his contractual obligations
d) where there is a change of law which renders the party unable to perform his
contractual obligations

5. The statement that an ‘unaccepted repudiation is a thing writ in water and of no value to
anybody” means that
a) the contract automatically comes to an end
b) the contract only comes to an end when the innocent party becomes aware of
the repudiatory breach
 c) the contract comes to an end when the innocent party accepts the
repudiatory breach by communicating his acceptance of the repudiatory
breach to the guilty party
d) the contract only comes to an end when the innocent party accepts the
repudiation in writing

Discussion Questions
Agnes has just purchased a freehold property (the property) on which stands a promising, but
dilapidated, old Victorian building in Tiong Bahru. Discuss the legal position of the parties in
each of these scenarios taken separately and independently.
(a) Agnes engaged Bill, a contractor, to restore the building for the price of $500,000.
Bill had almost completed the restoration work, except for the front gate, when he
secured a more lucrative contract elsewhere and told Agnes that he ‘did not intend’ to
complete the front gate. Meanwhile, Agnes engaged Chris to complete the front gate
at an agreed sum of $50,000, and instructed him to use whatever materials Bill had
left behind. Bill, however, claims that Agnes should pay him the full sum as the
outstanding work was ‘quite insignificant’, while Agnes claims that Bill is entitled to
absolutely nothing.

What are the possible ways of resolving this deadlock? [If necessary, please show
calculations of what you think might be a fair legal outcome]. Would your answer be
different if: (i) the lump sum of $500,000 was to be made on completion of the entire
contract; (ii) the renovation contract was pro-rated into several parts, of which the
front gate was one?

(b) Agnes commissioned Dan for a sum of $100,000 to write a book on the history of the
old Victorian building. Payment was to be made when Dan published the book. Dan
wasted no time and spent much time and effort on research, sourcing pieces of archive
films and photographs of the old building, and interviews of former residents. Dan
intended to showcase his published work in order to secure other similar projects.
However, he was bitterly disappointed when Agnes called him to cancel the contract.
By then, Dan had completed his research and was ready to pen his first line. Stoically,
he went ahead with the project and published the book. He now claims to be entitled
to the agreed sum of $100,000.

Has Agnes committed a repudiatory breach of contract and, if yes, which situation
of the RDC Concrete rubric does her repudiatory breach fall under? Advise Dan on
his rights and obligations (including any possible risks) in choosing to proceed
with the contract rather than to end his contract with Agnes.
(c) Agnes ordered a certain quantity of porcelain teapots and cups from Eve that
incorporated intricate Victorian designs. In the signed agreement, Eve warranted ‘that
the teapots and cups (were) hand painted with high-quality indelible ink and suitable
for daily use’. Agnes paid a deposit, with the balance payable on delivery. However,
Agnes was dismayed to find out that the ink on the newly delivered porcelain began
 to smudge and come off as she was unboxing and placing them on her kitchen
shelves.

Advise Agnes whether she has the right to discharge herself from the contract and, if
yes, which situation of the RDC Concrete rubric does her right to discharge fall
under? Assuming that she had such a right, what legal steps should Agnes adopt to
properly bring the contract to an end?
(d) Agnes agreed to sell the property to Fred for $5,000,000, for use by him as his family
home. Fred paid a deposit, and agreed to pay the balance on the date of conveyance*.
But, two days before the conveyance, Parliament legislated with immediate effect to
compulsorily acquire the property as a national heritage museum. Agnes refused to
return Fred his deposit, claiming that she had incurred considerable expenses in
having to vacate the property in anticipation of handing over the property to Fred. On
the other hand, Fred has threatened to sue Agnes for her breach of contract.
* The date of conveyance is the time the vendor passes legal ownership of the property to the
purchaser.

Advise Fred whether he has any claim against Agnes for her inability to convey the
property to him, and whether Agnes has any defence which also allows her to
withhold his deposit.

Adapted from an earlier set of questions drafted by © Assistant Professor (Dr) Althaf
Marsoof (Jan, 2018).