3.4 - Discharge of contract
This lesson teaches how contractual obligations come to an end in AQA A-level Law Paper 3A: by performance, by breach, and by frustration. It builds the habit AQA rewards: identify the route to discharge, state the rule with authority, apply the facts to the threshold, and reach a careful conclusion about rights and remedies.
Discharge Map
Discharge is a neutral word for how contractual obligations end.
Discharge
The ending of the parties' primary contractual obligations, by performance, by breach (actual or anticipatory) or by frustration.
It may happen because both sides have done what they promised, because one side has committed a serious breach, or because an external event has frustrated the contract.
Start with the timing and cause of the problem.
| Route | Core question | Legal consequence |
|---|---|---|
| Performance | Has the party done what the contract required, or enough for an exception to complete performance? | The performed obligation is discharged. The other party's obligation to pay or perform may remain. |
| Actual breach | Has performance become due and not been given, or been given defectively? | The innocent party has a claim for breach. Termination is available only if the breach is repudiatory or fundamental. |
| Anticipatory breach | Before performance is due, has a party clearly refused or disabled performance? | The innocent party may elect either to accept the repudiation and sue, or affirm the contract and keep it alive. |
| Frustration | Has a supervening event, without fault, made performance impossible, illegal, or radically different? | The contract is automatically discharged for the future, with financial adjustment under the Law Reform (Frustrated Contracts) Act 1943. |
The common mistake is to treat every unhappy ending as the same legal issue. A party choosing not to perform because the contract has become unattractive is usually breach, not frustration. A contract ending for repudiatory breach is not rescission. Part performance is not automatically enough to discharge the contract. These distinctions control both AO1 explanation and AO2 application.
Performance
Performance discharges a contract when the promised obligations have been carried out. The starting point is complete performance: a party who promises a whole job normally must complete the whole job before claiming the contract price. If performance is complete, there is no breach on that obligation; if the paying party then refuses to pay, the paying party may be in actual breach.
The law recognises limited qualifications, but they must be used carefully.
| Qualification | Operational rule | Threshold and consequence |
|---|---|---|
| Substantial performance | A party who has done substantially all that was promised may claim the contract price, less a deduction for defects. | The defects must be minor in relation to the whole contract. In Hoenig v Isaacs, substantial performance allowed recovery subject to the cost of correcting defects. |
| Divisible obligations | If the contract divides performance into separate stages or instalments, a completed stage may trigger payment for that stage. | Look for agreed stage payments, delivery lots, or separable units. Do not invent divisibility merely because some work has been done. |
| Accepted part performance or agreement | Parties may agree to end or vary the contract, or the receiving party may freely accept partial performance so that a reasonable sum may be payable. | This depends on acceptance or agreement. A performer cannot simply impose "part performance" as discharge. |
| Prevention by the other party | If one party prevents completion, the law may prevent that party from relying on non-completion in the ordinary way. | Identify who caused the failure. A party should not benefit from obstructing the other's performance. |
The AQA examiner reports warn against loose use of substantial performance. It is not a label for "some work has happened". You must ask whether the essential obligation has been substantially completed and whether any defects are genuinely minor. If a garden, artwork, delivery, or service fails in its central purpose, substantial performance is unlikely.
Actual Breach
Actual breach occurs when performance is due and a party does not perform, performs late, performs defectively, or refuses at the time for performance. It is "actual" because the time for performance has arrived or the breach has already happened. It is different from anticipatory breach, where the refusal comes before performance is due.
Use this sequence:
- Identify the obligation: what term or duty had to be performed?
- Identify the failure: non-performance, late performance, defective performance, or refusal at the due date.
- Classify seriousness: is the broken obligation a condition, a warranty, or an innominate term whose breach has serious consequences?
- State the consequence: damages for breach, and termination only if the breach is repudiatory or fundamental.
The seriousness stage matters because not every breach discharges the contract. Breach of a warranty usually gives damages only. Breach of a condition, or a sufficiently serious breach of an innominate term, may allow the innocent party to treat the contract as at an end and claim damages. AQA materials describe this as a fundamental or repudiatory breach.
Do not call termination for breach "rescission". Rescission is a different remedy, commonly linked to vitiating factors such as misrepresentation. In a discharge answer, say that the innocent party may treat the contract as terminated or at an end for repudiatory breach.
Anticipatory Breach
Anticipatory breach is about timing: the refusal comes before performance is due.
Anticipatory breach
Before the time for performance, a party clearly indicates that they will not perform a contractual obligation, or puts themselves in a position where they cannot perform.
The refusal must be serious enough to amount to repudiation if the threatened non-performance concerns a condition or another fundamental obligation.
Hochster v De La Tour is the key authority. It establishes that the innocent party does not have to wait until the performance date. If the other party repudiates in advance, the innocent party may elect immediately to accept the repudiation, treat the contract as ended, and sue for damages.
The election is the heart of the rule.
| Innocent party's election | Effect | Exam consequence |
|---|---|---|
| Accept the repudiation | The contract is discharged for the future because of breach. | The innocent party may sue immediately. Ordinary mitigation principles are engaged. |
| Affirm the contract | The contract remains alive until performance is due or another discharging event occurs. | The innocent party may continue to expect performance and may need to be ready to perform their own obligations. |
White and Carter (Councils) Ltd v McGregor supports the point that, where the innocent party affirms rather than accepts the repudiation, there may not yet be a breach to mitigate. AQA examiner reports use this to explain why a claimant who continues preparing for their own performance may recover necessary expenditure, despite knowing of the other party's advance refusal. The rule has limits: affirmation may be restricted where performance needs the wrongdoer's cooperation or where the innocent party has no legitimate interest in keeping the contract alive.
Common errors are worth clearing out. Giving advance notice is not a lawful way to cancel a binding contract. The issue is not usually that the notice period was too short. A party who refuses because they have found a better-paid opportunity is committing breach, not relying on frustration. Finally, the remedy is not automatically specific performance; contracts for personal services are very unlikely to be specifically enforced, so damages are usually central.
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