H418/04 - Discharge by performance

Complete performance

Discharge by performance means that a party has done what the contract requires and is released from that obligation. If a shop delivers the agreed goods and the buyer pays the price, both obligations are performed. Delivery alone does not discharge the buyer's unpaid obligation.

The starting point is complete and exact performance of the promises. Read the actual terms: the required quantity, quality, place and time matter. A promise to paint three rooms is not fulfilled by painting two, however carefully. Contract liability generally follows the promise; honest effort is not automatically a defence.

In an entire contract, completing the promised whole is a condition of entitlement to the agreed payment. In Cutter v Powell (1795), a sailor was promised a lump sum if he served for the voyage to Liverpool. He died before arrival. His representative could not recover a proportion of that sum because the expressly agreed condition of payment had not been fulfilled. The case concerns the particular entire bargain, not a universal rule that workers can never receive payment for incomplete work. Modern statutory rights and the qualifications below must also be considered.

Distinguish two questions: has the obligation been fully performed, and is any payment nevertheless recoverable? Substantial or accepted partial performance can support payment without making the defective work exact performance. The recipient may still have a claim for the defect.

Tender and severable promises

The recipient cannot fairly insist on performance while preventing a proper offer of that performance. Tender is an actual offer to perform the contractual obligation, made ready and willing at the required time and place. It must match the contract: bringing 80 boxes when 100 are due is not a valid tender of all 100.

Where proper performance other than payment is tendered and wrongly refused, the offering party is generally excused from further attempts to perform that obligation and can pursue the appropriate contractual remedy. This does not mean every refused delivery automatically earns the price: whether a price debt has accrued depends on the contract and relevant sale rules. Refusing a tender of money does not wipe out the debt; the debtor still owes the sum, although a valid tender can affect interest and costs. A message saying “I could deliver next week” is not tender of goods due today.

A severable contract divides performance into separate units with payment due for each completed unit. A promise to clean one office every Friday for £50 per completed visit can earn payment for the first three visits even if a later visit is missed. The missed visit remains a possible breach; severability does not excuse it. Payment instalments alone do not necessarily make a contract severable: they may merely finance one indivisible project.

The court interprets the bargain rather than mechanically counting tasks. Ritchie v Atkinson (1808), discussed in Hong Kong Fir, illustrates that incomplete carriage did not automatically defeat all freight earned; the obligation to carry the full cargo and the payment entitlement were not treated as inseparable in that way. Ask whether the promised exchange attaches to independently completed units or to the finished whole.

Substantial performance

Substantial performance applies where the promised work has essentially been completed but relatively minor defects remain. In a suitable lump-sum contract, the performer may recover the price less the reasonable cost of remedying the defects. It prevents a small deficiency from being used to avoid paying for an essentially completed bargain.

In Hoenig v Isaacs (1952), decoration and furnishing work was agreed for £750. Defects could be corrected for about £56. The Court of Appeal held that there had been substantial performance: the contractor could recover the outstanding price subject to a deduction for defects. The holding depends on the work being substantially performed. It does not turn all abandoned jobs into payable contracts.

Assess the nature and extent of defects, their effect on the main purpose, and the cost and practicality of correction. There is no automatic percentage threshold. A completed shelving installation with two easily adjusted doors may qualify. A ventilation system which looks finished but cannot safely ventilate the room may fail the central purpose, even if most physical components have been installed. An express obligation making a particular result essential also matters.