untitled

138 Chapter 5Discharge of contracts and remedies for breach

Carlillv The Carbolic Smoke Ball Co (1893)the company promised to pay any person a

£100 reward if they bought a smoke ball, used it properly and caught flu. A party who makes

the offer of a unilateral contract needs to keep the promise made only if the other party fully

performs the act specified. So if Mrs Carlill had not bought the smoke ball, used it properly

and caught flu, there would have been no obligation to pay her any part of the reward.

In bilateral contracts the general rule is that if one party fails to fully perform the contract

the other party need not perform the contract at all. The following case demonstrates this

general rule.

There are four exceptions to this general rule:

(i) Divisible or severable contracts.

(ii) Substantial performance.

(iii) Acceptance of partial performance.

(iv) Prevention of performance.

Divisible contracts

Part payment must be made for partial performance if the contract is regarded as divisible

or severable. In Cutterv Powellthe wording of the contract, and the fact that Cutter was

to be paid an unusually large lump sum for completing the contract, made it plain that

Cutter’s obligation to act as ship’s mate was entire. That is to say, it was one obligation

which was either performed or not. If a contract is divisible then it will consist of a number

of separate obligations and part payment will be required for each obligation performed.

Whether or not a contract is divisible or entire depends upon what the parties intended

when they made the contract. In Ritchiev Atkinson (1808), for example, a ship’s captain

agreed to carry a cargo of hemp at £5 a ton. The captain carried only half the cargo. This

contract was divisible because the price was expressed per ton rather than as a lump sum

for carrying the whole cargo. The captain was therefore paid for the cargo he did carry (but

had to pay damages in respect of the cargo which he failed to carry). If the contract had been

entire then the captain would not have been paid anything at all.

Substantial performance

A second exception to the general rule arises where the partial performance very nearly

amounted to total performance. If the partial performance can be regarded as substantial

performance then it will have to be paid for. For example, in Hoenigv Isaacs (1952)the

contract was to decorate and furnish a flat for £750. Defects in the work would have cost

£56 to put right. The Court of Appeal held that there had been substantial performance

Cutter vPowell (1795)

Cutter had agreed to be a ship’s mate on a voyage from Jamaica to Liverpool. The contract

said that Cutter was to be paid £31.50, ‘provided he proceeds, continues and does his duty

... from hence to the port of Liverpool’. The journey took about two months and usually
ship’s mates were paid about £4 a month. Cutter died after three-quarters of the voyage
and therefore did not fully perform his contractual obligations. Cutter’s widow sued for
payment for the work Cutter had performed.
HeldThe ship’s captain had no obligation to pay anything because Cutter had not
completely performed his contractual obligations.