140 Chapter 5Discharge of contracts and remedies for breach
Discharge by agreement
Having made a contract, the parties are free to agree to abandon it or to vary it. However,
an agreement to do either of these things must amount to another contract. All the require-
ments of a new contract are therefore necessary. There must be an offer, an acceptance, an
intention to create legal relations and consideration moving both ways. As the parties must
agree to alter their legal position, there is usually no difficulty in finding the offer and
acceptance or an intention to create legal relations. Generally, any problem which arises is
caused by the difficulty of showing that consideration has moved from both of the parties.
The following extended example shows the possibilities.Example
John has agreed to service Jim’s boiler for £1,000. Several possibilities must be considered.
(i) If both of the parties agree to call the contract off before there has been any performance
of it, the contract will be discharged. John has given consideration to Jim by discharg-
ing him from the obligation to pay the money. Jim has given consideration to John by
discharging him from the obligation to service the boiler.
(ii) If John does some of the work, and Jim agrees to pay him a proportion of the money for
the work he has done, then the contract is discharged. Jim’s consideration is letting John
off with finishing the job. John’s consideration is letting Jim off with paying the rest of
the money.
(iii) If John does some of the work and agrees that Jim need not pay him for this work done,
then the contract is discharged. John lets Jim off with paying the money. Jim lets John
off with finishing the work.
(iv) If John finishes the whole job but agrees that Jim need not pay anything, the contract is
not discharged. Jim has not provided any consideration for being let off the duty to pay
the price.
(v) If John finishes the work and agrees to accept a bicycle instead of the contract price, the
contract is discharged. The court will not enquire whether or not the bicycle is worth
£1,000. In Chapter 2 we saw that consideration must be sufficient (worth something) but
need not be adequate (worth the same amount as the other party’s consideration).
(vi) If John finishes the work but agrees to accept 90 per cent of the contract price, the
contract is not discharged. In Chapter 2 we saw that (subject to promissory estoppel) a
lesser sum of money cannot be consideration for a greater sum owed.A party may waive (give up) contractual rights by indicating to the other party that the
rights will not be insisted upon. If no consideration was given in return for the waiver, the
contract is not discharged. However, the rights which were waived can be reintroduced
only by giving reasonable notice of this. Until this is done, a party cannot be in breach of
contract for failure to perform a waived right.
For example, in Charles Rickards Ltdv Oppenheim (1950)the claimant agreed to sell
the defendant a specially constructed car. The contract provided that the car was to be
delivered on 20 March. The claimant did not deliver on time and the defendant kept asking
him for delivery. The defendant then said that if the car was not delivered by 25 July he
would refuse to accept delivery. The claimant tried to deliver the car in October, but
the defendant refused to accept delivery. The Court of Appeal held that the defendant was