Performance, Breach, and Discharge
Discharge of obligations
A contract ends by performance, agreement, frustration, or breach. Performance must generally be exact and complete (the entire obligations rule), though exceptions exist for divisible contracts, substantial performance, and acceptance of part performance. Frustration discharges both parties where an unforeseen event makes performance impossible, illegal, or radically different, without fault of either party.
Breach
Breach may be actual (failure to perform) or anticipatory (clear refusal before performance is due). The innocent party may affirm the contract and claim damages, or terminate for repudiatory breach (breach of a condition or a serious intermediate term) and claim damages. Termination discharges future obligations but not accrued rights.
Traps to watch
- Substantial performance: a small shortfall may still allow the contract price, minus the cost of remedying the defect, but only where the breach is not fundamental.
- Frustration is narrow: mere hardship, increased cost, or a change in profitability does not frustrate a contract.
- Anticipatory breach: the innocent party can sue immediately or wait; waiting risks the contract being overtaken by events.
- Entire obligations: part performance generally earns nothing unless the contract is divisible or the other party accepts it.
Rule of thumb
Ask: has performance been completed exactly, and if not, how serious is the failure? Worked example: a builder completes 95% of a house and the defects are minor; the owner may owe the price minus repair costs under substantial performance, but if the work is fundamentally incomplete, the builder may recover nothing.