LAWS6991 Chap.9 Performance, Termination and Frustration
Performance, Termination and Frustration
This chapter covers how contracts end. Exact performance is the base rule, entire and divisible obligations are distinguished, and Hoenig v Isaacs and Bolton v Mahadeva test substantial performance. Termination may follow breach of a condition, serious breach of an intermediate term, delay made essential by a notice to perform as in Louinder v Leis, or repudiation under Universal Cargo and Laurinda.
The innocent party must elect, with the risks shown in Bowes v Chaleyer. Frustration under Davis Contractors and Codelfa discharges automatically, with consequences adjusted by the Frustrated Contracts Act 1978 (NSW).
What this chapter covers
- 01
Exact and substantial performance
- 02
Entire and divisible obligations
- 03
Time stipulations and section 13
- 04
Notice to perform
- 05
Repudiation and anticipatory breach
- 06
Election to terminate or affirm
- 07
Test for frustration
- 08
Consequences of frustration
Worked example · free
A notice to perform with too short a deadline
- 1Time is not essential, and section 13 of the Conveyancing Act 1919 (NSW) treats time stipulations as not of the essence unless the parties agree otherwise.
- 1A non-essential time term can be made essential by a valid notice to perform: a reasonable time, a statement that termination may follow, and a giver ready, willing and able to perform.
- 1Louinder v Leis held that breach of a non-essential term justifies a notice to perform that term, but generally not a notice to complete the whole contract.
- 1The vendor's notice demanded completion rather than the form, and 7 days may also be unreasonable, so the purported termination is likely invalid and may itself be a repudiation.
Key terms
- Substantial performance
- Performance close enough to the contract that the performer can recover the price less the cost of defects.
- Entire obligation
- An obligation that must be completely performed before payment becomes due.
- Notice to perform
- A notice that fixes a reasonable time for performance of a non-essential term and warns of termination.
- Anticipatory breach
- Words or conduct showing that a party will not perform when performance falls due.
- Affirmation
- An election by the innocent party to keep the contract on foot despite a right to terminate.
- Frustrating event
- A supervening event, not caused by either party, that makes performance radically different.
Performance, Termination and Frustration FAQ
Does a builder with minor defects get paid?
Usually yes, if the work is substantially performed. Denning LJ in Hoenig v Isaacs said courts lean against denying payment for some defects; Bolton v Mahadeva shows the limit where the work was ineffective for its purpose and costly to fix.
Is time of the essence in New South Wales?
Only if the parties make it so or the contract's nature requires it. Section 13 of the Conveyancing Act 1919 (NSW) adopts the equitable rule that time stipulations are not essential, although mercantile cases like Bunge v Tradax treat some time terms as conditions.
What counts as repudiation?
Conduct showing unwillingness or inability to perform according to the contract. Devlin J in Universal Cargo separated renunciation from inability, and Laurinda shows that unfulfilled assurances and unjustified delays can together amount to repudiation by conduct.
Does a contract end automatically on repudiation?
No. The innocent party must elect to terminate or affirm, and must communicate an unequivocal termination. If it affirms, as Bowes v Chaleyer shows, it remains bound and gives the other side the benefit of later events.
What is the test for frustration?
Lord Radcliffe's test, adopted in Codelfa: without either party's default, performance has become radically different from what was undertaken. Mason J framed it as a mistaken common assumption essential to performance for which neither party took responsibility.
What happens to money paid before frustration?
At common law the loss lies where it falls unless consideration has wholly failed, the issue in Fibrosa. The Frustrated Contracts Act 1978 (NSW) replaces that with fixed rules adjusting payments so that loss is shared.
Exam move
Revise this chapter around one decision path: was the contract performed, was there a breach, did that breach or other conduct give a right to terminate, did the innocent party elect properly, and if no one was at fault, was the contract frustrated? Keep a comparison table of the five routes to termination with their triggers and cases.
Practise notice to perform problems carefully, because a single defect in the notice changes the answer. Ask Sia to give you termination scenarios and check whether you chose the right route.
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