UNIT 7

DISCHARGE OF CONTRACT BY AGREEMENT

A contract can be discharged by mutual agreement between the parties involved. This discharge occurs when both parties decide to release each other from their contractual obligations. The principles governing the discharge of contract by agreement are embedded in common law and judicial precedents. However, specific statutes like the Nigerian Contract Act may provide supplementary guidelines. This can be done through various methods, such as rescission, novation, or accord and satisfaction.

1. Recission: Rescission refers to the cancellation of a contract by mutual consent. When a contract is rescinded, both parties are restored to their original positions as if the contract had never been made. This method is applicable when both parties agree that the contract should be nullified due to reasons like mutual mistake or misrepresentation. See the case of Alhaji Atiku Abubakar v. Musdafa & Anor. (2013) LPELR-21801(SC) where the Supreme Court of Nigeria held that a contract can be rescinded by mutual consent when both parties agree to release each other from their obligations.
2. Novation: Novation involves substituting a new contract in place of an old one, with the consent of all parties involved. This usually happens when a new party is introduced to replace one of the original parties, and the old contract is extinguished. See the case of Chukwumah v. Shell Petroleum (1993) 4 NWLR (Pt. 289) 512 where the court recognized novation as a valid method of discharging an original contract, where a new contract takes the place of the old one with mutual agreement.
3. Accord and satisfaction: Accord and satisfaction occur when a party agrees to accept a performance different from what was originally agreed upon, thereby discharging the original obligation. This method requires an agreement (accord) and the execution of the substituted performance (satisfaction). See the case of Okonkwo & Sons v. Niger Dredging & Construction Co. Ltd. (2007) LPELR-2421(SC) where the court held that accord and satisfaction effectively discharge the original contract when a new agreement is reached and performed.

DISCHARGE OF CONTRACT BY PERFORMANCE

1. Complete performance: this is where a contract is discharged by performance when all parties fulfill their contractual obligations as agreed. Complete performance means that all terms of the contract have been fully executed. See the case of Nigerian Bank for Commerce and Industry v. Integrated Gas Nigeria Ltd. (2005) LPELR-2003(SC) where the court held that a contract is discharged when both parties have performed their respective obligations completely.
2. Substantial performance: Substantial performance occurs when a party has performed enough of the contract to warrant payment, although there may be minor breaches. The non-breaching party is entitled to damages for the minor breaches but cannot refuse to pay for the substantial performance. See the case of Obikoya & Sons Ltd. v. Governor of Lagos State (1987) 1 NWLR (Pt. 50) 385 where the court recognized substantial performance as a valid discharge of contractual obligations, allowing the performing party to claim payment less damages for minor breaches.
3. Divisible contracts: In divisible contracts, performance of each part can be separately enforced. A party may discharge their obligation by performing part of the contract, provided it is divisible. See the case of Ude v. Nwara (1993) 2 NWLR (Pt. 278) 638 where the Supreme Court of Nigeria acknowledged that divisible contracts allow for part performance and separate enforcement of each segment.

DISCHARGE OF CONTRACT BY FRUSTRATION

Frustration occurs when unforeseen events render contractual obligations impossible to perform or radically change the nature of the performance. These events must be beyond the control of the parties and not due to any fault of theirs. The doctrine of frustration is primarily governed by common law principles and judicial interpretations. However, certain statutes, such as the Nigerian Contract Act, may include provisions regarding frustration. When a contract is frustrated, it is automatically terminated at the point of the frustrating event. Both parties are discharged from their future obligations, and any money paid before the event can be recovered. See the case of Nwaolisah v. Nwabufo (2011) LPELR-2115(SC) where the court held that frustration applies when an unforeseen event renders the performance of the contract impossible or fundamentally different and the case of G. N. Nwafor v. Anambra State Government (2006) 6 NWLR (Pt. 976) 44 where the court affirmed that frustration results in the automatic termination of the contract, discharging both parties from further performance. The elements of frustration includes the following;

1. Unforeseen event: this is where the event must be unexpected and could not have been anticipated by the parties at the time the contract was formed.
2. Impossibility or radical change: this is where the event must make the performance of the contract impossible or radically different from what was agreed upon.
3. No fault of the parties: this is where the event must not be due to the fault of either party.

DISCHARGE OF CONTRACT BY BREACH

A breach of contract occurs when one party fails to fulfill their obligations under the contract. The legal framework for addressing breaches of contract is provided by common law principles and statutory provisions, such as those found in the Nigerian Contract Act. See the case of Baba v. Nigerian Civil Aviation Training Centre (1991) 5 NWLR (Pt. 192) 388 which the court awarded damages for actual breach of contract, the case of Incar (Nig.) Ltd. v. A. I. U. Insurance Co. Ltd. (1991) 4 NWLR (Pt. 187) 553 where the court ordered specific performance as a remedy for breach of contract and the case of Olalekan v. Management Board, University of Maiduguri Teaching Hospital (1997) 7 NWLR (Pt. 512) 224 where the court granted rescission of the contract due to breach. There are several types of breaches and they include the following:

1. Actual breach: this is when a party fails to perform their obligations on the due date or performs them improperly.
2. Anticipatory breach: this is when a party indicates in advance that they will not perform their obligations when due.

REMEDIES FOR BREACH

When a contract is breached, the non-breaching party may seek various remedies, including:

1. Damages: this is the monetary compensation for losses incurred due to the breach.
2. Specific performance: this is a court order requiring the breaching party to perform their obligations as specified in the contract.
3. Rescission: this is the cancellation of the contract, with both parties restored to their original positions.

CONCLUSION

These notes provide an overview of the various ways contracts can be discharged, with relevant Nigerian cases illustrating the application of these principles.