A contract is an agreement that is enforceable in the court of law and has a binding effect upon the parties to the contract. The other essential elements of a contract are an offer; acceptance; consideration, legal capacity; certainty and legal intention of the parties to be legally bound by the contract. The parties to a contract are under statutory obligation to perform their respective contractual obligations. When either party to the contract fails to perform his or her part of the contractual obligation, such party is said to have committed a breach of the contract.
The issue arising in the given scenario is related to the performance and breach of the contract between Anthony and Emma. A contract may be discharged in various ways such as agreement performance frustration or breach. The most common way of discharging a contract is to discharge the parties to the contract of their obligations based on their performance of their respective contractual obligations.
In Re Moore v Landauer [1921] it was observed that the general rule is that the parties to a contract are required to perform in accordance with all the terms of the contract for discharging their respective obligations. However, this rule was modified in Cutter v Powell [1795] where it was held that a contract may be either an entire contract or divisible contract. An entire contract refers to an agreement where a complete performance by one of the parties to the contract is treated as a condition precedent to contractual liability on part of the other party to the contract.
Further, where either party to the contract promises the other party to the contract of full performance of the contractual obligations, but the other party only receives the benefit of partial performance of the promise, such party may either accept or reject the partial performance. In Christy v Row [1808], it was held that if the promisee accepts the partial performance then the promisee is legally obliged to pay reasonable price for the benefits received from such partial performance.
Under the Common law, time is regarded as the essence of any contract; hence, if any party fails to perform the contract within the stipulated time, the contract cannot be enforced against the other party to the contract. However, this common law rule was modified which stated that in case time is not the essences the aggrieved person may claim damages but cannot terminate the contract provided it is expressly mentioned in the contract that time is the essence of the contract.
If either party to the contract fails to perform his/her contractual, obligation or fails to perform in accordance with the terms o the contract, such person is said to have committed breach of the contract. Under such circumstances, the aggrieved party may discharge the contract. The innocent party is entitled to terminate the contract and sue for damages against the breaching party without waiting until the date fixed for performance of the contract before taking legal action against the breaching party. In Hochster v De La Tour [1853], it was held that if the aggrieved party does not indicate that he discharges the contract, the contract shall remain open for the risk of and benefit of both parties.
Conclusion
In the given scenario, Anthony enters into a contract with Emma to construct a new luxury apartment complex. The terms of the contract included that Emma shall be entitled to half of the contract price after completion of the walls, floors, roof, electrics and plumbing to all the units in the apartment complex and remaining amount shall be paid after the architect certifies that the project is completed in full and final. Further, the contract also includes that at the direction of Anthony, Emma shall terminate the employment of any sub-contractor hired by Emma if Anthony is not satisfied with the work of the sub contractor or if the sub-contractor exhibits gross misconduct. Furthermore, time was the essence of the contract.
However, some of Emma’s staff went on strike due to which Emma employed her brother in law Bruce as the electrician of the project despite being aware of the fact that Bruce is a habitual drunkard and often returns back to the work site drunk. When Anthony noticed the same, they engaged into a brawl and Bruce punched him. Further, Anthony found that the electric work was not appropriate and the consultant stated that the expenses to be incurred in order to rectify the faulty electrical work would amount to $200,000. Anthony informs Emma about the problems with the electric work and asks her to terminate Bruce and rectify the electric work.
However, Emma continues to work on the construction without even rectifying the electrical fault and refuses to terminate Bruce. Due to labor shortage, Emma failed to complete the construction work and the electrical work was still not rectified. Consequently, Anthony terminates the contract on the stipulated date on the grounds of faulty work and failure to comply with the terms of the contract.
Here, Anthony is under statutory obligation to make payments to Emma in the manner stipulated in the contract for the completion of the contract. Emma is under statutory obligation that she would complete the construction within the stipulated time and in accordance with the terms of the contract. Therefore, the contract binds both the parties and they are legally obligated to perform their respective part of the contractual obligations.
As mentioned earlier, time is considered an essence of a contract. Common Law rule states that any person who fails to perform the contract within the stipulated time, the contract shall not be enforced against the other party. Section 41 of the Law of Property Act 1925 modified this rules and stated that if time is not the essence of the contract the aggrieved person shall claim damages but cannot terminate the contract. This rule is subject to the exception that in case a contract explicitly mentions that time is of essence of the contract, then if the contract os not completed within the stipulated time, the aggrieved person may terminate the contract. In the given scenario, it was specifically mentioned in the contract, that time is an essence in the contract and that the construction work must be finished within 12th of December. However, Emma could not finish the work within the stipulated time and time being the essence of the contract; Anthony is entitled to the right to terminate the contract.
Emma has also committed a breach of the contract as she failed to perform her contractual obligation in accordance with the terms of the contract. As per the terms of the contract, she was required to perform the roofs, electric, wall, floor and plumbing accordingly but the electric work was faulty and she did not rectify the electric faults. Further, the terms of the contract stated that the main contractor may at the direction of the developer, terminate any sub-contractor if the developer is not satisfied with his work or conduct. Nevertheless, Emma did not terminate Bruce even on the request of Anthony, as he was dissatisfied with his work and conduct.
Anthony has discharged the contract by discharging Emma of her contractual obligations based on the performance of her part of the contract. As held in Christy v Row, if Anthony accepts the partial performance of the promise made by Emma, he would be legally obligated to make reasonable price for the benefit received by him. On 16 November, when Anthony insects the walls , floor , roof electrics and plumbing he found defects in the electric works and was not satisfied with Bruce’s work and conduct.
However, he did not discharge the contract and instead merely requested Emma to terminate Bruce. Even when she did not terminate Bruce, Anthony did not continued with the contract, which implies that he accepted the partial performance of Emma and waived the right to discharge the contract. As held in Hochster v De La Tour if the innocent party does not indicate to discharge the contract, the contract shall remain open for benefits or risks for bothe the parties.
Further, Anthony already paid a sum of $200,000 to Emma after site clearance and the consultant said that the expenses that must be incurred in order to rectify the electrical fault would amount to $200000. In addition, due to shortage of labor, Emma could not complete the construction as a result of which the work was pending and the cost of the remaining work would amount to $ 150,000. Furthermore, since Emma did not rectify the electric work and neither completed the construction work, which amounts to $350,000 (200000 + 150000) she would only be entitled to the sum of $1150000 (1500000-3500000) from the total Contract price amount.
References
Adriaanse, Mr John. Construction contract law. Palgrave Macmillan, 2016.
Andrews, Neil. Contract law. Cambridge University Press, 2015.
Bailey, Julian. Construction Law. Crc Press, 2014.
Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer. Bloomsbury Publishing, 2016.
Christy v Row [1808] 1 Taunt 300
Cutter v Powell [1795] 6 Term Rep 320
Furmston, Michael Philip. Cheshire, Fifoot, and Furmston’s Law of Contract. Oxford university press, 2017.
Hochster v De La Tour [1853] 2 E&B 678
McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
Miller, Roger LeRoy. Business Law Today, Standard: Text & Summarized Cases. Nelson Education, 2015.
Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
Re Moore v Landauer [1921] 2 KB 519
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