Revise Performance for Cambridge 9084 (3.3.1)

The traditional common law position on performance is strict and uncompromising. The general rule is that performance of a contractual obligation must be precise and exact. A contract that requires full and exact performance before any payment is due is known as an 'entire contract'. If a party to an entire contract fails to perform their complete obligation, they are not entitled to any payment. Performance is treated as a 'condition precedent' to the other party's obligation to pay. The classic authority is Cutter v Powell (1795), where a sailor who died part-way through a voyage was not entitled to any wages, as he had not completed the entire journey. The strictness of this rule is also shown in Re Moore & Co and Landauer & Co (1921), where a contract for tinned fruit to be packed in cases of 30 was breached because some cases contained only 24 tins, even though the total quantity was correct. The buyer was entitled to reject the entire consignment. This rule can lead to harsh outcomes, so several exceptions have been developed.

The most significant exception to the strict rule is the doctrine of substantial performance. This equitable doctrine allows a party who has performed the contract, but with minor defects, to claim the contract price, subject to a deduction for the cost of rectifying the defects. The key question is whether the performance received is substantially what was bargained for. In Hoenig v Isaacs (1952), a decorator was owed £750 but there were minor defects costing £55 to fix. The court held performance was substantial, and he was entitled to £750 minus £55. This is contrasted with Bolton v Mahadeva (1972), where a central heating system installation was so defective it did not work. The cost of repair was a significant proportion of the contract price, so performance was not deemed substantial, and the contractor could claim nothing.

Another exception applies where the contract is not 'entire' but is 'divisible' or 'severable'. If the parties have structured their contract so that obligations are divided into separate stages or instalments, with payment due upon completion of each part, then the rule in Cutter v Powell does not apply to the whole contract. Instead, each part is treated as a separate mini-contract. For example, a building contract with stage payments or a contract for delivery of goods by instalments may be severable. In Ritchie v Atkinson (1808), a ship owner agreed to carry cargo at a certain rate per ton. He only carried part of the agreed cargo. The court held the contract was divisible, and he was entitled to payment for the tons he did carry, though he was liable for damages for the shortfall. If one part is performed correctly, the party is entitled to payment for that part, even if subsequent parts are defective or not completed.

Beyond substantial performance and divisible contracts, other principles can modify the strict rule of complete performance.

Prevention of Performance If one party is prevented from carrying out their contractual obligations by the fault of the other party, the strict rule does not apply. The party who was prevented from performing can claim damages for breach of contract. Alternatively, they can claim a reasonable amount for the work they have already done on a quantum meruit basis ('as much as it is worth'). In Planche v Colburn (1831), a writer was commissioned to write a book. After he had done significant research and writing, the publisher abandoned the project. The writer was entitled to recover a reasonable sum for the work he had completed.

Tender of Performance Tender of performance means to offer to perform one's obligations under the contract. If a party is ready, willing, and able to perform, and offers to do so, but the other party refuses to accept the performance, the party who tendered performance is discharged from their obligations and can sue for breach of contract. For example, in Startup v Macdonald (1843), a seller tendered delivery of goods at 8:30 pm on the last day for delivery. The buyer refused to accept them because of the late hour. The court held that this was a valid tender of performance, and the seller was entitled to damages for non-acceptance.

The time for performance can be a critical aspect of a contract. If the contract expressly states that 'time is of the essence', or it can be implied from the nature of the contract (e.g., for perishable goods or in commercial contracts), then the specified time is treated as a condition. Any delay constitutes a repudiatory breach, allowing the innocent party to terminate the contract and claim damages. The strictness of this rule was famously demonstrated in Union Eagle Ltd v Golden Achievement Ltd (1997), where a 10-minute delay in tendering the purchase price for a property was held to be a repudiatory breach, allowing the seller to terminate and keep the deposit. If time is not initially of the essence, it can be made so by the innocent party serving a notice on the defaulting party, giving them a new, reasonable deadline to perform, as seen in Charles Rickards Ltd v Oppenhaim (1950). If time is not of the essence, a delay is treated as a breach of warranty, entitling the innocent party to damages only, not termination.