First Principles of Business Law

3. Discharge of a contract by performance

3.1. The effect of performance on contractual obligations

Once created, contractual obligations bind the parties until they are 'discharged'. In the normal course of events contracts are discharged by performance.

Performance means carrying out the undertakings agreed to in the contract. If what is given or done matches the requirements contained in the terms of the contract, then the performance  discharges the contractual obligations.  If the performance does not accord with what was agreed, there is a breach of contract and the obligations remain undischarged. The non-defaulting party can then seek to enforce the contract by claiming damages or some other availale remedy.

It becomes clear then, that to work out exactly what must be done to discharge a contract by performance requires careful analysis and interpretation of the contents of the contract. The examples in this section illustrate a number of different factors that need to be kept in mind.