A Case Summary of Cutter v Powell (1795)

Case name & citation: Cutter v Powell (1795) 6 Term Rep 320; 101 ER 573; [1795] EWHC KB J13

The concerned Court: Court of King’s Bench
Decided on: 9 June 1795
The bench of judges: Lord Kenyon CJ, Ashhurst J, Grose J, Lawrence J
Area of law: Entirety of contracts; the strict rule of performance; partial performance

What is the case about?

This is a significant case in English contract law. It dealt with the concept of entire contracts and the strict rule of performance in contract law. It was decided by the King’s Bench in 1795.

What happened in Cutter v Powell?

The plaintiff’s spouse, Cutter, agreed to serve as the second mate aboard Powell’s ship (“The Governor Parry”) for a journey from Jamaica to Liverpool. According to the contract, Cutter would receive 30 guineas as long as he fulfilled his duties until the ship reached Liverpool. The contract read as follows:

_____would be paid 30 guineas ‘provided he proceeds, continues and does his duty as second mate … to the port of Liverpool’.

The voyage began on August 2nd and concluded on October 9th, but unfortunately, Cutter passed away on September 20th, seven weeks into the voyage, constituting about 75% of the journey. Despite this, when the plaintiff requested a portion of her late husband’s wages, Powell refused. As a result, the plaintiff initiated legal action to recover a fair share of the wages.

Judgment (Cutter v Powell)

The court held that since the contract was considered “entire,” the plaintiff’s claim was not valid. It was determined that Cutter’s widow could not claim any compensation for the work he had completed prior to his passing. According to the court, Cutter was obligated to fulfill the entire voyage before becoming eligible for payment.

The strict rule of performance

This case was based on the strict rule of performance.

Typically, a party is relieved of their contractual obligations only when they have fully completed their part of the agreement, adhering precisely to the contract terms. Partial performance is usually deemed inadequate and could lead to the party being regarded as if they hadn’t fulfilled any obligations at all.

The potential injustice that can arise

In some contracts known as “entire,” one party’s entitlement to payment hinges on their full completion of contractual duties. This case demonstrates the consequences of failing to fulfill such a contract. It also highlights the potential for injustice, as Cutter’s death, an event beyond his control, can hardly be considered a default on his part.

Comment

This old case is often used to highlight the legal requirement for full performance before one can pursue legal action regarding an entire contract. While this principle remains relevant, contemporary legal standards might lead to a different ruling today. Cutter’s widow could now potentially argue that her husband’s premature death rendered the contract frustrated. Consequently, she could seek compensation for the significant value her husband provided to his employer before his passing under section 1(3) of the Law Reform (Frustrated Contracts) Act 1943.

Considering the harshness of the strict rule of performance, the judges have, over time, developed some exceptions when the rule does not operate e.g. divisible contracts, acceptance of part-performance, substantial performance, prevention of performance, etc. (in cases like Hoenig v Isaacs [1952], Bolton v Mahadeva [1972])

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A Quick Summary of Dakin v Lee [1916]

Dakin v Lee [1916] is a contract law case that dealt with the issue of disputed repairs to a house. Given below are the case details:

Case name & citation: H Dakin & Co Ltd v Lee [1916] 1 KB 566
Jurisdiction: Court of Appeal of England and Wales
Year of the case: 1916
Area of law: Substantial performance; discharge by performance

Facts of the case

The contract in Dakin v Lee was for the repair of a house. The work was not done according to the specifications outlined in the contract. For example, the concrete underpinning was shallower than what was contracted, the columns supporting a bay window were of incorrect dimensions, and there were issues with improper installation of joists over the bay window.

Therefore, the defendant refused to make payment to the contractor.

Issue

Was the contractor entitled to recover money for the work done?

Judgment of the Court in Dakin v Lee

The official referee who examined the case determined that the plaintiff had failed to perform the contract and hence had no right to claim payment for the work.

However, the Court of Appeal highlighted a distinction between failing to complete a contract and completing it poorly. In this case, while the work was executed poorly, it was still deemed to be performed. That is, the contract had been completed, albeit inadequately. Thus, it was held that the plaintiff could recover payment for the work done, less deductions for the fact that it did not adhere to the contract requirements. He was allowed to recover the contract price minus the cost of fixing the defects.

The doctrine of substantial performance

This case rests on the principle of substantial performance. According to it, where the obligations under a contract have been performed to a substantial degree, even if there are minor deficiencies in the work, the party concerned may still be entitled to recover payment (with deductions to cover the cost of those deficiencies). However, this won’t apply when the deviations are significant enough to undermine the very purpose of the contract. Hence, how the doctrine of substantial performance is applied can vary based on jurisdiction and the details of individual cases.

Quotes from the case (Dakin v Lee)

The statement of the judges was as under:

“Where a builder has supplied work and labour for the creation or repair of a house under a lump sum contract, but has departed from the terms of the contract, he is entitled to recover for his services, unless: (1) the work that he has done has been of no benefit to the owner; (2) the work he has done is entirely different from the work which he has contracted to do; or (3) he has abandoned the work and left it unfinished.”

Note:

You might also want to refer to another similar case named Hoenig v Isaacs [1952].

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Hoenig v Isaacs [1952]: A Case Summary

Hoenig v Isaacs [1952] is a contract law case that covers the concept of substantial performance. On completion of some decoration work at a flat, the owner refuses to pay the outstanding balance to the contractor because he is unsatisfied with some furnishings. Can he deny payment or not?

Given below are the case facts and decision:

Case name & citation:	Hoenig v Isaacs [1952] EWCA Civ 6; [1952] 2 All ER 176
Jurisdiction:	England and Wales
Decided on:	13 February 1952
The bench of judges:	Somervell, Denning, Romer LJJ
Area of law:	Substantial performance; breach of contract

Facts of the case (Hoenig v Isaacs)

In the given case, the defendant hired the plaintiff to redecorate and furnish a flat. The total contract price was fixed at £750 and payment was to be made in installments and balance on final completion. On completion, the defendant was not satisfied with some of the furnishings, especially with the bookcase and wardrobe. There were defects in the work done to redecorate the flat and the cost of correcting these defects was estimated to be £55.

Therefore, the defendant refused to make payment for the outstanding balance (which was £350 at the time of completion).

The key issue here

The legal issue, in this case, was whether the plaintiff was entitled to payment despite there being defects in performance.

Further, was the performance of the entire contract a condition precedent to payment?

Judgment of the Court in Hoenig v Isaacs

The Court determined that there was substantial performance of the contract, i.e., while there were some defects, it did not fundamentally breach the contract. Hence, the plaintiff was entitled to recover the contract price less the cost of repairs needed to rectify the defects. The reduction was for £55.

In view of the instant case of a contract for work and labour, the Court found that the entire performance of the work under the contract was not a condition precedent to payment. Instead, it was viewed as an innominate term. This means that minor flaws or deviations from the contract’s specifications would not automatically entitle the employer to withhold payment. Only breaches that were deemed to “go to the root of the contract” would entitle the employer to repudiate the contract and withhold payment.

Thus, the defendant was obligated to pay the contract price, after making deductions for defects in the completed work.

Substantial performance under contract law

Substantial performance is a legal principle in contract law that permits a party to recover the contract price even if there are small flaws or departures from the original terms, as long as the contract’s principal objective has been met. However, the injured party may still seek compensation for the cost of correcting any faults or issues that arise as a result of the inadequate or incorrect performance.

Sometimes the practicality of situations has to be taken into account where it might be unfeasible to demand a strict and absolute completion. A minor compromise is accepted in order to see a contract fulfilled. Thus, the principle of substantial performance is based on the idea that when there are minor deviations from the terms of a contract, the aggrieved party cannot claim to be discharged or walk away from their own obligations, but instead must rely on an action for damages for breach (which is usually the cost of repairs).

The origin of this concept can be traced back to the case of Boone v Eyre (1777), which involved the sale of a plantation along with a group of slaves. Lord Mansfield CJ indicated that the seller’s inability to prove ownership of every single slave specified in the contract would not preclude him from recovering payment from the buyer under the terms of the agreement.

Applying this principle to Hoenig v Isaacs [1952], it can be seen that despite the defects in the work, the Court found that the plaintiff was entitled to recover the contract price minus the cost of repairs. It was recognized that the defects were not substantial enough to invalidate the entire contract.

Note:

This case can be distinguished from Bolton v Mahadeva [1972], where the principle of substantial performance could not be applied. You may read the case at this link.

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A Summary of Bolton v Mahadeva [1972]

The case of Bolton v Mahadeva [1972] is concerned with the concept of “substantial performance” in contract law. It says that completing the main obligations of a contract and achieving substantial performance is essential to be entitled to payment.

Case name & citation:	Bolton v Mahadeva [1972] 2 All ER 1322; [1972] 1 WLR 1009
Court and jurisdiction:	Court of Appeal (Civil Division), England and Wales
Decided on:	13 April 1972
Area of law:	Discharge by performance; substantial performance

Facts of the case (Bolton v Mahadeva)

The claimant had contracted to install a hot water and central heating system in the defendant’s residence for a price of £560. However, there were many defects in the system’s installation. There were issues like fumes affecting the air in the living room, and deficiencies in maintaining the proper level of warmth in the house (the house was on average 10% less warm than it should have been). Overall, the cost to make rectifications was £174.50.

Issue

Whether the installer should be allowed to recover payment?

Judgment of the Court in Bolton v Mahadeva

Initially, at the first instance, the judge decided that the claimant was entitled to the agreed-upon price of £560, but that £174.50 should be deducted from the contract price due to the deficiencies that needed rectification. The defendant filed an appeal.

To this, the Court of Appeal concluded that there had not been a “substantial performance” of the contract. This means that the errors and deficiencies in the installation were serious enough to undermine the purpose of the contract and preclude the claimant from collecting payment. As a result, the claimant was not entitled to recover any money, and the defendant’s appeal was successful.

Despite the fact that the entire heating system had been installed, it failed to serve its primary purpose of heating the house effectively, and hence the installer was not permitted to recover.

Governing rule behind the decision

Substantial performance refers to a circumstance in which a party to a contract has fulfilled the main obligations under the contract, even if there are some minor flaws or deficiencies in its performance. In other words, the rule of substantial performance holds that the contract may be enforced where the performance is “substantial” and the amount payable corresponds to the price of the contract minus the cost of the deficiencies.

However, in case there are significant deficiencies in the performance of the contract that prevents the very purpose of the contract from being achieved, then the party responsible might not receive payment. It may not constitute “substantial performance.”

Nevertheless, it is important to note that contract law can be complex and can vary depending on jurisdiction and specific circumstances. Thus, taking advice from a qualified legal professional is recommended if one is dealing with such issues.

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