Part IV Termination and Affirmation, 9 Discharge of Primary Obligations

Subject(s):

Obligations of the buyer — Obligations of the seller

This chapter examines discharge of primary obligations, considering Lord Diplock's classic analysis of the termination process. The first and most important consequence of termination is that both parties are, as a general rule, discharged from their outstanding primary obligations under the contract. This applies both to the innocent party and to the party in default. Though Lord Diplock speaks in terms of the primary obligations of both parties being discharged in so far as they are not already performed at the time of termination, this is not always the case. On the contrary, such obligations can still remain binding in so far as they have already accrued. Given that most the cases on this point concern obligations to pay money, the issue here is the extent to which either party can sue for the relevant sum as a liquidated debt despite termination having taken place. The chapter then looks at the effect of termination on ‘ancillary’ terms, most notably dispute resolution clauses and clauses excluding or limiting the liability of one or other of the parties.