A question that often arises is whether a contract is inheritable regarding the obligations and rights deriving from it.
The general rule is that if the conditions for the existence and validity of a contract are met, then the parties must fulfill it. The general principle is that entire contracts must be fulfilled in full.
It has even been ruled that partial fulfillment of an entire contract does not entitle the performing party to claim payment for the part of the agreement executed. In the case of Cutter vs Powell (1795) 101 ER 573, the Court rejected a claim for proportional remuneration by a sailor who died before the voyage was completed. The findings, and consequently the Court’s decision, might have been different if:
(a) the agreement was severable, or
(b) substantial performance had been rendered.
A severable contract is one that can be divided into independent parts, from each of which different obligations arise. For example, if the sailor’s contract stipulated that payment would be made in installments upon arrival at each port, even if he didn’t reach the final destination, he could potentially claim compensation for the part of the contract he fulfilled.
Substantial performance means fulfillment that achieves the main purpose of the contract with only minor deviations. For instance, if the sailor’s contract stipulated that he would dock the ship at the port of Zygi, and he died just two minutes before docking—and with minimal additional cost, the ship eventually docked—then the deceased’s estate manager might be entitled to claim the sailor’s compensation, less an amount corresponding to the unperformed portion of the work.
Release from Contract Due to Death
According to Article 37 of Cap. 149 – The Contracts Law, the occurrence of death does not release a party from performing the contract. If the debtor dies before fulfillment, the promise binds their legal representatives, unless a different intention can be inferred from the contracting parties.
In practice, most contracts contain a clause similar to the following:
“This agreement binds the parties personally, and in the event of death, the heirs, administrators, executors, and assigns of the two contracting parties are bound to fulfill it.”
Frustration of the Contract
Beyond the above, there are cases where the death of one of the contracting parties makes performance impossible. These are personal contracts. For example, a contract with a singer to perform at a concert. Upon the singer’s death, the inherently essential term of the agreement cannot be executed, through no fault of either party.
It is accepted that frustration does not exist when:
- An alternative way of performance is possible, even at greater cost, that fulfills the contract’s objective purpose.
- The contract explicitly excludes frustration.
- Frustration was caused by the fault of one party, such as by rendering themselves incapable of performing the contract through their own conduct.
Finally, in the event of frustration, the legal result is that the contract becomes void, and the parties are released from any further obligations. However, in an attempt to balance the interests of the contracting parties, Article 65 of Cap. 149 provides for compensation if a benefit has been derived. For instance, in the above example with the singer, if death occurred after receiving an advance payment, the heirs might be required to return that amount.
This article is for informational purposes only and should not be considered legal advice.
Panayiotis G. Kyprianou
Lawyer
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