LWB137 Contracts B Notes.doc

8/10/2019 LWB137 Contracts B Notes.doc

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Discharge by Performance

Element 1: Definition of discharge by performance- For discharge by performance to occur, the contract must be exactly or substantially

performed, to allow for recovery of the contract price.- Partial performance does not allow for recovery of the contract price but payment

may be recovered in restitution for the work.- Failure to perform a contract according to its terms will be a breach of the contract

Element 2: Nature of Obligations

Sub element 1: Independent Obligations- On party must perform regardless of whether the other - E.g. a sale of goods contract may provide for payment on a certain day whether or

not the goods are delivered by that day.- Provided that any conditions precedent have been met, the contract price will be

payable.

Sub element 2: Dependent obligations

-One party must perform his or her obligations before the other.

- E.g. a sale of goods contract where the buyer is not required to pay for goods untilthe seller the goods and they are accepted by the buyer.

- !ntil the seller delivers the goods in accordance with the contract, the seller is notentitled to sue for the contract price of the goods.

- "f the goods are not accepted by the buyer, the seller#s only claim is for damages forbreach and not for the contract price, because the contract price is payable for theactual goods and not the promise to deliver them. Automatic Fire Sprinklers Ltd vWatson

- $ook to the performance.

Sub element 3: Dependent and oncurrent ObligationsE.g. in a sale of land contract where the purchaser pays the purchase price in exchange for,

and at the same time as, the vendor delivers title and possession of the property to thepurchaser. %ny failure to perform will generally &O' be considered of a minor nature.

Element 3: !ype of ontract

Sub element 1: Di"isible ontracts'his is a contract where the consideration and the payment thereof is apportioned or iscapable of apportionment according to the work to be done. (Steele v Tardiani)

- 'he (ourt considers) *o Each divisible part separately as if they were different agreements.o Only the obligations relating to that particular divisible part of the contract

- 'he party performing the contract is able to recover after each part of the contractnotwithstanding the whole of the contract is not completed.

Sub element 2: #ump sum contracts % contract that provides for the payment of a specific sum for the completion of specific work.

- (ourt considers)*o 'he whole of the performing party#s obligations under the contracto +hether the performance that was rendered satisfied the requirements of the

contract as a whole.- Hoenig v Isaacs followed in -ueensland in Lemura v (Coppola)

Element $ % Nature of the Obligation

Sub element 1 % Entire Obligations- 'his requires exact performance of the entire contract before the contract price can

be paid. "n the case of a divisible contract, it requires exact performance of that



particular part of the contract.- !sually occurs in contracts where the terms clearly indicate that #the consideration for

the Payment of money or for the rendering of some other counter performance isentire and divisible.# Baltic Shipping (o v illon

- Essential features are) *o (omplete performance is a condition precedent to payment of the contract

priceo 'he benefit expected by the de!endant is to result from the enoyment of

every part of the work ointly/ ando 'he consideration is neither apportioned by the contract nor capable of

apportionment.Cutter v "o#ell Facts)

- Seaman working on ship from 0amaica to $iverpool for 12 guineas on arrival providedhe worked for period of voyage died 3 weeks into 4 month voyage

- %dministratrix commenced an action for the contract price or quantum meruit5E$6)(ontract entire and therefore could not recover either

- (ourt influenced by) *o (utter required to do duty for whole voyageo $ack of prevailing customo 7ignificantly high amount of money payable under contract comparable with

the monthly wage.o 'herefore parties intended an all or nothing result

Sub element 2 % Not entire obligations'he fulfilment of every part of the contract price is not necessarily essential to payment of thecontract price even though the obligations of the parties are dependent.

Element &: Nature of Performance

Sub element 1: E'act Performance"f the contract was performed exactly the party is entitled to the contract price

Sub(element 2: Partial Performance- 6espite the fact the contract price may not be recoverable a party to the contract may

be able to seek alternative remedies.- 'he first alternative is for the party who has undertaken work or provided goods to

seek damages for the breach of the other party.o 6amages may be claimed only if the party seeking them is not themselves in

breach.- 'he second alternative is to make a claim in restitution for the return of a benefit

provided to the other part.o 'he only type of restitutionary claim relevant to this context is a claim for

quantum meriut for the value of serves provide to the other party.'he party is entitled to a quantum meruit or the choice of quantum meruit and damagesdepending who was in breach.

%pplication to 6ivisible (ontract- % party who only partially performs a severable part of the contract is not entitled to

the contract price for that part unless the other party has prevented performance orthe work has been accepted (Steele v Tardiani)$

%pplication to a $ump 7um contract- % party who partially performs a lump sum contract will not be entitled to the contract

price.- 'hey may be entitled to damages or a quantum meruit in certain circumstances. 7ee

Apple%& v '&ers and Automatic Sprinklers v Watson



Sub element 3: Substantial performance- +ill occur where the defects in the services or goods are of a minor nature. 'he court

takes into account)o 'he nature of the defect/ ando 'he cost of rectifying the defect compared to the contract price.

- +here the contract does not clearly and expressly provide that exact performance is

a condition precedent to the payment of the contract price, the court will lean againsta construction that would deprive the party any payment simply because of defects.

- "f a contract or part of a divisible contract is substantially performed the party will beentitled to the contract price less an amount for rectifying the defects in theperformance.

Hoeni v IsaacsFacts)

- P agreed to decorate and furnish 6#s flat for 892- 6 paid :22 as progress payments- +hen work was finished door of wardrobe needed replacing and too short book shelf

for 99.;<5E$6)

- %s p had substantially performed contract, he was entitled to payment less an amountfor rectification

Bolton v 'ahadevaFacts)

- P agreed to install water heater for 932- "nstalled water heater gave out fumes and didn#t work properly- P claimed payment of contract price- (ourt took into account

o 5eating system did not heat house adequatelyo =ave out fumeso (ost of rectification ;8: pounds

5E$6)P had failed to substantially perform obligations'he court took into account)

- +here nature of defect is minor and cost of rectification is ;2> or less court will allowrecovery for substantial performance 5oenig?

- +here nature of defect is minor and cost of rectification is ;2> or more court willallow recovery for substantial performance, subect to cost of rectification notexceeding a reasonable amount

- +here nature of defect is serious and cost of rectification is 11> or more court willrefuse recovery for substantial performance @olton?

- +here nature of defect is serious and cost of rectification is ;2> or less it is unlikelycontract price will be recoverable

%pplication to 6ivisible contract- 'he principle of substantial performance will apply to each part of a divisible contract

as if it were a separate contract.- 'herefore, a person who has substantially performed a part of the contract is entitled

to be paid for that part less damages for any defective performance.- 7ubstantial performance will not apply if the severable parts of the contract are

considered to be entire (Steele v Tardiani)$

%pplication to $ump sum contract- 'he court will look to the whole of the performance as compared to the whole of the

required performance under the contract.- "f the obligations are entire, the doctrine of substantial performance will not apply.

Element ): Effect of !ermination





Services- "t will be insufficient in a claim for quantum meruit by the party in breach to merely

show the services were requested.- 6espite the fact work may have been requested by the defendant, the problem will be

that the work provided will usually not match the request.

-"t will be difficult for the plaintiff to convince a court that work that does not complywith a request actually provides a benefit to the defendant except where the otherparty prevents the performance of the agreement) "lanche v Col%urn

Freely %ccepted'he concept of free acceptance means that the defendant has a choice whether to accept orreect the work and has freely decided to accept the work that does not comply with thecontract. +here the work concerns improvements to land the plaintiff will have a ver& difficulttask in proving free acceptance.

Sumpter v HedgesFacts)

- P agreed to build 4 houses and a stable for the 6 for 939

-P did part of the work amounting to 111 and received payment of part of it

- "nformed 6 he could not go on- 6 finished building using materials p left behind

5eld)- P was awarded value of materials left behind- Cefused claim of quantum meruit because in work done on land 6 does not have

much choice of free acceptance

"ncontrovertible benefit- %rises where the 6 has converted goods or services provided by the p into money in

the hands of the 6

Steele v Tardiani

Facts)- 6 employed P to cut firewood and alleged p were in breach because wood wasn#t cut

into correct lengths- 5owever 6 sold all wood

5E$6)- (ontract was divisible so p were entitled to be paid for any wood cut into correct

lengths- Entitled to recover on quantum meruit for remaining timber split



!ermination by ,rustration

'ermination by frustration will occur where subsequent to a contracts formation a change ofcircumstances beyond the control of either of the parties renders the contract impossible toperform because performance would render it a thing radically different from that *which wasundertaken by the contract. Codel!a Construction "t& Ltd v State ail Authorit& o! *SW

'here is no frustration ust because performance of a contract becomes more onerous orinconvenient or expensive. The +ugenia

Element 1: -as ,rustration Occurred.

7un element ;) 6estruction or unavailability of subect matter - 'his occurs where without the fault of either party/ the specific subect matter of the

contract is destroyed or lost to the parties e.g. through fire, or being resumed by thegovernment

- "t will not occur where one of the parties has expressly or impliedly agreed to bear therisk of destruction.

Ta&lor v Cald#ell Facts)

- 5all destroyed by fire

Sub element 2: Death or Incapacitation of person essential for performance- Occurs in a contract for service- "ncludes illness, imprisonment, conscription...- 'he effect of illness will depend on) *

o &ature and probable duration of illnesso 'erms and nature of contract/ in employment contracts that provide for sick

leave, the contract may be frustrated when all the sick leave benefits expire.- 7immons Ltd v Ha& - Carmichael v Colonial Sugar (a Ltd

-Finch v Sa&ers

Sub Element 3: ,ailure of basis of contractOccurs where an event that the parties have agreed to as the basis of the contract does notoccur

,rell v Henr& Facts)

- (oronation of Edward D""- 5ired a flat to watch the procession- (oronation was cancelled

5eld)- Frustrated because watching the procession was the basis of the contract

Event must be true basis of contract and not mere co*incident)

Herne Ba& Steam Boat (o v Hut tonFacts)

- (oronation of Edward D""- 5ired a yacht to look at fleet

5eld)- (oronation was cancelled- &ot frustrated because he could still watch the fleet

Sub Element $: /ethod of Performance Impossible- (ontract must expressly provide for a particular method of performance/ OC

-"t must be stipulated or contemplated by both parties in circumstances necessitatingthat method) Codel!a



Sub Element &: E'cessi"e Delay- Past or prospective delay in performance)- +ill depend on)

o 'he probability of the length of the delayo 'he time left to run on the contract) "ioneer Shippin Ltd v BT" Tio-ide Ltd

-7ometimes a party is not bound to wait for the delay to occur but can immediatelytreat the contract as discharged

- Others will require the parties to wait and see)o +m%iricos v S&dne& eid (oo "ioneer Shil.oin Ltd v BT" Tio-ide Ltd

- Events are not udged with hindsight) Court Line v ant ussell

Sub Element ): IllegalityPerformance rendered legally impossible by) *

- (hanges in $awo %fter the contract is performed, the law may change in such a way as to

prohibit further performance of the contract and the contract will bedischarged

o %ttention must be paid to the terms of the contract and the surroundingcircumstances

Scanlon/s *e# *eon v Toohe&sFacts)

- $eased neon sign.- !nder war powers illumination was prohibited at night.- P claimed was frustrated.

5eld)- was not frustrated because it was easily seen during the day and thus retained

significant advertising value, though less than what the P expected.

- (ontracting with the enemyo %ny contract between %us and a country it is at war with will be illegal

o Aay also be illegal if the contract provides assistance to the enem& prohibitsthe prosecution of the war

o Fi%rosa v Fair%airn

o Hirsch 0inc Corporation Ltd

o 'etropolitan Water Board v ,err

Sub Element *: #and ontracts

7ale contracts

- !pon execution of a contract of sale, the purchaser acquires an equitable interest inthe land

-"f there is a radical change in circumstances between the time of the contract and thetime of settlement that prevents the vendor from transferring legal estate, specificperformance will no longer be available

- 'herefore the purchaser cant be treated as the owner in equity and the contract willbe frustrated e.g. where

o =overnment resumes the land

o $andslide destroys the land

- "n a sale of land that includes a building, and the building is destroyed, the contract isnot frustrated because the purchaser can still acquire legal interest of the land.

- Austin v Sheldon

- Holland v 1old trans "t& Ltd$

$eases)- %greement to lease confers an equitable interest on the lessee while an actual grant



of the lease transfers legal estate

- "n (odelfa, the court followed the English ruling of &ational Carriers v "analpina(*orthern) Ltd$ 'he court takes into account) *

o 'he duration of the lease and the time left to run on it after the frustratingevent

o 'he nature and obect of the lease

o $ength or prospective length of the frustrating event

Element 2: 0re there any limits that apply.

Sub element 1: E'press contractual pro"isions

- 'he event must not be provided for in the contract)

- +here the contract expressly provides for dealing with the event, the parties will betaken to have provided for its occurrence

- Claude *eon v Hardie

o provided for P to ask for rent balance if interest of lessee in premises was

extinguished or transferredo Premises resumed by =overnment

o 6 argued frustration

- 5E$6)

o Cesumption amounted to extinguishment of interest and therefore there wasno frustration because it had been provided for in the contract

o Aust be distinguished from !orce ma2eure clauses, which provide for anumber of events and then provide for consequences in case the eventoccurs e.g. Gstrikes, floods, war...G

Sub Element 2: E"ent ,oreseeable

- "n general, the event must not have been foreseen by the parties, apart from the caseof intervening illegality)

- Ceference must be made to what was originally contemplated by the parties/ thisdepends on) *

o Express provisions in the contracto &ature of the contracto 7urrounding circumstances

- +here the supervening event was, or should have been, foreseen by the parties as aserious possibility, but for which they did not make express provision, the inference isthat they have nevertheless assumed the risk of the event occurring.

- Event must be a Gserious possibility# and not #reasonably foreseeable#- Even where the event is foreseeable, it may frustrate the contract where the effect of

the interference exceeded anything that was contemplated.

W3 Tatem Ltd v 1am%oaFacts)

- Dessel chartered for ; month by Cepublicans to evacuate people- (ontemplated that vessel might be detained for a short while by &ationalists, so 6

paid 1 times market hire rate in advance- Dessel seiHed for 4 months- P claimed additional payment for 4nd month

5E$6)- %lthough both parties contemplated the event it exceeded anything that was

contemplated therefore frustrated and claimed hire not payable.

7ub element 1) Event induced by one of the parties

- 'he event must not be due to the GfaultG of one of the parties) *



o +here brought about by deliberate act of one of the parties, OCo 6ue to the negligence of one of the parties depending on) *

6egree of seriousness of the negligence

(loseness of the cause between the negligence and the frustrating

event +hether the negligent conduct was directed toward the performance

of the contract +hether contract commercial or personal

- +here party enters into a no of contracts and has a real choice whether to fulfill onecontract out of a number, the act leading to the failure to perform may be self inducedfrustration. 'aritime *ational Fish v 4cean Tra#lers

- Onus lies on person who makes the allegation of self*induced frustration. 3osephConstantine v Imperial Smelting

Element 3: hat ill be the effect of the frustration.

Discharge- Frustration automatically discharges a contract as to the future at the time of the

frustrating event) Hir2i 'ui2i v Cheong 5ue Steamship (o Ltd$

-6ischarge by force of law so not necessary to elect to terminate contract

oidable!nconditional rights accrued before frustration remains enforceable/Obligations not yet accrued are discharged. @ut some clauses may continue to bind theparties) eg arbitration clause) Codel!a

!otal failure of consideration- 'he loss arising from the discharge lies where it falls unless there is a total failure of

consideration.- Cights accrued before frustration will be unenforceable if there is a total failure of

consideration. Fi%rosa SA v Fair%airn$ La#son Ltd

4uantum /eruit- +ork done under the contract a!ter frustration may be claimed on a uantum meruit

basis) Codel!a *o$.

Damages- &either party is entitled to damages after frustration.

!ermination by 0greement

Definition- Parties to an existing contract can make an agreement to extinguish the rights and

obligations it has created-

%n agreement is itself a binding contract provided it is either made under seal orsupported by consideration.

Element 1: -as there been an agreement.'here must be) *

- Offer - %cceptance- (onsideration- (lear intention to bring the parties obligations to an end

Sub Element 1: Is there consideration.

+here neither party has performed their obligations) *

-'he consideration is the mutual release by each party of the other from performanceof outstanding obligations.

- @ilateral discharge may be an agreement to discharge the contract without replacing



it. Or to discharge the contract and replace it with another contract.

+here one party has completely performed his or her side of the contract) *- (onsideration must be under seal or be supported by fresh consideration. %ccord and

satisfaction) 'cermott v Black$

(ompromise of a cause of action %ccord and 7atisfaction?- %greement to relinquish a cause of action against a party may act as a discharge of

the original agreement- 'he accord is the agreement by which the obligation is discharged- 'he satisfaction is the consideration which makes the agreement operative

%ccord 7atisfaction- 'he original agreement is discharged immediately the compromise agreement is

entered into- 'he agreement itself releases the cause of action and is substituted in its place- 6ischarges the original agreement immediately

@reach

-"f a party breaches an accord satisfaction/ the innocent party will be forced toseek) *

- 6amages for the breach of the compromise or - 7pecific performance- Original agreement will not be revived by the breach

%ccord Executory- 'he compromise is a promise to release the cause of action only once the event set

out in the compromise occurs- 'he original cause of action will not be discharged unless the promised conduct

occurs

@reach

-"f a party breaches an accord satisfaction/ the innocent party will be entitled to) *

- Cevive the original cause of action/ or- 7eek 7pecific performance- Fraser v +lgen Tavern

Element 2: -as there been a "ariation.- Dariation leaves the original contract on foot but modifies some particulars- Cequires all the things that a valid agreement requires

Element 3: +e5uirement of riting

6ischarge)- %n oral agreement to discharge a contract will be enforceable even if the agreement

was of a type required to be in writing. Tallerman 6 co v *athan/s 'erchandise- 'he oral agreement is not in itself enforceable but will be enough to discharge the

original contract. 'orris v Barron

Dariation- %n oral agreement to vary an oral contract is enforceable/ an oral agreement to vary

a contract in writing will not be enforceable. Tallerman- "n an oral agreement to terminate a contract required to be in writing and replace with

a new contract, the termination will be operative but the new contract will beunenforceable. Tallerman

- 6ispensation of mode of performance Ii.e., extending time frame for performanceJ willbe enforceable even if the is one required to be in writing. "hillips v +llinson Bros

+riting then original contract remains on foot Australian "rovincial Association Ltd vagers I;K:1J :1 7C I&7+J 424.



Element $: Non(ontractual Discharge:- %bandonment will occur where an inordinate length of time has been allowed to pass

during which time neither party has attempted to perform or called on the other toperform

- Fit7gerald v 'asters



!ermination for 6reach

Element 1: -as there been a 6reach- % right to terminate for the breach of a term of a contract will arise either)

- Pursuant to the contract.

-Pursuant to common law. 'his will occur where there is) *- % breach of an essential term, or - % serious breach of an intermediate term.

Sub Element 1: ontractual +ight of !ermination- 6epends upon the construction of the contract

- Events that activate the contractual right must occur - "nnocent party must exercise the right of termination

- (ontractual right will be construed strictly- (laim for damages will depend on the inured party#s proving that the term breached

is essential or that a repudiation has occurred

Sub element 2: 6reach of an Essential !erm

- %scertained by reference to) *

o 'he contract as a whole ando 'he intention of the parties

Luna "ark (*SW) Ltd v Tram#a&s Advertising "t& Ltd - 'est of essentiality- Promise is of such importance to the promisee that he would not have entered into

the contract unless he had been assured of a strict or substantial performance of thepromise and this ought to have been apparent to the promisor

- %ll breaches of the term will allow the innocent party to terminate the contract

E'press terms- #'ime is of the essence# is strictly construed as an essential term

- % provision in the contract for a right to terminate the contract for a breach of the termwill also be construed strictly

- "nnocent party will need to elect to terminate the contract- (ourt will have regard to) *

o (onduct of the parties following a breach of the termo Aotivation for entry into the contracto +hether the term itself was set out clearly and conciselyo +hat the consequences of breaching the term will be

Implied !erms- "mplied by statute

o 7tatute will regularly provide for the effect of breaching such a term

o Effect of the implied term may not as a rule be altered by the parties- "mplied by common law

o (lassification depends upon the construction of the contract and possibleintentions of the parties

Sub Element 3: Serious breach of an intermediate term+ill give rise to a variety of breaches6epends on)

o 'he seriousness of the breach ando (onsequences both actual and foreseeable

o "f consequences deprive innocent party of substantially the whole of thebenefit of the contract termination will be possible

o +here consequences are less serious the innocent party will be limited to

damagesHong ,ong Fir Shipping case ;K34? 4 -@ 43



Bunge v Trada- 8.9BI: " WL 8;;.



!ermination by +epudiation- % repudiation occurs when a party)

o Cenounces his liabilities under the contracto Evinces an intention either expressly by words or impliedly by conduct, no

longer to be bound by the contract/ or o "ndicates clearly an intention to perform the contract in a manner substantially

inconsistent with is obligations- 'he refusal or inability to perform must relate to the contract as a whole, or to an

essential respect- Promisee must elect to terminate the contract

Element 1: 0nticipatory 6reach- % repudiation before the time fixed for performance is called an Ganticipatory breachG.- 'he innocent party may elect to treat the contract as discharged and sue for damages

without waiting for the time for performance to arrive.o @reach must be of a sufficiently serious natureo 'his right of termination is subect to the restriction that the innocent party

need only show that at the time of the anticipatory breach he or she was notwholly or finally disabled from performing the contract/ Foran v Wight$

-Promisee may wait until the time for performance and accept the failure to performas an actual repudiation of the contract or a breach of an essential term

o @reach must be accepted before it is acted upono "f innocent party does not elect to terminate contract prior to time for

performance the contract will continue on foot for benefit of both partieso Possible for repudiating party to change his mind and complete the contract

Element 2: 0pplication to #eases- 6elivery of a notice to lessee to rectify breach will be a prerequisite to e-ercising a

right to terminate for repudiation- Cight to damages will depend on the existence of a breach of an essential term or a

repudiation of the contract notwithstanding there is a clause in the contract giving

the lessor a right to terminate if the lessee is in default of any clause of the lease- 6octrine of surrender of leases/ *

o "f the ct considers that the lessor actually accepted a surrender of the leaserather than terminating for repudiation no damages for future rent areavailable

Element 3: Proof of +epudiation- Ceference to 6#s words or conduct

o &o requirement for proof that the 6 is also unable to perform- Ceference to 6#s position/ that is, whether on the basis of surrounding facts they are

in a position to performo P required to prove 6 was unable to perform at the time for performance

Element $: E'amples of +epudiation

Sub element 1: +epudiation by ords or conduct

Express refusal- Cefusal to perform all the obligations will dearly amount to repudiation

o Hochster v de la Tour

o 6 agreed to employ p as a courier o @efore p started he was told his services no longer requiredo 5E$6/ 6 had repudiated all his obligations under the

- Cefusal to perform some of the obligations may amount to repudiation if refusal is of asufficiently serious matter

o Associated *e#s v Bancks



"mplied refusal- Aay be implied from party#s words or conduct where a reasonable person in the

shoes of the innocent party would clearly infer that the other party would not bebound by the or would fulfil it only in a manner substantially inconsistent with thatpartyLs obligations and in no other way. Laurinda v Capala%a "ark Shopping Centre

!nustifiable interpretation of the contract- Party acts or/ an erroneous construction and breaches one or more terms or - Evinces an intention not to perform except in accordance with the erroneous

interpretation Luna "ark (*SW3 Ltd v Tram#a&s Advertising "t& Ltd - T *ominees "t& Ltd v 'ona Homes "t& Ltd

- 5owever, before termination an attempt should have been made to persuade theparty of the error of its ways, or to give it an opportunity to reconsider

- (ourt distinguished two instances- +here in the face of adverse comment a party insists on an interpretation of

the which is not tenable repudiation?- +here the party although asserting a wrong view is willing to perform the

rightly

+rongful termination of the contract- +here a party purports to terminate a contract in circumstances where he has no

legal right to do so the party#s conduct will constitute a repudiation- 'he termination will therefore not be effective- "nnocent party will still have to elect to terminate- Braidotti v ;ld Cit& "roperties Ltd

(ommencement of proceedings- +ill not amount to repudiation unless proceedings commenced in such

circumstances as to make it plain that the party commencing them evinces anintention not to be bound irrespective of the outcome

- Lom%ok "t& Ltd v Serpentine "t& Ltd

Sub element 17 +epudiation based on Inability to perform- +-press declaration %& #ords or acts < Faran v Wight - Implied ina%ilit& < P must prove that the 6 is wholly and finally disabled from

performing &ecessary to prove 6#s actual position rather than what he said or did

Element &:- Aust be accepted by terminating the

Element ): !ermination for Delay in Performance % contract may be terminated for a delay in performance of the agreement. 'his is in essencean example of a situation where a party may be entitled to terminate for breach of a term of the contract or for a repudiation depending upon the circumstances.

-"f time is expressly or impliedly of the essence of the agreement, failure to performon the date specified will be a breach of an essential term of the contract allowingthe innocent party to terminate.

- "f time is not of the essence of the agreement termination is only possible where)o % notice making time of the essence has been served and the other person

fails to comply with the notice/ or o &o notice is served making time of the essence but the conduct of the person

is such to amount to a repudiation of the contract.

7ub Element ;) 'ime of the Essence'imely performance will be of the essence where)

- 'he contract expressly so stipulates) Harold Wood Brick Co v Ferris/ or - 'he surrounding circumstances or the subect matter make it imperative that the

agreed date be precisely observed) Bunge Corp v Trada- SA= or - 'he terms of the contract are such that time of the essence should be inferred) Wocal



Investments v Hurle& - 7ee also Sale o! 1oads Act ;<K3 I-ldJ, s ;1I;J which provides for the effect of time

stipulations in contracts for the sale of goods.

"f a time stipulation is of the essence failure to perform the contract on time will allow theinnocent party to terminate the contract for breach of a term immediately.

E'amples of time of the essence

Commercial contracts- "n commercial contracts time stipulations are generally regarded as essential) Bunge

v Trada- - "f a date for performance of the contract is stipulated then a failure to perform on that

date will entitle the innocent party to terminate the contract.- "n general equity follows and upholds the common law in these situations.

Land contracts- Payment of a deposit on time is prima !acie essential because of its special character

as an earnest of performance) Brien v #&er

-Failure to pay a deposit is a breach of an essential term entitling the innocent party toterminate the contract.

- Payment of the balance of the purchase monies is subect to the rules of equityconcerning time performance in contracts for the sale of land.

- %t (ommon law, time is of the essence if the contract expressly so stipulated orthe contract named the date of completion. 'he innocent party could terminateforthwith.

- "n Equity, however, time was not of the essence unless expressly stipulated.- 'herefore, where there was only a date for completion stipulated equity regarded

time as not of the essence. 'he party not in default had to serve a notice tocomplete giving a reasonable time to complete before that party could terminatethe contract for breach) Canning v Tem %&$

-(ourts of Equity did however recognise that in some cases, other than wheretime is expressly of the essence, time could be impliedly of the essence in equity)see Stickne& v ,ee%le I;K;9J %( 1<3. 'hat is where the surroundingcircumstances or the subect matter makes it imperative that the agreed date beprecisely observed.

- 'he ascendancy of the equitable rule was statutorily affirmed by s 49I8J of the3udicature Act ;<81 I!J) see now "ropert& La# Act ;K8: I-ldJ s 34.

Sub Element 2: !ime not of the Essence- "f time is not of the essence failure to perform on time will merely be a breach of an

inessential term of the contract.- @efore the innocent party is able to terminate the contract it is necessary for the

innocent party to serve a notice to complete on the party in breach.

-'he notice should give the party in breach a reasonable time to perform the obligationbefore the innocent party is able to terminate the contract.

!ime for gi"ing notice to complete

+here (ontract does not specify a date for completion- 'here must be) *

o Failure to perform within a reasonable timeo 'he notice will then give a further reasonable time

ontract specifies a date for completion and time is not of the essence- 'his will occur where) *

o 'he delay that extends beyond the date stated in the contract is so gross soas to cause serious detriment to the other party.

o "n a commercial contract where the delay is so unreasonable as to frustrate



the commercial purpose of the contract- 'he notice to complete can be served immediately once the date of performance is

passed giving a further reasonable time for performance.- Failure to complete on that further date will be considered an unreasonable delay

allowing the innocent party to terminate.

E'ception to the rule that a notice is re5uired- % right to terminate will arise for breach of a non*essential time stipulation without the

service of a notice where the delay is unreasonable) *o @ecause of the serious consequences for the promisee, or o @ecause the delay amounts to a repudiation of the party#s obligations)

Laurinda v Capala%a "ark shopping Centre$

+e5uired content of the Notice;. +hat the promisor must do to perform the contract4. % reasonable time in which the contract should be completed/ court will consider) *

- 'he nature of the transaction- 'he remaining actionM a party is required to undertake to perform the contract- 5ow long the party has already been given to complete

1. % statement of the consequences of not performing in accordance with the notice- Either that time is of the essence- Or in the event of non*compliance the notifying party will regard itself as entitled

to terminate the contract Laurinda v Capala%a "ark Shopping Centre

Element *: +estrictions on the right to terminate

Sub element 1: Election- % contract will not automatically terminate due to the breach of one of the parties it

must be terminated by one of the parties) ,ell& v esnoe$- "n general a party who has the right to terminate has a choice whether to affirm or to

terminate.- "f the innocent party elects to affirm the contract it will continue to subsist for the

benefit of both parties)o Aver& v Bo#den

o "eter Turn%ull "t& Ltd v 'undus Trading "t& Ltd$

- Celiance on a ground of termination, which proves untenable, does not prevent laterreliance on a then

- Existing ground which is adequate)o Shepherd v Felt and Te-tiles o! Australia Ltd I;K1;J

Sub Element 2: ,urther performance impossible- +here further performance of the contract requires the co*operation of the other party

or is impossible, the innocent party may have no choice but to terminate the contractfor breach)

-

White +t Carter (Councils) Ltd v 'c1regor

Sub element 3: !erminating Party not in breach

6ependent and concurrent obligations- 'his will apply to the obligation to complete a land or sale of goods contract, which

are dependant and concurrent- 'he terminating party must be able to show that they were ready, willing and able to

perform the contract at the time for performance. Foran v Wight

- "f the breach occurs at the time !or performance of the contract the terminating party

must be ready willing and able at the time of performance.o %n innocent party who is not able to show they are ready willing and able

may not terminate the contract.



"f the breach is prior to the time of performance, i.e. anticipatory breach, the terminating partyneed only show that at the time of the anticipatory breach they were not wholly and financiallydisabled from performing the contract. Foran v Wright

- Proof of this at the time of the anticipatory breach will enable the party to terminatethe contract

-5owever, if the party wishes to claim dama4es it will be necessary to show that theywould on the balance of probabilities have been ready willing and able on the date for completion.

Obligations not 6ependent and concurrent- +here the obligations are not dependent and concurrent the terminating party does

not need to show they are ready, willing and able)- ,ell& v esnoe

Sub Element $: !erminating Party not in default- %nother restriction is that a terminating party cannot take advantage of their own

breach or default to terminate the contract or acquire a benefit under the contract)

Sub Element &: +elief in E5uity

Equitable Estoppel7ee $+@;13 notes on estoppel.

Celief against forfeiture)(t. exercising its equitable urisdiction will prevent a vendor from relying on a forfeitureclause. For the court to allow this remedy it requires) IShiloh Spinners Ltd v Harding)

- 'hat the obect of the transaction and the insertion of a right to forfeit are essentiallyto secure the payment of money.

- 'he party possesses a sufficient interest under the contract.- 'he intervention of equity is appropriate, either because of unconscionable conduct

Iexceptional circumstancesJ or because the forfeiture clause acts as a penalty.

'he court will take into account when determining if exceptional circumstances exist)- +hether vendorLs conduct contributed to the breach.- 5ow serious the breach was- +hether the breach was wilful- 'he damage actually caused to the vendor.- 'he vendorsL gain weighed against the purchasers loss and whether an award of

specific performance is an adequate remedy for the vendor.

'his remedy will usually not be granted where the failure to perform is a breach of anessential time provision.

Sub Element ): +ight to terminate lost or e'cluded- Cight to terminate may be excluded by agreement, or legislation.- 'he parties may expressly exclude the doctrine of repudiation.- For example the contract may provide that the common law concept of repudiation

does not apply. "t would be rare for a contract to expressly provide for this to occur.5owever, the terms of the contract may provide for a code in relation to thetermination of the contract, which impliedly excludes the operation of the doctrine ofrepudiation) Amann Aviation "t& Ltd v The Common#ealth I;KK2J K4 %lC 32;.

Element 8: Effect of Discharge for 6reach

6ischarge of Obligations- @oth the party electing to discharge and the party in breach are released from all



future obligations under the contract. 7ome terms, however, intended to governliability for breach will continue to apply, eg arbitration clause, exemption clause,limitation of damages clause.

Enforcement of accrued rights- !nconditionally accrued rights, for example, fixed sums payable under the contract in

respect of performance rendered prior to breach, and causes of action which haveaccrued because of a breach, are also unaffected by termination) 'conald venn&s Lascelles Ltd$

Cecovery of (ontract Price- (ontract price is only recoverable after termination if it has been earned prior to

termination. IEither exact or substantial performanceJ- +ill be able to claim completion of divisible parts if earned before termination.- 6efaulting party will not be able to resist a claim for payment on the basis of total

failure of consideration



Damages6amages for breach of contract are awarded to compensate the person for their loss not topenalise the wrongdoer

- Obligation to pay damages for failure to perform an obligation arises impliedly formthe entry into the contract.

o 'his is a secondary obligation assumed or agreed upon and not imposed

o (an be expressly excluded or limitedo Aere entry into contract is sufficient

Element ;) "s there a cause of actionBOne of the parties fails to perform one or more of that party#s obligations under the contract-uestion of fact %ctual loss needs to be proved but proof of loss is not a precondition to damages"n the absence of actual loss nominal damages may be awarded

Onus of Proof - Plaintiffs case on balance of probabilities

o Elements of cause of actiono %mount of loss sufferedo (ausationo Cemoteness

- 6efendants caseo Prove that plaintiff has failed to mitigate his losso "f 6 does not argue above then it will be assumed P has mitigated losso %dditional onus in cases where reliance loss is claimed *

Element 4) (ausation6id the wrong or breach of contract cause the lossB(ommon law looks at whether) * %n act or omission contributed to the occurrence of a particular event IcausationJCesponsibility should attach to that act or omission IremotenessJ

7ub Element ;) the N@ut for test.- 'he traditional test for establishing causation in contract is the Gbut forG test.- 'he loss would not have accrued %ut !or the breach of the defendant.- "f the loss would have been suffered anyway no more than nominal damages will be

payable.- "t is not necessary that the 6#s conduct be the only factor as long as it#s a cause of

the loss

7ub Element 4) (ommon sense approach and multiple causes- CecogniHes that the Gbut for# test is plainly inadequate where there are two separate

and independent events each of which alone was sufficient to cause the damage.- Ale-ander v Cam%ridge Credit Corp the question should be/ whether #as a matter of

common sense, the relevant act or omission was a cause# of the loss.- "t is possible to apply the but forL test in a common sense way to determine whether

the breach causally contributedL to the damage.- "t is not necessary for the breach to be the only cause of the loss only that it was a

cause.

Sub Element 37 ho causation can limit damages+here the chain of causation between the defendant#s conduct and the loss to the plaintiffhas been broken the defendant will not be liable for the loss.

(ontributory &egligence+here actions of the plaintiff contributed to the loss"n tort contributory negligence will not break the chain of causation but will reduce the amount

of damages"n contract, contributory negligence will only be relevant where the conduct is such as to



break the chain of causation between the defendant and the loss.

Le-mead (Basingstoke) Ltd v Le#is- Farmer bought a towing hitch to connect his four wheel drive to a trailer - !sed it while broken for 1*3 months- 'railer became loose and killed driver and son in a car

-Passenger brought action for damages for personal inury

- Farmer in 1rd party proceedings sought damages from seller of hutch claimingbreach of contract for goods no fit for purpose

5eld)- $oss arose from farmers negligence in not repairing hitch and not from seller so broke

chain of causation

"ntervening acts or events %ction of 1rd party that is so substantial so it is no longer possible to conclude that the breachof contract attributed to the loss"ntervening act must Gact to supersede in potencyG the breach of contract so that it can nolonger be considered as a cause either in common sense or in law@ut where the 6 is under a contractual duty to guard against the very act of the intervener

there will be no break in causation e.g. writing a check in a careless way that allows someoneto change the payee+here the intervening event is foreseeable by the parties this will not break the chain ofcausation.

'ahone& v 0 ,ruschich (emolitions) "t& Ltd - (ausation may be broken by

o 'he relevant inury not reasonably foreseeableo (hain of causation is broken by a noveus actus intervenienso 'his is a -uestion of legal liability and not of fact

'onarch 77 (o Ltd v AIB ,arlshamns 4lie!a%riker - %ppellant breached its contract with the 6 to provide a seaworthy ship for the carriage

of cargo from Aanchuria at o 7weden- Dessel was delayed so couldn#t reach 7wede before ++4- @ritish ordered vessel to unload a =lasgow- 6 had to arrange for cargo to be shipped to 7weden and %ppellant was charged for

this cost- %ppellant argued that war intervened and broke chain of causation- 5eld) appellant ought to have reasonably foreseen war might break out

Element 3: Is the loss suffered by the P not too remote.- 'he law places a limit on the amount and time over which losses are recoverable

o % loss, which is causally related to the breach, will nonetheless not becompensable if it is too remote.

- Cemoteness operates as a policy factor in the courts decisionso emoteness of damage is governed by the rule in Hadle& v Ba-endale$

o %lderson* parties to a contract should only be liable for loss that could befairly and reasonably contemplated by both parties when making the contract.

o 'he principal is that damage is not too remote if it is such as may reasonablybe considered)

Sub element 1: ,irst limb of -adley 6a'endaleamage that arises naturall& according to the usual course o! things !rom the %reach #ill %erecovera%le

- (ourt looks to the reasonable contemplation of a reasonable person on the position

of the parties to the contract.- %lderson. 'he loss would be loss flowing naturally from the breach of the contract

in the great multitude of such cases occurring under ordinary circumstances



- Parties to a contract will have in their contemplation a result which will happen inthe great maority of cases IoufosJ

- 'est of reasonable foreseeability should not be applied to contract law IoufosJ

!here ha"e been se"eral formulations of hat is meant by the first limb of the rule:

Hadle& v Ba-endale- "n this case the ;st limb wasn#t satisfied- P, owner of a flour mill contracted with the 6, a common carrier, to convey a broken

crankshaft to engineers to manufacture a new shaft- 6elivery was delayed so mill was stopped for 9 days longer and profit was lost

5eld)- 6 not liable for lost profits as he was a mere carrier who didn#t know mill would be

stopped. &ot a result that could have occurred in a multitude of cases

,ou!os v C7arinko# - ;st rule was satisfied- 6 agreed to carry sugar form (onstanHa to @asrah but deviated taking ;2 days

longer.

-7ugar prices fell in @asrah and P suffered loss of profit by selling at lower price

5eld)- $oss occurred in usual course of things because 6 knew- P were sugar merchants- 'here was a market for sugar in @asrah

>ictoria Laundr& Windsor Ltd v *e#man Industries- Part of the loss was recovered under the l# limb but the balance of the loss was too

remote- P purchased a boiler from 6 to use in dye and dry cleaning business- 6 damaged machinery while moving it and P refused to take it until fixed- 6 delayed for 9 months

5eld)

-6 liable to P for an amount for loss of business in respect of reasonably expecteddyeing contracts* ordinary contracts

- @ut not for more lucrative contracts

Notes- "n ,ou!os v C7arinko# Ltd the 5ouse of $ord unanimously considered a test of

reasonable foreseeability was not appropriate to contract.- Burns v 'A* Automotive (Aust) "t& Ltd at 338 i.e. what is the loss that is Gsufficiently

likely to resultG.- H "arsons Livestock Ltd v ?ttle& Ingham (o "t is only necessary to foresee the

type of damage, not necessarily the degree of damage that would result from thebreach)

Sub element 2: Second limb of -adley " 6a'endale- % plaintiff who claims loss not arising in the usual course of things must come within

the second limb if the loss is to be recovered*- 'his limb relies on actual knowledge possessed by the defendant.

o 'he basis of this rule is said to be that the defendant with actual knowledgeof special facts is undertaking to bear a greater loss) ,ou!os v C7arinko#Ltd$

- "n addition to actual knowledge of the special circumstances it is necessary for thedefendant to either

o %cquire this knowledge from the P, or

o For the P to know the 6 is possessed of the knowledge at the time thecontract is entered into, and so could reasonably foresee that an enhancedloss was liable to result from a breach.

- Only a loss that is likely to occur in a maority of cases will not be too remote



'cae v Common#ealth- %n example of damage that falls within the second limb- 6 had warranted to P that a tanker lay on a coral reef and needed salvage- P expended moneys to locate vessel which wasn#t where 6 said- 5eld) expenditure fell within the 4G# limb because of the 6#s actual knowledge of the

need for a salvage operation

(ontrast with >ictoria Laundr& Q+indsor Ltd v *e#man Industries Ltd - Even though 6 had knowledge of the business of the p and the fact that the p wanted

to put boiler into immediate operation, this wasn#t sufficient to bring knowledge intosecond limb

- 6 did not have actual knowledge of the specific contracts p had entered into

Sub Element 3: hat is the e'tent of loss that can be reco"ered

Exactly what must the parties contemplateB

5 "arsons (Livestock) Ltd v ?ttle& Ingham 6 Co

-P#s pigs died as a result of eating contaminate nuts from a faulty hopper bought from6. 'he loss had been caused by the negligence or breach of contract of 6

- %lthough# it couldn#t be considered that the parties would have contemplated thedeath of the pigs as a probable result, ct held 6 was liable for loss of pigs

o Aaority considered that as p was suing for breach of an implied term, thathopper would be fit for purpose, the question was whether the partiesconsidered that breach of an implied term would lead to loss of pigs

o Parties should have considered that if the hopper was not suitable for storageof pigs nuts then it was a serious possibility that the pigs would become ill

o %ccordingly the parties need only contemplate the type of inury that hasoccurred not the full extent of the loss

- $ord 6enning) in cases of physical damage forma breach of contract the test appliedshould be one of reasonable foreseeability and not reasonable contemplation

Element $: -as the P acted reasonably to mitigate unnecessary loss.- 'he general rule is that a plaintiff should mitigate hisRher loss.- 'he plaintiff is not entitled to claim for loss, which the plaintiff could have avoided by

taking reasonable steps) unkirk Collier& (o v Lever - 'he onus of proving the plaintiff acted unreasonably is on the defendant.

Sub Element 1: -as the P 0cted reasonably- P is only required to take those steps. +hich are reasonable and is not required to resort

to steps. +hich are costly or extravagant)- +hether the p has acted reasonably or unreasonably is a matter of fact and will depend

on the individual circumstances of the case.o %s long as P#s have acted reasonably they should not be debarred from

recovering actual loss because 6 can show that if p had taken another course,the loss would have been lower

o $ikewise if P#s loss diminished s a result of its actions, this must be taken intoaccount

British Westinghouse +lectric and 'anu!acturing (o Ltd v ?nderground

+lectric ail#a&s (o o! London Ltd

Sub Element 2: Should the P enter into a further contract ith D"f the parties had the opportunity of entering into a new bargain after breach, which mighthave eliminated the loss suffered, the issue is whether the plaintiff has acted reasonably inrefusing to enter into a new contract)

(ommercial (ontracts- +here the 6 makes a reasonable offer to resume the contract, it should generally be

accepted by the p



- -uestion is whether the refusal is reasonableo +here the new contract may cause risk to P, refusal may be reasonableo Cefusal to negotiate because of any ulterior motive may also deny the plaintiff

any damages

Employment (ontracts

Overriding consideration is whether the refusal is reasonable. "t may be reasonable where) *- 'he new offer of employment is at a lower status- 'he new offer of employment requires the p to abandon his legal rights arising from

the breach- 'he new offer of employment is made during the course of proceedings to claim

damages where the offer is made to reduce the damages awarded

Sub Element 3: should the P purchase a substitute in the mar9etplace."n the ordinary course, an inured party would attempt to avoid loss by making a substitutearrangement

Sub Element $: +eductions or Increases In the amount of loss

"ncrease in loss- 'he mere fact the loss of the p has increased will not bar the p from recovering the

loss from the 6.- "f the p has acted reasonably then the loss may be recoverable) Banco de "ortugal v

Waterlo# 7ons $td

6ecrease in loss- +here the p obtains extra benefits as the result of the breach of the 6 then these

benefits must be accounted for in assessing the damages.- For example where an employee is unfairly dismissed the damages payable will be

reduced by the amount earned from another employer after the dismissal) Lavarack v Woods o! Colchester Ltd

- Or the advantage of newer and more efficient machinery purchased to replace

defective machinery may have to be taken into account) British Westinghouse+lectric and 'anu!acturing (o Ltd v ?nderground +lectric ail#a&s (o o! LondonLtd$

Sub Element &: #imitations on the mitigation principles %nticipatory breach and mitigation

- &o question of mitigation can arise until there is an actual breach of contract or ananticipatory breach that is accepted as repudiation

o "n most cases the innocent party should consider mitigation prior totermination of the agreement.

- 'he exception occurs in the case of anticipatory breach where there is no breachuntil such time as the breach is accepted and the contract terminated.

o +here repudiation precedes the time for performance, there can be no issueof mitigation until termination has taken place) White and Carter (Councils)Ltd v 'c1regor$

- 'he mitigation principles do not apply unless the plaintiff#s claim is for damages asdistinct from an action for a debt or a liquidated sum) White and Carter (Councils) Ltd v 'c1regor$

Element &: 0ssessment of Damages

Principle in o%inson v Harman- Where a part& sustains a loss %& reason o! a %reach o! contract@ the part& is@ so !ar

as mone& can do it@ to %e placed in the same position as if the contract had %een per!ormed$

o

'he P will be awarded damages commensurate with the loss of expectationor profits from the contract- "n a contract for sale of goods or land the general measure of the loss of expectation



is the difference between the contract price and the market value of the Coods orland at the time of breach.

- "n other cases where the breach has prevented the opportunity to earn theexpectation or profits from arising, the court will have to estimate the value of thepotential expectancy.

- Fact that damages are difficult to calculate is not a bar to recovery

6ate of %ssessment- 6amages are usually assessed at the date of the breach. 5owever, the date may be

altered so a Pl gets the amount that most fairly compensates them.3ohnson v Agne#

- +here a debt is payable in a foreign currency* date when the debt should have beenpaid

- % sale of goods for which there is no available market* reasonable time after thebreach

- (ases of anticipatory breach* date for the performance of the contract- (ourt assess the damages once and for all and as per a particular date therefore it

takes into accounto Aarket value at the date

o +hether the loss is capable of mitigation- Events that occur after the date of the breach are irrelevant unless

o 'he p gets a benefit that would not have occurred but for the breach.o $oss of an income earning asset occurs

Sub Element 2: Once and for 0ll +ule- (ourt assess the damages once and for all and there is a lump sum payment- 'here is no right to return to court to recover additional loss accrued at a later date

unless)o 'here is more than one cause of actiono 'here is a continuing breach

- "n each of these cases the court will award damages for the loss sustained at thedate of trial and any additional loss may be recovered in a further action

Sub Element 3: Net #oss only reco"erable- (ourt takes into account any benefits or saved expenses received by the p as a

result of the breach due to)o (ontract has been prematurely terminatedo 6ue to the acts of the p to mitigate the loss

- P should not be placed in a better position as a result of the breach- (ourt therefore takes into account) *

o 'he value of any asset in the hands of the p* if p retains any asset he haspurchased, ct takes into account the residual value of assets. Cth v Amann Aviation "t& Ltd

Sub Element $: E'pectation of loss- 'he value of the expectancy that the promise created.- 'his can be compensated in a suit for specific performance or by making the guilty

party pay the money value of the promise Iusually equated with loss of profitsJ- %s damages for breach of contract are designed to place the inured party so far as

money can do it in the same situation as if the contract had been performed, they arenormally assessed on the basis of expectation loss or loss of profits.

- $oss of profit or valueo 6ifference between the contract price and the value of the subect matter of

the contract at the date of the breacho %pplies inc contracts for sale of real property and sale of goods

- $oss of opportunity- (ost of rectification of defective work

-6elay in the payment of money



Sub element &7 +eliance loss- +here one party in reliance on the promise of another expends money Ieg purchaser

of land expends money on investigating the titleJ.- 'he obect of reliance loss is to put the innocent party in the same position heRshe

was in before heRshe entered into the contract.- 6amages for breach of contract are not usually calculated on the basis of reliance

loss IexpenditureJ but in some cases calculation of damages on the basis ofexpectation does not adequately reflect the loss of the plaintiff.

- %s a general rule damages may be recoverable on the basis of reliance loss where)o 'here is no way of quantifying the expectation loss/ or o &o profit will be made on the contract

#osing ontracts- Celiance loss is not available if the defendant can prove the plaintiff had entered into

a losing contract and would not have been able to recoup the expenditure even if thedefendant had performed all hisRher obligations.

- 'he plaintiff ma& however. @e able to recover some amount for wasted expenditure- The Common#ealth v Amann Aviation Ithis is an example of where no profit was

going to be made on the contractJ. It also discusses the proviso relating to losingcontracts Isee below for losing contractsJ.

Sub element ): +eco"ery of both reliance and e'pectation loss Anglia Television Ltd v eed

- "t was suggested that a plaintiff cannot pursue a claim for both expenditure IreliancelossJ and loss of profits Iexpectation lossJ as this would lead to double recovery andthe Plaintiff would be in a better position than if the contract had been performed

- 'he preferable view is that lost expenditure and expectation loss are bothrecoverable where the lost expenditure forms part of the profit expected to be madeby performing the contract. *

- 1ates v Cit& 'utual Li!e Assurance Societ& Ltd

Sub Element *: ind of Damages

6amages may be recovered for *- Physical inury caused by breach of contract) Cullen v Trappell .- 6isappointment) 3arvis v S#an Tours but not for inured feelings) Addis v

1ramophone (o Ltd - Aental distress) Baltic Shipping v illon$- 6elay in performance. 'his now extends to delay in the payment of money)

Hunger!ord/s v Walker$- $ost opportunity) Common#ealth v Amman Aviation "t& Ltd - 'he (ourt also has a discretion to award interest on damages under the (ommon

La# "ractice Act ;<38, ss 84, 81.

Sub Element 8: Issues impacting on the reco"er of damages- "s termination of the required- 7hould the P be ready willing and able to perform- "s accrued right to damages lost after termination or breach- 6oes affirmation of a waive damages for breach

Sub Element ;: 0greed Damages lauses- 'he contracting parties may agree what sum shall be payable by way of damages in

the event of breach.- "f the sum so fixed is a genuine pre*estimate of loss, it will be accepted by the court

and awardedo %s Gliquidated damagesG.

% liquidated sum is also referred to as a debt.

'he main advantage in seeking to recover a debt as opposed todamages is that a plaintiff does not have to prove the amount of the



debt. !nlike a claim for damages, the plaintiff is entitled to seek theamount specified in the contract irrespective of any loss suffered.

- +here the sum fixed by the contract bears little relationship to the loss incurred, thatclause of the contract may be struck down as being a penalty.

- Factors the court takes into account in determining whether a particular clause is apenalty, include)

o 'he bargaining power of the parties/o 'he intention of the parties/o +hether the stipulated sum is clearly in excess of the greatest possible loss

that might be expected to follow from the breach/o 'he presumption that the stipulated sum is a penalty if it is payable on the

occurrence of one or more of several events, some of which will result inserious, and others in only trifling damage.

- 5owever, genuine pre*estimates stipulated in the contract make it unlikely to beconsidered a penalty.

- +here a damages clause is struck down for being a penalty, the innocent party willbe left to prove their loss in the normal way.



+estitution

Element 1: Introduction'he principle of unust enrichment involves three things);. 'he defendant has been enriched by the receipt of a benefit/

4. 'he defendant has been enriched at the expense of the plaintiff/ and1. "t would be unust to allow the defendant to retain the benefit.

Element 2: +eco"ery by the party not in breachAoney

- 'he inured party is entitled to recover sums paid for which there has been a totalfailure of consideration.

- %lternatively, he or she may claim damages Iany award taking into account anyprepaid sum which has not been recoveredJ.

- "t is not possible to claim both restitution and damages)o o#land v ivall

o Fi%rosa v Fair%airn

o Baltic Shipping v illon I;KK1J 38 %$0C 44< at 412*413.

7ervices- +here an inured party, who has performed work for the party in breach, elects to

discharge for breach, the inured party may, as an alternative to a damages claim,claim on a uantum meruit for the value of the work done Ia quasi*contractual claimJ.

- 'his form of relief will be particularly relevant where the effect of the breach preventsfurther performance by the inured party)- "lanche v Col%urn- Automatic Fire Sprinklers v Watson$

- %lso where the contract is unenforceable because of a statutory provision requiringthe contract to be in writing, the party who has completed the contract may be able toclaim on a uantum meruit for work done) "ave& v 'atthe#s "t& Ltd v "aul I;K<8J;34 ($C 44;

Element 3: +eco"ery by the party in breachAoney

- 'he party in breach is entitled to recover any part payments of the contract price forwhich no consideration has been received.

- 'he party in breach is not, however, entitled to the return of a pre*paid GdepositG Iassum paid as an earnest or guarantee of due performance, commonly ;2 per cent orless of the contract priceJ, or any other payment, which is forfeited pursuant to aprovision Iexpress or impliedJ in the contract) 'conald v enn&s Lascelles$

- &ote, however, the existence of an equitable power to relieve against forfeiture, thatis, where the agreed contractual provision forfeiting the payment is in the nature of apenalty and it would be GunconscionableG for the other contracting party to retain themoney)

o "itt v Curotta I;K1;J 1; 7C I&7+J :88o 'conald v enn&s Lascelles I;K11J :< ($C :98.

7ervices and goods- 'he party in breach is generally not entitled to a restitutionary claim unless the other

party has freely accepted the goods or performance of the services by the other partyor converted the services or goods into money in their hands. Steele v Tardiani

- "n each of the above cases, the party in breach will be able to say that the other partyhas received a benefit, which it is unust to retain unless payment is made



E5uitable +emedies

;. "ntroduction!nder specific circumstances, a promise to do a thing may be enforced by an order forspecific performance and an express or implied promise to forbear by an inunction.'hese remedies are equitable remedies and are therefore discretionary. 'hey will not

normally be granted if the common law remedy of damages is adequate in the circumstances.

4. 7pecific performance'his is an equitable remedy by which a court orders a defendant to perform the contractualobligations. "ts main application is in the case of contracts for the dale or other disposition ofland.

5owever, by s 91 Sale o! =oods Act ;<K3 (;ld) the court may, if it thinks fit, direct that acontract for the sale of goods be specifically performed. 7uch order will not be made exceptwhere the chattel sold is unique in some way. "n some way, an order to pay an agreed sum of money may be obtained/ Ber#ick v Ber#ick ;K3<? %( 9<.

1. "nunction

'his is also an equitable remedy. "t is dealt with in more detail in the Equity course. "t will be aparticularly effective remedy where the plaintiff seeks to prevent breach by the defendant ofan express negative promise Ia promise not to do somethingJ, eg breach of an enforceableGrestraint on tradeG clause)

Lumle& v Wagner I;<94J ; 6e =A= 32:/ andWarner Bros v *elson ;K18? ; @ 42K.

#imitations of 0ctions;. (ommon law"n -ueensland, the period within which an action founded on simple contract must be broughtis six years from the date upon which the cause of action arose Is ;2I;JIaJ Limitation o! Actions Act ;K8:J. % court will dismiss an action brought outside of this time period.

'he cause of action accrues on the date the breach of contract is committed) Ward v Le#isI;<K3J 44 D$C :;2.

4. Exceptions to the rulea. +here a cause of action is based on fraud or for relief from the consequences of mistake,

the period of time %e!ore the aggrieved party discovers Ior any have with reasonablediligence discoveredJ the fraud or mistake is not included within the six year time periodIs 1<J.

b. +here a person is under a disability Ieg an infant or a person of unsound mindJ at the dateon which a right of action accrues, the limitation period is extended for a period of sixyears from the date on which that person ceases to be under a disability Is 4KI4J, I1JJ.

1. Equity

'he courts exercising their equitable urisdiction are not bound by the time limitationsimposed for actions under the common law in the limitations of actions act. 5owever, thecourts exercising their equitable urisdiction will only hear a case if it is brought within areasonable time S a maxim of equity is that NEquity favours the diligent not the tardy. 'hismay mean that an action in equity may expire faster than one under the common lawdepending on its nature.7.:1 of the $%% ;K8: provides the act does not affect the rules of equity concerning therefusal on the grounds of acquiescence or otherwise.



/isrepresentation

Element 1: Definition"t is a false statement of existing or past fact, which is addressed to the representee, beforeor at the time when the contract was made/ and which was intended to and did induce therepresentee to make the contract.

Element 2: 0 false statement of e'isting or past fact- 'he statement need not be made in writing/ a misrepresentation can be made by

means of conduct. Waiters v 'organ- 5owever, a representation of fact must be distinguished from)

Sub Element 1: 0 representation of la- One can only ever express an opinion as to the law on an issue until a court

adudicates on it.- 5owever this will be a misrepresentation where) *

o 'he stmt is made fraudulentlyo "t is given in a situation whet the representor owes the representee a duty of

care to ensure any advice given is accurate and it is reasonable for the

representee to rely on ito "t would be unconscionable to allow the representor to escape liability

IestoppelJ

Sub Element 2: +epresentation as to future intention< promise or assurance- 'his will not amount to an operative misrepresentation. For a statement of future

intention to have any effect, it must be a term of the contract or part of a collateralcontract.

- 'he exception is where the intention was never held) +dgington v Fit7maurice$

Sub Element 3: Statements of Opinion- 'he expression of an opinion or belief cannot amount to a misrepresentation unless

fraud can be established or the opinion was unreasonably held (Bisset v Wilkinson)

or - 'he representor had no facts to support such an opinion) Fit7patrick v 'ichael$- %n opinion given in circumstances where the representor alone is in a position to

know the facts upon which that opinion is based can also amount to amisrepresentation if the opinion is erroneous) Smith v Land 6 House "ropert&

Sub Element $: Silence- =enerally, mere silence cannot constitute misrepresentation. 'here are, however,

circumstances under which silence may amount to a misrepresentation)o 5alf truths* non disclosure by one party can amount to misrepresentation

where the silence distorts a positive representation) immock v Hallet o 7tatement becomes false prior to contract *'here is a duty to correct a false

statement if the representor later discovers its falsity) avies v London'arine Insurance Compan&

o 6uty of 6isclosure +here there is a fiduciary relationship between the parties) rate v

Williamson Or in the case of contracts uberrimae fidei Ii.e. contracts requiring

utmost good faithJ, eg contracts of insurance) see s 4; InsuranceContracts Act I(thJ ;K<:.

Element 3: 0ddressed to the representee by the other party- Aisrepresentation must be made by other party to the contract. % person cannot be

induced to act by a statement addressed to someone else. 'cCormack v *o#land - "f induced representee to enter contract with 1rd party then he will not be allowed to

rescind the but the representor may be liable to compensate the representee ifreliance on the statement can be proved. Shaddock v Cit& o! "arramatta



Element $: 0t or before the time hen the contract as made % statement after the contract is made cannot have induced the contract.

Element &: hich as intended to and did induce the representee to enter the contract

% representation need not be the sole or decisive "nducement *it suffices if it was the real"nducement) +dgington v Fit7maurice ;<<;*9? %;; EC <93.

- 'he rules of inducement were fully stated by +ilson 0 in 1ould v >aggelaso &otwithstanding that a representation is both false and fraudulent, if the

representee does not rely upon it he has no case.o "f a material representation i9 made which is calculated to induce the

representee to enter into a contract and that person in fact enters into acontract there arises a fair inference of fact that he was induced to do so bythe representation.

'he inference may be rebutted, eg by showing that the representee,

before he entered into the contract, either * +as possessed of actual knowledge of the true facts and knew them

to be true or * alternatively, made it plain that whether he knew thetrue facts or not he did not rely on the representation.

(arelessness of representee to discover the truth of the stmt has no

relevance- Onus of proof of inducement rests on the representee but that onus may be

discharged in circumstances where, as a matter of common sense, an inference canbe drawn that the statement did induce if it was calculated to induce. %n evidentiaryonus may then shift to the representor, as shown by rule 1. "eek v 1urne&$

Element ): !ypes of misrepresentations

Sub element 1: Innocent misrepresentation=- 'he representor has neither been fraudulent nor negligent.

-'he maker of the statement honestly believes the statement to be true.

- Cepresentor under no duty of care- Cemedies

o Cemedy in equity for the misrepresentation* rescission Election must be made in reasonable time

"n sale of landRshares must be before completion of

"n equity, the contract is voidable by the representee who has a rightto resist an action for specific performance or to institute an action for rescission

o 'here is no common law right to damages for innocent misrepresentation)edgrave v Hurd$

Sub element 2: ,raudulent /isrepresentation- Fraud is proved when it is shown that a false representation has been made/

o nowingly/ or o +ithout belief in its truth/ or o Cecklessly, careless whether it is true or false with the intention that it should

be acted upon by another party who is thereby induced to act upon it.- 'he test is subective/ err& v "eek - GFraudG embraces situations in which the representor lacked belief in the truth of the

representation or made it recklessly, not caring whether it is true or false/ 1ould v>aggelas= "eek v 1urne&$

o 'he representor will not be guilty of fraud unless the representee can provethat the former did not honestly believe the representation to be true in thesense in which he understood it/ Akerhiem v e<'ure$

o 7ee also Alati v ,ruger I;K99J K: ($C 4;3.



Cemedies- Cemedy in equity for the misrepresentation* rescission

o Election must be made in reasonable timeo "n equity, the contract is voidable by the representee who has a right to resist

an action for specific performance or to institute an action for rescission- 6amages for any losses suffered as a result. (alculated in the same manner as

damages for the tort of deceit.

Sub Element 3: Negligent /isrepresentation- 6oes not require a statement of past or present fact.- "t merely requires the giving of information or advice.- 'his includes statements of opinion and statements of intention.- 'hese principles apply also in relation to misrepresentations made in the course of

pre*contractual negotiations)

Elements- % duty of care owed by one person to another/- % breach of that duty/ and- $oss or damage that is not too remote.

Hedle& B&rne v Heller "artners- % person to whom a negligent statement was made could recover damages in tort for

losses caused to that person by the negligence, if the person making the statementowed the other a duty by reason of a special relationship between them.

7pecial relationship- 'LC Assurance v +vatt applied in Shaddock v The Council o! the Cit& of "arramatta

o % person gives information or advice to another

o !pon a serious matter,o "n circumstances where the speaker realises, or ought to realise, that he is

being trusted to give the best of his information or advice as a basis foraction on the part of the other party and

o "t is reasonable in the circumstances for the other party to act on thatinformation or advice, the speaker comes under a duty to exercisereasonable care in the provision of the information or advice he chooses togive.G per Aason 0 in 7haddock relying on views of @arwick (0 in A$( vEvatt.

Cemedies- Cemedy in equity for the misrepresentation.

Cescission- 6amages for any loss suffered same as those of the tort of negligence- (ontract is voidable at the option of the representee

Element *: +emedies

Sub(element 1: +escission %n election by one party to rescind a contract must normally be communicated to the otherparty) Car Finance Ltd v Cald#ell

$imits on the right to rescind'he right to rescind may be lost in a number of circumstances) ed grave v Hurd= 'c,en7iev 'conald

-

%ffirmation) 'he right to rescind the contract will be lost if the party who has sufferedthe misrepresentation has elected to affirm the contract) Coastal +states v'elevende



- $apse of time) 'he right to rescind will be lost if the inured party does not exercisetheir right promptly) Lea! v International 1alleries$

- "mpossibility of restitutio in integrum) "n order for the court to allow rescission for apre*contractual misrepresentation, it must be possible for the parties to be returned tothe pre. (ontractual position) Bro#n v Smit= Alati v ,ruger$

- +here a third party bona fide and for consideration acquires an interest "n the subect

matter "t is important to note that if the property is purchased in good faith by aninnocent third party prior to the rescission of the voidable contract, the third partyobtains good title. &o title will pass in any property transferred after the rescission ofthe contract) 'c,en7ie v 'conald= "hillips v Brooks Ltd$

- (ontract is completely performed I"nnocent Aisrepresentation onlyJ S % contract thatis completely performed is not capable of being rescinded if the misrepresentation isinnocent. Seddon v *orth +astern Salt Compan& Ltd . 5owever, commentators havestated a preference that this rule only applies to sale of land and contracts for thepurchase of shares, not sale of goods.





o 7tatements of law capable of being misleading or deceptiveo Opinion can be breach if no reasonable grounds for holding opinion

Silence- 7ilence or refraining from conduct can be misleading or deceptive- &o fiduciary relationship etc required under 994

--uestion of fact based on all the surrounding circumstances

- +hether the circumstances are such as to give rise to a reasonable expectation thatif some

- Aaterial or relevant fact existed, it would be disclosed) emagogue v amensk&

Intention- &ot an element of 994- Cequired in limited circumstances

o 7tatement of opinion or intention or concerns future matter o $iability arising under section 893o 7ilence as conduct

Element $: +emedies

-7ections <2,<4 and <8 'P%

- 6amages "s principal remedy- (ourts prefer tortuous assessment of damages than contractual

o 7ection <2 inunctions to prevent the conduct from continuing/o 7ection <4 damages/ ando 7ection <8 (ourt can make other orders. 'his would include rescission of the

contract) s <8I4J.

% remedy can be sought against the person engaging in the conduct and any person "nvolvedin the contraventionG. GPerson involved in a contraventionG is defined in s 893. 'he personmust have knowledge of the essential facts of the contravention) 5orke v Lucas I;K<1J 3<F$C 43<.

,air !rading 0ct 1;8; >4ld?- 7ection 1<.

o % person shall not in trade or commerce engage in conduct that is misleadingor deceptive or is likely to mislead or deceive.

- %pplies to persons not corporations- Cestricted to remedies for GconsumersG

o 6efinition 93- 7ections 18 and 1< of the Fair Trading Act reproduce ss 9;% and 94 of the Trade

"ractices Act$- Trade and commerce and Gmisleading and deceptive have the same meaning as in

the Trade "ractices Act$- &ote the definition of GbusinessG and the definition of services Is 9J and the meaning

of a GconsumerG Is 3J.- 7ection :2 of the Fair Trading Act reproduces s 91 of the Trade "ractices Act

concerning misleading representations.

+emedies under the Fair Trading Act - 7ection K< S Power for the court to grant inunctions- 7ection KK) gives an action for damages "n certain circumstances/ and- 7ection ;22) other orders, "ncluding rescission of the contract.

&ote that the only limitation under the Fair 'rading %ct is that the person seeking a remedy must be a consumer which is de!ined in s 3.

"n addition a breach of s K4 of the Act attracts a criminal sanction.

&ote also the defences for an offence under the %ct as set out in 9 K8 of the %ct.



Note: %n action for misrepresentation under the common law will still have its place wherethe parties do not come within the ambit of the Act *eg the representor has not engaged intrade or commerce$ %n example of this might be the private purchase of a motor vehicle byone individual from another individual."t should be noted that it is necessary to go to (ourt for a Trade "ractices Act or Fair Trading

Act remedy Iincluding s <8 rescissionJ whereas common law rescission can be done withoutrecourse to the courts.



/ista9e

- Aistake is concerned exclusively with mistakes made by one or both parties at thetime of contract formation.

- Aistake can operate at different levels, for example it may be a mistake as to thesubect matter of the contract, or the contractual terms or the effect of contractual

terms.- % mistake of law is no ground for release from a transaction.

Element 1: ommon /ista9e

(ommon mistake occurs where both parties make the same mistake.

ommon la

Ces extincta- %t common law the contract is void if the specific subect matter of the agreement is

non*existent- Couturier v Hastie

o "t was the view of the 5ouse of $ords that everything depended on theconstruction of the contract.

- 7.K Sale at 1oods Act I-ldJo G+here there is a contract for the sale of specific goods, and the goods

without the knowledge of the seller have perished at the time when thecontract is made, the contract is voidG.

- Ces extincta will not apply where)o (ontract for an adventure* p has agreed to take a chance on whether or not

the subect matter is in existenceo +arranty as to existence * % party to a contract can, of course, guarantee or

warrant the existence of the subect matter. "n such cases a non*existencewill not be grounds for having the contract set aside) 'cae v(ommonwealth 6isposals (ommission.

Ces 7ua- (ontracts where, unknown to either party the purchaser is in fact buying hisRher own

property- Bell v Lever Bros$ Ltd I;K14J %( ;3; Iper $ord %tkin at 443*448J- Cochrane v Willis I;<39J ; (h %pp 9< at 31.

-ualities or %ttributes(ommon mistake as to the qualities or attributes of the specific subect matter of the contractdoes not make the contract void at common law.

E5uity

Cescission- 'hose contracts declared void for mistake at common law would also be regarded as

void in equity. S Aaxim of equity NEquity will follow the law- +ill operate to deny a party unconscionability or fraud- Equity may declare the contract voida%le where the common mistake relates to the

fundamental nature or quality of the subect matter and the party alleging mistake isnot at fault (Solle v @utcher. 'his requires 1 elements- % common misapprehension as to the facts or the parties rights- +hich is of a fundamental nature- %nd an absence of fault on the part of the party seeking to have the set aside

- Fundamental nature relates to) *o &ature or quality of subect matter



o Dalue of subect matter - %lso applies to total failure of consideration- Lucas v Long - 7ee previous reference to limitations on the right to rescission) Ta&lor v 3ohnson

Cectification

-"t may order recti!ication of an agreement because the written instrument does notaccurately reflect the agreement.

- +here there is a common mistake, not in the formation of the contract, but in itsreduction into writing the court can order rectification of the written agreement tocorrect the mistake.

- Cectification is only possible if)o 'here was a prior complete agreement and the parties then erroneously

record that agreement in a written document/ or o 'here is evidence that the written document does not give effect to the

parties common intention not amounting to a concluded contract/o 'he %ona !ide rights of a third party are not preudiced.

- 'aralinga "t& Ltd v 'a2or +nterprises "t& Ltd$

-(lear evidence of a mistake common to both parties must be adduced and

- 'he burden lies on the person alleging the instrument needs to be altered. 'hey mustbe able to show precisely the correction that is needed) "ukallus v Cameron$

- 'he court may not order rectification if third parties# rights will be affected) Smith v3ones$

- "n War%urton v *ational Westminster Finance Aust@ it was held that a documentmight be rectified if, by an honest mistake, incorrect material is inserted.

Element 2) /utual /ista9e

(ommon $aw- Autual mistake occurs where the parties misunderstand each other.- 'he court must try to ascertain the sense of the promise from an obective point of

view/ that is how would a reasonable person understand the contractB Smith vHughes$

- "f no meaning can be attributed to the contract it is void. "f the sense of the promisecan be ascertained obectively, the contract Igiven that meaningJ is valid and bindingon both parties)

- a!!les v Wichelhaus$ Peerless ships- 1olds%orough 'ort Ltd v ;uinn

EquityEquity generally follows the common law in the case of mutual mistake.

Element 3: Anilateral /ista9e- 'his is where one party is mistaken and the other knows, or ought to know of the

mistake) Ta&lor v 3ohnson- 'he appropriate test is the obective test and that in applying such a test/ the contract

is not void at common law if all outward appearances show that the parties havereached an agreement.

- 5owever, the contract may be voidable where the conduct of the party not mistakenamounts to Nsharp practice.

'he elements that must be shown for rectification for unilateral mistake/- 'he p wrongly believes that the written document contains a particular term or does

not contain a particular term- 'he 6 is aware of the P#s belief - 'he 6 says nothing to correct the P#s wrong belief -

'he mistake either provides an advantage to the 6 is or a detriment to the P

Aistake as to identity



- +here one party claims to be mistaken as to the identity of the other party suchagreement will be void if)

o %t the time of the apparent agreement the identity of the other party wasmaterial/

o 'here was an intention to contract, not with the other party, but with aseparate entity/ and

o 'his intention was known or ought to have been known to the other party.

'he presumption in face*to*face dealings, and the relevant remedy)o +here parties make the contract in each other#s presence, a rebuttable

presumption arises that the contract is concluded with the person who ispresent.

o "hilips v Brooks< looking up name in directory is insufficient to rebutpresumption

o Ingram v Little *checking directory is sufficiento Le#is v Aver&< Phillips was preferredo "n relation to element IiiJ, a plea of mistaken identity will succeed only where

two distinct entities are involved) ,ings *orton 'etal Co v +dridge 'erritt +tCo- "f a contract is void on the basis of unilateral mistake as to identity, then title in the

goods will not be able to pass to a third party.- 5owever if the contract is not void for mistake but only voidable for a fraudulent

misrepresentation that induces the mistake, then it will only be able to be set aside atthe instance of the mistaken person, so long as this is done before third parties have,in good faith acquired rights under it.

*on +st Factum- "n certain circumstances the courts recognise a particular kind of mistake concerning

written contracts,- +here one party alleges that the document signed was of a wholly different nature to

that which he intended to sign (non<+st Factum= not my actJ.

Three conditions are necessar&- 'he claimant must belong to the class of persons able to recover under the plea.

G'hose who are permanentl& or temporarily unable through no fault of their own tohave without explanation any real understanding of the purport of a particular document, whether that be from defective education, illness or innate incapacityG)lord Ceid Sounders v Anglia Building Societ&

- 'he claimant must show that the document was signed in the belief that it wasradically different from what in fact it was.

- %s against innocent persons@ the failure of the claimant to read and understand mustnot be due to carelessness on his part) "etelin v Cullen

- 'he claimant#s mistake may be as to the character of the document or as to its

contents but not as to its legal effect) 1allie v Lee

Documents

LWB137 Contracts B Notes.doc