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WEEK11.1.DischargebyPerformanceAvailableremedies:
• Equitableremedies(specificperformance/injunction)=unlikelytobedecreedwhereadamagesawardissufficient.
• Damages="unliquidated"(i.e."asofright"andnotdiscretionary)• Alternatemoneyclaimfollowingcontractualbreach=liquidatedsum(actionisdebt-innocent
partyhasperformedconsiderationandsuesbreachingpartyforagreedpayableprice).• Liquidateddamages=sumbycompensationagreedatcontractformationineventofbreach.
TheDischargeofContractualObligations:Dischargedby:
• Mutualperformanceofcontract(bothpartiesperformprimaryobligations):automaticdischarge(noresidualliability)
• Consent:outcomecanbeundonethroughconsiderationformality(secondarycontract)• Mutualabandonment
Dischargedfor:
• Non-fulfilmentofacontingentconditionofperformance• Terminationforbreachofcontract/repudiation:dependsonunilateraloptionalelectionof
innocentparty(righttosuefordamagessurvivestermination)• Frustratingevent:automatic(noresidualliabilityifnothinghasunconditionallyaccruedbefore
termination)DischargebyPerformance:
• "Primaryobligations"ofacontract(mustbefulfilledthroughperformance)v."secondaryobligations"o "Secondaryobligations":responsibilitieswhichmaysurvivedischargeofprimary
obligations(e.g.obligationtopayliquidateddamages)• Performance=(i)"exact";(ii)"substantial"
The"ExactPerformance"Rule:• Unlessallpartiescontractedforwas"substantialperformance"bypromisor,onlyexact+
literalperformancecandischargecontract.• Ifpromisordischargedhis/hercontractualobligationsexactly=mayenforcepromisee's
obligations• Breachingpartycannotrecovercontractpriceifcontractis"entire"-promisee's
obligationtopaycontractpriceissubjecttoapriorfulfilmentofa"conditionprecedent"(exact+completeperformancebypromisorofhis/herconsideration).
CuttervPowell(1795)-Entirecontract:-Powell(defendant)agreedtopayCutter(secondmateonvesselandintestate)30guineas"providedheproceeds,continuesanddoeshisduty"onvoyagefromJamaicatoLiverpool(8weeksapprox.).-Payment10daysafterLiverpoolarrival.-Cutterdiedafter7weekservice-Widowsoughttorecoverreasonablesum(quantummeruit)HELD:Expresscontract=norestitution(partiesmustabide)
-Contractwasentire;conditionprecedent(8weekservice)hadtobefulfilledbeforedefendantpromiseofpaymentcouldbeenforced.-Lackofwholedutyperformance=norecoveryofmonies(defendantnotliable)SumptervHedges[1898]-Entirecontract:-Sumpter(P)contractedtobuild2housesandstablesforHedges(D)for565pounds,payableoncompletion.-Sabandonedcontractafterperformingworktovalueof333pounds(ranoutofmoney).-HfinishedconstructionwithS'sleftovermaterials.-Ssoughttorecover333poundsHELD:Contract=entire("lump-sum")-Scouldnotrecoveranythingunderit.-Scouldrecoverquantummeruit(restitutionarybasis)forvalueofleftovermaterialswhichHusedtohisbenefit.Divisible("severable")contracts:• Payments=apportioned(expressly/implicitly)todistinctpartsofotherparty's
performance(e.g.instalmentcontractswhereeachinstalmentispaidforupondelivery)GovernmentofNewfoundlandvNewfoundlandRailwayCo(1888)-Divisibleobligationcontract(eachsection=entire):
• ContractthatPconstruct100milesofrailwayinfiveyears.• Dwouldpay$180,000subsidyperannumfor35yearsuponconstructionandcontinuous
operation(efficient)ofline-proportionatepaymentuponeachfive-milesection.• Dwouldalsogranttitleto5000acresoflandforeach1milecompleted(oncompletionofeach
5-milesection)• Uponconstructiondue-date,only85mileswasbuilt(nomoretocome).
• SupremeCourtofNewfoundlandquestions:
o Whetherrightstosubsidy+landgrants(forcompletedrailway)werelostbynon-completion.
o Whetherplaintiffcouldreceivesubsidiesforcompletedpartsoftrack(ifoperatedtheyinfuture).
• Dcounterclaimedfornon-compliance+soughtset-offagainstpromisedsubsidies.HELD:Grantsoflanddidn'tdependoncompletionofwholeline(onlyeach5-milesection)-rightto25,000acresofland.
• Completionofeachsection:1/68partofwholesubsidywaspayableasaseparatesubsidy(beginningnextdayofpaymentfor35yrs).(Divisibleobligation)
• Dsucceededincounter-claimtoset-offdamages(dismissedsubsidyitwasmeanttopay).DoctrineofSubstantialPerformance:• Escaperoutefromrigiddoctrineofentirecontract(favouredbycourtsthatcondition
precedent=substantialratherthanentire)
• Appliestoentirecontracts/individualpartsofadivisiblecontract.-Cannotbeappliedifpartiesagreedthatperformance=exact/entire
• Promisorcanrecovercontractprice(i.e.enforcecontractagainstpromisee)ifhis/herperformance="substantial"(lessthanexact;i.e.defective/incomplete)
• Recovery=subjecttoset-offforcostofrectification/damagesawarefordifferenceinvaluebetweenpromisedperformanceandactualperformance.o Cost=substantialrelativetocontractprice,plaintiffwillnotrecover(liablein
damagestodefendant)o Ifperformancereceived=substantial,plaintiffwillsucceedinrecoveryofcontract
price(remainliableindamagesforbreachofcontract).
• Natureofclausebroken/defect=importanto Regardlessofrectificationcost,didnon-performancerelateto"condition"or"mere
warranty"or"intermediateterm"whichcausedasubstantialdeprivationofbenefit.
HoenigvIsaacs[1952]-ordinarylump-sumcontract(substantiallyperformed):HoenigcontractedforfurnithingwithIsaacsatpriceof750p.
• Isaacspaid400p(refusedtopaybalanceduetodefects)andused+occupiedfurniture.• Hsuedforrecoveryofremainingmoney.
HELD:Hoenigentitledtopricelessadeductionfordefects
• Failuresdidnotgotothe'root'(onlyconditionwheredefendantcanrefusetopay)ofthecontract(wrongtodeprivecontractoroftriflingdefect)
• Entireperformancewasnotaconditionprecedentofenforcement,contractwassubstantiallyperformed.NB:Partiescanuseexpresswordstomakeentireperformanceaconditionprecedent.Jacob&YoungsIncvKent(1921)-Substantialperformance(trivialbreach)
• Plaintiffbuiltcountryhomefordefendant($77,000)• Certainmaterialsrequested(i.e.pipemanufacturedbyReadingCompany)• Readingpipenotused-encasedinwallsandreplacementwouldrequiredemolishmentof
majorityofstructure.• Plaintiffrefusedtoreplaceandsuedforpaymentof$3,800owed(mistake=innocent+faultof
subcontractor,notfraudulent)• Expensivetoreplacepipesbuttheydidnotdiminishvalueofhome(performedsamefunction
asReadingCompany's).HELD:Substantialperformancegranted
• Defect=trivialandinnocent(atonedforbyallowanceofresultingdamages)• Measureofallowance(amountdeductedfromcontract)isnotthecostofreplacement
(verylargeandoutofproportion)butthedifferenceinvalueofpipes(nominal/nil).• Weighupfollowing(literalfulfilmentimpliedinlaw?)
o Purposetobeservedo Desiretobegratifiedo Excusefordeviationfromthelettero Crueltyofenforcedadherence.
LunarPark(NSW)LtdvTramwaysAdvertisingPtyLtd(1038)-Mathematicalexactitudenotrequiredtoaffordsubstantialperformance
• Promisemadebyadvertisingcompanythatboardwouldbeontheirtracksforatleast8hrsadaythroughoutthedecision.HELD:Court:morethananaverageof8hrsaday(7:55minutesononedayand8:05onanothermightbesufficient).BoltonvMahadeva[1972]-DoctrineofSubstantialPerformacefailedtoapply
• BoltoninstalledaboilersystemforMahadeva• Price=560p(deficienciesworth174.5p)• B(plaintiff)suedtorecover636pounds(balance)fromM(defendant)forworkdone+
materialssuppliedundercontractforhotwaterandheatingsystem.• MrefusedtopayBbecauseB"didn'tcompletework".
HELD:Boltoncouldnotrecovercontractpriceatall,exceptforanominalamount(46p)
• Costofrepairrepresented35-30%ofcontractprice(notminorlikeinHoenigvIsaacs)• Substantialperformancedidn'toccur• Natureofdefects=important(workwasnotsomuch"shoddy"butineffectiveforprimary
purpose).DischargeforNon-fulfilmentofaContingentConditionofPerformance• MeehanvJones("subjecttofinance")• PerrivCoolangattaInvestmentsPtyLtd(1982)• Condition=expressly/impliedlyprovidethatitsnon-fulfilmentconfersaterminationright
onone/bothparties.o Conditioncanbepositive/negative(e.g.subjecttoaneventoccurringornot
occurring)• Termination=electiveandautomaticwhenbeyondparties'control(e.g.subjectto
weather)• Ifcondition=unfulfilledaftertimeprovidedforit'sfulfilment,contractremainsonfootas
aconditionalcontract.• Contingentconditioncannotbereliedoniffulfilmentwaspreventedbyterminating
party,orifsuchpartyfailedtoco-operateoractedinbad-faith.1.2DischargebyAbandonmentorConsent:
• Furthercontractusedtodischargeapreviouscontract(compromiseoraccordandsatisfaction)• McDermottvBlack(1938)
• Mutualabandonment(bothpartiestreatcontractasatend)-Frequentlyhappensaftera
disputeresultingin/followingonbreachDTRNomineesPtyLtdvMonaHomesPtyLtd(1978)-Mutualabandonment
• After4monthsofinactivity,Courtheldthatcontractwasmutuallyabandoned.Principlesofabandonment:(a)Conductmayamounttomutualabandonmentofcontract;
(b)Contractonfootmaybedischargedbyinferredlateragreementofparties(agreementinferredfromconduct);©Abandonmentdescribessituationofinferredlateragreement(rarewaytodischargecontract);(d)Abandonmentinferredmaybeeitherofunperformedobligation/bothfutureperformance+existingrights);
KeyQuestion:Whetherpartieshaveobjectivelymanifestedimpliedintentiontoextinguishfirstcontract
(f)Inference=clear(whetherlaterinferredcontract-substantialinconsistentwithfirst)(g)Subjectiveintentionofparties=irrelevant(h)Impliedintentionmaybemanifestedthroughsilenceanddelay(i)Partiesmaybeestoppedfromdenyingthatcontracthasbeabandoned(silence+delay=relevantinshowingestoppel).• Terminationbyabandonment"operatesprospectivelywithoutprejudicetoaccrued
entitlements".
Week21.3.1Repudiation:General:
• Termination:prospectivedischargeofcontractforbreach/repudiation• Rescission:contractbeingputtoanendretrospectively(e.g.unravelledbecauseof
vitiatingfactorlikemisrepresentation/duress).ContractuallyConferredTerminationRights:
• Presumptionofconcurrentoperation;innocentpartycanrelyoncontractualandgenerallawterminationrights(e.g.ProgressiveMailingv.Tabali)o Comparethe"exclusivecode"(AmanvAviation)(Conferredrightsareexclusiveandthe
commonlawisexcluded).• "Remediallimitation":riskofelectingtoterminateoutofcontractualright=loseremedial
rights(torecoverforlossofprofitsandfutureexpectation)unlessterminationrightwasalsosupportedbygenerallawterminationrights(ProgressiveMailingvTabali)o Relyingonatrivial/technicalbreach,won'tallowgeneralterminationright(torecover
futureprofits)becauserecoveryhasbeenforfeitedinthatregard(atrivialbreachcouldhavebeenputupwith).
TheRighttoTerminateUnderGeneralLaw:• "Serious"eventsofbreach:
(a)Repudiation(anticipatorybreach):express/impliedunwillingness/inabilitytoperformcontractaswhole(goestotherootofthecontract);(b)Breachof"condition":failuretoperformessentialterm(express/implied)©Breachofan"intermediateterm":causessubstantiallossofcontractualbenefitorincreaseincontractualburdentoinnocentparty.
• Courts=upholdersofbargains(tendtoleanagainstdestroyingcontracts)• Invalidtermination=repudiation;enablesotherparty(ifwilling/abletoperform)toterminate
contract+sueforloss-of-bargaindamages.• RepudiationofObligation:
-TheMeaningofRepudiation:• Test(KoompahtooLocalAboriginalLandCouncilvSanpine):'First,itmayrefertoconduct
whichevincesanunwillingnessorinabilitytorendersubstantialperformanceofthecontract.Thisissometimesdescribedasconductofapartywhichevincesanintentionnolongertobeboundbythecontractortofulfilitonlyinamannersubstantiallyinconsistentwiththepartiesobligations.Itmaybetermedrenunciation.'-GleesonCJ,Gummow,HeydonandCrennanJJ
Onprovingrepudiation(Objectivetest):
• KoompahtooLocalAboriginalLandCouncilvSanpine:'Thetestiswhethertheconductofonepartyissuchtoconveytoareasonableperson,inthesituationoftheotherparty,renunciationothecontractasawholeorofafundamentalobligationunderit'.GleesonCJ,Gummow,HeydonandCrennanJJExamplesofRepudiation:
• Unequivocalwords(e.g.'Iwillnotkeepthisbargain'• Conductthatmanifestsunequivocalintentionnottocontinuewithcontractorproceedina
mannerinconsistentwithcontract.
LunaParkvTramwaysAdvertising• Tramway'spastperformance:preparedtocontinueonlyamannerthatwasinconsistentwith
obligationsundercontract.ErroneousInterpretationofaContract:
• Ifapartyinsistsonproceedingonanerroneousinterpretationofcontract=repudiation• Ifgoodfaitherror,partyshouldbegivenanopportunitytocorrectconduct.
DTRNomineesPtyLtdvMonaHomesPtyLtd(1978)-Erroneousinterpretationofcontract(bonafide)
• WrittencontractforsaleoflandrequiringplanofsubdivisiontobelodgedwithcouncilbyDTR.• MonaHomesnotrequiredtocompletesalebeforeregistrationofplan• DepositpaidbyMHonsigning.• DTRlodgedplanseekingapprovalofonlypartyofthesubdivision(mistakenlybelieveditwas
entitledtoproceedintwostages).• MHpurportedtoterminatecontract• DTRarguedthatpurchaserhadwrongfullyrepudiatedandthatdepositwasforfeited.
HELD:DTRwasinbreachbuthadnotrepudiation
• Assertedwrongviewofcontract-bonafidebelievedtobecorrect• NobasisthatDTRwerepersisting"willynillyinthefaceofaclearenunciationofthetrue
agreement".• DTRnotentitledtoterminateforrepudiation(wrongfulterminationonMH'spart)becausein
breach.• Aftercontractbeingonfootfor4monthswithoutanyactivity,declaredthatithadbeen
mutuallyabandoned.• DepositrecoveredbyMH.
ProgressiveMailingHousePtyLtdvTabaliPtyLtd(1985)-Repudiationwithnobonafidedisputeastoconstructionoftermsinquestion(unlikeDTR).
• TalabiletafactortoProgressiveMailing(5yrterm,monthlyrentalof$7750)o Cl.10.1:lessorhadrightofreentryifrentwereunpaidfor14dayso Cl.11.6:Lessorwasrequiredtocarryoutcertainworksonpremisesandlesseewouldtake
possession14daysafternoticeofcompletionprovided.• Lesseewentintopossessionbeforeexecutionoflease.• Tabalogavenoticethatworkshadbeencompleted,PMclaimedthattheywerenotsatisfactory
andrefusedtopayrent.HELD:Lesseerepudiatedleasebybaselesslyrefusingtoperformobligationunderit(non-paymentandotherminorbreaches)
• Commonlawofcontractappliestoleases.• Expressprovisionforre-entrydidnotprecludedoperationofcommonlawrighttoterminate
forrepudiation(orfundamentalbreach).WrongfulTermination:
• Expressrepudiation• Terminationforconductthathasbeenwrongfullyappraisedasrepudiatory,inseriousbreachor
frustrating.
StarlightEnterprisesLtdvLapcoEnterprisesLtd[1979]-ATTITUDEexample-bonafide
• Starlightcontractedtobuy4000travelbagsat$3perunitfromLapco.• LapcosentStarlightletterinformingthemofneedtoraiseprices.• StarlightpurportedtoacceptLapco'srepudiation,evenafterLapcoindicatedwillingnessto
proceedasperoriginalterms('Yourrepentancehascometoolate').HELD:Lhadnotrepudiatedintheirletter(actingingoodfaithandmistakenlybelieveditwasentitledtoraiseprices).
• ReasonableonlookercouldnotinferfromletterthatLapcowas"unequivocallyassertingitsintentionnotperformthecontractaccordingtoitstrueinterpretation".
• SshouldhavepointedouterroneousviewandgivenLtheopportunitytocorrect-consequentlyinrepudiation.OxboroughvNorthHarbourBuildersLtd[2002]-Specificperformanceaffirmingcontract(wrongfultermination)
• OxboroughcontractwithNorthHarbourtobuildthemahomeonlandOowned.• Ostartedtocomplainaboutwork+progress;commencedproceedingsseekingspecific
performanceofcontract.• After7dayslitigation:Opurportedtoterminatecontractbecauseofbuilder'sbreach+
repudiationofcontract.HELD:O'stermination=invalid.
• Soughtspecificperformancewithfullknowledgeofbuilder'sbreaches=affirmedcontract(losttherighttoterminateiftheyhadany)andthenchosetoterminate.
• Afteraffirmation,Owouldhavetoshowfreshrepudiationbythebuilder(e.g.newsubstantialbreachorcontinuingrepudiation).RepudiationofInstalmentContracts:
• SaleofGoodsAct1896(Qld),s33:
MapleFlockCoLtdvUniversalFurnitureProducts(Wembley)Ltd[1934]-Maintestforrepudiationofinstalmentcontract,usageofSGAct(norepudiation)
• MFagreedtosupplyUniversalwith100tonsofragflockin3weeklyinstalments(1.5tonseach-paidforseparately).
• Deliverieswouldcomplywithstatutorystandardchlorinelevels(contractualterm)• 16thdelivery:didnotmeetstandard• UniversalnotifiedMFandpurportedtoterminatecontractforrepudiation• 4moredeliveriesmade:defendantsacceptedfirsttwoandrefusedtoacceptothers(contract=
terminated)• MFsuedfordamagesforbreachofcontract;defendantsargueddefectivedelivery=
repudiation.HELD:Defendant'srefusal/termination=invalid
• SGAct:singlecontract(notasmanycontractsasinstalments)o Breachofoneconditioninone/moreinstalmentsisnotalwaysrepudiationofcontractas
awhole.Maintests:
• Considerratioofbreachtocontractasawhole;and• Considerprobabilityofbreachbeingrepeated
• (1)Deliverycomplainedofwasonly1.5tonsoutof100tons;(2)Chan=ceofbreachbeing
repeated=practicallynegligible(successfuldeliveriesbeforeandafterdefectiveone).
HammerandBarrowvCoca-Cola[1962]-ApplicationofMapleFlocktest(repudiation)
• Manufacturer(HammerandBarrow)agreedtosupply200,000yoyostoNorthernBottlingCo(behalfofbuyer,Coca-Cola)touseinanadvertisingcampaign.
• About80%of85,000yo-yosdeliveredweredefective.• Coco-Colarefusedtoacceptfurtherdeliveries.• HammerandBarrowsuedfordamagesfornon-acceptance.
HELD:Manufacturer'sclaimfailed.
• Coca-Cola=entitledtorefusefuturedeliveries(i.e.terminatethecontract)ratherthanbesubmittedtofurtherrisks(marketingcampaignandreputationofCoca-Colaatstake,etc.)o Ratioofseller'sbreachtoentirecontract=considerable(80%defective)+highprobability
offuturebreaches.
EffectsofRepudiation:• Ifinnocentpartyterminatesforrepudiation(rightfully):contractisdischarged+partyin
repudiationisliableindamagesforanticipatorybreachesofcontract.• Ifinnocentpartyrefusestoacceptrepudiation:
o Repudiatingpartymayrepent+withdrawo Contractremainsonfooto Repudiatingpartymaystillexploitfutureevents(e.g.seriousbreachesbyformerly
innocentparty).• Ifinnocentpartyfailstoperformownobligation,butdoesnotacceptrepudiation:
o Innocentpartymaybeexcusedfromnonperformanceofobligationswhereobligationsaremutual+co-dependent(ForanvWight)
ForanvWright(1989)-estoppelbeingraisedbyrepudiation:• Writtencontractforsaleoflandwithfixeddateforcompletion;purchaserspaid10%deposit• Timeforcompletion(22ndJune)='oftheessence'• Specialcondition:vendorsobtainregistrationforeasement(righttocross/usesomeoneelse's
land)priortocompletion.o Vendorstoldpurchasers(20June)thattheycouldnotcompetebyfixeddate.
• Neitherpartyperformed22ndJune• 24June:purchaserssoughtdeclarationthatcontractwasterminatedandrestitutionofdeposit.
HELD:Vendorshadrepudiated-purchasershadnotaccepted
• Partiesmutuallydependentandconcurrentobligationremainedonfoot.• Thiswouldnormallyprecludeterminationbyonepartyfortheother'sfailure.• Repudiatoryconductraisedanestoppel-dispensedpurchasersfromneedtoproffer
performance.• Dispensedfromtemporalobligationbutnotsubstantive(revivedwithreasonablenoticeof
intentiontoperform).• Purchasersentitledtoreturnofdeposit-totalfailureofconsideration.
WEEK31.3.2BreachofanEssentialTerm:• "Sufficientlyserious"contractualbreaches=sufficientforcourttoterminatecontract• Seriousnessdependsonlegalclassification• Classificationofcontractualterms(inAU)=KoompahtooLocalAboriginalLandCouncilv
SanpinePtyLtd(2007)-confirmedUKtripartiteclassification:o Essential
• "Conditions"(matterof"agreement")§ ExpressEssentiality("timeoftheessence"-ForanvWight,Tropical
TradersvGoonan)§ ImpliedEssentiality("objectiveimportance"-JodanCJinLunaParkv
Tramways;AssociatedNewspapersvBancks)• Generalnatureofcontract:BungeCorpvTradax(mercantile
contract:timeisoftheessence)o Non-essential
• "IntermediateTerms"("Consequences"or"gravity"ofbreach-"waitandsee"approach)§ SubstantialBreach(substantiallydeprivespromiseeofwholebenefitit
weretoreceiveundercontract)§ InsubstantialBreach(treatedasabreachofwarranty)
• "Warranties"§ InsubstantialBreach(leadstoawarranty)§ Noterminationrights-onlydamages§ Rare(generally)outsideofimpliedwarrantiesinsale-of-goods
legislation.
"Conditions":• "Essential"contractualterm=slightestbreachgivesinnocentpartyrighttoterminate
(refusetoperformobligationsrestingonhim/her)andsuefordamages.o Essentialityisagreedbypartiesexceptwhereimpliedinlaw(e.g.underSaleof
Goodslegislation)
• Impliedessentialitydependson"objectiveimportance"ofterminquestion:o Considercontractasawhole:promiseisofsuchimportancetopromiseethathe
wouldnothaveenteredintocontractunlessassuredofstrict/substantialperformanceofpromise-apparenttopromisor(LunaParkvTramways)
o Considernatureofterm,purposeandsubjectmatterofcontract;likelyconsequencesofbreach;whetherdamageswouldbeanadequateremedy;promisee'smotivationforentryintothecontractandcommonintentionofparties(expressesthroughcontractuallanguage,contextofcontractualrelationship,commercialpurpose).
LunaPark(NSW)LtdvTramwaysAdvertisingPtyLtd(1938)-breachofacondition• LunaParkcontractwithTramwaysfordisplayofadvertisingboardsfor52weeksfor'at
leasteighthoursperday'throughoutLunaPark'sseason.o "We[Tramways]guaranteethattheseboardswillbeonthetracksatleasteight
hoursperday…"• LunaParkterminated(forrepudiation);Tramwayssuedforfeeowingundercontract.
• Tramwayscouldnotrecoverifbreachedterm=condition(admittedboardwasnotdisplayedfor8hrsaday)
HELD:Tramwayscouldnotrecoverfee;LunaParkentitledtoterminateforbreachofcontract.• Essentialitywasevidentfromcontractualtermsandcircumstances.• LathamCJ:'[T]hewords'weguarantee'emphasizetheimportanceoftheclausethey
introduce…thepaymentof20poundsperweekwasnottobeginuntilthecompletenumberofroofboards,namely,53,werealldisplayedatthesametime…'o Therefore,completion=essentialelement(condition)
AssociatedNewspapersvBanks(1951)-Breachofcondition
• Banks(defendant)contractedwithAssociatedNewspapers(plaintiff)tosupplycomicstripfor10yrperiod.o Associatedundertooktopresentcomiconfrontpageofcomicsectioninnewspaper.
• Threeweeksinarow-comicdisplayedonthirdpage.• Bankspurportedtoterminatecontract;ANsoughtaninjunctiontorestrainBanksfrom
breachingcontractandsigningwitharival.HELD:Banks'termination=valid(breachofacondition)
• Structureofcontract:partiesobligations="concurrentandcorrelativepromises"-impossibletoattacheddifferentvalues(bothobligations=conditions)
• Dixon,Williams,Webb,FullagarandKittoJJ:'Theplaintiffwouldnothaveemployedthedefendantunlessithadbeenassuredthatthedefendantwouldperformhispromise,andthedefendantwouldnothavemadethepromiseunlesshewasassuredthathisworkwouldbepublishedinaparticularmanner.'"Innominate"or"Intermediate"Terms:
• Termsareclassifiedas'intermediate'atthetimeofcontractformation• Neitherconditionsnorwarranties-somebreachesaretrivial,someserious.• Courtswill"waitasee"todeterminewhetherterminationrightexists.
o Terminationrightsdependonconsequencesofbreach-whetheritgoestotherootofthecontract:• Ifso,term=condition(doestheeventdeprivetheinnocentparty"substantiallyof
thewholebenefit"hewasintendedtoreceive?)[HongKongFirShipping]• Ifnot,term=merewarranty
HongKongFirShippingCoLtdvKawasakiKisenKaishaLtd[1962]-Breachofintermediateterm(trivial)
• Charterpartyagreement(shippingcontract)containeda'seaworthinessclause'describingvesselas'ineverywayfittedforordinarycargoservice'.
• Cl3:owners(HongKong)weretomaintainvesselina'thoroughlyefficientsrareinhullandmachineryduringservice'.
• Kawasaki(defendant)purportedtoterminateforbreachofseaworthinessclause.o Firstthreemonths(inefficient+insufficientengineroomcrew),vesselwasoff-hirefor57
days(defendantscouldn'tearnincomebycarryinggoods).o Vesseloff-hireforenginerepairsforweeksinnextthreemonths(crew=replaced).
• Plaintiffsarguedtermination=wrongful+defendantshadrepudiated(suedfordamages).• Defendantscounter-claimedfordamages(couldnotrecoverifwrongfullyterminated).
HELD:Clausewasnotaconditionbutanintermediateterm(defendantscouldnotrecover)
• Somebreaches=trifling,otherswouldresultinlossofvessel.• Breachofclausedidnotgotorootofcontract.
TEST:• Doesbreachgotorootofcontractwhichfurthercommercialperformanceofcontract=
impossible?(wholecontractfrustrated)o Yes,innocentmaytreatcontractasatanendo No,claimonlydamages(can'tterminate)
• Occurrenceofeventdepriveparty(furtherundertakings)ofsubstantiallywholebenefitofcontract(receptionofsuch=originalintentionuponcontractformation)?
KoompahtooLocalAboriginalLandCouncilvSanpinePtyLtd(2007)-ApplicationofHongKongDoctrine;seriousbreachofanintermediateterm
• Koompahtoo+SanpireenteredintoJointVenture(JV)concerningcommerciallandacquiredbyKoompahtooundernativetitlelegislation.
• Cl.16:Sanpinerequiredtoprepareannualaccounts(developmentprogram)o Book-keepingclauses(cl16.5(a))-requirementtoprepareandsubmitprogressreports.
• JVdidnotproceedtorezoning(despite$2millionincosts)• Koompahtooenteredintoadministration+administratorattemptedtoacquirefinancialinfo
o Unsuccessfullyattempts(metwith'evasionandprevarication')o AdministratorterminationJVagreement
• Trialjudge:termination=valid(Sanpinecommittedseriousbreachesofadminstrationobligations)o SanpineappealedtoNSWCAsucessfullyo KoompahtooappealedtoHCA
HELD:Koompahtoo=entitledtoterminate(seriousbreachofanintermediatetermwhichwenttotherootofthecontract-ApplyingHongKongdoctrine)
• Obiter:Intermediarytermspromoteinterestsofjusticebylimitingrightstorescindtoseriousandsubstantialbreaches,aremoreflexibleandensurejustoutcomes.TerminationforDelay:• Contractualobligations:"temporal"+"substantive"
o Performancemustoccurwithinspecifiedperiodoftimeorifnotspecified,withina"reasonabletime"
• "Delay":maygenerateterminationrightintwowayso Delayinperformance(i.e.breachoftimestipulation,express/implied);oro Delay=resultofbreachofsubstantiveobligation(e.g.HongkongFir)
Terminationforbreachofatimestipulation(i.e.lateperformance)• Timeforperformancestipulated
o Timeoftheessence(condition)• Express(e.g.ForanvWight;TropicalTradersvGoonan)
• Implied(e.g.LunarPark-JordanCJ-objectiveimportance;BungeCorpvTradax-mercantilecontract)
o Timenotoftheessence(warranty)• Repudiationrequired(renunciationasinKoompahtoo;mannersubstantially
inconsistentwithtemporalobligations)§ Problem=ambiguityofbeinglate§ Meredelayisnotrepudiation,delayshavetobe"grossandprotracted"
(LouindervLeis)§ Riskforinnocentpartyregardinghowlongislongenough?Notice
procedurecomesin:• Repudiationshownasfailuretoconformwithvalidnotice.• Evenifnoticeissuedincorrectly,canstillterminatefor
repudiation,it'sjustharderasotherevidenceofrepudiationisneeded(LaurindavCapalaba)
o Timeforperformanceopen(e.g.LouindervLeis;LaurindavCapalaba)• Repudiationrequired(reasonabletimeforperformance;nobreachuntil
unreasonabledelay)• Issuenoticegivingstrictperiodforcompliance(ifthisisbreached=double
delaygivingrisetotermination).
QLD,s62PropertyLawAct1974(Qld):
• Equity:performanceontime=notgenerallyessentialunlessstatedexpressly(sometimes
impliedly),orelseexpirednoticesettingreasonableperiodforperformance.Breachof"essential"timestipulationsBungeCorpNewYorkvTradaxExportSAPanama[1981]-MercantileContractwheretimeisoftheessence("stringcontract")
• Saleandpurchaseof15,000tonsofsoyabeanmeal• 3consignments(May,JuneandJuly1975-5000tonseach)• Cl7("periodofdeliveryduringMay1975wasatbuyer'scall.Buyersshallgiveatleast15
days'noticeofprobablereadinessofvessel.")• Buyersgave10days'notice+sellersterminatedforbreachofanallegedcondition(cl7).
HELD:Timefornoticewasimpliedlyoftheessence-defaultinmercantilecontracts
• Unlessbuyersgavenotice,vendorscouldnotidentifycorrectloadingport.• Notice=conditionprecedenttovendorsperformance.• Bothbuyer+sellerneedtoknowwhattheirobligationsare,notinretrospect,butatonceas
eventsoccur-forbusinessefficacyandbecauseoneparty'sobligationsmaybetotallydependantonpunctualperformanceoftheotherparty-i.e."string"contract
Breachof"non-essential"timestipulations(includingwheretimeforperformanceisnotstipulatedatall)
• Noticerequirements:o Servedafterbreach/unreasonabledelay;ando Mustrequirestrictcompliancewithinareasonabletimeandspecifiedperiod;ando Partyinbreachmustbeadvisedthatfailuretocomplymaybetreatedasbasisfor
termination.LouindervLeis(1982)-Doubledelay(contractisatlarge)
• Writtencontract(1Nov),LouinderagreedtoselllandtoLeis.• Cl4:LeisrequiretotenderformoftransfertoLouinderwithin28daysfromdeliverydate
(Louinder'sstatementoftitle).• Contracthadnofixeddateofcompletion-timewasnotoftheessence• Louinderdeliveredstatementoftitleon2Nov
o Leisdidnottenderanyformoftransfer• 3monthslater(8Feb):LouinderservednoticeonLeisrequiringcompletionofcontract(not
merelytenderofform)within21days.• 4March(noticedperiodexpired):Louinderpurportedtoterminatecontract(noticehadnot
beencompliedwith)HELD:Louinder'snotice=invalid(contractisopenmeaningpurchaserisentitledtoreasonabletimeforcompletionofcontract)
• TimehadnotarrivedwhereLouindercouldserveanoticerequiringLeistocompletecontract(nobreachexceptanon-essentialtimestipulation)
• Partycannotremake(unilaterally)thecontractbymakingtimeoftheessence(consensuallynotso).
• DOUBLEDELAYREQUIRED:• Initialperiodofdelay=breach(non-essentialterm-withoutmore,can'tfindrepudiation).• Followingsaidbreach,innocentpartygivesanoticefixingareasonabletimeforperformance.
o Non-compliancewithnotice=unreasonabledelayincomplyingwithnon-essentialtimestipulation=repudiationinferrred=termination.
LaurindaPtyLtdvCapalabaParkShoppingCentrePtyLtd(1989)-Contractatlarge(defectivenoticebutterminationforotherrepudiatorybehaviour)
• Laurindaenteredinto6yrleaseforshopspaceinCapalaba'sshoppingcentre.• Leaseneverregistered(Capalabahadtofillinimportantdetails-whichwasneverproperly
done)• 9monthsafterenteringpossession,LaurindavacatedpremisesongroundthatCapalaba
repudiatedleaseorbreachedanessentialterm.• CapalabapurportedtoacceptLaurinda'srepudiation(re-enteredpremises)• 9months-Laurindamadewrittenrequestsforregistration
o Issuedademandforcopyleasewithin13days-purportedtoterminateifCapalabadidn'tcomply.
HELD:Laurinda'snotice=defective(toolittletimetoregister)
• Repudiationcanoccurinabsenceofeffectivenotice:Capalaba'sunresponsive,'cavalierandrecalcitrant'behaviourjustifiedtermination.
WEEK41.3.4TheMechanicsofTermination:The"Election"toTerminateorAffirm(underGeneralLaw).TheConceptofElection:• Innocentvictimofseriousbreach/repudiationmaychoosebetween:
(1)Assertingrighttoholdotherpartytoexistingandvalidcontractualrelationship("affirmingcontract"-e.g.orderforspecificperformance).• Ifaffirm,mustawaitfreshrepudiation/reasontoterminate.
(2)Terminatingthecontract• Iftermination,contractcannotbeunilaterallyrevived.
Ifbreachforrenderingfutureservices=impossible(e.g.frustratingeventoccurs),dischargeautomaticallyoccursandelectionisirrelevant.Whatamountsto"affirmation"ofthecontract?• Word/conductconveyingunequivocallyadecisionnottoterminatecontract.
o Questionoffactinallcases(OxboroughvNothHarbourBuildersLtd)CoastalEstatesvMelvende[1965]-Fraudulantmisrepresentationcase(noaffirmationofcontract)
• 09/1960:Mentersintocontract(purchaseofcertainpropertyallotments),inducedbyfraudulentmisrepresentationbydefendant's(CE)agent.
• 04or05/1961:Munsuccessfullyattemptstoselllandthroughagents(withpossibleknowledgeoffalserepresentations)
• 01/1962:CertainthatMknowsthatCEagent'srepresentationswerefalse.• 03/1962:Mceasedtopayinterestinstalments• 04or05/1962:Mdeterminedtoavoidcontract• 06/1962:Mceasedtopayinstalmentsontheprinciple• 09/1962:Mvisitsasolicitor+learnsofrighttorescind.Issuesasummonsofmoneypaidunder
contract.• CEarguedthatplaintiff'sconductevincedanaffirmationofcontract(nolongerrescind).
HELD:Mhadnotaffirmed-hadproceededonassumptionthatrepresentationswerefalse(beendefrauded)
• M'sactionswouldhaveonlyaffirmedcontractifheknewofrighttorescind.• Onusondefendanttoproveaffirmation-noactswereadversetohim.• SecondpaymentofratebyM:cannotaffirmwhathasbeendisaffirmed.
Actual(Intentional/Conscious) Imputed(Deemedelection)
• Requiresknowledgeof: Factsgivingrisetorighttoterminate(i.e.knowledgeofbreach);and One'slegalrightsconcerningbreach(i.e.powertoterminatecontract)
• Decisiontoaffirm=unequivocal(expresscommunication/conduct)
• Doesn'trequireknowledgeoflegalrights • Canbeexplainedasapplicationofprinciplesof
estoppelorruleagainstapprobating/reprobatingor"generalconsiderationsofjustice"
• "Didplaintiffexerciserightsundercontractadverselytootherpartywhichwouldnothavebeenjustifiedhadthecontractbeenonfoot?"
• "Didplaintiffdoanyactsthatrecognisedcontinuedexistenceofcontract?" • "Neutral"or"adverse"
exercisetorights. ElectionandReasonableness
• Wherecooperationisrequired,contractmaybeautomaticallydischarged+incapableofunilateralaffirmation.
• Nooverarchingdutyofreasonablenesswhichfetterselectiontoaffirm.White&Carter(Councils)LtdvMcGregor(1962)-Affirmingfromwrongfultermination(LordReid'stwoexceptions)
• W&Cprovidedlitterbinstolocalcouncil;contractwithMtodisplayadvertisementsonbinsforthreeyears.
• SalesmanagerhadnoauthoritytocontractonbehalfofM-Mpurportedtoterminatecontract.• W&Celectedtoaffirmcontract(fulfilledobligations)-suedMforfullcontractprice(actionof
debt).• Defendant'sargument:contractwasrepudiatedbeforeanythingwasdoneunderit(Melectedto
terminatethesamedaycontractwasmade).HELD:W&Centitledtocontractprice(victimofM'srepudiationforwrongfultermination;theyhadanunfetteredoptiontoacceptoraffirmthecontract).LordReid:twoexceptions(1)Wherecooperationofrepudiatingpartyisinvolvedsothatinnocentpartycancompletecontract,contractisautomaticallydischargedandincapableofunilateralaffirmation.(2)Wherethereisno'legitimateinterest'withininnocentpartytocontinueperformanceapartfromdamages-cannotsaddleotherpartywithadditionalburdenandnobenefittohimself.On"postponing"theelectiontoterminate:• Victimofseriousbreach/repudiationhas"reasonabletime"tomakeanelection(neednot
beimmediate).• Postponementcannotbeunreasonableoradverseorprejudicialtobreachingparty.• Partycandelayterminationwithoutaffirmingcontract-TropicalTradersvGoonan
TropicalTradersPtyLtdGoonan(1964)-"conditionalelection"• 6Jan1958,defendant(Goonan)enteredintoinstalmentcontracttopurchaselandfrom
plaintiff(Traders).• Contractprice=47,500ppayablebyinitialdepositof10,000pandfourinstalments(5,
000peach).o Finalpayment17,500p(payableon6Jan1963)
• Cll.12:timeoftheessence• Cll.11:ifpurchasersfailtopayanymoniesontime,vendorcouldrescindcontractwithout
noticeandforfeit(keepallmoniespaidbypurchaser).• Respondentswentintopossession,paiddeposit,firstthreeinstalmentswerelateandthe
4thwaspaidearly.Finalpaymentwasnotmade.
• Vendorsgavepurchasersextensionoftimetopayfinalpaymentby14Janandifnotpaidtheywouldrescind.o Purchasersdidn'tpay,contractrescinded.
• Purchasers'argument:acceptanceoflatepaymentsdemonstratedintentiontoaffirmcontractonvendor'spart.Impliedthattimewasnotoftheessence.
HELD:Vendorsvalidlyrescinded• Eachacceptanceoflatepayment=electiontoaffirm(notawaiveroftimebeingoftheessence
astofuture).• Extensionoftimenotice=notelectiontorescind(intimationofintentiontoexerciseright
unlesspaymentismadewithintimeofgrace)=conditionalelectionThe"mechanics"oftheelectiontoterminate:Twoquestions:
Hastheright(power)toterminatearisen? Ifso,hasitbeeneffectivelyexercised?o Mustbeunequivocallycommunicated(madeknown)bywords/conductevincingan
intentiontoterminatetobreaching/repudiatingparty.• Silence/non-performance=sufficienttomaketerminationknowntopartyin
breach.o Effectiveuponnotification.o Groundforterminationmustbevalid(evenifparty'sreasonforterminationis
wrong,terminationisstillvalidifthereisanotherreason)VitolSAvNorelfLtd(The"SantaClara")[1996]-Non-performanceissometimessufficientcommunicationoftermination
PurchaserentersintocontracttobuypropaneatUS$400pertonne. DeliverymadebetweenMarch1-7 8March:buyerstelexedsellers(deliveryvesselwouldnotbecompleteuntil9March)o Buyersnotacceptingdelivery,repudiatingcontract.
Aftervesselcompletedloading,neitherpartytookactiontocompletecontract. Sellerssoldvesseltothirdparty(US$170pertonne) 9thAugust:sellersclaimbuyersmustpay$1millionindamagesforlowerpriceobtainedonresale. Disputesubmittedtoarbitrationwhofoundthat:o Buyer'stelex=repudiation/anticipatorybreacho Seller'sfailuretoact=acceptanceofrepudiationwhichwaseffectively
communicated.HELD:Arbitratorwascorrect(repudiationhadbeenacceptedbysellers) Actofacceptancerequiresnoparticularform(communicationdoesn'thavetobeinlanguageofacceptance,itjustneedstobeunequivocallyconveyedtorepudiatingparty). Notificationdoesn'tneedtocomefromaggrievedparty(DickinsonvDodds)-breachingpartyjusthasto"findout".TheConsequencesofTermination Terminationoperatesprospectively(fromtimeofnotificationofelection).
Partiesarecompletelydischargedfromprimaryobligations,butsecondaryones(e.g.exemptionandliquidated-damagesclauses)remain.[E.g.arbitrationclausesasinHeymanvDarwinsLtd] Rightthatareunconditionallyaccruedarenotaffected('divested')• E.g.Rightstodamagesforbreach/repudiationpriortotermination• Rightsaccruedunconditionallytocontractualobligations(McDonaldsvDennysLascelles
Ltd)• Restitutionofpaymentsumsmaybeavailablewheretotalfailureofconsideration
McDonaldvDennysLascellesLtd(1933)-rightnotaccruedunconditionallytocontracutalobligations=norecovery InstalmentcontractbetweenRyeandDennysLascellesforpurchaseofland Ryepaid6000pdepositandtwo1000pinstalments InreturnforextensionoftimeforthirdinstalmentpaymentfromRye,DennysobtainedguaranteefromMcDonaldforRyes'sobligationsundercontract. Ryerepudiated,Dennysaccepted DennyssoughtthirdpaymentfromMcDonald(asguarantor)asadebt.HELD:Instalmentwasnotrecoverable Debthadnotunconditionallyaccrued. Paymentwasconditionalonsubsequentcompletionbyvendor(notprecludedbytermination). Previouspaymentswererecoverableinrestitutionfortotalfailureofconsideration.HeymanvDarwinsLtd[1942]-Arbitrationclausesremaindespitecontractualtermination Darwins(steelmanufacturer)contractedwithHeyman. Contractincludedarbitrationclause(ifdisputearose,contractsubmittedtoarbitration). Disputearose,HpurportedtoterminatecontractbecauseofallegedrepudiationbyDandclaimeddamagestoo. Daskedforstayofproceedingsforarbitration. Harguedthatcontractualarbitrationclausewasnolongerenforceablebecausecontracthadbeenterminated.HELD:Staywasgranted-contractendedastofutureperformancebutsecondaryobligationsstillsurvived(e.g.damagesclaims). Dinsiststhatinordertodeducedwhattheseliabilitiesare,Heymanmustlookatthecontract(throughprocessofarbitration).TotalFailureofConsideration: Deposit/sumhasbeenpaidpriortodischargeofcontract-recipientmaybeliabletoreturnifnoconsiderationisgiveninexchange. FibrosavFairbarn(frustration-superveningillegalitypreventedconsiderationwhichwasperformancefrombeinggiven). ForanvWight(termination) Notacontractualremedy(restitution):BalticShippingvDillon
ForanvWight-totalfailureofconsideration(conveyanceofland)-affirmationisnolongerpossibleaftertermination.
Vendorswereliableforreturnofthedepositbecausewhenthecontractwasvalidlyterminatedbythepurchasers,theconsiderationforwhichthepurchaserspaidthedeposit-conveyanceofland-hadtotallyfailed. Purchasersbecameentitledtorecoverthedepositnotasdamagesbutinrestitutionasmoneypaidforconsiderationthathadtotallyfailed.
"Affirmation"isnolongerpossibleaftertermination(likeinCoastalEstatesvMelevende). Innocentpartycangenerallyonlygetdamagesforanticipatorybreach/repudiationifhe/sheelectstoterminate.Otherwise,he/shemustwaituntilactualbreach(then,innocentpartyisentitledtodamagesregardlessofwhetherhe/sheterminatesthecontract).