week 1 1.1. discharge by performance available remedies

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).