Contract B Flashcards
A contractual term is a condition if ‘it is an an essential element in the contract’ for which the other person would have required ‘strict or substantial performance’.
Tramways Advertising v Luna Park (NSW) Ltd (1938) NSWCA
Advertisement - min 8 hours/day - average 8 hours/day.
A term will be intermediate if it can be breached in a variety of ways. It will justify termination if it ‘denies substantially the whole benefit under the contract’.
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] EWCA
“Seaworthiness” - intermediate term - multiple ways breachable.
A contract is repudiated when one parties indicates an intention not to be bound by its terms.
Carr v JA Berriman Pty Ltd (1953) HCA
Repudiation - lock out - bought steel from third party.
An accumulation of small breaches can amount to a repudiation.
Progressive Mailling House Pty Ltd v Tabali Pty Ltd (1985) HCA
Terse relations - rent, maintainence, sublease - cumulative effect.
In installment contracts, it may be repudiation if there is a sufficient % breached and liklihood of repeat.
Maple Flock Co v Universal Furniture Products (Wembley) (1934) 1 KB 148
Furniture stuffing - 100 tonnes - only one with excesse chlorine.
A bone fide belief you are performing according to the contract is not termination (at least prior to being put on notice).
DTR Nominees v Mona Homes [1978] HCA
Subdivision rights - mistaken interepretation - not explained.
What is anticipatory breach?
Foresee inevitable breach the contract -non-breaching party accepts - sues for damages and/or terminate.
If time is of the essence, strict performance is required and failure to comply allows termination.
Union Eagle Ltd v Golden Achievement Ltd [1997] UKPC
10 minutes late to settle - lost deposit - ‘certainty’.
Even if time is not of the essence, a delay can be so extensive as to amount to repudiation if shows unwillingness to be bound.
Laurinda v Capalaba Park Shopping Centre (1989) HCA
Registration of lease - 9 months delay - inadequate excuses.
Where time is not of the essence, the party not in default may give a notice fixing a reasonable date for completion and making that time the essence of the contract.
Louinder v Leis [1982] HCA
Buyer impatient - premature notice - validity of notice discussed.
Can you complete the time not of the essence timeline?
What are the two requirements for a valid election to affirm?
Has the party elected by unequivocal words or conduct?
Did the party have knowledge of the necessary facts that imply that an election was made?
Knowledge of the necessary facts to support an election need only be the material facts, not their legal conclusion.
Sargent v ASL Developments (1974) HCA
No planning certificate - legal advice 32 months later - too late.
Providing a period of grace while “reserving all rights” is not unequivical conduct capable of forming an election.
Tropical Traders Ltd v Goonan (1964) HCA
Struggling to pay - grace period - rights reserved.
To terminate, a party must be ready, willing and able to perform (unless anticipatory breach makes their performance useless).
Foran v Wight (1989) HCA
Seller could not complete - buyer forwent fiannce - allowable.
If you affirm a contract, it keeps it on foot for both parties.
Bowes v Chaleyer (1923) HCA
Buyer repudiated - seller continued to import - affirmed - could be sued for breach of import conditions.
You can be estopped from terminating if the other party relies on your representation to their detriment.
Legione v Hateley (1983) HCA
Obiter only - “that should be ok” not a clear representation.
You may be prevented from terminating an agreement due to the defaulting party claiming relief against forfeiture where there is unconsciousability, a minor breach and no fault on their part.
Tanwar Enterprises v Cauchi (2003) HCA
Buyer 1 day late with finance - patchy history - not exceptional.
As much as money can, put the aggrieved party in the position they would have been in had the contract been performed.
Robinson v Harman (1848) per Parke B.
Reliance based damages will be awared in instances where you cannot prove your expectation loss.
McRae v Commonwealth Disposals Commission (1951) HCA
Non-existant oil tanker - expectation uncertain - reliance.
Damages can be awarded even if the plaintiff only lost a chance of receiving a benefit.
Howe v Teefy (1927) NSWSC
Racehorse wrongly repossessed - lost chance - compensable.
In assessing causation, courts must use their common sense to decide whether there is an NAI.
Alexander v Cambridge Credit Corporation (1987) NSWCA
Auditor negligence - company traded out - property crash.
What is the two stage test for remoteness from Hadley v Baxendale (1848)?
The plaintiff will only be liable:
a) for losses arising naturally; or b) losses actually contemplated by the parties.
If you take reasonable steps to mitigate and it increases your loss, can you claim the additional loss?
Yes.
You must take reasonable steps to mitigate your loss, and it is no excuse that you are impecunious.
Burns v MAN Automtive (1986) HCA
Defective engine - no money to repair - operated at a loss.
At common law, contributory negligence is not a defence to breach of contract.
(Apportionment does not apply unless specifically stated or legislated.)
Astley v Austrust Limited (2000) HCA
Trust liability - negligent advice - s 25, 26 Wrongs Act 1958 (Vic).
Loss of bargain damages are not available when you terminate due to a naked contractual right.
Shevill v Builders Licensing Board (1982) HCA
Covenant to pay the rent - failed essentiality test - not condition.
Who said “it has been truly said that the assessment of damages in contract and tort is a pragmatic subject…which does not lend itself to hard and fast rules”?
Deane J in Commonwealth v Amann (1991) HCA.
Wrongful termination - wasted expenditure - chance of renewal.
The general rule is damages will be assessed at the date of breach, but is flexible if necessary to provide adequate compensation.
Johnson v Perez (1988) HCA
Injured plaintiff - sued solictors - when is claim assessed?
Loss of a chance damages are awarded in contract.
AND
If court acecpts there is a loss, difficulty in assessment is no barrier.
Chaplin v Hicks [1911] 2 KB 786
Beauty contest - inadequte notice of interview - lost chance.
Non-economic loss is recoverable if there is physical inconvenience.
Hobbs v London & South Western Railway Co (1875)
Train stopped early - walked 4-5 miles home.
Non-economic loss is recoverable for physical injury.
Godley v Perry [1960] 1 WLR 9
Toy catapult - malfunctioned - injured plaintiff’s eye.
Generally damages are not recoverable for disappointment and injured feelings.
Addis v Gramophone Co Ltd [1909] UKHOL
Manager in Calcutta - replaced - home to England in humiliation.
Non-economic loss is recoverable for disappointment if the contract was to provide enjoyment and freedom from disappointment.
Baltic Shipping Co v Dillon (1993) HCA
Cruise ship - holiday - sank due to negligence.
Rectification costs are the normal measure of costs.
Bellgrove v Eldridge (1954) HCA
House - defective foundations - instablity - demolish and rebuild.
Rectification costs will not be awarded if costs are unreasonable.
Ruxley Electronics v Forsyth [1995]
Pool - 9 inches too shallow - cost of demolishing excessive.
Damages are available for loss of the use of money (i.e. additional borrowing costs, or costs of lost investment opportunity).
Hungerfords v Walker (1989) HCA
Accountants negligent - overpayed tax - loss of opportunity.
The High Court has observed, a proper understanding of the doctrine requires ‘more than a brief backward glance’.
Andrews v ANZ [2012] HCA
Bank fees case - secondary obligation (no breach) - penalty.
A liquidated damages clause will be a penalty if it is extravagant and unconscionable compared with the greatest loss that could conceivably be proved to have followed from the breach.
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] UKHOL
Resale price management - now illegal - retailer in breach.
Why is it beneficial to draft breach of contract claims as absolute breaches, rather than failure to take reasonable care?
Because it can circumvent:
- the potential defences of contributory negligence (Part V Wrongs Act Vic); and
- proportionate liability (a failure to take reasonable care).
Damages will be an inadequate remedy, allowing specific performance, if there is no substitute for performance available on the market.
Dougan v Ley (1946) HCA
Taxi sale - limited number - each unique - damages inadequate.
Damages will be an inadequate remedy, allowing specific performance, if damages are unavailable.
JC Williamson Ltd v Mulholland (1931) HCA
Theatre lolly store - unenforcable licence - damages unavailable.
Damages will be inadequate, allowing specific performance, where there is an exclusivity arrangement.
Curro v Beyond Productions Pty Ltd (1993) NSWSC
TV presenter - moved to Ch 9 - exclusivity not compensible.
Exemplary or punitive damages are not recoverable as part of a damages award for breach of contract.
Butler v Fairclough (1917) per Griffith CJ.
“A breach of contract may be innocent, even accidental or unconscious … Or it may be wilful…malicious and committed with the express intention of injuring the other party. But the measure of damages is not affected by any such considerations…”
Damages awarded as a substitute for specific performance, but denied on a discretionary ground.
Equitable damages or ‘Lord Cairn’ Act’ damages - s 38 Supreme Court Act (Vic).
Which 2007 High Court case confirmed the adoption of Hong Kong Fir Shipping into Australian law (over Kirby J’s dissent)?
Koompahtoo v Sanpine [2007] HCA
Aboriginal land - JV to develop - failure to keep records.
Misleading and deceptive conduct damages are not reducable for contributory negligence
“That two things contributed does not stop one being a cause.”
Henville v Walker [2001] HCA
Property developer - demand misrepresented - also miscaluclated costs.
The purpose of the inquiry must be known to extract from the legal cause from the whole complex of antecedent conditions of an event.
I & L Securities v HTW [2002] HCA
Mortgage default - house overvalued - bank no due diligence on borrower.
The advantage of claiming an action for debt is if you have a commercial reason you can ignore the repudiation, continue to perform and sue for debt. There is no need to mitigate your loss.
White and Carter (Councils) v McGregor [1961] UKHL
Rubbish bin advertising - attempted cancellation - refused to cancel and sued for debt.
For action for debt purposes, some contracts are divisible.
Steele v Tardiani (1946) HCA
Cutting firewood - ‘indefinitely divisible’ .
Under s.54 Supreme Court Act 1986 (Vic) when an item is rented or hired, the debt on rent accrues day to day.
See eg Nemeth v Bayswater Road Pty Ltd [1988] QSC
Hire aircraft - one month rental - crashed - debt for 16 days due.
Performing 92% of an obligation is substantial performance that will allow someone to sue for a debt.
Hoenig v Issacs [1952] EWCA
Furnish flat for £750 - £55 of defects in bookcase and wardrobe.
An older English authority, holding that completing 70% of an obligation was not substantial performance.
Cutter v Powell (1795)
Second mate - 10 week voyage - died after seven.
It is not substantial performance to perform 68% of an obligation for the purposes of bringing an action for debt.
Bolton v Mahadeva [1972] EWCA
Heating for £560 - cold, inconsistent, fumes - £174 to correct.
A contract may make a debt accrue, and be recoverable under an action for debt, from a specific time, as opposed to performance of the contract (i.e. installments).
This is known as payment idependent of performance.
McDonald v Dennys Lascelles Ltd (1933) HCA
Debt arose at moment due - irrelevant whether land transferred - but ultimately TFOC.
If purchaser pulls out, deposit is forfeit, and if hasn’t been paid when contract cancelled, deposit can be claimed as a debt.
Bot v Ristevski [1981] VSC
Deposit is “a guarantee that the purchaser means business…”.
To claim restitution there must be a total failure of consideration.
Baltic Shipping Co v Dillon (1993) HCA
Cruise ship - sank due to negligence - eight good days.
Frustration occurs when, without default of either
party, an unforseeable event makes performance radically different from that which was undertaken by the contract.
Davis Contractors Ltd v Fareham [1956] UKHL
78 houses - shortage of labour and materials - forseeable.
Breakout of World War I frustrated contract by making trading with German company illegal.
Ertel Bieber and Co v Rio Tinto Co Ltd [1918] UKHL
Contract for copper sulfide - 1911 to 1919 - World War I.
Delay for an unconfirmed amount of time can amount to frustration.
Bank Line Limited v Arthur Capel and Co [1919] UKHL
Charter boat - seized by UK government - unknown length.
A delay of 20 months out of 10 years is insufficient to amount to frustration.
National Carriers Ltd v Panalpina (Northern) Ltd [1981] UKHL.
Warehouse - road blocked for 20 months - useless to tennant.
Destruction of the subject matter can result in frustration.
Taylor v Caldwell [1863] EWHC
Music hall - grandiose plans - burnt to ground.
If the entire basis of the contract disappears, the contract will be frustrated.
Krell v Henry [1903] EWCA
Coronation of King Edward VII - express purpose - cancelled.
A party may be precluded from terminating the contract if there is an express mechanism to refer any disputes to arbitration first.
- Scott v Avery* (1856) UKHL
- ‘…no principle or policy of the law … prevents parties from entering into such a contract as that no breach shall occur until after a reference has been made to arbitration.*’
An injunction restricting the shifts available to perform work can amount to frustration of the contract.
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA
Rail tunnels - injunction - only 52% of shifts allowed.
There will be no frustration where there exists an alternative, albeit more onerous method performance exists which is not radically different from contemplated.
Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] UKHL
Peanuts - Sudan to Hamburg - Suez cannel closed.
What is the effect of a force majure clause?
A force majure clause describes specifies what will occur in the event of an unforeseen event, preventing frustration.
Complete the following table showing the consequences of frustration.
In situations where there is a written contract, a serious and obvious mistake as to a fundamental term that the other party opportunistically grabs and seeks to hide from the innocent party, the contract will be voidable.
Taylor v Johnston (1983) HCA
$15,000 for 10 acres - $15,000 per acre - “…snapped at an offer … perfectly well known to be made by mistake.”
“A corporation may not, in trade or commerce, engage in conduct that is misleading / deceptive or is likely to mislead / deceive.”
s 18 Australian Consumer Law
(contained in Schedule 2 Competition and Consumer Act 2010)
To engage the ACL, conduct must be to the essence of the corporation’s trade or commerce, and not just incidental to it.
Concrete Constructions v Nelson (1990) HCA
False statement - safety of airconditioner shaft - worker injured.
If misleading and deceptive conduct under the ACL is not applicable, what other remedies does an innocent plaintiff have?
Common law misrepresentation.
False statement of fact (not law or opinion) inducing entry into the contract. May be innocent, negligent or fraudulent.
The test for whether conduct is misleading “is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive.”
Per BlackCJ in Demagogue Pty Ltd v Ramensky (1992) FCFCA
Noosa apartment - unusually, driveway public land - silence.
An honest statement, and a change of mind, will not constitute misleading and deceptive conduct.
Carpet Fashion Ltd v Forma Holdings Pty Ltd (2003) NSWSC
Home Centre - genuine change of mind - women’s fashion.
In deciding whether conduct is misleading or deceptive, consideration must be given to effect on likely consumers of product, including the inexperienced as well as the experienced, and the gullible as well as the astute.
Parkdale v Puxu (1982) HCA
Famous “Contour” chairs - copied by competitor - consumer could examine label, ask salesman.
Caution should be exercised before recommending to any client that they pursue a claim that is based solely on alleged oral mirepresentations.
Principle in Watson v Foxman (1995) NSWSC per McLelland CJ
Subtleness of language and context - passing of time - litigation.
“Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action”.
A representation as to any future matter will be misleading if the person making it does not have reasonable grounds for making it.
Section 4(1) ACL
Which section provides for damages for breach of section 18 under the ACL?
Section 236 ACL
The limitation period is 6 years: s 236(2) ACL
Damages are only recoverable under the ACL in respect of actual loss or damage.
Wardley Australia Ltd v Western Australia (1992) HCA
Misleading advice - indemnity - when advice given or indemnity called.
Paying more than you expect can be a loss under the ACL, even if value is received.
Murphy v Overton Investments Pty Ltd (2004) HCA
Retirement village weekly fee - received value - higher than expected - cautious of applying common law tort analogy of difference between price and value.
Expectation damages are available under the ACL, if the counterfactual shows that you forwent the opportunity to secure the same deal elsewhere.
Gates v The City Mutual Life Assurance Society Limited (1986) HCA
(Obiter) TPD policy - mislead about coverage but received value - no evidence would have obtained equivilant deal elsewhere.
Which section of the Competition and Consumer Act allows a reduction in damages for misleading and deceptive conduct for contributory negligence?
Section 137B ACL
In order to engage unconsciousable dealings, the innocent party must be at a special disadvantage, including:
- poverty
- sickness
- age
- sex
- infirmity
- drunkeness
- lack of education
- assistance where assistance is required.
Blomley v Ryan (1956) HCA per Fullagher J
78 year old farmer - drunk - bottle of rum bought to negotiations.
A special disability for the purposes of unconsciousable dealing may be constituted by emotional dependence.
Louth v Diprose (1992) HCA
Infatuation - eviction, false crisis - bought house.
To engage unconsciousable dealing, more is required than a mere disparity in bargaining power. Judgement must actually be impaired.
CBA v Amadio (1983) HCA
Guarantee - misled by son - bank manager didn’t explain.
What are the remedies for duress?
Contractually, a right to rescrind. There is no right to damages, unless you can alos prove the torts of intimidation and/or inducing to breach contract.
Physical threats can amount to duress, even if it was not the sole reason for entering the contract.
Barton v Armstrong [1973] UKPC (from NSWCA)
State politician - threat to kill - co-director also wanted control.
An unlawful threat to detain property can amount to duress.
Hawker Pacific v Helicopter Charters (1991) NSWSC
Defect repair - urgently required - unlawfully withheld to extract payment.
Threat not to supply unless higher price is paid can be duress.
TA Sundell & Sons Pty Ltd v Emm Yannoulatos (Overseas) Pty Ltd (1955) NSWSC
Galvanised iron £109/t - markert rises - seller demands £140/t.
Which case on unconsciousable conduct, a case of emotional dependence, has been argued as being the worst case decided by the High Court of Australia in the past quarter century?
Bridgewater v Leahy (1998) HCA
Uncle/nephew - land transacted undervalue - emotional dependence or natural affection?
Which is the ‘catch all’ or ‘mop up’ section prohibiting unconsciousable conduct in the ACL if consumer or small business unconsciousability does not apply?
Section 20 ACL
“Big business” - within the meaning of the unwritten law - Amadio unconsciusability or broader?
What section of the ACL prohibits unconsciousable dealing with consumers and consumer goods?
Section 21 ACL
Unconsciousable - in all the circumstances - factors also listed.
Which section prevents unconsciousability in small business transactions (not public company, less than $3 million)?
Section 22 ACL
Unconsciousable - in all the circumstances - specific factors listed.
A presumption of undue influence can arise outside of the accepted categories (i.e. on the facts).
Johnston v Butrtess (1936) HCA
Niece - assisted old man after wife’s death - ‘substitute wife’.
A special wives equity exists for wives to avoid guarantees to the bank in circumstances of undue influence.
Yerke v Jones [1939] HCA
Pottery farm - sold to husband - purchase price secured by wife.
In which case did the High Court accept the appraoch in Yerke v Jones?
Garcia v NAB (1998) HCA
Wife - guaranteed husband’s business debts - seperated.
‘Every contract imposes on each party a duty of good faith and fair dealing in its performance and enforcement’.
Uniform Commercial Code (#1-203) and Second Restatement on Contracts (#205).
The right to terminate for failure to “show cause” must be exercised reasonably (perhaps even absent express words).
Renard Construction v Minister of Public Works (1992) NSWCA per Priestly JA
Minister terminated - own delay contributed - unreasonable.
Where a duty of good faith arises, it can prevent a party from terminating capriciously or for an extraneous purpose.
Burger King v Hungry Jacks [2001] HCA
Burger King - engineered breach to enter market - not permitted.
It isnot unconscionable to terminate a relationship where trust and confidence had been undermined.
Garry Rogers v Subaru (1999) NSWSC
“Six star” program - resistant and belligerent - proper termination.
The question of whether there is a general implied term of good faith to prevent the “opportunistic or commercial exercise” of an otherwise lawful commercial right is left undecided by the High Court.
Royal Botanic Gardens and Domain Trust v South Sydney Council (2002) HCA
The Domain - rent adjustment clause - implied duty to calculate reasonably and in good faith.
A terminating party can rely on facts not known to it at the time of termination to justify the termination, as long as those facts existed at the time of termination.
Shepherd v Felt and Textiles of Australia Ltd (1931) HCA
Company representative - misdeeds - ‘ancient heresay’.
There is no duty to mitigate liquidated damages, subject to having a legitimate commercial interest in keeping the contract on foot.
MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2015] EWHC
Cotton shipment - shipment detained by customs - LD each day containers not returned.
The High Court affirmed the ‘true rule’ in Codelfa, but left open whether surrounding circumstances could be used to create latent abiguity.
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA
Royalties - “[o]re…from the MBM area” - physical land or rights to land?
Insurance contracts are subject to a duty of utmost good faith.
s 13 Insurance Contracts Act 1984
‘there is implied … a provision requiring each party to it to act towards the other party … with the utmost good faith.’
When will unfair, standard form, ‘small business’ contracts be void from?
November 2016, under the ACL.
Employment contracts do not have an implied term of trust and confidence implied at law.
CBA v Barker [2014] HCA
Long term employee - email blocked - no meaningful steps to redeploy.
In the UK, the penalty doctrine will only apply to breaches of contract where there is no “legitimate interest”.
Cavendish and ParkingEye [2015] UKSC
Excess parking fee - Middle East arms-length deal - Andrews rejected.
It is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made.
Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA per Gummow, Hayne and Kiefel JJ.
Tea tree investment scheme - ‘punctually’ - no complaint means punctual?
Australian law does not recognise a standalone legal doctrine of waiver - “but substitutes for thought” for:
- Election
- Estoppel
- Variation of contract
- Release by deed
Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA
Tea tree investment scheme - ‘punctually’ - no complaint as waiver?
What is the trend with entire agreement clauses?
Australian appellate courts have tended to undermine entire agreement clauses and look to other matters outside the contract.
See I M Jackman, “Some judicial fallacies concerning entire agreement clauses” (2015) 89 Australian Law Journal 791
The court disallowed otherwise valid and valuable claims for extensions of time (EOT) on the basis of non-compliance with time bars despite accepting that doing so was “harsh”.
CMA Assets Pty Ltd v John Holland Pty Ltd [No 6] [2015] WASC
Wharf extension - demolish shipping berth - ‘immediate’ notice required.
Assessment of damages under the TPA should not be limited by analogies with contract, tort or equity.
Marks v GIO [1998] HCA
Loan - charges misrepresentd - counterfactual showed no better deal.
Damages for loss of an opportunity are available under the ACL.
Sellars v Adelaide Petroleum [1994] HCA
Negotiating with A - mislead away - returned on worse terms.
In New South Wales, promissory estoppel can only operate as a restriction on legal rights - it cannot enforce promises at large.
Saleh v Romanous [2010] NSWCA per Handley AJA
Promise - obtain co-owners consent to develop - “leave Eddie to me”.
In proprietary estoppel, the High Court has said the normal measure of relief is the value of the promise.
Sidhu v Van Dyke [2014] HCA
Affair - “don’t worry about settlement” - promise to sub-divide land.
No person can insist on a settlement procured by intimidation.
D & C Builders Ltd v Rees [1966]
Building dispute - delay in payment - “£300 or nothing”.
