failure of consideration Flashcards
Challenges to the view that the contract must be discharged/terminated/void etc before restitutionary claim can succeed
BBBTMS
Roxborough
Smith terminate contract
” Smith “Concurrent Liability in Contract and unjust enrichment: the fundamental breach requirement” considers concurrent liability should be possible as it would be strange if concurrent liability were appropriate in tort and contract, but not unjust enrichment and contract; seriousness of a breach (i.e. whether it permits termination or not) should have nothing to do with whether restitution following breach ought to be possible has it has little connection with whether the breaching party was unjustly enriched. The claim that allowing restitution where the contract is still on foot would enable parties to get out of bad bargains is not good enough justifidation becaue if true it would mean restitution should never be allowed following a breach of contract, but it is when there is a fundamental breach.
McMeel terminte contract
McMeel: “ Where an initially valid contract is discharged in response to breach, a fully retrospective regime of mutual restitution of benefits may be un unprincipled and disportionate response. So the rule that restitution is permitted if the contract has been discharged is too widely stated. There is no logical or conceptual limit on the impact which contractual arrangements may have on claims in unjust enrichment.
Contractual relevance:
o Where there is a subsisting contract it is a matter of construction whether its terms govern the transfer of the disputed benefit
o Where a contract is discharged, the court must exsmine the contract to see whether its terms govern the transfer of the disputed benefit
o Even if no contract links the claimant and defendant a contractual setting may be relevant.
Tettenborn terminate contract
Tettenborn: authorities relied on to support the rule do not in fact support it. rule only applies when the terms of the contract are inconsistent with a claim to res and where the nullity of the contract is essential to create the FPC. Instead of broad rule, can rely on interpretation of the contract to prevent restitution from trumping contract law (on the terms of the contract would restitution be inconsistent with contractual allocation of risks) and recognising that in some cases whether the contract is at an end goes to the question of whether there has been a FOC.
Birks termiante contract
Birks: absence of basis for a payment can occur although there is a valid contract (e.g. one obligation within contract unlawful - Roxborough) - total failure of basis in respect of a particular obligation. if the performance was required by a contract, then that is the basis for the payment and it cannot be recovered unless contract eliminated.
Burrows terminate contract
Burrows: it is a general but not necessary requirement, as on a particular set of facts there may be no undermining of the risks taken by the parties. Alternatively, need to show FOC is sufficient to prevent subversion of the contract.
Beatson terminate contract
Beatson: concurrency between contract and restitution should be treated like contract and tort. Real question is whether restitution would conflict with the contractual allocation of risk. Should be able to bring a claim where to do so would not reassign value or reallocate risk.
support for rule in Sumpter v Hedges
Stevens and McFarlane
argument that the rule results in unconscionability/is unfair is just a claim that it is unfair to hold the parties to what they agreed.
unlikely to show encrichment is unjust when parties contracted on that basis.
no reason to presume that recipient of part performane has benefitted.
no failure of basis.
Law Commisison’s concern is really with readiness of courts to find that particular obligations are entire
Law Commisison Sumpter v Hedges
recommended starting point that part performers should get restitution unless the parties had contracted out and the intention to contract out would not be shown merely by fact that payment expressed as a llump sum or postponed until completion.
Burrows argument against Sumpter v Hedges
the case against restitution for part performers is not sufficiently strong to outweigh the argument of principle for it. The argument of principle concerns symmetry of approach to both parties.
it is incorrect to say that the breach cancels out the injustice of the innocent party’s enrichment, because the wrongdoing is dealt with by damages liability. can’t always say that the defendant has not benefitted. does not encourage breach, because the breacher has to pay damages.
the contracting out argument is not compelling just because the parties have said that payment was to be on completion. they might not have turned their minds to the consequences of breach. It is better to allow restitution but recognise that contracting out is possible and look for this explicitly.
applies to money benefits and non money benefits
Cobbe v Yeoman’s Row, Benedetti v Sawiris, Barnes v Eastenders Cash and CArry
core species
failures of contractual counterperformance, but also applies to events or states of affairs that fail to materialise: Patel v Mirza, Barnes v Eastenders Cash and Carry
how to identify basis
not subjective: burgess v rawnsley.
claimant’s understanding is not determinative: Giedo.
Subjective understanding of claimant is only relevant to the extent that it has been communicated and accepted
Swynson Ltd v Lowick Rose says expectation should be mutual
commentary on objective identification of basis
Edelman and Bant argue that “there is a strong reason of principle supporting this objective approach and the need for an objective common basis. A plaintiff who enters a transaction upon a subjective basis that is not apparent to the other party knowingly runs the risk of disappointment.”
Maher “A New Conception of Failure of Basis” argues that the relevance of a shared basis is evidentiary, to show that the claimant did not take the risk of the basis failing. She argues that assessing whether the claimant took the risk should be assessed subjectively from the perspective of the claimant.
basis can be implied or inferred
Rowland v Diwall
multiple bases
argued by Goff and Jones that there can be multiple bases, failure of just one justifying restitiution e.g. Rowland v Divall (obtaining lawful title, possession and use), Guiness Mahon (payment legally due under a valid contract, counter performance would be received)
Wilmott-Smith’s argument in Reconsidering Total Failure
the total failure of basis requirement is necessary to ensure that restitution does not undermine the law of contract, but that it should be interpreted so that total failure of basis means substantial failure (when C transfers an enrichment to D subject to a condition, C can only recover if a substantial part of the condition is unsatisfied). Value of the total failure rule is that it prevents restitution where the failure of the condition is insubstantial, so that restitution is only granted when the award is justified (begs the question). Virgo’s response to this is that this approach reflects the real concern about the injustices caused by the requirement for total failure, but that how “substantial” is to be interpreted will raise new problems.
total failure: construing consideration to exclude benefits received/ancillary benefits
Fibrosa Rowland v Divall Warman v Southern Counties Car Finance Rover International Giedo
Really Good Fudge Ron Weasley
nb recognition that there can be more than one basis can explain some of theswe cases
Fibrosa Spolka
contract was for sale and delivery of the machine so fact that manufacter had spent time and money producing the thing was not relevant, the basis failed for the advanced payment.
Stocznia
the contract was for design, construction and delivery, so the construction work was part of the bargained for counter performance.
defaulting buyer could not recover instalments paid because no total failure
