Repudiation and restriction on the right to terminate

Question 1

What is repudiaiton

Answer 1

When a party display an inability or unwillingness to perform their obligations under the contract

Question 2

What factors can be used to indicate repudiation?

Answer 2

Words, conduct or factual inability to perform. Includes a party seeking to terminate where they have no right to do so.

Question 3

When is repudiation most useful?

Answer 3

When a party seeks to terminate but there has been no breach of the contract.

Question 4

Can you terminate for an anticipatory breach?

Answer 4

Yes - an anticipatory breach can indicate an unwillingness/inability to perform obligations under the contract.

Question 5

When will damages relating to an anticipatory breach will be available?

Answer 5

When the contract is terminated

If the contract is affirmed there will be no right to damages unless and until the breach actually occurs

Question 6

What are the two choices when there is a right to terminate?

Answer 6

○ Accept the termination

○ Affirm the contract

Question 7

Test for repudiation

Answer 7

Would a reasonable person believe that the defendant did not intend, or was unable, to perform obligations under the contract that related to the whole, were conditions, or were otherwise fundamental to the contract (Carr v Berriman)

Question 8

Reasons for repudiation doctrine

Answer 8

• There is an implied promise in every contract that neither party will repudiate his obligations (whether or not the time for performance has arrived) without just cause
A party should not be bound by a contract that the other party is unwilling or unable to perform

Question 9

Carr v J A Berriman Pty Ltd (1953) CLR principle

Answer 9

If a reasonable person believed that the defendant did not intend, or was unable, to perform obligations under the contract that related to the whole, were conditions, or were otherwise fundamental to the contract the contract will be repudiated

• Can be words or conduct
• Small breaches can be combined to indicate repudiation

Question 10

Carr v J A Berriman Pty Ltd (1953) CLR facts

Answer 10

• Contract to build a factory between site owner (Carr) and builder(Berriman)
• Site owner was required to excavate the site by a certain date
• Builder required to provide steelwork
• He didn’t show any sign of excavating the site
• Builder entered a tender to get steelwork
• Site owner sourced own steel and wrote to builder saying this
(Breach: not excavating site, getting own steel)

Question 11

Carr v J A Berriman Pty Ltd (1953) CLR decision

Answer 11

Breach one: Not excavating. Affirmed by buying steal - no right to terminate.
Breach two: Buying steal instead of using builder’s steal. Lost builder significant profits. Carr knew that he had tendered for steal.
Combination of breaches evinced an intention not to be bound by the contract - right to terminate through repudiation

Question 12

Progressive Mailing House v Tabali 1985 CLR principle

Answer 12

A number of breaches can combine to show an intention to repudiate

Question 13

Progressive Mailing House v Tabali 1985 CLR facts

Answer 13

• If the rent goes unpaid for 14 days the lessor can re-enter the premises
• Required landlord to carry out works on the property before the tenant entered the property
• Tenant could take possession 14 days after notice in writing by the tenant that works had been completed
• Ignored this and moved in before letter
• Received the letter but wasn’t satisfied with the required work and stopped paying rent
• Damaged the house
• Sublet the premises
The lessor wanted to terminate to claim lost rent and loss of bargain

Question 14

Progressive Mailing House v Tabali 1985 CLR decision

Answer 14

• None of the breaches in isolation was sufficient to repudiate
- The breaches of contract; damages, refusal to rectify, refusal to pay rent etc. combined to repudiation, therefore the leaser was entitled to damages for the loss of bargain

Question 15

Goods Act 1958 (Vic) s 38(2)

Answer 15

(2) Where there is a contract for the sale of goods to be delivered by stated instalments which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each case depending on the terms of the contract and the circumstances of the case whether the breach of contract is a repudiation of the whole contract or whether it is a severable breach giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated.

Question 16

Maple Flock Co Ltd v Universal Furniture Products [1934] principle

Answer 16

When considering if a breach of an installment contract is sufficient for repudiation courts must take into account the quantative ratio of the breach to overall contract, and the probability of the breach being repeated

Question 17

Maple Flock Co Ltd v Universal Furniture Products [1934] facts

Answer 17

• Maple flock provided flock for use in furniture
• 3 1 tonne deliveries each week
• Flock would not exceed statutory standard of chlorine (less than 30 parts of chlorine residual)
• 16th loads had 250 parts of chlorine
• Furniture accepted several more loads then purported to terminated
• Had maple flock repudiated it’s obligations under the whole contract?

Question 18

Maple Flock Co Ltd v Universal Furniture Products [1934] decision

Answer 18

• Must take into account the quantative ratio of the breach to overall contract, and the probability of the breach being repeated
• Unlikely to be repeated
• 15 uneventful deliveries before, and several after the delivery
• Court could not confer any intention by maple flock to repudiate the contract
• The single incident was not enough

Question 19

Woodar Investment Devt v Wimpey Constructions 1980 principle

Answer 19

If arguing unwillingness you must evince an intention not to be bound. If the party is attempting (but struggling) to uphold the contract there is no intention.

Question 20

Woodar Investment Devt v Wimpey Constructions 1980 facts

Answer 20

• Builders licensing board owned the leased land
• Truck company continually late with payments
• Payments were made but late or short (which were made up later)
• Account was constantly in deficit
• Multiple cheques bounced
• Owed about $5500
Builders sought to terminate

Question 21

Woodar Investment Devt v Wimpey Constructions 1980 decision

Answer 21

• There was not sufficient evidence of a fundamental inability to pay
  
  • Main argument was an unwillingness - the truck company was unwilling to participate in the contract; they were evincing an intention to no longer be bound
  • Court: Principle is correct but it does not apply in this case. The only possible inference drawn from these facts was that there was financial difficulties which made it difficult for the rent to be paid - but from this you cannot infer that they didn’t intend to be bound. They continued to attempt to make payments

Question 22

DTR Nominees v Mona Homes (1978) CLR principle

Answer 22

There will be repudiation if a party insists on the incorrect interpretation ‘willy nilly’ in the face of clear enunciation of the true agreement
- looks at subjective view of parties (honesty in belief)

Question 23

DTR Nominees v Mona Homes (1978) CLR facts

Answer 23

• Land developer proposed to sell 35 blocks of land
  
  • Contract to sell 9 blocks to one builder
  • Condition that plan of subdivision (which was attached to contract) had been lodged with council and vendor would proceed to have lodged with council as deposited plan
  • Builder wasn’t required to complete plan until it had been registered with council as deposited plan
  • Land developer though it could lodge a plan showing lots 1-9, instead of all 35 lots
  • Developer lodged plan with council then asked builder to pay for land
  • Builder purported to terminate the contract because of the misunderstanding (all blocks should have been on the plan)

Question 24

DTR Nominees v Mona Homes (1978) CLR decision

Answer 24

• Land developer genuinely believed he had done the right thing
• Builder took no steps to inform him of the correct method before terminating - he was unaware of the correct interpretation
• No repudiation

Question 25

Is there repudiation if a party doesn’t comply with the contract due to an erroneous interpretation?

Answer 25

• If a party won’t except a contract except on their erroneous interpretation they may be subject to repudiation
Depends on the honesty of the belief and if efforts have been made to explain the correct terms of the contract to them.

Question 26

Eminence Property Developments Ltd v Heaney [2010] princple

Answer 26

Looking at all the circumstances objectively, that is from the perspective of a reasonable person in the position of the innocent party, the contract breaker has clearly shown an intention to abandon and altogether refuse to perform the contract.

Question 27

Eminence Property Developments Ltd v Heaney [2010] facts

Answer 27

• Eminence Solicitors gave notice for ten days
• Accidentally calculated as ten actual days rather than ten working days
• Terminated contract after 10 actual days
  Other party terminated for repudiation based on breach: the 10 days hadn’t passed

Question 28

Eminence Property Developments Ltd v Heaney [2010] decision

Answer 28

The judge held that the letter “comprised a clear case of refusal by Eminence to perform their future obligations under the contract, those obligations going to the very root of the contract”
“the irresistible inference is that they were saying, ‘We will only perform the contract upon our terms and not on yours’

Question 29

What must an aggrieved party do when they have a right to terminate?

Answer 29

Make an election - to either affirm or terminate the contract.

Question 30

What are the consequences of electing to terminate?

Answer 30

Aggrieved party loses right to future performance, no longer has to perform own future obligations. But any past obligations remain on foot – see (McDonald v Dennys Lasceles.)
Neither party has to perform future obligations, but past obligations remain on foot.

Question 31

What are the consequences of electing to affirm the contract?

Answer 31

Aggrieved party loses right to terminate for that breach. (Foran v Wight)
contract stays on foot but breaching party still Liable for damages for breach (subject to special rule re damages for anticipatory breach)

Question 32

Bowes v Chaleyer (1923) CLR principle

Answer 32

• Affirmation and termination are mutually exclusive
• If a contract is affirmed contractual obligations remain on foot
• After an election to affirm both parties can rely on subsequent events for termination

Question 33

Bowes v Chaleyer (1923) CLR facts

Answer 33

• Contract for tie silks
• Anticipatory breach - purchaser repudiated
• Supplier affirmed contract by shipping ties in 3 instalments
• Purchaser refused to accept shipments
• Seller couldn’t terminate because they had affirmed the contract
Purchaser terminated for breach (ties weren’t meant to be in three shipments)

Question 34

Bowes v Chaleyer (1923) CLR decision

Answer 34

The Purchasers had a valid right to terminate because of the breach. Suppliers lost right to terminate by their election to affirm.

Question 35

McDonald v Dennys Lascelles Ltd (1933) principle

Answer 35

All rights and obligations that accrued before that moment are binding and enforceable;
• All of those rights and obligations that would have accrued after that moment are not.
–
We have to ascertain the rights and obligations of each party at the time of termination to give affect to this rule
There still must be valid consideration

Question 36

McDonald v Dennys Lascelles Ltd (1933) facts

Answer 36

Purchasers required to pay instalments on dates
Vendor transferred interest to Dennys
Purchasers defaulted on an instalment
McDonald stepped in as guarantor for the purchasers
Appeared vendor would be unable to complete contract as promise - anticipatory breach - repudiation
Issue: Did the late instalment still have to be paid?

Question 37

McDonald v Dennys Lascelles Ltd (1933) decision

Answer 37

The instalment was due before the moment of termination - so it is still due if the contract is terminated
Because there had been total failure of consideration, if it paid it would have to be repaid, they didn’t actually have to pay the instalment

Question 38

Carr v Berriman facts

Answer 38

Contract to build a factory between site owner (Carr) and builder (Berriman)
• Site owner was required to excavate the site by a certain date
• Builder required to provide steelwork
• He didn’t show any sign of excavating the site
• Builder entered a tender to get steelwork
• Site owner sourced own steel and wrote to builder saying this
(Breach: not excavating site, getting own steel)

Question 39

Carr v Berriman restriction principle

Answer 39

If a party is required to do something by a specific rime then fails to do so, it is a once and for all breach.

Question 40

Carr v Berriman restriction decision

Answer 40

• Weather had been really bad - so made it difficult to move the machinery etc.
• Didn’t evince the intention not to be bound - the weather gave an alternative explanation for his continued failure to rectify the breach
• But when combined with the other breach - combine to show the intention to repudiate the contract

Question 41

What are the two categories of breach?

Answer 41

Continuing breach and once and for all breach

Question 42

What is a once and for all breach?

Answer 42

• Once and for all breach: most breaches fall into this category and the standard rule applies: once you affirm, you lose the right to terminate unless and until another breach occurs.
But note: A continued failure to rectify may eventually satisfy the test for repudiation. If and when it does, it will give rise to a right to terminate

Question 43

What is a continuing breach?

Answer 43

• Continuing breach: every day it’s not rectified you get a new right to elect whether or not to terminate – so an earlier election will not prevent you from changing your mind later
○ A party is required to maintain a particular state of affairs, and fails to do so
○ E.g. Keep something in a state of good repair
○ Continuing to fail to do something which you are continuing to be required to do is a continuing breach

Question 44

Tropical Traders v Goonan (1964) CLR principle

Answer 44

Granting an extension is not an election to affirm. If time is of the essence, granting an extension does not mean that it is no longer of the essence.

Question 45

Tropical Traders v Goonan (1964) CLR facts

Answer 45

• Contract expressly said time was of the essence for each and every one of the payments
• If any were late the seller would be entitled to terminate the contract and keep all of the money
• Goonan paid the first three payments 3, 13 and 5 days late and the 4th payment early
• Goonan paid interest on 8th and sought extension to pay balance
• Tropical Traders said extension should be ‘an act of grace which didn’t alter contract’, extension to 14th
• Not paid by 14th
Issue: Had they affirmed the contract by allowing the extension and made time no longer of the essence?

Question 46

Tropical Traders v Goonan (1964) CLR decision

Answer 46

○ General rule: just because you accept some payments late doesn’t mean you can’t enforce your right to strict payment for the remainder but it does mean they cannot terminate because of that late payment - which they have accepted
○ Each new payment breach gives a new right to terminate

• Granting extension
	○ Had just deferred the decision to elect
	○ Hadn't done anything to affirm
	○ Entitled vendor to make election on Jan 14, so the election to terminate was valid

Question 47

Immer v Uniting Church (1992) CLR principle

Answer 47

Aggrieved parties must know the facts which give rise to a right to terminate for an election to have occurred.

Question 48

Immer v Uniting Church (1992) CLR facts

Answer 48

• Contract for the sale of airspace
  
  • Buildings are allowed a certain amount of floor space
  • Uniting Church sought to sell airspace to Immer
  • Council had to approve
  • Church said if council didn’t approve by ___ then Immer had a right to terminate
  • Both sides assumed councils approval was a formality
  • Immer didn’t realise council hadn’t approved
  • Aug.(months later) Immer found out Council hadn’t approved and sought to terminate

Question 49

Immer v Uniting Church (1992) CLR decision

Answer 49

• No affirmation on the facts
  
  • Essence of election is that the party electing is confronted with two mutually exclusive courses of action, between which he must make his choice
  • Any time April 1, unless and until the council granted the transfer and unless and until Immer affirmed the contract
  • When Immer sent settlement papers it hadn’t been confronted with the choice
  • Papers didn’t say they would approve without Council approval, just that they were ready to go ahead with the contract, which they thought was ready

Question 50

Foran v Wight (1989) CLR principle

Answer 50

Application of the readiness and willingness principle depends on the nature of the breach (actual or anticipatory)
• Actual breach:
○ Wronged party must show they were ready, willing and able to perform at the time of the breach
• Anticipatory breach:
○ If the repudiation was accepted, wronged party just needs to show that at the time of repudiation they were not substantially disabled from performing (lighter test)
○ If the repudiation was not accepted, wronged party needs to perform – unless the repudiation of one party makes it futile or pointless for the other to attempt to perform their obligations

Question 51

Foran v Wight (1989) CLR facts

Answer 51

• Settlement 22 June
• Time was of the essence
• Advised they wouldn’t be able to get the registration of a right of way, as required by the contract, in time for timely settlement
• On 22nd neither party offered performance
• Purchasers purported to terminate the contract
Issue: was termination invalid because the vendors weren’t ready to sell?

Question 52

Foran v Wight (1989) CLR decision

Answer 52

• Generally: if you don’t accept the contract remains on foot, and you are expected to maintain your obligations
• If the contract stays on foot but a repudiation by one party makes it futile or pointless to attempt to perform obligations they are not required to do so
• Changed the nature of the required readiness and willingness
• At the time the vendors had no substantial capacity to perform
• Even thought the purchasers were experiencing difficulties with finance they were able to demonstrate they were sufficiently ready and able to perform
No right to terminate

Question 53

Estoppel Legione v Hateley principle

Answer 53

A part can be estopped from terminating a contract if there is an unequivocal representation to the contrary (e.g. representation that they are not going to terminate).

• Representation
• Inducement
• Reasonableness
• Unconscionable
• Detrimental reliance
• Departure/threat of departure

Question 54

Estoppel Legione v Hateley (1983) CLR facts

Answer 54

• Hateley’s entered into a contract to purchase land
  
  • $6000 deposit payable straight away, the rest plus interest payable later
  • Contract allowed them to move into land before paying rest
  • Contract said time was of the essence
  • Built house on land after paying deposit but before final payment
  • 2 days before final payment due asked for a 3 month extension
  • 12 July they were told they couldn’t have an extension
  • 26 July sent notice saying if they didn’t pay the purchase price by 10 Aug the contract would be terminated
  • 9 Aug purchasers spoke to secretary said they had got finance and they could pay by 17th August
  • Secretary ‘I think that’ll be alright, but I’ll have to get instructions’
  • Legione terminated contract

Question 55

Estoppel Legione v Hateley decision

Answer 55

• Majority held no estoppel
• Representation was as a response to a statement - not an answer to a question
• Representation: the right to termination would be withheld until Miss Williams got back to the purchasers and said
• Wasn’t a reasonable assumption to rely upon
• No clear and unequivocal representation (this requirement has been applied less strictly since 1983)
• The solicitors had no authority to alter the notice

Question 56

Relief against forfeiture Legione v Hateley (1983) CLR principle

Answer 56

Equity may provide relief in cases of sale or lease of land to protect against unconscionable conduct

Question 57

Relief against forfeiture Legione v Hateley (1983) CLR facts

Answer 57

• Hateley’s entered into a contract to purchase land
  
  • $6000 deposit payable straight away, the rest plus interest payable later
  • Contract allowed them to move into land before paying rest
  • Contract said time was of the essence
  • Built house on land after paying deposit but before final payment
  • 2 days before final payment due asked for a 3 month extension
  • 12 July they were told they couldn’t have an extension
  • 26 July sent notice saying if they didn’t pay the purchase price by 10 Aug the contract would be terminated
  • 9 Aug purchasers spoke to secretary said they had got finance and they could pay by 17th August
  • Secretary ‘I think that’ll be alright, but I’ll have to get instructions’
  • Legione terminated contract
• Hately argued if she paid the purchase price she should get the land since she had already built her house on it

Question 58

Relief against forfeiture Legione v Hateley (1983) CLR decision

Answer 58

Split judgement
2 judges
§ Unjust to insist on the strict application of the common law
§ Relevant that an expensive house had been built on the land
§ Purchasers would receive an ‘ill-merited windfall’
§ Payment offered only 4 days late
§ Breach was not ‘wilful or serious’
§ Harsh penalty for comparatively minor breach
2 judges
§ Basis of grant for relief against forfeiture is to protect against unconscionability
§ Specific performance to grant wouldn’t be awarded where the breach involved a breach of condition
§ Doctrine needs to be more flexible
§ In exceptional cases relief against forfeiture should be granted even where is an essential condition
§ Exceptional circumstances: unconscionable conduct (e.g. seller caused or contributed to breach

Question 59

Union Eagle v Golden Achievement [1997] AC

Answer 59

Terminating a contract after the specified time period is not unconscionable.

Question 60

Union Eagle v Golden Achievement [1997] AC

Answer 60

• Sale of land for apartment in Hong Kong
  
  • Time of the essence - termination and deposit forfeited if delay
  • Vendor indicated strict compliance
  • Money due at 5
  • 5.10 money came
  • Vendor saw money then sought to terminate

Question 61

Union Eagle v Golden Achievement [1997] AC

Answer 61

• Not enough to restrict vendor from exercising his strict legal rights
  
  • Court thought maybe it wasn’t really fair but required consistency on the issue - decision based on policy reasons rather than justice
  • Commercial certainty

Question 62

Tanwar Enterprises Pty Ltd v Cauchi (2003) CLR principle

Answer 62

• You don’t get relief against forfeiture because someone is going to lose something - the vendor has to have done something that puts the burden on them rather than the purchaser
- there must be something in the aggrieved parties conduct which prevents them from reaping the benefits of their legal right to terminate

Question 63

Tanwar Enterprises Pty Ltd v Cauchi (2003) CLR facts

Answer 63

• Contract for sale of land
• Time for the essence
• Payment and settlement to occur on 25th June
• Funds which were being sent from Singapore didn’t arrive before 26th June
• Purchasers claimed that vendors had unconscientiously relied on the time stipulation

Question 64

Tanwar Enterprises Pty Ltd v Cauchi (2003) CLR decision

Answer 64

• It is always going to be necessary to point to the conduct of the vendor for causing or contributing to the breach to claim relief against forfeiture
• Vendors tried to argue because of accident - but court said they won’t grant it where the possibility of accident is reasonable - in this case it was reasonable for the money to take some time
• No unconscionable behaviour
○ The vendor had made very clear they intended to enforce the contract strictly
• You don’t get relief against forfeiture because someone is going to lose something - the vendor has to have done something that puts the burden on them rather than the purchaser

Question 65

Agriculture and Rural Finance v Gardiner (2008) CLR principle

Answer 65

Unlikely that the doctrien of waiver exists - it will come under election or estoppel.
Kirby: argued that the doctrine of estoppel exists, just not on the facts

Question 66

Agriculture and Rural Finance v Gardiner (2008) CLR facts

Answer 66

• Gardiner had borrowed money
• Indemnified by Agriculture and Rural Finance
• Indemnity made punctual repayment of the loan
• Loan was repaid on time but was repaid

Question 67

Agriculture and Rural Finance v Gardiner (2008) CLR decision

Answer 67

• Gardiner argued the indemnifier had waived it’s right to terminate
○ Election
§ Failed - election requires choice to decide between
○ Common law doctrine of forbearance
§ Courts argued this is just estoppel
§ Not made out: no detrimental reliance
○ Acts on basis it wouldn’t enforce - abandon or renounced
§ Possible for party to do this with term that is in their favour
§ No such abandonment on these facts
○ Obiter: residual doctrine of waiver outside election,
§ Unlikely