Full LAW2102 Contract Law B Notes, Includes Cases, Steps to Solve Problems

5 Found helpful • 77 Pages • Complete Study Notes • Year: Pre-2021

TERMINATION: There are various ways in which a contract may come to an end – understanding the “terminology”: Termination – one party or both parties choose to end the contract by agreement or for breach – applies prospectively Rescission – remedy which can be sought by an aggrieved party where a vitiating factor exists – applies retrospectively Frustration – ends the contract automatically when frustrating circumstances exist – applies prospectively Repudiation – a party “repudiates” when they are unwilling or unable to perform the contract – the aggrieved party may elect to terminate or affirm the contract Suggested steps to determine whether there is a right to terminate Step 1 - Identify the breach. State what the contractual obligation is and the nature of the non-performance. A breach of contract occurs if there is a failure to perform; or an anticipatory breach by one of the parties to the agreement. 1. Failure to perform: occurs after time for performance has expired by: • Defective performance – if it is not (a) of quality, (b) of the quantity, (c) fit for the purpose required by the contract. • Delayed performance • No performance 2. Anticipatory breach: occurs before performance is due  Consider also - Is there a repudiation? Step 2 - Classify the term: In determining the right to terminate, three types of term must be distinguished:  Is it a condition? Where every breach is likely to deprive the innocent party of substantially the whole benefit of the contract  Is it a warranty? (unlikely) Where no breach is likely to deprive the innocent party of substantially the whole benefit of the contract  Is it an intermediate term? Where the term can be breached in a variety of ways, from the trivial to the serious Consider: 3 ways of classifying a condition:  Statute: ie. Goods Act  Expressly stated by the parties – consider application of Schuler, s.15 & s 16(2) Goods Act, s.41 Property Law Act  Intention of the parties – Tramways analysis – other factors  Application of Arcos (can terminate even if the breach is minor) Step 3 - Identify the consequences of the classification:  Breach of warranty - no right to terminate (damages only)  Breach of intermediate term - look at gravity of breach and its consequences- Does it deprive the innocent party of substantially the whole benefit of the contract (Hong Kong Fir Shipping; Koomphatoo)? If yes = right to terminate. If no = no right to terminate (damages only)  Breach of condition - right to terminate for any breach REPUDIATION: A contract may be terminated for repudiation. Repudiation is a manifestation of an unwillingness or inability to perform contractual obligations, or a willingness to perform in a manner substantially inconsistent with obligations and in no other way. (Carr v J A Berriman Pty Ltd (1953) 89 CLR 327). TERMINATION FOR BREACH – DELAY Delay / Notice • Consider: – Is “time of the essence”? – Repudiation – Notice procedure (including requirements for valid notice) CONSEQUENCES OF AFFIRMATION & TERMINATION for BREACH and REPUDIATION Right to elect • Termination is not automatic. • Where faced with a breach giving the right to terminate, aggrieved party has a choice and can elect to either: o Terminate the contract = contract ends – loss of bargain damages; or o Affirm the contract = contract is on foot - damages for breach. RESTRICTIONS ON THE RIGHT TO TERMINATE: Where one party has the prima facie right to terminate, the other party may claim this right is restricted when:  The party purporting to terminate was not ready and willing to perform the contract.  The party purporting to terminate elected to affirm the contract.  The party purporting to terminate is estopped from terminating the contract.  There has been a waiver (?).  There is relief against forfeiture.  [The termination is a breach of an implied duty of good faith].  [There is an express contract restriction on the right to terminate]. CONTRACT LAW REMEDIES: 1. Damages: An amount awarded by a court to compensate for breach 2. Liquidated damages: An amount specified in the contract to be paid 3. Specific performance/Injunction: An order by a court (equity) to compel a party to perform or not breach a contract; lord Cairns’ Act damages 4. Restitution: Compensation for unjust enrichment; the defendant gives back what they have received from the plaintiff 5. Action for debt: Payment of an amount due under a contract FRUSTRATION The performance of a contract will sometimes be disrupted by events outside the control of the parties. Examples: A ship transporting goods is delayed by a hurricane; The hall in which a concert is planned burns down. MISLEADING or DECEPTIVE CONDUCT Common law: The unwritten law recognises a range of vitiating factors that impair a contract at the time of its formation ABUSE of POWER Vitiating factors - overview Common law: The unwritten law recognises a range of vitiating factors that impair a contract at the time of its formation – Examples:  Misinformation – misrepresentation; mistake  Abuse of Power – duress, undue influence, unconscionable conduct – The victim of a vitiating factor may be entitled to an order of rescission – ie that the contract be set aside and parties restored to their original position. Statute: Some vitiating factors are also recognised under statute, where a broader variety of remedies are available – Examples: Misleading and deceptive conduct; unconscionable dealing Unconscionable dealing The equitable doctrine of unconscionable dealing “looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so…” Per Deane J, CBA v Amadio  Test: The doctrine of unconscionable dealing operates where: – in entering into a transaction the plaintiff was under a special disability in dealing with the defendant, with the consequence that there was an absence of any reasonable degree of equality between them; and – The disability was sufficiently evident to the defendant to make it prima facie unfair or ‘unconscientious’ that he or she procure, or accept, the plaintiff’s assent to the impugned transaction in the circumstances in which he or she has procured or accepted it Per Deane J in CBA v Amadio Rebuttable presumption: Where these elements are established, there is an equitable presumption to the effect that the improvident transaction was a consequence of the special disadvantage, and that the defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage. The onus is accordingly cast upon the defendant to show that the transaction was fair, just and reasonable Remedies for vitiating factors under the unwritten law: - Rescission  Effect of vitiating factor - contract is voidable – Right to elect to affirm or rescind (if rescission available)  Rescission – Effect of rescission – Requirement of restitutio in integrum  Substantial restoration sufficient – Alati v Kruger - Brown v Smitt  Partial rescission – Vadasz v Pioneer Concrete – Restrictions  Restitutio in integrum  Affirmation - Coastal Estates Pty Ltd v Melevende  Third party rights – Hartigan v Krishna Statutory remedies If there has been a contravention of either:  s18 (misleading or deceptive conduct)  ss20 or 21(statutory unconscionability) consider the availability of statutory remedies under:  s236 (damages)  s237 (other orders)

This document is 50 Exchange Credits