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Definition of offer:
A promise to do, or refrain from doing something (by the offeror) upon
condition that the other party (the offeree) agrees to do or refrain from
doing something else.
TEST:
• Brambles Holdings Ltd v Bathurst City Council (2001) 53
NSWLR 153
• Heydon JA
o “It relevant to ask, can agreement be inferred? Can Mutual
assent manifested? would reasonable person in the
position of plaintiff/defendant think there was a concluded
bargain?”
1. Supply of Information
The mere supplying of information requested or otherwise is not an offer
to deal…
2. Invitation to Treat
Invitation to treat is an invitation to others to come forward and make me
an offer. It signals a readiness to receive offers. Situations of invitation to
treat:
• Advertising, circulars & newspapers
o Advertising goods for sale not an offer
o Grainger & Sons v Gough [1896] 2 All ER421
• Displays of goods in shops
o Display on shelves ϖ prices marked ↓
Pharmaceutical Society (GB) v Boots Cash Chemists (Southern)
Ltd [1952] 2 QB 795
COURT:
• UK Court of Appeal
FACTS:
• Self service pharmacy
• P brought action against D (Boots) under Pharmacy & Poisons
Act 1933 (UK) → selling of certain poisons was unlawful unless
taken place under pharmacists supervision
HELD:
• Display constituted an invitation to treat, customers offered to
buy goods when they took them to the counter
• Boots decided to accept the offer at the counter
• Auctions
o Auctioneer’s call for bids is just an invitation to treat
o Bid is an offer, accepted at the fall of the hammer
Payne v Cave (1789) 100 ER 502
British Car Auctions v Wright [1972] 1 WLR
1519
o Auctions ‘without reserve’ are still yet to be established in
common law. Obiter dicta of Martin B in Warlow v
Harrison (1859) 1 E&E 309 suggests that it does
constitute an offer. This was followed in:
o Ulbrick v Laidlaw [1924] VLR 247
• Tenders
o Call for tenders is an invitation to treat not an offer…
o Spencer v Harding (1870) LR 5 CP 561
o unless stated in the call to tender that they would accept
the highest option↓
o Harvela Investments Ltd v Royal Trust Co of Canada
Ltd [1986] 1 AC 207
Cross-Offer
• Occur when two parties send each other offers to one another at
the same time. These offers are exactly or substantially the
same. This does not result in a contract.
o Tinn v Hoffman & Co (1873) 29 Lt 271
o Parties wrote an offer to one another on same day with
exactly same terms. P tried to enforce → no contract
Counter-Offer
• Occur when a party indicates a willingness to deal on slightly
different terms than the original offer but still in respect of the
same subject matter. The original offer is rejected, and
substituted with the new offer. The original offer cannot be
accepted after a counter-offer is made.
o Hyde v Wrench (1840) 3 Beav 334; ER132
o D (Wrench) offered to sell farm for £1000. P replied with
an offer for £950 which D refused. P then said he would
pay £1000. D refused to sell & P sued → original offer had
lapsed ∴ no contract
Rejection
• If an offer is rejected it cannot, at a later date, be accepted.
• If acceptance is communicated by a faster medium than
rejection, the acceptance will stand (and vice versa).
Lapse of time
• Time can terminate offers:
o Where the offeror imposes a time limit in an express
stipulation…
Change of circumstances
• Circumstances where the offer no longer become viable
• See ‘frustration’:
o Can be quite complicated if the contract did not clearly
stipulate ‘use’ of the frustrating
Death of a party
• Death of the offeror
o If the offeree receives notice of the death before
acceptance → offer is terminated
Cite: Fong v Cili (1968) 11 FLR 495
o If the offeree does not receive notice the estate of the
offeror can be bound:
Cite: Bradbury v Morgan (1862) 158 ER 877
Definition of accepted:
Acceptance is the final unqualified assent to the terms of the offer, made
in the manner specified or indicated by the offeror. It can either be made
by action or by some implication of conduct.
Qualifications:
Finality.
Whether parties have reached finality (arrived at the final agreement on
which they wish to be bound) is decided by examining on the parties
intention – either by their language and/or inferred from their conduct.
HOWEVER:
The courts will uphold contracts if possible… They will always try to do
justice by seeking out the intention of the parties and upholding the
Incomplete Contracts
• Same notion as above, courts will seek justice for the parties but
will not add essential terms.
• The courts ability to imply missing terms is limited to a few
minor terms that are needed to make the contract work as it was
intended to work.
• Courts can infer a ‘reasonable price’ if price is missing from a
contract → Sale of Goods Act 1985 (WA)
• ANZ Banking Group v Frost Holdings [1989] VR 695 (at
702)
o Kaye J: “The law does not permit a court to imply a term
into a bargain between the parties for the purposes of
making their bargain an enforceable contract.”
o → Terms will only be implied to give commercial effect to
contract that are already legally enforceable.
Agreements to Agree
• Generally not enforceable → nothing to enforce
• Are circumstances where substantial agreement has been
reached bust the parties have elected to leave one or more of
the terms to be decided later (either by themselves of a third
party) → can be binding
o If missing terms can fairly & objectively be ascertained or
there is some mechanism proved for in the contract to
resolve missing terms
o The intention of the parties is to be immediately bound
• Hawthorn Football Club v Harding [1988] VR 49
o Harding agreed to play for Hawthorn 1987, 1988 & 1989
under the term “as agreed between the parties as being
Meaningless Statements
• A well-constructed clear contract can sometimes contain a
clause(s) that are meaningless & vague when the contract is
read as a whole.
• An action to dismiss the contract in regards to this contract will
fail if the meaningless clause can be severed without affecting
the substance of what was agreed.
• TEST: if the parties intended that if the clause, for whatever
reason, could not take effect, would the whole contract fail?
o Fitzgerald v Masters (1956) 95 CLR 420
o South Coast Oils Pty Ltd v Look Enterprises Pty Ltd
[1988] 1 Qd R 680
Revocation of Acceptance
Lead-In…
(A) & (B) were married, and subsequently split. During the marriage (A)
promised (B) a seaside villa in Tuscany if (B) promised to park on the left
side of the garage. (B) did this and now wishes to enforce the contract for
the seaside villa in Tuscany. Advice (B)?
TEST:
NB:
• Courts aren’t concerned about commercial equity between
consideration parties provided.
• Courts are very loathed to get involved on the domestic sphere.
• A deed, signed, sealed and witnessed, needs no consideration
and will always be viewed by the courts as a contract.
The clause must be clear, although one or both of the parties may intend
to make it an agreement in honour, this must be manifestly apparent by
their words. Courts will disregard words used and look at surrounding
circumstance to ascertain intention if any ambiguity. (no adequate
citation)
Lead-In…
Definition:
Joint Promisees:
• B & C agree that A may use B’s resources
• A is paying consideration to B & C
• C may still enforce the contract even though consideration only
comes from B
• Doctrine of Privity presents no problem as outlined by Barwick CJ
& Windeyer J in the High Court case:
o Coulls v Bagot’s Executor & Trustee Co Ltd (1976)
119 CLR 460
(on appeal from SA Supreme Court)
Timing of Consideration
Consideration may be executory, executed but not past:
• Executory: act of forbearance still to be completed
• Executed: party has done what was promised
• Consideration cannot be past:
o Consideration pre-dates agreement↓
• Also cite:
o Roscorla v Thomas (1842) 3 QB 234; 114 ER 496
It does not matter that the action may not have succeeded:
• Callisher v Bischoffsheim (1870) LR 5 QB 449
o Plaintiff honestly believed he was owed money by the
government of Honduras. He was about to commence legal
action, when the defendant handed over £6,000 worth
Honduras Railway Loan Bonds provided he stop the action.
The plaintiff agreed, but when the bonds were not
forthcoming he sued for them. The defendant argued that
since the government did not, in fact, owe him money that
• Recent UK developments:
o 1991 UK Court of Appeal: Williams v Roffey Bros &
Nicholls (Contractors) [1991] 1 QB 1
D (Roffey) subcontracted the carpentry work on a
series of flat renovations to P (Williams) for £20,000.
During the course of this work the P got into financial
difficulty and could not finish the job unless he was
paid an extra £575 per flat. D, knowing that he
would suffer a significant penalty for late completion
if he was to find another carpenter agreed. D
reneged on this agreement and P sued. → P entitled
(A) owes (B) $1,000, to be paid on the 10th May for a spirited lute
performance. On the 10th May (A) pays (B) $800 in full payment of the
debt. (B) accepts because he needs the money. Can (B) later sue for
outstanding amount?
• Yes…
Lead-In…
(A) has made a promise to (B) with ✗ consideration & ∴ not typically
enforceable at law. (B) has relied on (A)’s promise to their detriment.
• The courts will apply doctrine of ‘promissory estoppel’
• The promisor (A) will be held to the consequences of their
promise.
• The court will award promisee (B):
o Probable remedy is damages = minimum amount required
to restore (B) to former position.
o Rare remedy is award of specific performance to make
good (B)’s expectation.
Definition of Estoppel:
Australian Adoption:
NB:
• As with all equitable doctrines, the person relying on it must
come with clean hands. It follows that…
• Promissory Estoppel must be used as a shield not a sword.
o First proposed by Denning LJ in Combe v Combe [1951]
2 KB 215 and referred to in Waltons Stores v Maher.
o This means that promissory estoppel can not be used to
create a ‘independent, new cause of action’.
Remedies/Relief available:
Lead-In…
(B) enters a contract to paint (A)’s fence in consideration for (A) paying
(C) $1,000. (B) paints (A)’s fence then leaves town. (A) refuses to pay
(C). Can (C) enforce the contract between (A) and (B)?
• No!
Definition:
Joint Promises
(B) & (C) both paint (A)’s fence. The consideration came from both so
both can enforce the contract even if (A) is only paying (C).
• Cite: Coulls v Bagots Executor & Trustee Co Ltd (1967)
119 CLR 460
Exclusion Clauses
Others
Lead-In…
(A) breeches a term of the contract they have with (B). The court will
establish if the breeched term is a condition, warranty or innominate term
by looking at its essentiality.
Test of Essentiality:
Conditions
Conditions are terms that go to the heart of the contract. If breeched,
render the performance of the contract substantially different from what
was agreed.
• Poussard v Spiers & Pond (1876) 1 QBD 410
o P was to play lead role in new opera. Opera to open 28th
November. Poussard rehearsed until 23rd November when
she became ill. D found a replacement on the 25th
November. On the 4th of December, P, having recovered,
offered to sing. D refused, P sued.
o She failed, P performance from opening night went to the
very heart of the contract.
• Remedy
o Innocent party can terminate contract (& be released from
any further contractual obligations)
o Damages
Warranties
A warranty is a minor term of the contract, a breech of this does not
render the contract substantially different.
• Bettini v Gye (1876) 1 QBD 183
o D contracted to use P (Bettini) a singer for 3 months. P
undertook (inter alia) to be in London 6 days before the
contractual start time. P arrived 2 days before start time. D
refused to proceed, P sued.
o Rehearsal clause not vital to the contract, term was a
warranty. Bettini was entitled to damages for wrongful
repudiation.
• Remedy
o Only remedy available is damages for any loss or
inconvenience
o ✗ right to terminate
Lead-In…
ALTERNATIVELY
o (B) can show that (A)’s statement created a ‘collateral
contract’ to induce (B) to enter the primary contract.
Term or Representation:
Definition
• A term is something that has contractual significance & is
binding.
o see Terms (expressed).
≈
• A Representation ‘salesman’s puff’ or factual statements not
guaranteed by the promisor & not binding, but to induce the
contract.
o Statement could have legal consequences, see
Misrepresentation.
TEST:
The courts apply an objective contractual intention test:
• Hospital Products Ltd v United States Surgical Corp
(1984) 156 CLR 41
• Would a reasonable person in the position of the parties have
understood from the parties’ words and behaviour that the
statement would become an enforceable obligation on
acceptance?
Parol Evidence:
Butterworths Australian Legal Dictionary:
• any extrinsic evidence of the res gestae (surrounding
circumstances) to ascertain the factual matrix.
Collateral Contracts
NB: Innocent party can use promissory estoppel to negate this apparent
unfairness in collateral contracts.
Lead-In…
(A) has breached a contract with (B). (A) is now relying on an exclusion
clause to limit/exclude their liability. How can (B) negate the exclusion
clause?
This issue appears a lot in dry-cleaning cases…
NB: Terminology
exclusion clause = exemption clause → totally excludes liability
limitation clause → limits liability
They both have the same legal tests / definitions etc.
Proferens = Party (A), the one relying on the clause
Test:
Adequate Notice:
Non-Contractual Documents
→ Require ‘actual notice’ before effective
Contractual Documents
→ Require either ‘constructive notice’ or ‘actual notice’
Effect of Signature
Documents that require signature a generally contractual in nature and
the courts will rarely help someone that has signed a document they have
not read.
As Scrutton LJ said in L’Estrange v Graucob [1934] 2 KB 394:
• “When a document containing contractual terms is signed, then,
in the absence of fraud, or, I will add, misrepresentation, the
party signing it is bound and it is wholly immaterial whether he
has read the document or not.”
Courts interpretation
Exclusion clauses are construed strictly against those trying to enforce
them:
‘verba chartarum fortius accipiuntur contra proferentem’ the ‘contra
proferentem rule’ → the words of a written document are more forcefully
construed against the person inserting them.
• Cite: Alex Kay Pty Ltd v General Motors Acceptance Corp
and Hartford Fire Insurance Co [1963] VR 458
Lead-In…
Contingent on degree the factual matrix fits these criteria one of the
following actionable misrepresentations will be triggered:
• Innocent Misrepresentation
o Rescission
• Negligent Misrepresentation
o *Damages in the tort of negligence
o Rescission
• Fraudulent Misrepresentation
o *Damages in the tort of deceit
o Rescission
* Damages are not sought in tort law because the representation has not
been incorporated as a term in the contract. Since the representation is
not part of the contract there is no breach, and subsequently no cause for
action in contract law.
And if you can’t prove any of this whack them with s.52 of the Trade
Practices Act… in fact it might be better to do that first!
5 Exceptions:
• There is a distortion of a positive representation (a half-truth)…
o Cite: Krakowski v Eurolynx Properties (1995) 183
CLR 563
Organise a ‘strong tenant’ before I buy case.
• Subsequent discovery that the representation was misleading…
o Cite: Lockhart v Osman [1981] VR 57
Cattle in “excellent condition” and “well suited for
breeding purposes” case.
• The representation becomes untrue because of a change in
circumstance…
o Cite: With v O’Flanagan [1936] 1 Ch 575
The £2000 medical practice that became worthless
case.
• Parties are in a fiduciary relationship: partnerships, trusts and
beneficiaries…
o Cite: Hill v Rose [1990] VR 129
$250,000 stake in a worthless seafood business
case.
• Contract ‘uberrimae fidei’: one party has all the information
(insurance contracts)
o Cite: Gordon v Gordon (1821) 3 Swan 400; 36 ER 910
The bastard child’s inheritance case.
Statements of Fact
The representation must be a statement of fact:
• ✗ a statement of opinion
• ✗ a statement of intention or a promise as to the future
o Bisset v Wilkinson [1927] AC 177
While negotiating a contract for the sale of his farm,
the owner stated that it could carry 2,000 sheep.
Both vendors were aware that the owner had never
run sheep on his property. The purchaser found it
could not carry that number of sheep and sought to
rescind the contract.
4 Exceptions
• where the representor never held the opinion in the first place
(i.e. where they lied)
• where, although the representor did hold the opinion, no
reasonable person would
• where, although the statement was clearly couched as an
opinion, the representor implied that he or she knew the FACTS
that justified the opinion
• where the facts were not equally known by the parties AND an
opinion was given by one who should have known the facts or
who was in a far stronger position to assert the facts. See:
o Esso Petroleum v Mardon [1976] QB 801
Esso built a servo and induced Mardon to lease it by
assuring him that it was likely to have a throughput
of 200,000 gallons a year. Mardon thought this was
high, but because of Esso professed expertise in
estimating petrol sales he accepted it. The
throughput was only 78,000 gallons a year. Esso
sued for possession of the premises and moneys /
profit owed. Mardon countersued for negligent
misrepresentation.
Esso claimed it was a statement of opinion but Lord
Denning found them negligent. Their statement was
one on which no reasonable person would have
relied.
• Where the representor made a statement of opinion on law and
o Wilfully misrepresented the law
o Made statements of mixed law and fact
o Made representations as to the nature or effect of private
rights (as opposed to common law or statutory given
rights)
o Statements of law where the representor knows, or should
suspect that the representee will rely on the representor’s
superior knowledge of the law.
Fraudulent Misrepresentation
TEST:
Lord Herschell in Derry v Peek (1889) 14 App Cas 337:
• Fraud is proven when it is shown that a false representation has
been made…
o Knowingly,
o Without belief in its truth,
o Recklessly, careless whether it be true or false (gross,
reckless disregard for the truth)
Remedies
• Damages in the tort of deceit
• Rescission (↓ for rescission discussion)
TEST:
UK → Hedley Byrne Ltd v Heller & Partners [1964] AC 465
Aus → MLC Assurance Co v Evatt (1968) 122 CLR 556
• If a person is held out as competent to give information or
advice, AND
• If he or she realises or ought to realise that the are being trusted
to give correct statements, AND
• It is reasonable in the circumstances for the other party to rely
on that information or advice…
The representor will be liable.
Remedies
• Damages in the tort of negligence
• Rescission (↓ for rescission discussion)
Innocent Misrepresentation
Rescission
Rescission aims to put the party back exactly (under common law) or a
close as possible (in equity) to their previous positions.
• The party hoping to rescind the contract must give notice to the
other party of their intentions to do so…
o If the other party absconds notice is no required
Cite: Car & Universal Finance v Caldwell [1965]
1 QB 525
o Can apply to the court for a formal rescission when the
other party refuses to return property transferred under
the contract OR where the other party is seeking specific
performance.
• Restitution must be possible
o If the parties can’t substantially be restored to their former
positions rescission will not be available
o Compensation will be awarded instead
• If you elect to affirm the contract, when your are entitled to
rescind, you cannot later try to rescind.
• Lapse of time (won’t usually remove the right to rescind) unless:
o Representee is aware of the right to rescind and elects not
to
o An inordinate period of time passes
Cite: Leaf v International Galleries [1950] 2 KB
86
rd
• If a 3 party takes good title of the consideration in a contract
rescission will not be possible.
Remedies
• Damages
• Anything listed under Section87
Lead-In…
(A) agrees to sell (B) their car. (A) has two cars, a Ferrari and a Volvo. (B) pays the money
and goes to collect the Ferrari, but finds that he has bought the Volvo. What can (B) do?
This is known as a mistake in common law…
Definition: Mistake
When a contract has been entered into because one or more of the
parties are under a misapprehension about something forming the basis
of their agreement, it can be argued that there is no true consent
(mutuality), and consequently no binding contract.
• The contract is deemed ‘void ab initio’ or ‘void from the
beginning’.
Common Mistake
Common Mistake
… when reducing a contract to writing (Rectification by the courts)
Mutual Mistake
TEST:
• The parties must clearly be contracting at cross purposes.
o The courts will ascertain as objectively as possible ‘the
sense of the promise’.
o Cite: Raffles v Wichelhaus (1864) 2 H&C 906; 159 ER
375
The Oct/Dec cotton ‘ex peerless from Bombay’ case.
• If the court finds against the mistaken party, and some sense
can be read into the contract, it will be upheld.
Unilateral Mistake
TEST:
• The parties must clearly be contracting at cross purposes
AND
• The true meaning of the agreement ✗ reasonably ascertained by
a third party overhearing the negotiations.
Cite: Taylor v Johnson (1983) 151 CLR 422 ©
TEST:
• The party (B)’s offer was only intended for party (A) and that
(A)’s identity (for quality, trade relations) was of vital importance
• That party (B) took reasonable steps to ensure that party (A)
was the person being dealt with.
o Failure usually occurs in face to face transactions where
the presumption is greatest you intended to deal with the
person you dealt with.
• That (B) was aware, or should have been aware, of the offeror’s
true intentions
Cite:
• ✓ Cundy v Lindsay (1878) 3 App Cas 459
o Handkerchiefs with the fraudulent label case.
• ✗ Phllips v Brooks Ltd [1919] 2 KB 243
o The rogue called ‘North’ claiming to be Sir George
Bullough, jewellery store & pawn broker case.
Common Law
• Iff (if and only if) the mistake goes to the heart of the contract
(something fundamental), it will be declared void ab initio.
• The parties are treated as if there is no contract between them;
any money or property transferred between them must be
returned.
• The contract is insufficient to pass title.
• The rights of a third party who has acquired an interest in the
subject matter of the contract will be defeated.
In Equity
• Where a contract cannot be declared void in the common law
sense:
o There must be a common misapprehension
o It must be of a fundamental nature
o The party seeking to have the contract set aside must not
be at fault
o It must be unconscionable to let the other party benefit
from the mistake
o There must be no possibility of a 3rd parties rights being
prejudiced
Cite: Taylor v Johnson (1983) 151 CLR 422
THEN:
o The contract is voidable not void.
o The contract may be rescinded by the mistaken party or
the contract may be set aside by a court on such terms as
it sees fit.
o This right is limited where it is not possible to put the
parties back in the position they were in
where an innocent 3rd party has acquired in interest
in the subject matter for value,
affirmation, or
lapse of time
o Rectification of the written contract may be ordered;
o The court may refuse a grant of specific performance
D → Duress,
Ui → Undue Influence,
U → Unconscionability.
Lead-In…
(A) threatens to ‘get fresh’ on (B)’s cousin unless (B) enters a contract to
buy (A)’s potatoes. → Duress…
(A) had been given a cottage by (B). (B) was uneducated and heavily
dependent on (A) for help. (B) now seeks to rescind the contract and give
the cottage to his son instead of (A). → Undue Influence…
(B) has entered into a contract with (A) in which there is an extremely
harsh and onerous clause. (B) is a migrant with poor English and business
skills. → Unconscionability…
DURESS
Threat of Violence
• Of death, bodily harm or imprisonment,
AND
• Calculated to cause fear,
AND
• May actually cause fear.
o To the person being coerced
OR
o To someone they are associated
Threat of Imprisonment
• Common Law
o ✗ Threats of warranted imprisonment
o ✓ Threats of unwarranted (malicious) prosecution
• Equity (softer line)
o ✓ Threats of warranted imprisonment
o ✓ Threats of unwarranted (malicious) prosecution
To the person being coerced
NB: Duress to the person need only be a factor, not the primary reason
for contracting → however if the person would have contracted anyway
the contract will be valid and enforceable.
• Cite: Barton v Armstrong (↑)
Remedies
• Contract is voidable
o ∴ Binding on both until he coerced party elects to bring it
to an end
o Restitution of all money and goods transferred under the
contract
• Damages
o There has been no breach?
o Most likely use Tort…
Tort of Intimidation
Tort of Fraudulent Misrepresentation
Duress of Goods
• One party unlawfully sizes, detains, damages or destroys
another’s goods,
OR
• Threatens to do so.
The courts have been very careful not to set defined limits to the
situations in which undue influence can be pleaded.
TEST:
• The contract that the influenced party wishes to set aside
resulted from an abuse of influence by the other party.
o (A) influence (B) to contract… (A) benefits
OR
• The influencing party is an agent of the person who benefits from
the contract.
o (A) influences (B) to contract… (C) benefits, (A) & (C) are
in cahoots.
• Do not need to show why the intention of the servant party
entering the contract.
Presumption:
Cases which indicate that requisite undue influence can originate are (2):
UNCONSCIONABILITY
The common law will not come to ad of someone that freely enters into a
bargain hoping or expecting that its harsher terms will not be activated.
Limits:
• Ratification
• Affirmation
• Acquiescence
• Intervention by a 3rd Party
• Innocent party not having ‘clean hands’ → Unconscionability is a
equitable remedy!
Lead-In…
Definition: Illegality
ASK…
What was parliament trying to achieve with this Act?
What is trying to stop, the contract or the performance of?
Does it render ‘this’ contract illegal? Or is there just a penalty?
Consideration sets from above (2):
1)
• Express prohibition OR implied prohibition?
o Express prohibition:
s.12: No one shall engage in the selling of stills for
the purposes of making bootlegged booze.
∴ It is illegal for (A) & (B) to create a contract.
Cite: Re Mahmoud & Ispahani [1921] 2 KB 716
Defence of Realm → Linseed Oil case.
o Implied prohibition:
ASK: what was the act trying to prevent?
s.12: It is illegal for a person to own a still for the
purposes of making bootlegged booze.
∴ It could be illegal for (A) & (B) to create a
contract.
Cite: Cope & Rowlands (1836) 150 ER 707
London unlicensed brokers fee of £25 case.
There are 6 types of contract that are illegal for public policy:
Effect of Illegality
Void Contracts
Lead-In
(A) and (B) have a valid contract to paint a wall. (A) paints the wall with
only one coat and the underlying colour is still showing through. Does (B)
have to pay?
When both parties complete their obligations under the contract it has
been ‘performed’ & consequently is discharged.
De Minimis Rule
• “De minimis non curat lex”: The law does not concern itself with
trifles.
• Shipton, Anderson & Co v Weil Bros & Co [1912] 1 KB 574
o Contract was for cargo of wheat, 4,500 tonnes, 2% more
or less (+ could tender for an additional 8%) (total
allowable 4,950 tonnes). Shipment was 4,950.55 tonnes so
D refused delivery, even thought they were only charged
for 4,950. → Courts made D pay.
Substantial Performance
• Where the has been performance, not enough to = de minimis,
but substantial, the court will not allow the innocent party to
terminate, but will award damages for an actual losses flowing
from the breach.
• Hoenig v Isaacs [1952] 2 All ER 176
o P was to redecorate and furnish D’s flat for £750. Only
£400 was actually paid on the grounds that the work had
been done poorly & needed rectification. → Court found
substantially done, P entitled to contract price - £55 18s 2d
deduction.
• Bolton v Mahadeva [1972] 1 WLR 1009
o P (Bolton) agreed to install a heating system in D home for
£560. D refused to pay as it gave out offensive fumes &
did not heat the house properly. Remedial work would cost
£174.50. → Courts rules object of contract faulted ≠
Substantial Performance. ✗ recover.
Obstruction of Performance
• Prevention of Performance occurs when one party denies the
other party the ability to perform their obligations.
o The ‘prevented’ party may regard the contract as at an
end.
o They will be released from further obligation & may sue for
damages or on a quantum merit (if performance of an
entire contract had commenced but had not been
completed at the point of obstruction).
• Refusal of tender of performance
o One party is not prevented from performing, → the other
party simply refuses to accept the proffered.
Determining if Breach?
Innocent party entitled to…
• Damages if…
o Breach of term: warranty, intermediate term or condition.
o Discharge of contract.
• Damages & Discharge if…
o Breach of term: condition or serious intermediate term.
o Time Clause
o Discharge of contract.
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38
SR (NSW) 632
• Test of essentiality
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd
[1962] 2 QB 26 ©
• Wrongful repudiation (see express terms)
Ankar Pty Ltd v National Westminster Finance (Aust) (1987) 162
CLR 549 ©
• Discharge of obligations via breech..
Bunge Corp New York v Tradax Export SA Panama [1981] 1 WLR
711
• 15 days notice required to seller that ship was coming to port →
Ship came early. Seller terminate contract for breach. Time
clause is a condition ∴ ok to terminate.
DAMAGES:
DISCHARGE:
• Both parties are released from future performance and the
innocent party may sue for damages.
• With anticipatory breach (& election)…
o If the breach makes future performance impossible
discharge is automatic and election is not required.
o If the innocent party elects to accept the breach and
terminate the contract, it must be made in clear &
unequivocal words OR conduct that would evidence such
an election (i.e. entering into another contract).
o If the innocent party elects to keep the contract on foot the
breaching party is given a second chance to go through
with the contract.
If the breach continues the innocent party can
terminate and get damages.
If the innocent party fully completes their required
performance they can sue for contract price
(assuming the court aggress that they had a
legitimate interest in continuing the contract.. see
above↑).
o What obligations live on after termination:
Exclusion clauses
Confidentiality clauses
Agreed damages clauses
Arbitration clauses
Doctrine of ‘Frustration’
‘Non haec in foedera veni’ = it was not this that I agreed to
Frustration cannot be established where:
• Performance not impossible → just more onerous or
inconvenient.
• Where specific provision for the event is made in the agreement.
• Where the frustrating event should have been foreseen &
provided for by the party relying on it against the other.
• Where the frustrating event is self-induced
• Where the contract is merely delayed or interrupted.
• Impossibility = ‘futility’
o Performance, although possible, is futile, because the
mutually understood purpose of the contract can no longer
be achieved. The frustrating event must render the entire
underlying purpose of the contract.
o Krell v Henry [1903] 2 KB 740
Contract to lease a flat overlooking the Kings
coronation. This was implicit in the contract. After
the King took sick and delayed the coronation. D no
longer wanted the flat for the period, but P sought to
enforce contract.
Courts found that contract had lost it purpose,
contract was predicated by a primary purpose to
watch the procession ∴ frustration.
(A) has breached a contract with (B) what can (B) expect in terms of
compensation.
NB: Mitigation is only talked about after a breach has been established.
Definition:
Damages recoverable are limited to those that are not too remote. The
principal was first enunciated in:
• Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 ©
o BUT/FOR Test:
• ∴ in law damages are only recoverable for those losses that:
o Arise naturally from the breach…
‘natural consequence’ OR ‘usual course of things’
✗ Victoria Laundry v Newman Industries
[1949] 2 KB 528 ©
• Boiler during the war case.
✓ H Parsons (Livestock) v Uttley Ingham
[1978] QB 791 ©
• Mouldy pigs nuts case.
o Are actually contemplated as a probable result of the
breach…
D will be liable if special circumstances are brought
to the attention at the time of contracting.
Does not necessarily require a formal term in the
contract just notice.
Burns v Man Automotive (Aust) Pty Ltd (1986) 161 CLR 653
COURT:
• High Court of Australia on Appeal
FACTS:
• July 1977, P bought a truck that was guaranteed to have a
reconditioned engine. P had lots of trouble with this truck.
• In July 1978 P discovers that truck ✗ reconditioned engine,
approached D to fix, but they refused.
• P decides to change from intrastate to interstate haulage (this =
↓ profits)
• November 1979, P defaults on truck payments & Esanda
repossesses.
• P has no $, he has contracts due, no truck to complete & cannot
sell truck for same $ he bought because ✗ reconditioned engine.
P made the best of a bad situation, but could show the lost
profits.
• P sues D for:
o Expectation damages - Loss of profit (4 years)
o Actual Damages for mechanical repairs & towing etc
o Nervous Stress
HELD:
• On appeal, no nervous stress and no damages awarded after
July 1978.
Set damages, estimated & agreed to, at the time of contracting are called
‘liquidated damages’ or a ‘liquidated damages clause’. → entirely
enforceable.
Other Remedies
Specific Performance
• Equitable remedy ∴ is entirely at the discretion of the court.
• ✗ available where damages will suffice
Injunction
• Equitable remedy ∴ is entirely at the discretion of the court.
• ✗ available when the breach is unlikely to occur again
• Mandatory Injunction:
o Can enforce a term of the contract in isolation (Specific
performance will enforce the whole contract)
o Cite: Warner Bros v Nelson [1937] 1 KB 209
Restitution
• It is restoring one party to a state prior to contracting.
• Basis of Restitution is the concept of ‘unjust enrichment’.
• Only available where:
o The D has received some form of benefit.
o That benefit was at the expense of the P.
o It would be unjust to allow D to keep benefit.
• So it follows that unjust enrichment will probably be an
appropriate remedy where:
o There has been a total failure of consideration.
OR
o P is claming ‘reasonable remuneration’
‘Reasonable Remuneration’
• ‘Quantum Meruit’ → ‘as much as he has earned’
• Where Quantum Meruit will be awarded:
o Quasi-Contract
o Where ‘no contract’ ever came into being
o Where an ‘entire’ contract was wrongfully discharged
o For work done before frustrating event
o For a partial-performance of contract (perhaps↓)
• No available where the contract stipulated ‘entire’ performance.
o Cite: ✗ Sumpter & Hedges [1898] 1 QB 673
o Cite: ✓ Steele v Tardiani (1946) 72 CLR 386