Chapter 19: Discharge by performance p.

282
Discharge:
The party is excused from further performance of his obligations under that contract. There is nothing further that the law requires them to do. A party or both parties may be discharged from further performance by performance of the promises made by or on behalf of the contracting parties. We must satisfy questions that arise as to the time, meaning and order of performance. With regards to the order of performance, reference needs to be made to the stated intention of the parties in the contract. To ascertain the parties intention is a question of construction. The resolution of this issue is a matter of law.

Time for the performance of contractual obligations:

The time at which obligations are to be performed is governed by the contract. If contract expressly stipulates time, failure to perform accordingly is breach. Where no time expressly stipulated, obligation must be performed within reasonable time unless there are indications to the contrary: Reid v Moreland Timber Co Pty Ltd. reasonable time is determined in light of circumstances existing at the time when performance takes place or when the party demanding performance asserts it should have taken place: Handley v Gunner. In deciding whether a reasonable time has been exceeded, a broad consideration includes taking into account, but not limited to: (i) any estimate given by the performing party of how long it would take him to perform; (ii) Whether that estimate has been exceeded and, if so, in what circumstances; (iii) Whether the party for whose benefit the relevant obligation was to be performed needed to participate in the performance, actively, in the sense of collaborating in what was needed to be done, or passively in the sense of being in a position to receive performance, or not at all; (iv) Whether it was necessary for a 3rd parties to collaborate with the performing party in order to enable it to perform; and (v) What exactly was the cause, or were the causes of delay to performance: Astea (UK) Ltd v Time Group LTD. In Electronic Industries Ltd v David Jones Ltd,

Facts: The plaintiffs were electrical contractors while the defendants were a department store. The plaintiffs entered into a contract with the defendants to install TV equipment in the defendants store and to operate the equipment on a particular date. Due to industrial action the defendants put off the demonstration, and subsequently did not agree on a new time to hold the exhibition. The plaintiff thereupon treated the contract as repudiated by the defendant and sued for damages. Held: The HC held that the plaintiff did not intend to terminate the original contract and never did so. The plaintiff always meant to perform it and hold the defendant bound to it. The plaintiffs only meant to accommodate the defendants request for a postponement. The court found for the Electronic Industries because despite the fact that there was no longer a fixed date for performance, where performance of a contract requires cooperation, David Jones had a duty to comply with reasonable requests for performance by Electronic Industries. The court stated that it was reasonable for Electronic Industries to demand a date for commencement of the exhibition and in this respect, Electronic Industries could not give David Jones an unreasonably short period of time to gain access to David Jones store to set up and run the exhibition. Further, the court found that what is reasonable depends on all the circumstances, including the nature and purpose of the express stipulations.

Remedy:
When a party fails to perform in accordance with a time stipulation the innocent party is entitled to recover damages for losses suffered as a result of that breach: Canning v Temby.

Order of performance of contractual obligations:

Terms of contract can fix the order for performance of contractual obligations. If the contract is silent on this it becomes a question of construction of the contract to ascertain the intention of the parties as to the order in which obligations are to be performed: Burton v Palmer. To determine order of performance the court distinguishes between independent and dependent obligations.

(i) Independent obligations: Where the parties obligations are independent of one another, the order of performance is irrelevant. E.g. occurs in the sale of goods legislation (Sale of Goods Act 1923 (NSW) s 51(2)) which allows a seller to recover the price of goods if the buyers

promise is to pay for the goods on a particular date irrespective of actual delivery. (ii) Dependent obligations: One partys obligation to perform is dependent upon performance by the other party unless the parties have agreed to perform their obligations concurrently. So if one party is not ready, willing and able to perform his obligation, the other party does not have to perform his obligation. E.g. employment contracts. If the employee has not performed, the employer is not obliged to make payment: Automatic Fire Sprinklers Pty Ltd v Watson. There may also be a presumption that parties will perform obligations concurrently . E.g. contract for sale of land it is presumed that the vendors obligation to hand over title deeds to the purchaser and the purchasers obligation to pay the purchase price are to be performed concurrently on settlement or completion of the transaction. E.g. contracts for sale of goods (Sale of Goods Act 1923 (NSW) s 31). In these cases, there is a presumption that each of the parties is ready, willing and able to perform his contractual obligation. If party A is not ready willing and able to perform then party B does not have to perform: Foran v Wright. Obligations of good faith and cooperation One partys ability to perform its obligations will depend upon the other partys co-operation in carrying out its own obligations.

It is a general rule applicable to every contract that each party agrees, by implication (if not expressly provided in the contract), to do all such things as are necessary on his part to enable the other party to have the benefit of the contract: Butt v MDonald. The level of performance required to discharge a contract
Exact performance rule: For performance to lead to a discharge, the party must perform obligations exactly as required by the contract: Arcos Ltd v EA Ronaasen & Son. This rule has led to unjust results. Cutter v Powell: Facts: Cutter signed on as a merchant seaman on a ship sailing from the West Indies to England. The contract said that Cutter would be paid the sum of 30 guineas by the D provided he proceeds, continues and does his duty as a second mate. Cutter died 7 weeks into the voyage. The D refused to pay any part of the salary to Cutters wife. She sued to recover a proportionate amount but was unsuccessful.

Held: Cutter had promised to serve for the whole of the voyage but did not do so. The contract was an entire contract in which the consideration to be provided in return for payment is indivisible. Thus complete performance is a condition of payment, and so it follows that there was no entitlement to any part of the salary. Exceptions to the exact performance rule Severable or Divisible Contracts If a contract is divisible into discrete parts, a party who performs a discrete part has rights in relation to the part performed. Divisible contracts are commonly found in building contracts, where the consideration has been apportioned: GEC Marconi Systems v BHP Information Technology. In this case payment of the contract is by instalments, with each instalment due and payable upon performance of each divisible part of the contract. The right to payment is enforceable and is not lost even if the contract is subsequently terminated: GEC Marconi Systems v BHP Information Technology. Another example is the sale of goods by instalments.

De Minimus Non Curat Lex Rule (the law does not concern itself with trivialities) Where it is alleged that a contract has been breached, a court will not regard or give effect to what are undoubtedly trivialities or of a trifling or negligible nature: Margaronis Navigation Agency Ltd v Henry W Peabody & Co of London Ltd. Whether or not a breach is trivial depends on the nature and extent of the breach and the nature and scope of the term breached, having regard to the presumed intention of the parties: Att-General of Botswana v Aussie Diamond Products Pty Ltd.

Substantial Performance Where there is substantial performance, though not enough to activate the de minimus non curat lex rule, the defaulting party may still retain and enforce rights. That performance be exact is a term not a condition of payment Unless the contract expressly makes exact performance a condition of payment, if the P has substantially performed his obligations he is entitled to recover contract price subject to a reduction for the cost of any remedial work. Only a breach which goes to the root of the contract, such as an abandonment of the work when it is only half done, can absolve the employer from his promise to pay. Otherwise he must pay and bring a

cross-claim for defects and omissions or set them up in diminution of price: Hoenig v Isaacs Hoenig v Isaacs Facts: Isaacs agreed to redecorate Hoenigs flat for 750 pounds. He was to be paid as the work proceeds, and balance on completion. Hoenig made some progress payments but refused to pay the balance on completion because of poor workmanship and because some of the work needed to be remedied. Isaacs sued for the outstanding amount. The cost of remedial work was 55 pounds. Held: Although the work was partially defective, the defects were easily correctable. Also, it was held that the P had substantially performed his obligations. Thus Isaacs was entitled to the contract price less the cost of necessary remedial work. If the extent of defect is serious and the cost of rectification is high by comparison to the contract price, substantial performance will not have occurred. Bolton v Mahadeva The contract price for installing a water heating system was 560 pounds, and the costs of remedial work was 174 pounds. The court held that substantial performance had not taken place when taking into account the nature of the defects and the proportion between the cost of rectifying them and the contract price. In Highmist Pty Ltd v Tricare Ltd, the principle of substantial performance did not apply because it was a condition of the contract that performance be exact. Here the sake of land was to be subdivided. The contract permitted the size of the land to be no more than 3% less than was shown on a draft plan. The subdivision that was approved resulted in the land being 3.015% less than that indicated on the draft plan. It was held that this did not amount to substantial performance. To excuse this failure because the amount by which the specifications of the plan deviated from those stipulated in the contract was small would be to deprive the terms agreed upon by the parties and contained in that special condition of any real meaning.

Acceptance of Partial Performance Where there has not been complete and exact performance of an obligation, the party who has not so performed may be able to bring a restitutionary claim for a reasonable sum for the work done and materials supplied, if the other party has a real choice as to whether or not to accept the partial performance. If there is no real choice but to accept the partial performance, a restitutionary claim is not available: Sumpter v Hedges. The person accepting the partial performance must do so of their own free will. Sumpter v Hedges

Facts: The P contracted with the D to build 2 houses on the Ds land. When the houses were about half finished, the P builder ran out of money and could not complete the houses. The P builder sued for the work he had done before abandoning the job. Held: The court held that the contract was entire and thus the P builder could not recover under it. As the Ps failure to complete the contract was not the Ds fault, the P builder had no entitlement to a quantum meruit, as the owner had not accepted partial performance as discharge of the contract.

Ch 20 - Discharge by Agreement
Discharge by Abandonment
A court may infer that a contract has been abandoned by both parties (cant just be one party): Summers v The Cth; o After an inordinate length of time has passed in which neither party performed its obligations or called upon the other party to perform: Fitzgerald v Masters; and o By both parties conduct as opposed to the subjective intention of the parties: J R Marine Systems Pty Ltd v Wavemaster Intl Pty Ltd whether an inordinate length of time has been allowed to elapse is relative: Ryder v Frohlich.

Discharge by Original Contract

A term of a contract may enable the contract to be terminated if a certain breach occurs. Alternatively, the term may discharge that contract if certain circumstances arise. In such a case, the term is usually referred to as a condition precedent or condition subsequent. Condition in this context is not equated with the meaning of condition in the sense of the term of a contract which, when breached, give the innocent party the right to terminate the contract.

Contractual Right to Terminate a contract may contain a provision which gives a party the right to terminate the contract if a certain type of breach occurs. If the contract is silent on what will discharge the parties obligations or on the consequences of termination, it may be that such a term can be implied into the contract. The existence of such a term is a matter of construction which depends, not only upon a textual examination of the words of the contract, but also on a consideration of the subject matter of the agreement, the circumstances in which it was made, and the provisions to which the party have or have not agreed: Crawford Fitting Co v Sydney valve & fitting Pty Ltd. If such a term is to be implied the normal rules are set out in BP refinery Pty Ltd v Hastings Shire Council. It is possible to imply a term to terminate a contract where it has been abandoned after being partly performed: Fitzgerald v Masters.

Conditions Precedent

a condition precedent is a provision which states that a contract will not come into existence or that a party's obligation to perform does not arise, unless a certain event occurs. There are two categories: 1) a condition which is precedent to the formation or existence of a contract - here, the transaction creates no rights enforceable by the parties unless and until the condition is fulfilled. 2) a condition which is precedent to the obligation of a party to perform his part of the contract; it is a condition subsequent because it entitles the party to terminate the contract on non-fulfilment. Here, there is a binding contract which creates rights capable of enforcement, though the obligation of a party, or perhaps of both parties, to perform depends on fulfilment of the condition and nonfulfilment entitles him to terminate: Perri v Coolangatta investments Pty Ltd. In 1) either party can withdraw from the transaction and that any time before the occurrence of the event without being liable for damages for breach of contract. In 2) the non-occurrence of the event will either automatically terminate the contract or confers a right to terminate the contract on one or both of the contracting parties: Suttor v Gundowda. In this case courts prefer the latter alternative when possible: Perri v Coolangatta investments Pty Ltd. if there is a clear and explicit term in the contract which stipulates that the contract will be automatically terminated if the condition precedent is not satisfied, the courts will give effect to such a term: M K & JA Roche Pty Ltd v metro Edgley Pty Ltd.

Perri v Coolangatta investments Pty Ltd (condition precedent to the performance of an obligation) Facts: The Perris contracted to purchase land in April 1978. A term of the contract stated that the contract was "entered into subject to the Perris completing a sale of their property, Lilli Pilli. The contract did not fix a time for the completion of the sale of the property, nor did it contain any promise that the sale would occur. The Perris made no arrangements to sell their property until March 1979. In August 1978, the vendor gave notice requiring completion of the contract and on expiry of this notice formally issued a notice of termination. The Perris challenged the validity of the termination and asked the court to order specific performance of the contract. Held: the High Court held that the vendor had validly terminated the contract before the Perris began proceedings for specific performance. The condition making the contract subject to the sale of the property was a condition precedent to the performance of the contract and not one going to its formation. The court held

that the contract existed but the obligation to proceed to completion of the sale was contingent on fulfilment of the condition. Neither party could withdraw and there were obligations on both sides. Furthermore, the court implied an obligation that the Perris would make all reasonable efforts to achieve the sale of the property. A failure to do this would lead to breach of contract and liability for damages. Non-fulfilment entitles the other party to terminate.

George v Roach (condition precedent to the formation of a contract) Facts: an agreement for the sale of a newsagency stipulated that the sale would be at a price to be determined by a named valuer. The valuer refused to value the newsagency. Held: the valuation by the named valuer was a condition precedent to the existence of a contract. In some circumstances, a condition precedent will also contain a promise for which the promisor will be liable for damages of breach of contract if the promise is not carried out. Thus, if A and B contract for the sale of property on the basis that the sale to A is conditional on B obtaining an export licence by a certain date and B promises to obtain the licence by a certain date, there is both a condition precedent and a promise. As obligation to perform is contingent on B getting an export licence. Bs failure to obtain the licence is the breach of promise which renders him liable to A for damages for breach of contract. Whether A can also terminate the contract depends upon the classification of the provision in the contract as either a condition or a serious breach of an intermediate term (ch 21). The act that constitutes the condition precedent must be strictly performed before the condition precedent becomes operative. So, the condition precedent will not be fulfilled until one party does an act that strictly matches that described in the contract: Tricontinental Corporation Ltd v HDFI Ltd. If the condition precedent specifies a time for performance then time is of the essence (ch 21): Meares Nominees Pty Ltd v permanent custodians Limited.

Conditions Subsequent a provision which states that, on the occurrence of a particular event, further performance of the contract automatically comes to an end or the contract can be terminated by one or both of the parties. Courts prefer the latter. If the benefit of the condition is construed to be for the benefit of one party, only he can wave the benefit to the condition. If the benefit is construed to be

for the benefit of both parties then the clause can only be waived with the consent of both parties. Head v Tattersall A seller of a horse stated that the horse had hunted with hounds, and that the buyer could return the horse if it did not fit that description. The horse did not answer the description and the buyer returned the horse. The buyer was held to be entitled to a refund of the purchase price.

Discharge by Subsequent Agreement

the parties to a contract may enter into a subsequent agreement to vary or terminate the original contract. Whether or not the parties have varied or terminated the original contract is determined by looking at the intention of the parties as disclosed by the later agreement: Tallerman & Co Pty Ltd v Nathan's merchandise Pty Ltd the intention of the parties in entering into the subsequent agreement will result in one of three outcomes: 1) termination of the original contract (discharge simpliciter); or 2) variation of the original contract; or 3) termination of the original contract and entry into a new contract (novation agreement or merger), thereby extinguishing the old obligation and creating a substituted obligation in its place. Novation may be express or implied from the circumstances: Fightvision Pty Ltd v Onisforou. Novation may result in a new contract between the parties or a new contract between one of the parties and the new party. In this situation the departing party to the old contract must join in the novation because the novation agreement extinguishes its rights and obligations under the original contract: Pacific brands sport and leisure Pty Ltd v Underworks Pty Ltd. Parties to a contract can also execute a deed in a substantially similar terms as the original contract, i.e. A merger. In this case, the rights and obligations of the parties will be determined solely by reference to the deed. See pg 297 20.26 The degree to which the original contract has been modified will be a relevant factor in ascertaining the parties intention: Lahoud v Lahoud in all 3 cases there are 2 important issues that arise as to the validity of the subsequent agreement: 1) whether the subsequent agreement needs to be in writing; and 2) consideration. General rule: a contract may be discharged by a subsequent agreement which is either under seal or supported by consideration.

An executory contract is one in which neither party has performed/completely performed his obligations. An executed contract is one in which one party has fully performed his obligations that the other party has not.

Discharge of Executory Contracts

REQUIREMENT OF WRITING if the parties just want to terminate the original agreement, the subsequent agreement does not have to be in writing, even if the original contract was a kind that had to be evidenced in writing: Tallerman and Co v Nathan's merchandise if the parties want to vary the original contract, the subsequent agreement must be in writing if the original contract was of a type that had to be evidenced in writing to be enforceable: agricultural and rural finance Pty Ltd v Gardiner a later oral contract varying an enforceable contract for the sale of land is ineffective: Phillips v Ellinson brothers Pty Ltd. If the parties want to terminate the original contract and replace it with a new agreement, the subsequent agreement needs to be in writing if the new agreement is one of the type that house to be evidenced in writing to be enforceable. CONSIDERATION Unless the subsequent agreement is in the form of a deed is, both parties to the subsequent agreement must provide consideration. The consideration given by each party is usually the promise not to sue on the unperformed obligations of the other party (compromise of a claim or forbearance to sue).

Discharge of Executed Contracts

REQUIREMENT OF WRITING the same principles apply as with executory contracts. CONSIDERATION Accord & Satisfaction: Osborn & Bernotti v McDermott Unless the subsequent agreement is in the form of a deed, the party that has not completely performed its obligations must provide consideration for

the other party's promise not to sue the first party on his unperformed obligations under the original contract. By providing consideration, the party that has not completely performed its obligations under the original contract is released from its obligations under that contract Accord -

& satisfaction = an agreement to accept the satisfaction.

accord and satisfaction - promise for a promise (bilateral), the new contract discharges the old so that the plaintiff can't sue on the old claim. If the defendant completes his side of the new agreement, he has a defence against the plaintiff if the plaintiff tries to sue him on the original contract. If the defendant doesn't complete his obligations, the plaintiff can only sue him for breach of the new contract. In this situation there is an immediate and enforceable agreement once the compromise is agreed upon, the parties agreeing that the plaintiff takes in satisfaction of his existing claim against the defendant the new promise either defendant in substitution for any existing obligation. If the promisor fails to perform the promise, the promisees only remedy is to sue for breach of the promise. There cannot be a return to the original obligation or claim: Koutsourais v Metledge & Associates

McDermott v Black Facts: a purchaser claimed to have been induced to enter into a contract of sale of shares by a number of fraudulent misrepresentations made by the vendor. Prior to the date of completion of the contract, the purchaser complained of the misrepresentations. However, in a subsequent letter he withdrew all allegations imputing anything improper to the vendor conditionally on the basis that the vendor of the property grant him an extension of time to complete the contract. This extension of time was granted by the vendor. Held: the withdrawal of the allegations in consideration of the extension of time for completion constituted an accord and satisfaction. D & C Builders Ltd v Rees pg 301 no accord & satisfaction found Illawong Village Pty Ltd v State Bank of NSW pg 301 - to succeed in establishing and accord and satisfaction, the bank needed to establish that Illawong agreed to give up its claim that it had been overcharged interest, in return to something which the bank gave it. In this case the court was not satisfied that the dealings between Illawong and the bank could be so characterised. Thus the defence of accord and satisfaction failed. Flowers v Vescio pg 302 deeds El-mir v Risk pg 302 Accord Executory: Osborn & Bernotti v McDermott

An accord executory (unilateral) neither extinguishes the old cause of action nor affords a new one. The plaintiff can revoke the new agreement until the defendant starts to take action and accepts the unilateral offer. In this situation, an accord executory does not constitute a contract and is altogether unenforceable, giving rise to no new rights and obligations pending performance and under which, when there is performance (but only when there is performance), the plaintiffs existing course of action is discharged.

Conditional Accord & Satisfaction: Osborn & Bernotti v McDermott a promise not to sue on the original contract on the condition that the defendant does something. If the defendant doesn't do it, the plaintiff can sue on the original contract or order specific performance under the second contract, so there are more options under this arrangement this exists when the compromise amounts to an existing and enforceable agreement between the parties for performance according to its tenor but which does not operate to discharge any existing course of action unless and until there has been performance.

Where there is no accord and satisfaction or a deed then there is a naked promise (gratuitous promise by A not to sue B for their outstanding obligations, and B may be suited unless he can rely on equitable estoppel, or possibly he might be able to make a case under misleading or deceptive conduct under s 18 of ACL, in which case an injunction may be available to stop A from suing).

Waiver
A party has made a conscious decision to relinquish a right to seek and available remedy: The Bell Group v Westpac banking Corporation an intentional act, done with knowledge, whereby a person abandons a right by acting in a manner inconsistent with that right: agricultural and rural finance v Gardiner the voluntary or intentional relinquishment or pronunciation of a known right, claim or privilege: Pacific brands sport and leisure Pty Ltd v underworks Pty Ltd see pgs 304-305

Commonwealth v Verwayen Facts: the plaintiff was injured while serving in the Armed Forces. The Commonwealth admitted responsibility and did not plead a defence at first until it

changed that policy, at which point the plaintiff had already taken action that had begun during the initial policy. Held: the Commonwealth was estopped from departing from the assumed state of affairs upon the basis of which it deliberately induced the plaintiff to act.

Ch 21 Discharge by Breach
2 forms of breach that give rise to the right to terminate the contract: 1) Actual breach (breach of a condition or intermediate term) 1. where the parties have agreed to perform their obligations under the contract by a certain time, but fail to completely perform the contract at the time agreed; 2. where there has been a failure to perform in a manner contemplated by the contract e.g. to a particular standard, at a time when those contractual obligations were due to be performed. 2) Repudiatory breach (renunciation): where a party indicates an unwillingness or inability to perform their contractual obligations when the time for performance arrives. The conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner inconsistent with the partys obligations: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd Test: whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it: Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd Anticipatory Breach: where a party indicates an unwillingness or inability to perform contractual obligations in advance of the time that that party was due to perform pursuant to the contract.

3 situations in which the right to terminate will be implied: 1) for breach of condition (an essential term) - failure to perform at the time when performance is due, a term regarded as essential by the parties or by law; 2) for a sufficiently serious breach of an intermediate term; 3) absence of readiness or willingness to perform constituting a repudiation of obligation or capable of being treated as an anticipatory breach of contract.

Failure to Perform Contractual Obligations

whether or not a failure to perform contractual obligations entitles the innocent party to terminate the contract depends on whether the term is a condition, warranty or intermediate term. A term, courts will construe a term as a warranty unless the parties made it clear that they intended a particular term to operate as a condition: Ankar Pty Ltd v National Westminster finance Ltd

Condition/Essential Term if such a term is breached, the innocent party may choose to proceed with the contract or to terminate it and/or claim damages. Until the innocent party elects to terminate the contract still stands: Automatic Fire Sprinklers Pty Ltd v Watson the innocent party may seek an order for specific performance if the remedies available: Turnbull and Co Pty Ltd v Mundus Trading Co Pty Ltd Test of essentiality:

Whether the promise is of such importance to the promisee, i.e. it is the essence of the contract, that he would not have entered into the contract unless he had been assured of a strict performance of the promise, and that this ought to have been apparent to the promisor. If the promisee contracts in reliance upon a substantial performance of the promise, any substantial breach would ordinarily justify discharge: Tramways Advertising Pty Ltd v Luna Park Ltd. Associated Newspapers Ltd v Bancks pg 313

Warranty if such a term is breached, there is no right to terminate the contract: Bettini v Gye the innocent party can only seek damages at C/L for breach of a warranty

Intermediate Term if the right to terminate the only arises if the consequences of the breach are sufficiently serious. Otherwise there is only a right to damages or specific performance.

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd Issue: whether the breach of the seaworthiness term justified termination by the charterers.

Held: the court held that the breach did not justify termination. Although there had been a breach by the owners of the seaworthiness condition in the contract, it was not of the character to entitle the charterers to regard the contract as terminated since: it did not make the performance of the contract a totally different performance from that intended by the parties; it did not go so much to the root of the contract that it made further commercial performance of the contract impossible; it did not deprive the charterers of substantially the whole benefit which the parties intended they should obtain from the further performance of their own contractual undertakings.

If the breach of the term means that the innocent party is not deprived of the essence of the contract under any circumstances then the term is a warranty. If a breach of the term means the innocent party will always be substantially deprived of the essence of the contract this means the term is a condition. But if a breach of a term means that we can't, in advance, say that the breach will necessarily lead to the innocent party being deprived of the essential benefit of the contract then the term is intermediate. The question of termination will depend on assessing the consequences for the plaintiff in the circumstances of the case. In this case if the plaintiff had lost money because of breach that could have sued for damages to remedy. Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd Endorsed Hongkong Fir.

Terminate for Breach of a Time Stipulation

a Time stipulation is can allow the innocent party to terminate for its breach termination of the contract will only be allowed in the following circumstances: 1) if the contract expressly declared time to be of the essence; 2) if there was an implication that time was of the essence: Summers v Cocks 3) if time, not being of the essence, was made of the Essence by the service of a notice to complete on a party who breached the Time stipulation: G R Mailman & Associates Pty Ltd v Wormald Pty Ltd Where the contract contains a stipulation as to time, but that stipulation is not an essential term, then before a notice can be given fixing a time for performance, one party must be in breach or guilty of unreasonable delay and the party giving the notice must be free of default by way of breach/delay. Only then may notice be given fixing a day a reasonable time ahead for

performance and making the time of the essence of the contract: Neeta Pty Ltd v Phillips unreasonable delay: a delay on the part of a purchaser in performing an obligation after the time when he was bound to do so, so not measuring the interval of time between the making of the contract and the time for performing the obligation, although that interval may be relevant to the description of any subsequent delay: Louinder v Leis According to Lindgren, for a notice to complete to be valid: 1) the recipient of the notice must be in default under the relevant contract; 2) the person who gives the notice must themselves be ready, willing and able to perform their own obligations under the agreement; 3) the time fixed by the notice for completion of the contract must be a reasonable time; 4) the notice must be valid in form and must clearly call on the recipient of the notice to perform the contract. Once the notice to complete is served it operates to make time of the essence for both parties to the contract: Dainford Ltd v Yulora Pty Ltd there is no principle of law that the notice to complete must always limit the period which is sufficient to meet the prefatory needs of the party in default: Michael Realty v Carr it is possible for a vendor, having first supported by notice to make time of the essence and thereafter purported to terminate the contract for failure to comply with the time constraints, to then give a second notice purporting to make time of the essence of the contract. Such a second notice is an offer to reinstate the contract and is capable of being accepted by the purchaser: Monzer Tabbouch v Devlin Generally speaking, courts have considered time stipulations to be a warranty but this isnt a fixed rule because it could be expressed to be a condition such as in the Foran where time is of the essence, and also generally speaking, with certain types of contracts such as those for sale of land courts expect you to issue a notice to complete before you actually terminate because the party in breach suffers a major loss such as forfeiting a deposit. Its also not a strict rule because it can be seen as an intermediate term and often is construed as such i.e. the court will have to look at the consequences of the breach to determine this.

Repudiation
breach of contract by repudiation: intention no longer to be bound by the contract, or to fulfil it only in a manner substantially inconsistent with his obligations.

actual intention to repudiate is not necessary: the issue is resolved objectively by reference to the effect it would have on a reasonable man. Conduct that is self-disabling, such as going out of business. Words or conduct by a party may indicate unwillingness to perform. The innocent party is entitled to sue for damages and terminate the contract if the breach goes so much to the root of the contract that it makes further commercial performance of the contract impossible: Hongkong Fir repudiation can arise in two circumstances: 1) from a party showing an intention not to be bound by the entire contract, or 2) by showing that he does not intend to be bound by term or terms which are of sufficient importance in the contract: Laurinda v Capalaba Park shopping Centre repudiatory conduct includes: refusal to perform a contract because of an erroneous interpretation of provisions contained in its; if a party terminates without justification: Kennedy v Vercoe

Anticipatory Breach (type of repudiation)

words or conduct indicating an intention not to perform a promise before performance falls due (same kind of definition has repudiation generally except for the fact that it comes before performance is due)

Foran v Wight Facts: Mr and Mrs Wight contracted to sell land to Mr and Mrs Foran on December 24, 1982. The Forans paid a deposit of 10% upon entry into the contract. The term of the contract required the Wights to register a right of way in relation to the land prior to completion. The contractual completion date of June 22, 1983 was time of the essence. On June 20, 1983 the Wights advised the Forans that they had not yet registered the right of way and would not be in a position to complete the contract on the due date. In the light of the Wights stated inability to complete on the due date, the Forans abandoned their efforts to secure the necessary finance for completion. On June 30 second 1983, the Forans did not attempt to perform their obligation under the contract of tendering the balance of the purchase price. On June 24, 1983 the Forans purported to terminate the contract. The Wights denied that the validity of the termination notice on the ground that the Forans would not have been able to raise the necessary finance to complete the purchase on June 22, 1983. After having the right of way registered on July 22, 1979 the Wights unsuccessfully sought to enforce completion of the contract by the Forans. The Wights then purported to terminate the contract. The Wights subsequently sold the property to other

purchases. The dispute between the parties was as to whether the Forans had validly terminated the contract and would therefore entitled to a refund of the deposit. If the termination was invalid, the Wights were entitled to forfeit the deposit on account of the Forans failure to complete the purchase of the property. Held: An intimation of non-performance of an essential term amounted to repudiation which releases a party who acts on it from performance. This led the purchasers to alter their position, and so it would have been inequitable to allow the Wights to take advantage of their situation. 1. The vendors notice at the beginning that he was not in a position to complete the contract (because of the easement problem), this was anticipatory breach. This amounted to repudiation of the contract by the vendor, and entitled the purchaser to terminate immediately. 2. Any right that the purchaser had to terminate at that point for anticipatory breach (which he didnt use) lapsed on the date set down for completion. The right to terminate for anticipatory breach was replaced by a new right to terminate for actual breach when the vendor failed to settle. That new right was validly exercised by the purchaser. 3. The party terminating the contract does not have to show that he would have been ready, willing and able to perform on the day performance was due. However, they must show that at the time of termination they were not already unwilling or unable to perform: Foran v Wight. 4. Where you have cases of anticipatory breach, the party repudiating the contract may withdraw the repudiation, and insist on performance, but the party withdrawing it must give notice of the retraction and the circumstances must be such that it is, at the time of the retraction, reasonable for the innocent party to be expected to be able to perform the contract: Foran v Wight. - 3 circumstances that give rise to a discharge of contract by repudiation: 1) Renunciation by a party of his liabilities under it (anticipatory breach); 2) Impossibility created by his own act (anticipatory breach); and 3) Total or partial failure of performance (actual breach).

Termination
Termination by a party for breach must be clear and unequivocal: Stocznia Gdynia SA v Gearbulk Holdings Ltd. On an objective test there must not be any doubt that the terminating party is actually terminating as opposed to threatening to terminate. Termination discharges both parties from their future obligations. Obligations that were to be performed prior to the terminating breach are enforceable: McDonald v Dennys Lascelles Ltd

Circumstances Where a Party Cant Terminate the Contract For a Breach by the Other Contracting Part
A) Party not ready, willing & able OR in breach: DTR Nominees v Mona Homes - Where there is anticipatory breach, the party terminating the contract does not have to show that he would have been ready to perform on the day. B) Election - If the innocent party has elected not to terminate, the right to terminate is lost: The Bell Group Ltd v Westpac - The innocent party may still seek damages: Ogle v Comboyuro Investments Pty Ltd - Election to terminate must be unequivocal: Immer Pty Ltd v Uniting Church - An election can be communicated by words or by conduct: Tele2 Intl v Post Office - Once an election to terminate the contract has been made it cant be retracted: Newbon v City Mutual Life Assurance Society Ltd C) Relief against forfeiture - Where contract has been terminated for breach, the breaching party may lose some interest in property as a result of the termination. - In this situation the court may order specific performance of the contract and the right to terminate will be denied based on unconscionability and unconscientiousness: Tanwar Enterprises v Cauchi - Equitable intervention relates to circumstances involving fraud, accident, mistake or surprise: Shiloh Spinners Ltd v Harding - In cases that dont involve the above, the P must establish that the conduct of the party seeking to enforce the right of forfeiture has in some significant way caused or contributed to the breach of the contract by the other party: Tanwar Enterprises Pty Ltd v Cauchi. - Conveyancing Act 1919 (NSW) s 55(2A): the court may order a vendor to refund a deposit to a defaulting purchaser in a contract for sale of land if the court thinks it would be unjust for the purchaser to forfeit the deposit. Union Eagle Ltd v Golden Achievement Ltd: purchaser failed to complete a transaction within the time stated in an essential contractual time stipulation and the vendor subsequently terminated the contract. The court rejected the purchasers application for specific performance, despite the fact that he was only 10 minutes late in seeking to tender the balance of the purchase price, because time was of the essence. This has been argued as being unconscionable because the vendor got both the benefit of the substantial deposit and immediate resale at a higher price. The degree of fault of the purchaser is slight compared to the detriment he will suffer. Thus it is suggested that a purchaser who has tendered performance a short period of time after it was due should be entitled to seek equitable relief against

forfeiture of his deposit if it can be showed that the vendor has not suffered any loss as a result of his failure to perform on time. Tanwar Enterprises v Cauchi: There was nothing unconscientious in the vendors being able to terminate the contract for the purchasers failure to get his finances ready, despite the fact that he was able to complete the transaction the next day. Unconscientious conduct arises in the circumstances mentioned above. Otherwise the vendor needs to have significantly caused or contributed to the breach by the other party. The courts will otherwise not readily intervene against the loss of a contract for sale validly terminated by the vendor for breach of an essential condition.

Discharge by Frustration Ch 22

Supervening event between the making of the contract and its performance that makes performance of the contract substantially different from what the parties agreed to, or makes performance impossible: Davis Contractors Ltd v Fareham urban district Council

ELEMENTS
1) there must be a supervening event that significantly changes the nature of the outstanding contractual rights; 2) there must be no fault in either party; 3) the supervening event must not have been reasonably contemplated by the parties at the time of the contract; and 4) it must be unjust to hold the parties to the original contract: National Carriers Ltd v Panalpina Ltd

1. Intervening event - categories

COURT ORDER - after the parties have made an agreement an order is made by a court which has an impact on the party's ability to carry out the terms of that agreement: Codelfa Constructions v State Rail Authority Codelfa Constructions v State Rail Authority: Facts: the contract between the parties specified that the deal for would excavate and construct the eastern suburbs train line. The term of the contract was out the work was to be completed within 130 weeks. Although not expressed in the contract, the parties were aware that the Delta would complete the works by running three eight-hour shifts every day of the week. The work generated considerable noise and vibration. Local residents successfully sought an injunction restricting the working hours to 6 AM to 10 PM, six days a week, with no work on Sundays. Codelfa claimed the contract had been frustrated and claimed a quantum meruit for the work completed rather than the agreed sum. Held: A mere delay in or interruptions to performance are not enough to render a contract radically different thereby frustrating it. However in this case the change in working hours caused by the injunction made the contract fundamentally different from that which was envisaged therefore it was more than a delay to performance. CHANGE OF LAW

if a change in the law renders the performance of contract illegal it frustrates the contract. Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd Facts: a contract between a British company and a Polish company for the supply of goods for delivery in Poland. The outbreak of World War II made it illegal for a British company to supply goods to a country occupied by an enemy country. This frustrated the contract. DESTRUCTION OF SUBJECT MATTER destruction or a substantial alteration of the subject matter without fault after contract and before completion frustrates the contract. - The destruction or alteration must take place after the contract has been entered into. If it happens during negotiations and neither party is aware this amounts to a common mistake which is that the hall existed. Taylor v Caldwell Facts: a hall was hired out for five days for the purpose of giving a series of concerts. It was a term of the contract that the payment of 100 would be made to each day that the hall was used. After the contract was made, and six days before the concert Held, before it was destroyed by fire. The plaintiff sued for breach of contract. Held: in a contract with performance depends on the continued existence of a given person/thing, the condition is implied that the impossibility of performance arising from the parenting of the person or thing to excuse the performance. CONTRACTS OF PERSONAL SERVICE in a contract of personal service the death, long-term illness or injury or unavoidable absence of the person supplying the services, such as imprisonment or compulsory military service may lead to frustration of the contract. Chapman v Taylor Facts: the Taylors entered into a contract with Chapman in 1999 for residential building work to be carried out at their property. The contract was to be performed by Chapman personally or under his supervision. He was injured on a building site that was not the property. He was in a coma and after was unable to undertake or supervise the work until the end of 2000. Held: the contract was frustrated because the thing undertaken would, if performed, be a different thing from that which was contacted for. A temporary injury however is not sufficient to frustrate a contract of employment, depending on whether it would make performance of the contract radically different from that promised.

FAILURE OF A CONDITION (coronation cases) where the parties expressly or by implication acknowledge that the basis of the contract is the happening of a future event, the failure of that event to happen will frustrate the contract. Krell v Henry Facts: Krell sued to recover 50 being the balance is said to be due under an agreement by which Henry was to have the use of Krell's flat. The contract required the payment of $25 deposit and a payment of an additional 50.02 days before Henry was to be given possession of the flat. Henry had intended to use the flat to view the coronation of King Edward's coronation and both parties understood that this was the purpose of the hiring. The coronation procession was cancelled and Henry refused to pay the 50. Held: there was a necessary inference from the circumstances, recognised by both parties, that the coronation procession and the relative position of the flat was the foundation of the contract. The cancellation of the procession discharge the parties as it was no longer possible to achieve the substantial purpose of the contract. The fact that the purpose of the using the room was not stated in the contract was not fatal to a finding of frustration in this case. Inferences instead, could be drawn from the surrounding circumstances which required the existence of a particular state of things. Where the state of things assumed are non-existent it is no longer possible to perform the contract. Thus there is no breach of the contract. Herne Bay Steamship Company v Hutton: Facts: the contract for the hire of the steamship had not been frustrated. The purposes for which the defendant had high end the steamship did not represent the foundation or essence of the contract. The contract was able to be performed in a way that would achieve the substantial purpose of the contract. Thus a partial failure of the contractual purpose will not frustrate a contract.

GOVERNMENT INTERVENTION Metropolitan water board V Dick, Kerr & Co Facts: the respondent had agreed with the appellant to build a reservoir within six years. The contract contained a clause extending this time limit is delays were occasioned by difficulties or obstructions howsoever occasioned. War broke out and the Minister of munitions ordered that the work should cease indefinitely. Held: the substantial time interruption arising from the war and the circumstances would make performance of the contract, if it took place, so different from that originally contemplated by the parties, that there was frustration.

DELAY A mere delay in or interruptions to performance are not enough to render a contract radically different thereby frustrating it: Codelfa Embiricos v Sydney Reid & Co: the ship was chartered for a voyage from a port in the Sea of Azoff to the UK with a cargo of grain. The ship sailed under the Greek flag and loading was interrupted in consequence of war being declared between Greece and Turkey. The ship was constantly delayed in its voyage through the Dardanelles. The delay was held to be a frustrating event.

WAR

2. Caused by the Parties no frustration

FAULT if the change in circumstances is self-induced, there is no frustration: Maritime National Fish Ltd v Ocean Trawlers Ltd EXCEPTION: an employer successfully argued that the contract was frustrated where its employee was imprisoned following a criminal conviction, even though the criminal conviction was the result of the employees own actions: F C Shephard v Jerrom the party alleging that the change in circumstances are self-induced has the onus of proof: Joseph Constantine v Imperial smelting

3. Contemplated by the Parties no frustration

the contract is not frustrated where the change in circumstances or supervening event was foreseeable: Walton Harvey Ltd v Walker where the contract specifically provides for the change in circumstances or supervening event, there is no frustration: Claude Neon v Hardie a clause providing for extensions of time in cases of delay "howsoever occasioned" was not held to have included within its ambit delays occasioned by the government intervention. It was construed to mean delays occasioned by factors such as whether, shortages in the supply of materials, industrial action: Metropolitan water board v Dick, Kerr

Effects of Frustration C/L & Statute

Common Law

the contract is automatically discharged at the moment of frustration (termination in futuro). obligations that existed before frustration are still enforceable: Fibrosa Spolka if there is a total failure of consideration as a result of frustration, payments made before frustration can be recovered under the law on restitution: Fibrosa Spolka. This rule only applies where there has been a total failure of consideration. The common-law position does not deal adequately with the position where large sums are paid, but only a small benefit is received before the frustrating event occurs Statute frustration is not grounds for a cause of action in damages, however, all rights, duties and liabilities acquired or incurred by the parties before and the frustrating event remain on foot and may form the basis of a claim for damages. Once frustration occurs the parties must enter into a new agreement should they want to continue on: bank line Ltd v Arthur Capel

Statute Frustrated Contracts Act 1978 (NSW)

the act excludes certain types of contracts (a contract for the carriage of goods by sea; contracts of insurance; the charter party which is not a time or demise charter party; contracts in which the parties have agreed that the act does not apply; contract is made before 1979: s 6(1); for contracts which are embodied in the Constitution of companies and partnerships: s 6(2). the act allows parties to exclude operation of the act. Where no alternative outcome is agreed, the common-law rules that apply the act sets out a mechanism for the parties to apportion their loss s 13: tries to overcome Fibrosa Spolka situation where consideration has been provided. In such cases the amount of the wasted expenditure (consideration) is equally apportioned between the parties.

STATUTORY ILLEGALITY pg 352

The court will not enforce a contract which is expressly or impliedly forbidden by statute or that is entered into with the intention of committing an illegal act: Moore Stephens Stone Rolls Ltd - did Parliament forbid the subject matter (expressly/impliedly) of the contract no matter how it is to be performed or did they merely forbid aspects of the contracts performance? - Where the contract is expressly, or by implication, forbidden by statute or common law, the court will not give it affect: there are numerous cases where an action on the contract has failed, because either the consideration for the promise or the act to be done was illegal, as being against the express provisions of the law, contrary to justice, morality, and sound policy: Wetherell v Jones Contracts Prohibited by Statute
a contract made in breach of the prohibition will be illegal, void ab initio and unenforceable, unless the language of the statute, either expressly or impliedly, provides otherwise: Yango Pastoral v First Chicago Australia see ch 25 for consequences

Express Statutory Illegality

Re Mahmood and Ispahani Facts: in June 1919, the Food Controller, under the Defence of the Realm Regulations, enacted the Seeds, Oils and Fats Order of 1919 which stated: Until further notice a person shall not buy or sell any linseed oil except under and in accordance with the terms of a licence issued by or under the authority of the Food Authority. Mahmoud, the plaintiff, applied and was granted a licence. Ispahani, the defendant, did not have a licence, although he had told Mahmoud that he did have a licence.

Buy contract, dated August 1919, Mahmoud sold 150 t of linseed oil to Ispahani. In October 1919, Ispahani refused to accept delivery of the linseed oil. Mahmoud sued Ispahani who defended the action on the basis that the contract was prohibited and therefore unenforceable. Held: the court found for Ispahani on the grounds that the contract was illegal and therefore unenforceable because the defendant, Ispahani, did not have a licence. The contract of sale was prohibited by the statutory order and because the prohibition was in the public interest, no claim could be made under the contract.

Implied Statutory Illegality

where a statute makes it an offence to make a particular contract or to make it in defined circumstances, that will be construed as an implied prohibition of the making of the contract unless the statutory provision is merely in aid of the revenue: Yango Pastoral v First Chicago - it is not necessary to show that the contract is illegal outright, it will be enough to show that a party did not perform the contract in the only way in which the statute allows it to be performed: Anderson Ltd v Daniel Yango Pastoral v First Chicago Facts: First Chicago was carrying on the business of banking for which it did not have the requisite proper authority under statute. The prohibition was accompanied by a penalty. Held: Not illegal. The purpose of the legislation was to protect the interests of the public, such as people who deposited money with banks. Because Parliament could not have intended that loans made by unauthorised banks be irrecoverable, thereby putting deposits at risk, it was decided that Parliament did not intend to prohibit each contract made in the course of business, but only to penalise the carrying on of the business without authority. For this reason the contract was not illegal. But in deciding this question the court will take into account the scope and purpose of the statute and the consequences of the suggested implication with a view to ascertaining whether it would conduce to, or frustrate, the object of the statute. If the contract was declared illegal, it would have led to an unreasonable result. St John shipping Corporation v Joseph Rank Facts: the plaintiff's ship was chartered by the defendants to carry grain from the USA to England. It was overloaded and its load line were submerged, which was a breach of British shipping laws. The defendants were sued by the plaintiff for nonpayment and raised the defence of illegality because of the overloading.

Held: contract was not illegal. The overloading was not intentional, it was merely incidental to the manner in which the contract had been performed. There is a distinction between a contract which has as its object the doing of the very act forbidden by the State, and a contract whose performance involves an illegality only incidentally.

Cope v Rowland (prohibited, not intended for public revenue)

Held: a brokerage contract entered into by an unauthorised person was prohibited in order to prevent improper persons acting as brokers for the purpose of protecting the public. The statute was not meant merely to secure a revenue to the city. Thus the contract was illegal and void. Pretorius Pty Ltd v Muir & Neil (severe penalty implies prohibition) Held: severe penalties for contravention of statute meant that the object of the legislation was to make any contract between an unlicensed seller and the purchaser, illegal. Anderson Ltd v Daniel (publics protection illegal) Facts: an invoice is needed to be provided stating what is in the product straight after delivery. A failure to provide an invoice attracted a fine. There was a sale without the invoice and when the seller attempted to recover the prize the purchaser refused to pay, arguing that the contract was illegal and the debt was unenforceable. Held: the reason behind the imposition of a fine was for the public's protection thus the contract was illegal. Because the policy of the act is to protect the public or a class of Person by requiring that a contract shall be accompanied by certain conditions, and the penalty is imposed on the person who doesn't abide by those conditions, the contract and its performance without those conditions is illegal.

COMMON LAW ILLEGALITY

1) 2) 3) 4) 5) contracts to commit a crime, tort or fraud contracts made with the intention of acting unlawfully contracts prejudicial to the administration of Justice contracts to oust the jurisdiction of the courts contracts promoting/causing conflict between one's public duty and private interests 6) contracts that promote sexual immorality 7) contracts that impose a restraint on trade 1. Contracts to commit a crime, tort or fraud
where the objective of the contract is to commit an illegal act, the con of tract is contrary to public policy and void the principle applies to contracts to commit serious crimes and torts, to defraud creditors and to defraud the revenue: Hutchinson v Scott there must be proof of an intention to act unlawfully and the parties must have knowledge that what they are doing involves acting unlawfully: Yaroomba Beach Development v Coeur de Lion

2. Contracts made with the intention of acting unlawfully - illegal, thus void against public policy Contracts aimed at defrauding the state of tax revenue Alexander v Rayson:

Facts: Alexander split the transaction for rent into two documents to defraud the Council. Held: contract was illegal due to the intention to defraud the Council. It is the documents, not the subject matter of the contract that is unlawful. 3. Contracts prejudicial to the administration of Justice - Callaghan v O'Sullivan: the plaintiff sought to recover money which he had paid to 4 police officers in return for the undertaking not to prosecute him for various offences. The officers did not prosecute him. However information from a third party implicated him in various other activities. The plaintiff then decided to claim back what he had paid to the police officers but it was held that the contract was illegal and void against public policy. 4. Contracts to oust the jurisdiction of the courts

such an agreement is void at common law on grounds of public policy. However, the clause that refers a dispute to arbitration prior to legal proceedings is not void: Scott v Avery ousting the jurisdiction of the court can arise in many ways: o by agreement parties cannot take the law out of the hands of the courts and put it into the hands of a private tribunal without any recourse at all to the courts in cases of error of law. Such an agreement is contrary to public policy and void. Hyman v Hyman:

Facts: as part of a separation deed in a marriage the wife was not to take proceedings against her husband the alimony beyond what was provided for in the deed. Held: the wife's right to future maintenance is a matter of public concern, which she cannot waive. o Provisions attempting to contract out of jurisdiction conferred upon the courts by statute will be held void on public policy grounds on the basis that it amounts to an attempt to oust the jurisdiction of the Courts: Aribisala v St James Homes. 5. Contracts promoting or causing conflict between one's public

duty and private interests

void as against public policy Wilkinson v Osborne: a real estate agent who is also a member of Parliament was to be paid a commission for the purchase of land by the government. It was held to be unenforceable. There is potential for conflict of interest between the agents private interest and the public duty.

6. Contracts that promote sexual immorality or are prejudicial to the status of marriage
when measured against the relevant community standards at the time the contract was entered into the contract can be void Seidler v Schallhofer: Facts: a contract between a de facto couple stipulated that, after a period of living together, the parties would either marry or separate, and in the case of the latter, it provided for the division of property between the parties. It was held that this was not sexually immoral contract due to the change in public policy with regard to unmarried cohabitation. However a contract to provide meretricious (like a prostitute) sexual services is and has long been regarded as contrary to public policy and illegal. Ashton v Pratt:

Facts: In Pratt a contract to establish the relationship of a mistress was a contract to provide meretricious sexual services and was, accordingly, void against public policy. Meretricious is understood as not a contract with a prostitute, but a contract treating a woman as if she was a prostitute: Markulin v Drew. 7. Contracts that impose a restraint on trade At C/L a restraint of trade is contrary to public policy and is void unless it is reasonable from the perspective of the public interest as well as between the court will prefer an interpretation which will void unjustified unreasonable the parties to the restraint: Nordenfelt v Maxim-Nordenfelt; Onus of establishing that the restraint is contrary to the public interest is on the person who asserts that: Buckley v Tutty

REASONABLENESS: - the restraint must be reasonable in its extent, both in time and place, and in protection of a legitimate interest: Cream v Bushcolt;
must afford no more than adequate protection: Herbert Morris Ltd v Saxelby. - consequences: Australian Broadcasting Corp v Australasian Performing. - Inequality of bargaining power between parties: Amoco Australia v Rocca Bros - the time at which reasonableness must be judged is the time of entry into the contract: Lindner v Murdocks Garage. - Industry practice is relevant to determine reasonableness: Esso Petroleum v Harpers Garage - effect and operation of the restraint in practice: Cream v Bushcolt Nordenfelt v Maxim-Nordenfelt: Facts: the clause restraining the seller of a munitions business from setting up a similar business in Europe or North America for a period of 45 years was held to be valid. In this industry, the clause was reasonable at that point in history.

Restraint of Trade Act 1976 (NSW)

S 4(1) a restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not.

S 4(3)

this section allows the court to order that a restraint of trade clause be altogether valid or invalid to such extent as the court thinks fit. This allows the court to modify the clause that might otherwise be unreasonable. In terms of establishing whether or not there is a manifest failure, a covenantor will need to show that the covenantee has imposed a restraint which it knew was unreasonable, or which a reasonable person in its position would know to be unreasonable. If the covenantee has a reasonable basis to believe that the extent of the restraint is reasonable there is no manifest failure and the court cannot invoke its powers under s 4(3): KA & C Smith v Ward

VENDOR-PURCHASER RESTRAINTS
for a restraint on a vendor to be upheld, there must be a genuine sale of a business and not transfer of an illusory business interest: Vancouver Malt and Sake v Vancouver Breweries - amount of purchase price paid when business was sold, particularly amount paid for goodwill, is relevant factor: Cream v Bushcolt Hawkinson v Brookview: Facts: Contract for sale of a video store. Restraint cluse prevented vendors were not to engage directly or indirectly in any capacity whatsoever as principal or employer in any business or activity of a similar nature for 2 years and within a radius of 10km from the business which was being sold. When taken in a practical context, not unreasonable.

EMPLOYER-EMPLOYEE RESTRAINTS
an employer is not entitled to be protected through a restraint of trade against mere competition; restraint of trade must protect the legitimate interests of the employer: Koops Martin Financial Services v Dean Reeves employers interests include: goodwill, customer connections and confidential information in if an employee has access to trade secrets or other confidential info he may be restrained from communicating those secrets/information: Lindner v Murdocks Garage. And employers interest in its goodwill and customer connection can support a reasonable restraint of trade: Sear v Invocare Australia Pty Ltd

TRADER AGREEMENTS Amoco Australia v Rocca Bros Facts: Rocca agreed with Amoco that he would build a service station and lease it to Amoco for 15 years. Amoco would then sublease the service station to Rocca. The

sublease contained covenants by Rocca that it would buy a minimum amount of petrol each month from Amoco and not to buy petrol from anyone else. Following a dispute between the parties, Amoco sought an injunction to restrain Rocca from buying petrol elsewhere. Held: the sublease was an unreasonable restraint of trade and was void. Amoco could not establish that the restrictions which were imposed were reasonably necessary to protect their interests. OTHER SITUATIONS restraint of trade clauses can also be used in partnership agreements in relation to the activities of partners to leave the firm: Bridge v Deacons

REMEDIES FOR ILLEGALITY ch 25

"The court will not assist claimant to recover her benefit from his wrongdoing": Moore Stephens Stone Rolls Ltd STATUTORY ILLEGALITY
if the statute expressly, or by implication, prohibits the formation of a contract then it is illegal to enter into such a contract and any contract in breach thereof is void ab initio and no rights are conferred on either party. Is the statute only prohibits the actual carrying out of the contract, that is, making the actual performance of the contract illegal rather than its formation, legal or equitable remedies are available.

3 EXCEPTIONS TO BRING A CLAIM EVEN IF CONTRACT IS ILLEGAL OR VOID 1. the plaintiff has an independent cause of action, distinct from the illegal contract
Restitutionary claims prevents the defendant being unjustly enriched at the expense of the plaintiff these claims do not depend on the existence of a contract

Tortious Claims where money has been paid or property transferred under a legal contract, the plaintiff may have an action in tort. pg 391-2

Collateral Contract Claims pg 393

2. the parties are not equally at fault - where the innocent party has entered into an illegal contract as the result of
mistake, misrepresentation, duress or fraud: Marles v Trant Clegg v Wilson Facts: Wilson promised to ensure that criminal proceedings against Clegg's son were discontinued. Clegg's purpose in entering into this contract was to ensure that her son was not in prison. In return, Clegg promised to transfer certain land to Wilson. This contract was illegal on the common law ground that it was prejudicial to the administration of Justice. Clegg delivered and executed transfer of the title to the

land to Wilson. Before it was registered she withdrew from the illegal purpose and sought an injunction to prevent registration of the transfer. Held: the court found in Clegg's favour on the ground that the contracts illegal purpose had not been carried out. The repentance does not need to be sincere. In this case Clegg's repentance was prompted by the fact that her son would almost certainly be imprisoned on other charges. She was still entitled to the injunctive relief.

3. THE ILLEGALITY CAN BE SEVERED FROM THE CONTRACT

a contract that contains provisions that are avoid at common law or void by statute but not illegal will may be enforced if the offending parts can be severed. Here the remainder of the contract is unenforceable after severance but the courts will not re-write an offending clause to save it: Attwood v Lamont

Two ways of severance:

1. an objectionable provision may be removed from the contract leaving the rest of it valid and enforceable 2. contractual provision may be read down where it is unreasonably wide: Attwood v Lamont

Test of severance where promises are validly severable:

1) whether the substance of the contract is divisible without altering its nature; 2) whether severance changes the extent only, not the kind of the contract: McFarlane v Daniell - Also applies to restraint of trade Thomas Brown v Fazal Deen Facts: Fazal leisured that he entered into a contract of battlement with Thomas by which the latter undertook to take due care of a safe and a quantity of gold and gems and to redeliver all these goods to Fazal on demand. Subsequently, Fazal demanded the return of the goods and Thomas refused or failed to comply with that demand. The gold and gems subsequently disappeared. The question was whether the bail meant breached the national security regulations which relevantly provided that anyone who had gold in their possession or control was required to deliver it to the Commonwealth Bank within one month of it coming it into their possession. Held: severance was permissible in this case because, in removing the reference to gold from the contract, the severance resulted in a change to the extent only, and not the substance, of the contract.

PRIVITY OF CONTRACT CH 37

The Privity Rule

Only a person who is the party to a contract can sue on it: Coulls v Bagots Executor. A 3rd party may gain a benefit from a contract, gives rise to questions of fairness.3rd part has no legal right to sue. Only the parties to the contract can sue one another.

Dunlop Pneumatic Tyre (manufacturer) v Selfridge (retailer) Facts: Dunlop was a manufacturer of tyres and Dunlop sold its tyres to a wholesaler and that wholesaler then sold those tyres on to a retailer. In both contracts, that is, between Dunlop and the wholesaler, and the contract between the wholesaler and the retailer, built a term that they would not sell the tyres below a certain price. The retailer broke its promise to wholesaler and sold the tyres below that minimum set price and Dunlop, the manufacturer, sued the retailer and failed. The retailer was not liable because Dunlop had not given consideration to it in exchange for Selfridge's promise not to on sell under a certain price. Selfridge's promise was given to the wholesaler so that was no contract formed between Dunlop and Selfridge. Dunlop was not privy to the contract between the wholesaler and retailer. It was only the wholesaler that could sue Selfridge for breach of that promise. Coulls v Bagots Facts: Mr Coulls agreed with the O'Neill construction company that it could quarry stone from his land and the company had to pay royalties to him and his wife as joint tenants. When Coulls died his wife claimed that she was entitled to the royalties as joint tenants. But the company did not want to pay her and argued that they will only pay her husband, and now that he's dead they will pay his estate, and the estate can distribute whatever he is entitled to according to how he wanted it to be distributed. Here the court had to decide whether Mrs Coulls could enforce the contract to which she was not a party. The High Court held that that the company's promise was not made to Coulls and his wife jointly but only to him and she had no right to enforce that promise. Privity and Consideration close relationship. Consideration must move from the promisee. In both of the above case is the third party that was Dunlop in the first case and the widow of the second case, they provided no consideration for the promise that had been breached.

E.g. if you make the promise to my brother, he is the promisee, but he has given no consideration and can't sue you. If you make the promise to me, my brother again has not given consideration, which is irrelevant, because he is not the promisee. So whichever rule we apply, my brother, the third party, who benefits under the contract, is not able to enforce the broken promise. This question remains unresolved. Whichever rule you apply, the third party fails to do is overlap between the two rules. Dunlop is authority for both rules. Important consequence of this rule: if I was to sue you for failing to live up to contractual obligation and failing to pay my brother what is the likely outcome? E.g. I agree to paint your house and you pay the money to my brother. What will happen if you don't pay him? Two possibilities. Possibility one: I sue you for damages - breach of contract. But what is my loss? The measure of damages: the difference between my position had the contract being performed and my position at the time the contract was breached. But I'm going to be in exactly the same position - I have suffered no loss. Even if I can prove the breach, I would receive only nominal damages, and in this case it amounts to nothing. I can't sue to recover my brother's loss. Possibility two: I could seek to enforce your positive contractual obligation by getting an order for specific performance of the contract. Would I be were to get an order for specific performance for you to pay the money my brother? Because it's an equitable remedy its discretionary so it can be refused such as if damages would be an inadequate remedy. The issue is if you have to pay money to my brother and he failed to pay that money, for damages in adequate for me? Most courts took the view that since I am only entitled to nominal damages and I stand to get exactly that, nominal damages if I was sue you, there would be no grounds for saying that damages in my case would be inadequate. So so there is no incentive for me is the contractual party to seek specific performance or damages where I am not getting anything, and not getting anything for my brother. This problem was overcome in Beswick v Beswick:

Facts: there was a contract between an owner of the business and his nephew and the agreement was that the uncle would sell his business on to his nephew and the nephew would pay a lump sum in part payment and that the balance of the purchase price would be paid over a period of time and that the uncle would be retained somehow some kind of employee. It was also agreed that if the uncle were to die and the purchase price has still not been fully repaid then the nephew would continue to pay the balance of the purchase price by way of an annual sum of money to the uncle's widow for as long as she lived. The uncle died and the nephew refused to pay his widow. The widow was the administrator of the husband's estate. As administrator she sued the nephew and sought specific performance of that contractual term.

Held: The court held that in cases like this week damages would be nominal the measure of damages is in fact in adequate from the perspective of Justice. So in this case courts have taken a broader view of the strict interpretation of the privity of rural and have said that at least in cases where the contract is to pay money or transfer property to a third party it would be unjust to refuse an order for specific performance for two reasons: 1) if it is held that the measure of damages is nominal only and the suing party gets only nominal damages and the breaching party gets off scot-free 2) by saying that nominal damages are adequate specific performance would be unavailable and the party in breach is again able to ignore his positive contractual obligations and thus doesn't have to pay and doesn't have to perform - this would amount to a denial of justice. So in such cases damages are inadequate and specific performance may be ordered as long as all the other requirements of specific performance are satisfied.

Trident General Insurance v McNiece key Australian case of privity rule application. Facts: a company called blue Circle was conducting a very large building project in Sydney and hard at general policy of insurance, compensation insurance, with Trident. The policy of insurance was meant to cover any injuries, debts to any of the people working on the project that included all the blue Circle employees and the contract said as well as other associated companies, contractors and suppliers" engaged in that project. One of blue Circle's contract as was McNeese who were aware of this insurance policy that this Circle had with Trident. McNeese assumed that it would also be covered by this insurance policy. There was an industrial accident, one of McNeese employees and was seriously injured on-the-job and sued his employer McNeese for a negligence. That went to court and the employee won the case and obtained a judgement for a substantial amount of money. McNeese then sought indemnity from Trident insurance under blue Circle's policy. Trident did not pay. They argued that the insurance contract was unenforceable by McNeese on the grounds of privity. So, the insurance policy was a contract between Trident and blue Circle and McNeese brothers were not a party to the contract, although McNeese were to receive a benefit under the contract they had no standing to sue for its benefit. Held: high court found in favour of McNeese, the third party, by a majority of 5-2, partly on the grounds of privity and its exceptions. MAJORITY (Mason, Wilson & Toohey) they argued that the doctrine of privity had outlived its purpose and that it should be abolished. Mason and Wilson argued for its complete abolition while Justice Tilley

said it should be abolished in so far as insurance cases such as this. All three held that damages that blue Circle was entitled to get from Trident for failing to indemnify McNeese were limited to nominal damages. They agreed that if blue Circle was to sue Trident for failing to pay McNeese then there would only be entitled to nominal damages, as such of those damages were completely inadequate because they reflected blue circles of nominal loss will not McNeeses real loss which is substantial amount of money. Thus there was no incentive for blue Circle to take action against Trident and there was no incentive for Trident to carry out its contractual obligations to blue Circle by paying McNeese. They did acknowledge that in some cases specific performance may be an incentive for parties in Trident position to perform but specific performance will not always be available. They also acknowledged that you can get around this privity rule by getting around the so-called exceptions. But, they said that the third party, McNeese should not have to establish any of the exceptions because there was a valid contract for which the consideration had been given, and a third party like McNeese should be able to recover under the contract, should be able to enforce the contract, because they have a valid expectation of a benefit under that contract.

MINORITY (Brennan, Dawson & Deane)

Privity is too important to abolish, it is a fundamental common-law doctrine that has been confirmed in many decisions. Justice Deane argued for the retention of the privity doctrine, but found in favour of MacNeice on the basis of an exception - trust exception. Brennan and Dawson found in favour of Trident on the basis of the privy rule.

Justice Gaudron
referred to privity, acknowledged this position, and found that the rule prevented the McNeese brothers from enforcing the contract however she went on to hold in favour of them on the basis of one of the other exceptions to the privy rule - the unjust enrichment exception. Time of the judges found that either privity did not apply or that it did apply that an exception to it applied on the facts.

EXCEPTIONS TO PRIVITY

1. AGENCY

The 3rd party would need to establish that on the facts of the case the party who is to enforce the contract, e.g. I'm going to provide a service to you and you're going to pay my brother, under the agency exception my brother would need to establish that the party who is to enforce the contract i.e. me, was acting as the agent of the third party when the contract was formed. So at one I entered into the contract review I was acting in the capacity of my brother's agent and by the law of agency, you could be sued either by me as the agent or directly by my brother is the principal, because agency binds the principal.

E.g. EXLUSION CLAUSES in a shipping contract where the owner of goods are owned by a party who enters into a contract with the ship to the carriage of the goods by sea. When the goods arrive at their destination they have to be unloaded by a stevedoring company. Then the goods are collected by the purchaser. If a shipping company who is transporting the goods by sea excludes its liability for any damage to the goods was the goods are in transit, this will not normally cover the stevedore. So any exclusion clause that operates to cover the shipping company normally would not extend to cover the stevedore unless that exclusion clause is specifically for the benefit of the shipping company and any other third party such as the stevedore which is involved in the transport and handling of the goods. Exclusion clauses like this are common in contracts for carriage by sea. But to what extent can the stevedore rely on exclusion clause in the contract between the shipping company and the owner of the goods? Midlands Silicones v Scruttons Facts: Midlands ordered chemicals to be shipped from New York to London. The shipping company was protected by an exclusion clause and that exclusion clause did not exclude its liability completely just limited it to an agreed amount of money. The chemicals are damaged by the stevedore company (Scruttons) while they were being unloaded from the ship. The stevedore was sued that they argued that they were protected by the shipping companys exclusion clause because it was an agent of the ship owner. Held: the agency exception that the stevedore company was arguing was possible and could be established if the facts were different, if four elements were proved: 1. the exclusion clause must clearly express that the third party is to be protected; 2. the shipping company must include the exclusion clause in the contract on its own behalf and as agent for the third party; 3. the shipping company must have the express or implied authority of the third party to act as their agent even by ratification;

4. the third party must provide consideration for the shipping companies promise to exempt the third party from liability and get the benefit of the exclusion clause.

NZ Shipping Co Ltd v A M Satterwaithe Facts: goods were shipped from the UK to New Zealand and a stevedoring company in New Zealand was negligent and the goods were damaged. The exclusion clause covered the stevedore clearly as principal of the aged shipping company. This satisfied the first two elements of the four elements above. The other element about consideration were satisfied because the stevedore unloaded the goods. The act of unloading the goods satisfied the consideration requirement. It was argued that there was a problem with the remaining element, that the shipping company had the authority of the stevedore because in that case the shipping company was a whollyowned subsidiary of the stevedore. The stevedore company was agent of the shipping company in securing contracts for the transport of goods out of New Zealand. It was held that the relationship between a shipping company and the shipping company established an implied authority of the shipping company that contract on the half of the stevedoring company. On those facts the stevedoring company was protected by the exclusion clause.

Homburg Houtimport BV v Agrosin Private Ltd The privity exception is not a true exception. We can look at it as a separate and enforceable collateral contract between the owner of the goods and the third party stevedore. The contract is initiated by a unilateral offer by the owner of the goods, whereby the owner of the goods promises that the third party will have the benefit of the exclusion clause if the third party damages the goods. What this means is that because the third party stevedore is under no obligation to the owner of the goods, if engaged by the shipping company, as soon as the third party stevedore start unloading the goods it has accepted the unilateral offer and given consideration for the owners promise thereby bringing in a new contract into existence between the owner of the goods and the third party, so long as the four conditions are satisfied as between the third party and the shipping company. So the new contract is between the owner of the goods who has promised the benefit of the exclusion clause and the stevedore who has given consideration for the promise by unloading the goods, by doing work, which they were not obliged or obligated to do in the first place.

2. Covenants on Land

A restrictive covenant is a private agreement between landowners which may restrict the way in which the land is used to, it may restrict the way in land is developed e.g. you might have adjoining owners of land to enter into an agreement whereby a restrictive covenant is placed on one of the lots to preclude the owner of that lot of land from building a house above a certain height for example, that would interfere with the view that lot two has. Usually the owner of Lot two would pay a fee to owner of Lot one for the benefit of the covenant. So, common where land is subdivided, you include a restrictive covenant that would restrict the owner of the lot you have subdivided - effectively to contractual term between the two owners of the two lots. So the owner of the baht lot will promise not to build above a certain height and the owner of the higher lot will pay something that will give some other kind of consideration or deed. What if that second lot is sold? Can a subsequent owner also enjoy the benefit of the restrictive covenant and enforce it if the owner wants to build a second story, as the new owner is not a party to the contract. Despite that, there is a privity of estate between the lots themselves, which arises in the land at the time the contract is formed so that according to land law, the covenant runs with the land and bind any subsequent owners. So the privity rule is circumvented and the third party is given rights to enforce the contract through land law by using the law relating to restrictive covenants on land.

3. Trusts
The essence of a trust is that property is held by a trustee on trust for beneficiaries. The legal title to the property vests in the trustee while the beneficial/equitable title vests in the beneficiaries. E.g. if parents open up a trust account for their children in a bank account, the bank account is in the name of the parents but it is an account which is on trust for the children. The parents in that situation are trustees, they have the legal title to the money. The children are the beneficiaries, they have the equitable interest in the money. The trustees hold that money for the benefit of the beneficiaries, according to trust law, the trustees, have legal obligations towards the beneficiaries. It is possible that if the trustees, the parents use the money for their own purposes the beneficiaries can take legal action against the trustees for breach of the trust. Also where a person dies, leaving a will, that will nominate someone to be an executor who will propound the will. The person who is the executor is the trustee, but a trust arises, whereby the executor becomes the legal owner of the property by operation of law, but they own that property as trustee and their legal obligation is to administer the estate according to the will and distribute that eState to the beneficiaries. Those beneficiaries would only then become the legal owners of

the property. To the beneficiaries have an equitable interest and can take legal action against the trustee. For a trust to arise 4 things are needed: 1. 2. 3. 4. a trustee a beneficiary - separate from the trustee property the obligation of the trustee to hold the property on trust to the beneficiary

Under the law of trust, property has a very wide meaning. It includes tangible property such as land etc. It also includes intangible property such as nonphysical assets like intellectual property, goodwill, shares, securities including rights under a contract. One example of properly recognised by trust law is the trust of the covenant (a promise) such as one by a tenant to pay money under contract, and the property is the promise itself. So if you and I enter into a contract involving a benefit to be given by you to my brother can it be said that I hold your promise on trust for my brother. According to the law trust the answer is yes as long as we can prove that there is an intention, at least on my part if not on the part of both of us at the time the contract is formed that I am entering into the contract with you as trustee for my brother. If I can show that then we can show that the trust has arisen just as we can show that an agency has arisen as we did earlier on. How do we prove intention? Deane J in Trident v McNiece. We can see that Justice Deane found in favour of Macanese on the basis of this trust exception. He said we find the true intention by looking at the contract itself will, because there may be an express term to that effect/statement, but if not there may be an implied term, i.e. so there may be a term in their establishing intention by necessary implication on the facts of the case that I am acting as trustee of the your obligation under the contract when the facts and circumstances of the case as a whole are taken into account. In the Trident case Justice Deane found that blue Circle entered into the insurance contract with Trident as trustee, for all of the associated companies, contractors and suppliers like McNeese. Therefore according to Justice Deane, the trustee, blue Circle, had duties to the beneficiaries. If the trustee had breached those duties, the beneficiaries could take legal actions in equity to enforce their equitable/beneficial interests. That means that if blue Circle failed to see Trident to enforce Trident's promise to indemnify McNeese, McNeese, as beneficiary, could sue the trustee, blue Circle for breach of trust, not contract, because there is no contract between McNeese and Trident. But McNeese could sue blue Circle for breach of trust and join in Trident in the proceedings as a co-defendant. This means that what would happen is that the third-party beneficiaries that is McNeese would force the trustee, blue Circle, to enforce the contract indirectly and the trustee would then recover damages from the insurance company and hold those damages on trust for the third party beneficiary. In such a case the measure of damages would not be nominal because the trustee would sue to recover the actual loss to the trust

which is in effect the third partys loss. What would happen then, once the trustee has recovered that money on behalf of the trust, the beneficiary, MacNeice, which would then terminate the trust by giving notice to the trustee, and the trustee then delivers the trust property to the beneficiary. So the privity rule is circumvented and the third party received a benefit under the contract.

4. Equitable Estoppel
In the Trident case, Justice Mason and Wilson argued that privity to be got rid of completely. They mention that there is a case to argue in Estoppel in this situation. Justice Deane also mentioned that as long as the principles of equitable estoppel are satisfied from Walton stores then the estoppel argument would run like this: McNeese Bros failed to take out its own insurance policy by relying on Trident's promise that it would indemnify McNeese Bros in its contract of insurance with blue Circle.

5. Unjust Enrichment
J Gaudron found that because McNeese Bros had no contractual claim against Trident because of the privity rule, it could seek rights under the equitable remedy of restitution. Restitution rests on the principle of unjust enrichment. The argument would be that Trident received premium payment from blue Circle under the insurance policy, calculated on the basis of its potential liability not only to blue Circle but also to blue Circle's contracters which included McNeese. Therefore Trident was unjustly enriched by the premium and Trident would be unjustly enriched if it failed to indemnify McNeese under the policy. This was considered to be a controversial extension of the unjust enrichment doctrine. However this argument can be used to get around the privy law in certain factual situations.

6. Statutory Exceptions
Cth Parliament and State parliaments have in some cases passed laws to avoid the privy rule where the practical considerations are Paramount simply for the sake of commercial convenience. e.g. bills of exchange and cheques (Cth): a chequ is the kind of contract between the drawer (party drawing the cheque) and the payee (the party entitled to be paid), but a 3rd party endoresee can enforce the cheque under the legislation if the cheque is endorsed by the payee. Legislation says privity doesnt apply.

Insurance Contract Acts (Cth) s 48(1): a 3rd party expecting a benefit under a contract of insurance may take legal action against the insurers directly. This overcomes the McNeese type of problem. Motor vehicle registration insurance legislation (NSW): need compulsory third-party insurer which provides an indemnity to the owner of the vehicle in case their car causes injury to the third party so that third party is covered by the contract of insurance between you and your insurer. Third-party gets the benefit.