CONTRACTS B

DISCHARGE
DISCHARGE BY PERFORMANCE
In order to discharge a party from his or her obligations under a contract, performance must be
exact, except for insignificant defects in performance. Shipton Anderson & Co v Weil Bros & Co
Some contracts will allow for discharge of obligations only after substantial performance. Luna
Park v Tramways Advertising
I.e Obligation to display signs on trams for 8hrs a day. Court was satisfied with substantially 8
hours a day.
Exact performance as a requirement for obtaining the contract price has been viewed as unfair.
Hoening v Isaacs

Is the contract divisible?

DIVISIBLE CONTRACT

A divisible contract is one in which the consideration and the payment for it are apportioned, or
capable of apportionment according to the work to be done. Steele v Tardiani

Where a contract is divisible, the court will consider each divisible part of the contract separately,
as though they were separate agreements. Steele v Tardiani
Even if a contract states it is not divisible, it may still be found to be divisible. Steele v Tardiani
i.e $5000 upon completion of slab of house, $10,000 on completion of laying frame, $7500 upon
completion of roofing etc.

ENTIRE CONTRACT (LUMP SUM CONTRACT)

A lump sum contract is one which provides for the payment of a specific sum for the completion of
specific work. Lemura v Coppola
i.e if there is no specific counter performance by the defendant for the stages, contract is lump sum
Does NOT include where a deposit is paid, a second amount is paid by a second date and the
balance upon completion. Hoenig v Isaacs

Are the obligations entire/ not enitre?

ENTIRE OBLIGATION
Courts will lean against interpreting a contract for services as being entire since the smallest defect
will mean the contractor is entitled to be paid nothing. Hoenig v Isaacs
i.e There will usually need to be a specific stipulation that the contract is entire
Entire obligation is an obligation to perform the entire contract exactly. Baltic Shipping Co v Dalton
Essential features:
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1. Compete performance is a condition precedent to payment of the contract price. Macaroni

Systems v BHP Information Technology
2. The benefit expected by the defendant is to result from the enjoyment of every part of the work
jointly
3. The consideration is not apportioned by contract, nor capable of apportionment
The mere fact a contract provides the price to be payable in a lump sum or payable on
completion is not enough for obligation to be entire. The contract must indicate that complete
performance of the obligation to provide services or goods is a condition precedent to
payment. Purcell v Bacon
Whether an obligation is entire or divisible is a question of construction of the contract as a
whole. Purcell v Bacon

What sort of obligations do the parties have under the contract?

INDEPENDENT OBLIGATION

An independent obligation is where one person must perform, regardless of whether the other
does so. This may oblige one party to pay the contract price without receiving goods or services
in return. Dunlop v Grote

I.e paying a contract price on a certain day irrespective of whether goods are delivered on time.

DEPENDENT & CONCURRENT OBLIGATION

If an obligation is dependent, the other party will have to perform his or her obligations before an
obligation to pay the price arises. Automatic Fire Sprinklers v Watson
i.e Where the performance of the contract by the second party is dependent on performance by
first party. Sale of goods, land or employment
A seller is only able to claim the contract price from the buyer once the goods are delivered and
accepted.
If a buyer refuses to accept the goods when delivered, the seller will only be able to claim
damages, not the contract price. Automatic Fire Sprinklers v Watson
Where a contract provides for a specific sum to be paid on completion of specified work, the
courts lean against a construction of the contract which would deprive the contractor of any
payment at all simply because there are defects or omissions Hoenig v Isaacs

Can <party> claim the contract price?

DEGREE OF PERFORMANCE

Where a contract does not clearly and expressly provide that exact performance is a condition
precedent to payment, the courts will lean against a construction which would deprive the party of
any payment simply because of defects. Hoenig v Isaacs.

A promisor who substantially performs a contract, or divisible part of a contract will be able to
claim the contract price, or portion of contract price related to the divisible part subject to a set-of
for defects. Hoenig v Isaacs.
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 Only if a breach goes to the root of a contract should the party be withheld from recovering the
contract price. Corio Guarantee Corporation v McAllum
A party will usually be considered to have substantially performed a contract where the defects in
the services or goods are of a minor nature. Hoenig v Isaacs
Determination of whether performance is substantial is a question of fact. Bolton v Madaheva
Court will take into account
The nature of the defect and
The cost of rectifying the defect compared to the contract price. Bolton v Madaheva
How significant is the breach and did the owner receive the whole of the benefit which the

contract was intended to provide Hoenig v Isaacs

i.e Plaintiff agreed to furnish entire house and defendant paid $400 in progress payments. Door of
wardrobe was defective and bookshelf was too short. Defendant was refusing to pay balance.
Court held the work was substantially performed and entitled to payment, less rectification
Where the nature of the defect is minor and the cost of rectification is 10% or less of the contract
price, it is likely the court will allow recovery of the contract price for substantial performance.
Hoenig v Isaacs
Where the nature of the defect is serious and the cost of rectification is 33% of the contract price
or more it is likely the court will refuse recovery. Bolton v Madaheva
i.e Plaintiff installed a water heating system which was defective and gave off fumes and didnt
even work. Contract price was $560 and rectification was $174

Where the nature of the defect is relatively minor but costs more than 10% of the contract price to
remedy, recovery of the contract price for substantial performance may be allowed, subject to the
cost of rectification not exceeding a reasonable amount

Where the nature of the defect is serious but the cost of rectifying the damages is small, it is
unlikely contract price will be recoverable

Court will not allow a claim for recovery of contract price where the claiming party has only partly
performed his or her obligations under the contract where:
a) The work is of no value to the defendant
b) the work is entirely diferent from that provided for in the contract Connor v Stanton
c) The conduct of the plaintif constitutes a repudiation or abandonment of the contract. Sumpter v
Hedges
It is not up to a party taking legal action to say even though something is done diferently, it still
may be acceptable. Connor v Stanton
i.e plaintiff was asked to build a fence with posts 12 feet apart. Posts had varying degrees of
distance but could be made workable with droppers.
Party may claim for partial performance if the other party prevented further performance of the
contract. Planche v Colburn

EFFECT OF TERMINATION
Only obligations due prior to termination are enforceable. The obligation to pay the price must have
arisen prior to termination because the terminating party has exactly or substantially performed
their obligations.
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 This right is not lost merely because contract is terminated for the breach of party entitled to
payment McLachlan v Nourse
Where the right to the contract price has accrued unconditionally prior to termination, quantum
meruit is not available. GEC Marconi Systems v BHP Information Technology.

Can <Party> claim a quantum meruit for the work performed?

QUANTUM MERUIT

CONTRACT MUST BE TERMINATED OR NON EXISTENT

Quantum Meruit is an action for the reasonable value of services performed. Rover International
Ltd v Cannon Film Sales
If services were performed, quantum meruit is only available if the contract is terminated,
rescinded, frustrated, unenforceable or void. Automatic Fire Sprinklers v Watson
If the plaintiff has performed his or her obligations exactly or substantially there will be a claim in
contract for the price and quantum meruit is not available
The court may imply an obligation on the defendant to pay reasonable value for the services
rendered. Pavey v Matthews

The law will only impose such an obligation if there is no subsisting contract. Update
Constructions v Rozelle Child Care Centre
Must satisfy 3 elements:
1. Benefit - has the plaintif provided a benefit to the defendant
- services must be requested by defendant
- services were freely accepted Sumpter v Hedges
- Defendant obtained incontrovertible benefit Steele
2. Expense - was the benefit provided at the expense of the plaintif
3. Unjustness - Is it unjust that the defendant retains the benefit

RECOVERY BY PARTY NOT IN BREACH

A party not in breach of he contract who has provided services to the other party will be entitled
to elect between the recovery of damages for breach and the recovery of a quantum meruit.
Automatic Fire Sprinklers v Watson
CANNOT CLAIM BOTH as this would be unjust enrichment Baltic Shipping Co v Dillon

Where the plaintif has performed services outside the terms of contract at defendants request
quantum meruit will be available ABB Power Generation v Chapple

i.e plaintif provided extra scafolding to enable defendant to fulfil contractual obligations to a third
party.
A benefit is received if the defendant requested the work performed Lumbers v W Cook Builders
Only if a plaintif is in breach of contract and fails to deliver can the defendant stipulate that they
didnt want the services and did not receive a benefit. Frontier Architects (In Liq)
It is clear that a defendant who requests services is required to pay for them Brenner v First
Artists Management
If the conduct of the defendant prevents the requested services, court will not allow the defendant
to deny the services are a benefit. Len Lichtnauter Developments v James Trowse Constructions
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 Even where the services dont produce a tangible product. Planche v Colburn
A quantum meruit can exceed the contract price, especially where the plaintif enters into a losing
contract and work performed exceeds contract pice. Boomer v Muir
Plaintiff built a dam and defendant breached agreement near completion. Plaintiff got $250,000
even though the final payment in contract was $20,000
Where a contract is unenforceable the contract price is the ceiling for the amount of the award.
Pavey & Matthews v Paul

RECOVERY BY PARTY IN BREACH

Parties in breach of contract cannot claim damages because they are unable to rely on their own
breach to obtain a benefit. Suttor v Gundowda
A quantum meruit is NOT DAMAGES. It is restitution.
A defendant who has not received what he or she expected under the contract may subjectively
devalue the work.
Services will generally only be considered to provide a benefit if
a)The services were requested by the the defendant
b)The services were freely accepted
c)The defendant has obtained an incontrovertible benefit from the services
Free acceptance means the defendant had a choice between accepting and rejecting the work
and freely decided to accept the work even though it does not comply with the contract. Oliver v
Lakeside Property Trust
An incontrovertible benefit will arise where the defendant has converted services or goods
provided by the plaintif into goods in the hands of the defendant.
TIME CONSIDERATIONS
If a time provision is essential, failure to perform exactly at the specified time will be a breach
discharging the compensation in future. McDonald v Dennys Lascelles
HOWEVER
The party in breach is liable to pay compensation and is not able to claim the contract price.
Sumpter v Hedges

If term is inessential failure to perform is a breach but the contract cannot be terminated and the
contract price may be recoverable if contract is substantially performed. Hoenig v Isaacs.

If a time for performance is not specified, performance must be within a reasonable time. Perri v
Coolangatta Investments
What constitutes a reasonable time is a matter of fact to be determined when performance is
alleged to be due. Perri v Coolangatta investments

CONCLUDE: PARTY IS ENTITLED TO X Y OR Z

DISCHARGE BY FRUSTRATION
Frustration occurs when a contract becomes incapable of performance because the
circumstances in which performance is called for renders a thing radically diferent from what was
undertaken in the contract. Codelfa Construction v State Rail Authority of NSW
If the event occurs before an agreement it WILL NOT FRUSTRATE, MISTAKE INSTEAD
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 Where a contract provides a clause stating the consequences of the happening of an event
which may frustrate the contract, this is a Force Majeure clause and may provide only one party
is discharged or that an obligation is merely suspended Ringstad v Gollin & Co

The mere fact an event means performance is more onerous or expensive does NOT mean
performance has become radically diferent. Davis Contractors v Fareham Urban District Council
i.e Contract to restore contaminated land was not frustrated because the land was in a worse than
expected state and unable to be economically restored
A contract made more expensive by market fluctuations without radical change will not frustrate.
Clark v Local Government Training Authority
UNLESS
There is a large fluctuation contrary to what parties contemplated not a trot or canter but at a
gallop Wates v Greater London Council
Has <event> frustrated the contract?

GENERAL TEST (APPLY THIS FIRST)

From Codelfa Construction v State Rail Authority of NSW. Court will analyse

1.TERMS OF PARTICULAR CONTRACT

2.WHEN DID FRUSTRATION OCCUR
3.EFFECT OF THE FRUSTRATING EVENT.

It is the efect of the supervening event rather than its nature. Codelfa Construction v State Rail
Authority of NSW
i.e A strike may delay performance, but it may not necessarily frustrate performance.

COMMON INSTANCES OF FRUSTRATION

DESTRUCTION OR UNAVAILABILITY OF SUBJECT MATTER

If the subject matter is destroyed without fault of either party, the contract will be frustrated. Taylor
v Caldwell
i.e A hall subject of a hire agreement was destroyed by fire. Hall is essential to performance of
contract
HOWEVER
Partial destruction or damage is insufficient. CF Russo v Resource Developments International
If one party expressly or impliedly agree to bear the risk of any destruction to the subject matter,
this rule may be negated. Fletcher v Manton
If the subject matter has been lost to the parties the contract will be frustrated. Austin v Sheldon
i.e Contract for sale of land, land is compulsorily acquired by government
HOWEVER
Temporary unavailability is not sufficient to frustrate FA Tamplin Steamship Co v Mexican
Petroleum Products Co Ltd

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DEATH OR INCAPACITATION
Death or incapacitation may frustrate a contract of service or for services Simmonds Ltd v Hay
Incapacitation includes
Imprisonment FC Shepherd & Co v Jerrom
Internment Horlock v Beal
i.e Person detained without trial Prisoner of war, Asylum seeker with bad security report
Illness will depend on
Nature and duration of illness
Terms and nature of contract Carmichael v Colonial Sugar
Incapacitation does not need to be permanent, temporary incapacitation may render
performance radically diferent Chapman v Taylor

Long illness must be considered in the context of modern employment contracts that normally
provide for sick leave rights and benefits and may make it difficult to determine when contract
was frustrated Finch v Sayers
Financial ill health will rarely frustrate agreement Clark v Local Government Training Authority

FAILURE BY BASIS OF CONTRACT

A contract may be frustrated where an event the parties agreed to be the basis of the contract
does not occur. Krell v Henry

i.e Defendant hired a flat to watch royal coronation of Edward VII. King got sick and coronation was
cancelled
HOWEVER
Herne Bay Steam Boat Co v Hutton
i.e This case failed because the plaintiff could still use the steamboat hired out to view the naval
review notwithstanding the review itself was cancelled

CONTEMPLATED METHOD OF PERFORMANCE IMPOSSIBLE

Where a contract expressly provides a particular method of performance a supervening event
which makes the particular method impossible, the contract may be regarded as frustrated.
Cornish Co v Kanematsu
i.e Contract expressed for onions to be shipped per P&O steamer from japan about 8 september
and coming direct to Sydney. Strike caused vessel to not arrive
Where parties jointly contemplate a particular mode of performance to be employed, without
making it an express provision and it becomes impossible, the contract is frustrated Codelfa
Construction v State Rail Authority

EXCESSIVE DELAY

An event which causes a temporary delay in performance may frustrate the contract where the
delay is such as to render performance something radically diferent from what was originally
undertaken. Jackson v Union Marine Insurance Co
Some cases require an assessment in relation to a delay in performance already incurred.
Ringstad v Grollin & Co

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TWO FACTORS

1. Probability and length of delay

2. The time of the contract still left to run or during which performance might have been expected to
have been completed Pioneer Shipping v BTP Tioxide
In some cases, the assessment of commercial probabilities may be made soon after the delay. A
party is not bound to wait for that delay to actually occur but can immediately treat itself as
discharged from its obligation to perform. Embiricos v Sydney Reid & Co
If, as assessed at the relevant time, reasonable commercial probabilities point to a frustrating
delay, it does not matter if in fact no delay occurs. Court Line v Dant & Russell

i.e Ship was going to port and war broke out between China and Japan. China sunk ships to block
the Japanese from using the river. The blockade was broken by Japan within a week but at the
time it occurred, it looked like the blockade would be indefinite = frustrated contract

ILLEGALITY

Where, after the contract is formed, the law changes in a way to prevent further performance of
the contract, the contract will be discharged. Cooper & Sons v Neilson & Maxwell

Attention must be paid to the nature and terms of the contract and surrounding circumstances.
Scanlans New Leon Ltd v Tooheys
i.e Defendant entered into contract to lease neon advertising sign which was banned under
wartime powers. High Court held because the advertising sign was still good when unlit, contract
wasnt frustrated
Where the prohibition efected is less than complete, the question as to whether the contract has
been rendered something radically diferent may depend upon, for example, the efect of any
delay caused by change of law. Metro Water Board v Dick

If war breaks out between Australia and another country any contract with a national of that
country or one residing in that country is illegal and will be frustrated. Hirsch v Zinc Corporation
i.e Zinc was being exported to Germany from 1910, WWI broke out in 1914
If a contract provides assistance to the enemy or hinders prosecution of war it will be illegal and
frustrated.

LAND CONTRACTS
SALE

Anything that happens to the land between the time of the contract of sale and the time of
completion is at risk of the purchaser Fletcher v Manton
However if there is a radical change in circumstances between the time and execution of the
contract and its settlement prevents transfer of legal estate to the purchaser, specific
performance isnt possible, the purchaser cannot be treated as owner in equity nor as having

been at risk, the contract is frustrated. National Carriers v Panalpina

i.e A landslide destroyed the piece of land which was contracted for sale
If a contract includes a building and the building is destroyed prior to settlement, the contract is
not frustrated because the purchaser is still able to acquire legal title and will have taken the risk
of any damage to structures built on the land. Fletcher v Manton
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LEASES
An agreement to lease confers an equitable interest upon the prospective lessee while an actual
grant of lease transfers a legal estate or interest to the lessee. Progressive Mailing House v

Tabali
AUTHORITY IN AUSTRALIA IS NOT CLEAR Firth v Halloran
Approach 1: Doctrine of frustration does not apply to leases CJ Knox J Dufy
Only where the interest granted by the lease or agreement capable of being enjoyed by the lessee
will frustrate the contract.
Mere destruction is not enough, only an act of God will basically frustrate the contract. Cricketwood
Properties v Leightons Investment Trust
Efect of a supervening event on a lease must render performance radically diferent from original
agreement taking into account
- Duration, nature of lease and time left to run at the time of supervening event
- Nature and object of the lease
- Length or prospective length of any interruption to the lessees possession. Robertson v Wilson

LIMITS ON FRUSTRATION

If a contract contains an express provision dealing with the intervening event, the parties will be
taken to have provided for the risk. Claud Neon v Hardie
i.e Defendant hired an illuminated sign. Clause stated in certain events unpaid balance was
payable in premises being exhausted. Premises were resumed by government. Resumption
amounted to extinguishment of interest.
Whether clause will discharge liability is a question of construction of particular clause. Codelfa
Construction v State Rail Authority

NOT TO BE CONFUSED WITH A FORCE MAJEURE CLAUSE

Force Majeure clause will categorise a number events and provide for a consequence of the said
event. Ringstad v Gollin & Co
i.e quantity of calcium being shipped to continental port provided Above sale is subject to strikes,
war, flood, accidents fire etc
Force Majeure clause will apply to events which will not normally frustrate
Force Majeure clause will provide the contract be terminated, suspended, renegotiated or
otherwise dealt with in express terms Yates
Force Majeure clause will be interpreted strictly conta preferentum Fairclough Dodd & Jones

HOWEVER

Even if a Force Majeure clause is present, an event may still may render performance radically
diferent. Metro Water Board v Dick, Kerr & Co.

EVENT IS FORESEEABLE

Where the supervening event was or is foreseeable by BOTH PARTIES at a serious possibility,
but for which parties made no express provisions the inference is that the parties nevertheless
assumed the risk of the event occurring. Codelfa v State Rail Authority
Must be a SERIOUS POSSIBILITY rather than being reasonably foreseeable Cf Simmons v Hay
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i.e incapacitating illness may be reasonable foreseeable but only as a serious possibility in rare
cases.
Even when an event is still foreseeable, it may still frustrate the contract where the interference
exceeds anything contemplated. WJ Tatem v Gaboa
i.e Plaintiff charted a vessel on behalf of Spanish Republicans in civil war. Was contemplated it
may be seized by nationalists so defendant paid hire 3x market rate. Was seized twice as long as
contemplated. Contract frustrated.

EVENT INDUCED BY PARTY

An event cannot be relied upon by a party if the event was brought about by that partys own
default. Joseph Constantine Steamship v Imperial Smeling
If the act is deliberate, contract is obviously not frustrated. Dymocks v Top Ryde Booksellers
Negligence on behalf of a party is enough to constitute default. The Super Servant Two

DEPENDS UPON

Seriousness of negligence Joseph Constantine Steamship v Imperial Smelting

Causation between negligence and frustrating event
Whether negligent contract was directed towards contract performance
Whether contract is commercial or personal Swanton
Self-induced frustration will occur when act caused supervening event but it is also a breach of
contract. The Lucille
i.e Plaintiff sent ship to unsafe ports where contract expressly forbid this.
Where a party enters into multiple contracts and has a real choice whether or not to fulfil one

contract out of a number the act or election leading to the failure to perform any to be classified
as self induced. Maritime National Fish v Ocean Trawlers

Onus of proving a supervening event amounted to a self-induced frustration lies on the party who
makes such an allegation Joseph Constantine Steamship v Imperial Smelting

What is the effect of <event> on contract?

EFFECT OF FRUSTRATION

Conditional right = Contract must be completed to receive this consideration. CONDITIONAL

RIGHTS ARE DISCHARGED
i.e payments for land, if title deed does not transfer between parties, money paid prior to frustration
must be repaid
Unconditional right = Contract does not need to be completed. UNCONDITIONAL RIGHTS ARE
UNDISTURBED
i.e build a fence. Work completed prior to frustration will still require payment
At common law, frustration automatically discharges the contract. Both parties are relieved from
further performance of their obligations under the contract as from the time of frustration. Hirji
Mulji v Cheyong Yue Steamship Co

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 The contract is discharged by law. No party has a choice whether it is terminated. Cachia v State
Authorities Superannuation board.
Frustration does NOT void the contract ab initio Unconditional rights and liabilities accrued prior
to frustration including rights to sue for damages for prior breach of contract remain unafected by
the discharge Baltic Shipping v Dillon
Right accrued prior to frustration will be unenforceable if there has been a total failure of
consideration. Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour
Money paid under a frustrated contract can be recovered Fibrosa
i.e An English firm was contracted to sell machinery to a polish firm. Contract price was $4800,
$1600 was payable on signing the contract. Polish firm paid $1000 and Nazi Germany invaded and
frustrated contract. Upfront payment could be recovered
Australian Authority: Re Continental C and G Rubber Co
Where there has been a partial failure of agreed consideration there will be no right to payment
that has been made. Baltic Shipping Co v Dillon
i.e Where services have been partly rendered there will be no ground in which money paid can be
recovered
If there are distinct and severable parts of the contract and there has been a total failure of
consideration for one or more components, there will be restitution paid for the components.
Where a contract for sale is frustrated, any deposit paid will be for consideration which has totally
failed and the purchaser is entitled to restitution of that amount. McRoss Developments v Caltex

If services are rendered AFTER the contract is discharged may be a right to a quantum meruit
Codelfa v State Rail Authority
Some clauses may still operate even though all performance under the contract is at an end
Heyman v Darwins

However for a term to operate after frustration, it must be clear parties intended this result. BP
Exploration v Hunt
CONCLUDE: THIS CONTRACT IS FRUSTRATED AND PARTY WILL BE ABLE TO DO X, Y Z

DISCHARGE BY AGREEMENT
A discharge and substitution, rather than variation, occurs where a subsequent agreement is
inconsistent to the extent that it goes to the root of the original contract Morris v Baron
Was <statement> a variation or an agreement to discharge?

VARIATION VS AGREEMENT
Variation will leave the original contract on foot but modify particulars Federal Commissioner of
Taxation v Sara Lee Household and Body Care
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 Whether the agreement between the parties is a discharge or variation or some combination
thereof depends upon the intention of the parties as ascertained from construction of the
agreement or the degree of change efected by the agreement. Tallerman & Co v Nathans
Merchandise

A purported variation may alter so many particulars of a contract that a court will infer the courts
intended to abrogate the existing contract and substitute it with the varied contract
Oral VARIATION of a contract is NOT efective if required in writing Phillips v Ellison Bros

Has there been an agreement to discharge the contract?

AGREEMENT
REQUIREMENTS

To discharge by agreement, the regular requirements of ofer, acceptance will be required. BP

Refinery (Westenport) v Shire of Hastings
Consideration and a clear intention to bring obligations to end is also required. Fitzgerald v
Masters

Where one party has performed his or her obligations, fresh consideration is required unless the
agreement is in the form of a deed. Atlantic Shipping & Trading v Louis Dreyfus

COMPROMISE OF CAUSE OF ACTION

An agreement to relinquish a cause of action against a party may act as a discharge of the
original agreement is called a compromise. It is the purchase of a release from obligation for
valuable consideration, not being the obligation itself. The accord is the agreement by which the
obligation is discharged. The satisfaction is the consideration which makes the agreement
operative. British Russian Gazette v Associated Newspapers

FORMALITIES
An oral agreement to discharge a contract will be enforceable even if the original contract was
required in writing Tallerman & Co v Nathans Merchandise
Where a contract is discharged orally the original contract is discharged but the new contract is
unenforceable if it isnt in writing. Tallerman v Nathans Merhandise
Writing requirement does not apply to dispensation or waiver of mode of performance Phillips v
Ellison Brothers

NOVATION
A novation occurs when one contract is substituted for another contract either between the same
parties or between diferent parties. Scarf v Jardine
Two elements must be satisfied
1. Discharge of original agreement, by agreement between the two parties
2. Entering into of a substituted contract usually between one of the original parties and a third
party
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 The second contract must be entered into in substitution for the first contract for novation to
occur.
Consent of all parties is required for novation Lindern Trawlers v WHJ Trawlers

ABANDONMENT
Where the parties conduct when objectively viewed indicates they are in fact treating the contract
as discharged without an express agreement. CGM Investments v Chelliah
Abandonment is found where both parties evince intention that a contract should not be
performed. Summers v Commonwealth
OR
Where an inordinate length of time passes in which neither party has performed or has attempted
to perform or called on the order to perform. Matthews v Matthews
Mere excessive delay will not be conclusive, inactivity must produce inference that one party
does not wish to proceed with the contract and the other consents to that situation. Marminata v
French

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DISCHARGE BY TERMINATION
Where one party to a contract, fails to perform an essential term, commits a serious breach of an
intermediate term, is unwilling or unable to continue with the contract constituting a repudiation or
anticipatory breach and the innocent party can prove one of these situations, the innocent party
may elect to terminate the contract. Hobbs v Persham Transport Co
Onus is on party seeking to terminate Hobbs v Persham Transport Co
Termination of a contract discharges the future obligations of parties, however unconditionally
accrued rights and some clauses are unafected Codelfa Construction Pty Ltd v State Rail
Authority of NSW.
The right to terminate can arise pursuant to the contract Honner v Ashton
In order to terminate the contract, [plaintif] need to show either:
1. Breach of an essential term. The test for essentiality is that one party would not have entered the
contract unless assured of a strict or substantial performance of the term and the other party
knows or ought to know: Associated Newspapers v Bancks
2. Sufficiently serious breach of an inessential term capable of a variety of breaches. An
intermediate term: Koompahtoo Local Aboriginal Land Council v Sanpine
3. Repudiation, that is express or implied words or conduct indicating a refusal to perform the
contract: Shevill v Builders Licensing Board

GROUND FOR TERMINATION

Does <Party> have contractual right of termination?

TERMINATION FOR BREACH

A contractual right to terminate will be generally construed strictly, particularly if a time limit is
imposed for exercising the right. Rawson v Hobbs

Where the clause provides for a notice to remedy the breach to be given, it has generally been
interpreted as meaning the party should make good the breach as to future Rawson v Hobbs

An interpretation clause may allow a party to terminate for a breach of any term, thereby altering
the common law position. Honner v Ashton
Generally if right of termination is expressed in clear terms, clause will not be read down by court
Sheville v Builders Licencing Board
A clause may allow either party to terminate for convenience Velvet Glove Holdings v Mt Isa
Mines

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LIMITATIONS

If a contract states time is of the essence equitable principles require a party to serve notice to
complete prior to terminating for breach of inessential time provision. Petrie v Dwyer
If contract is instalment contract, 30 days notice to remedy the breach must be given before the
contract can be terminated. s72 Property Law Act 1974 (Qld)

A party seeking to use a contractual right for termination for any breach is required to act
reasonably in exercising their rights. Le v Qureshi

i.e buyer failed to deliver transfer documents within reasonable time before settlement. Court held
seller must act reasonably as any alternative could lead to flood of applications seeking equitable
assistance
Termination for a convenience clause will be subject to an implied obligation of good faith but the
point is contentious GEC Macaroni Systems v BHP Information Technology
If a common law right to terminate by repudiation has not been excluded by contract a buyer may
still terminate through common law Rawson v Hobbs
If termination for repudiation has not been excluded by contract, it may be relied upon: Amann
Aviation Pty Ltd v Commonwealth
To exclude the right to terminate for repudiation, it must be expressly stated in the contract
Amann Aviation v Commonwealth

A claim for damages will depend upon the injured party proving the term breached is essential or
that a repudiation has occurred. Damages is linked to the type of breach rather than right to
terminate Progressive Mailing House v Tabali

Court will give efect to intention of parties when determining what clauses may give a contractual
right to terminate: Telfair Shipping Corp v Athos Shipping Co SA (The Athos);
CONCLUSION: The contract here does/does not give a right to terminate for breach.

Q: Does <Party> have common law right of termination

COMMON LAW RIGHTS

What sort of term has been breached?

ESSENTIAL TERM
Whether a term is essential depends upon whether the promisee would not have entered into the
contract without being assured of whether a strict or substantial performance of the promise and
that ought to be apparent to promisor Associated Newspaper v Bancks

Courts will be reluctant to construe a clause as essential unless it is clear from circumstances
that such an efect was intended by the parties. Ankar v National Westminster Finance

Where parties describe term as condition, this will not be conclusive of the fact an essential term
was intended L Schuler v Wickham Machine Tool Sales

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 If term uses phrase or similar phrase to In the case of any breach of term in contract the court
will usually give efect to this type of term and allow innocent party to terminate. Campbell v
Payne & Fitzgerald
HOWEVER
Damages may not follow unless term is actually essential or there is repudiation of contract.
Sheville v Builders Licencing Board

An essential term is unlikely to be an implied term unless there is an implied agreement to that
efect between the parties. Shepherd v Felt and Textiles of Australia

INTERMEDIATE TERM
Whether termination is available for a breach of an intermediate term depends upon the
seriousness of the breach and whether the consequences were actual and foreseeable. The
breach must deprive the innocent party of substantially the whole of the benefit of the contract.
Koompahtoo v Sanpine
IF NO TERM HAS BEEN BREACHED
Did the defendant repudiate the contract?

REPUDIATION

Repudiation occurs where one party renounces his or her liabilities under a contract or evinces
an intention no longer to be bound by contract or shows an intention to fulfil the contract only in a
manner substantially inconsistent with his or her obligations and not any other way. Sheville v

Builders Licencing Board

OBJECTIVE TEST
Whether a reasonable person would have concluded the defendant had repudiated his or her
obligations. Koompahtoo v Sanpine

Parties should be ready willing and able to perform contractual obligations at the relevant time
For termination to be efective, the repudiation must be an acceptance of the decision to elect to
terminate Scarcella v Linknarf Management services
Until repudiation is accepted the contract will continue on foot and bind both parties Foran v
Wight
Conduct which indicates an absence of readiness and willingness to perform may constitute both
repudiation and breach. Associated Newspapers v Bancks
i.e failure to put the cartoon on the front page for three consecutive weeks was both a breach of the
term and also unwilling to perform
The breach of an essential term does NOT amount to a repudiation. Gumland Property Holdings
v Duffey Bros Fruit Market

If term is a warranty, promisee will need to establish repudiation before it can be terminated.
Progressive Mailing House v Tabali
i.e Lessee failed to pay rent and failed to open on time, obstructed access to premises, caused
damage to drains, sublet without consent. Individual breaches were only warranty but when
combined = refused to perform contract
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 The absence of readiness and willingness to perform the contract must be to the whole of the
contract or a fundamental obligation under it Hochster v De La Tour

EXAMPLES OF REPUDIATION
REPUDIATION BY WORDS OR CONDUCT

Repudiation can be evidenced by express refusal to perform all of the obligations. Hochster v De
La Tour
Defendant agreed to employ plaintiff as a courier and told plaintiff services were not required prior
to commencement
Repudiation can also occur where the promisor refuses to perform some of his or her obligations
under contract, provided the refusal is a sufficiently serious matter. Associated Newspapers v
Bancks
A refusal to perform in accordance with the contract will also be a repudiation even though there
is no express refusal Associated Newspapers v Bancks

IMPLIED REFUSAL
Repudiation may be implied from a partys words or conduct where a reasonable person in the
shoes of the innocent party would clearly infer that the other party would no be bound by the
contract or would fulfil it only in a manner substantially inconsistent with that partys obligations
and in no other way. Laurinda v Capalaba Park Shopping Centre
Lessee executed lease and paid stamp duty with authority for lessor to complete lease and lodge it
for registration. Over 9 months, lease still not registered, lessee requested copies and sent demand
it be signed in 14 days, still not delivery.
A failure to deliver or pay for an installment may indicate the party will be unable or deliver or pay
for later instalments Millars Karris and Jarrah Co v Weddel Turner & Co
HOWEVER
Will depend on the proof of requirement of seriousness Warinco AG v Sampor
and the ratio that the breach bears to the whole of the contract Maple Flock v Universal Future
Products

ERRONEOUS INTERPRETATION OF CONTRACT

If a party acts on an erroneous construction and breaches one or more terms of a contract or
evidences an intention not to performance except in accordance with the erroneous
interpretation, the party may have repudiated their obligations if the requirements of seriousness
are satisfied. Luna Park v Tramways Advertising

i.e Defendant failed to display sign 8hs a day every day. Defendant continued with inadequate
performance despite being warned because could not control trams
Repudiation will occur where in the face of adverse comment, a party insists on an interpretation
of the contract which is not tenable. Rona v Shimden

A question of construction of a contract can involve law or fact DTR Nominees v Mona Homes
The partys subjective intention is irrelevant Laurinda v Capalaba Park Shopping Centre
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WRONGFUL TERMINATION

A wrongful termination of a contract is a repudiation. Ogle v Comboyuro Investments Pty Ltd

Because termination is wrongful it will not be efective to terminate the contract and the innocent
party will still have to elect to terminate under the contract for repudiation White and Carter v
McGregor
Where purported termination of contract is in reliance upon a contractual right of termination, the
court may consider the bona fides of the terminating party Woodar Investment Development v
Wimpey Construction

COMMENCEMENT OF PROCEEDINGS
Commencement of proceedings will not amount to repudiation unless the proceedings are
commenced in such circumstances as to make it plain the party commencing them thereby
evinces intention not to be bound irrespective of the outcome. Lombok v Supetina

REPUDIATION BASED ON INABILITY TO PERFORM

EXPRESS DECLARATION BY WORDS OR ACTS

Express declaration of an inability to perform is a clear example of repudiation Foran v Wight

i.e vendor informed purchaser that he would be unable to settle on date because he was unable to
remove easement from title prior to required date. Time was of essence and it would not removed
within the two days required
A party may also declare by its actions that it is unable to perform a contract. Schmidt v Holland
i.e Vendor agrees to sell property to purchaser but then sells to third party.

IMPLIED ABILITY

Facts may indicate a defendant is unable to perform, but the plaintif must prove the defendant is
wholly and finally disabled from performing Stanton v Richardson
OR
There is a substantial incapacity to perform Rawson v Hobbs

Is necessary to prove the defendants actual position rather than what is said or done. Universal
Cargo Carrier v Citati
Terminating party may seek to rely upon factual inability to perform as justification for his or her
termination. Shepherd v Felt and Textiles of Australia

ACCEPTANCE OF REPUDIATION
Repudiation of contract must be accepted by terminating the contract.
Prior to acceptance of repudiation, the contract continues for benefit of both parties and may be
possible for the other to retract a verbal repudiation and perform the contract.
HOWEVER
If verbal communication has been relied upon by innocent party in performing or failing to

perform the contract, the retracting party will need to give notice to the innocent party. Foran v
Wight
If reasonable notice of retraction is not given, the innocent party may refuse to peform. Peter
Turnbull & Co v Mundus Trading Co

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Is the breach or repudiation related to a time provision?

DELAY

A contract may be terminated for delay in performance in one of two circumstances.

1. Party does not perform at appointed time
2. As a consequence of another breach in the contract

GENERAL PRINCIPLES
At common law, a date specified in a contract will generally be considered essential unless
contrary indication is indicated in the contract. Craig Hardgraves Investments v Australian

Business Insurance Advisors

In equity, time is not considered to be of the essence unless it is expressly stated or there was
something in the nature of the property or the surrounding circumstances which would render it
inequitable to treat it as a non essential term. Neeta v Phillips

Stipulations in contracts as to time or otherwise which according to the rules of equity are not
deemed to be or to have become of the essence of the contract, shall be construed and have
efect at law in accordance with the rules of equity s62 Property Law Act 1974 (Qld)

But only as the rules of equity operated prior to the legislation Holland v Wiltshire
i.e Rules of equity regarding time will only have application when seeking specific performance,
and injunction or another equitable remedy
If a date is specified, it will usually be the case that time is intended of the essence expressly or by
implication Holland v Wiltshire

BREACH OF ESSENTIAL TIME PROVISION

Time will be of the essence at common law and in equity where time is expressly stated to be of
the essence. Usually requires Time is of the essence in this agreement Neeta v Phillips

Time will be of the essence where there is something in the nature of the property or surrounding
circumstances that indicates time should be essential. Stickney v Keeble
The terms of the contract are such that time of the essence should be inferred Wacal
Investments v Hurley
In a commercial contract, specific dates will generally be treated by the common law as essential
where they relate to substantive obligations under the contract. DTR Nominess v Mona Homes

LAND TRANSACTIONS

With a contract for sale of land, equity will not enforce a time stipulation unless the contract clearly
indicates time is of the essence
Payment of deposit will usually be considered an essential term even though payment at a
particular time may not be expressed as essential because of the nature of a deposit as a bond
for performance. Brien v Dwyer
If there was only a date for completion, under equity, time is not of the essence. The party not in
default had to serve a notice to complete giving a reasonable time to complete before that party
could terminate the contract for breach Canning v Temby

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 In contracts of sale of pastoral (rural) property, due to the nature of the stock and variability in
markets, likely that time is of the essence to the contract: Carpentaria Investments Pty Ltd v Airs
Payment of a deposit on land will generally be regarded as essential: Brien v Dwyer; Millichamp v
Jones

COMMERCIAL TRANSACTIONS

In commercial contracts, time stipulations are generally regarded as essential Bunge Corp v
Tradax SA

BREACH OF INESSENTIAL PROVISION

A notice requiring performance within a reasonable time will not be required if the conduct of the
party including the delay in performance constitutes a repudiation of the contract. Laurinda v
Capalaba Park Shopping Centre

If delay extends beyond date in contract is so gross and protracted as to cause serious detriment
to the other party repudiation will be proved Louinder v Leis
In a commercial context, a notice to perform may be served immediately once time for
performance has passed, requiring the performance within a reasonable time. Louinder v Leis
The notice will fix a day when the party in default will be held to have repudiated the promise, it
will show that it is fair for innocent party to terminate. Green v Sevin
NO TIME FOR PERFORMANCE
If no date for performance is set, it will be implied that performance of the contract should occur
within a reasonable time. Perri v Coolangatta Investments
Must be a failure to perform within a reasonable time which constitutes an unreasonable delay in
performance.
Unreasonable delay is a question of fact
Notice to complete will be served after a reasonable time has elapsed. Lounder v Leis

If performance does not occur court will infer repudiation, provided an appropriate time period is
given Laurinda v Capalaba Park Shopping Centre
It is not necessary to give notice if the delay in performance constitutes a repudiation. Laurinda v
Capalaba Park Shopping Centre

REQUIREMENTS OF VALID NOTICE TO COMPLETE

1. What promisor must do to perform the contract. Falconer v Wilson
2. A reasonable time in which the contract must be completed
Court will take into account nature of transaction, remaining actions to be completed and how long
the party is already given to complete. Greydae v Malinane
Longer periods may be considered if transaction is complex. Sindel v Georgiou
3. A statement of consequences in not performing in accordance with the notice. Laurinda v
Capalaba Park Shopping Centre
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 A generic statement such as our clients reserve their rights in respect of your clients default will
not be sufficient. Laurinda v Capalaba Park Shopping Centre
Failure to comply with all of these will make the notice invalid. Cf Aprilla v Hawkins
The party serving the notice must also not be in breach of an essential obligation. Neeta
(Epping) v Phillips

Following questions must be answered:

1. Was the purchaser in breach of any contractual provision or guilty of any unreasonable delay
2. Was the vendor himself in default by breach of any term of the contract or guilty of any
antecedent relevant delay
3. Was the time fixed reasonable in all the circumstances.
Neeta (Epping) v Phillips
A party serving notice must be in position to perform any still executory obligations by the date he
or she has nominated for settlement. McNally v Waitzer
A party in breach of an essential term or who has repudiated the contract will not be able to
efectively serve a notice to complete making time of the essence. McNally v Waitzer

DELAY CONSTITUTING REPUDIATION

To constitute repudiation, the delay must be so unreasonably long that the only inference that can
be drawn is that the defaulting party does not intend to perform the contract substantially in
accordance with its terms. It must substantially deprive the benefit of the promise Laurinda v
Capalaba Park Shopping Centre

Is there an anticipatory breach

ANTICIPATORY BREACH
Where a party prior to time for performance under the contract, displays intention to no longer be
bound by the contract according to its terms, the promisee may terminate prior to actual
performance. Foran v Wight
HOWEVER
The anticipatory breach must relate to breach of essential term or repudiation goes to root of
contact Koompahtoo v Sanpine
The breach must be accepted before it is acted upon. Foran v Wight
i.e A agrees to sell land to B by June 1, but on May 25 B cant get finance. If A chooses not to
terminate on May 25 and continues performing agreement, may terminate on June 1 for actual
breach. However if contract remains on foot between May and June, B is entitled to change mind
and complete contract in June, and if B completes, anticipatory breach cant be relied upon

Has <party> elected to terminate the breach?

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ELECTION TO TERMINATE

A contract does not terminate due to breach or repudiation by one of the parties, the innocent
party must either accept the repudiation or breach and terminate or affirm the contract. Kelly v
Desnoe
There is no requirement that the right be exercised immediately. Question may be kept open as
long as the innocent party does not affirm the contract or prejudice the other party with delay.
Champtaloup v Thomas

DOCTRINE OF ELECTION

An innocent party who elects to terminate a party will be prevented at a later date from seeking to
enforce the contract, because it no longer exists. Evans v Watt
A party who elects to affirm the contract will be prevented at a later date from terminating the
contract for the same breach. Sargent v ASL Developments
An election once made is FINAL Wendt v Bruce
A continuing breach of a contract will a fresh breach where it indicates an intention not to be
bound by the contract. Carr v JA Berriman

Doctrine of election will only arise if a party has a right to choose between inconsistent legal
rights. Agricultural and Rural Finance v Gardiner
A person confronted with a choice between inconsistent rights is required to elect which of the
mutually exclusive courses of action he or she wishes to take. Immer v Uniting Church of
Australia

A legal right is inconsistent with another right if neither can be enjoyed without the extinction of
the other. Sargent v ASL Developments
Once an election is made to affirm a contract, right to terminate cannot be revived Turner v
Labafox International
HOWEVER
Does not prevent an elector from relying upon a later breach or repudiation. Carr v JA Berriman
An election is not required to be made immediately. An elector is entitled to a reasonable time in
which to consider his or her position. Champtaloup v Thomas
The question may be kept open so long as he or she does not affirm or prejudice the other party
Sargent v ASL Developments
DIFFERENCE BETWEEN ELECTION AND EXTENSION
An extension merely substitutes a new date for the original date without destroying the
essentiality of time. Holland v Wiltshire
An extension of time is only a qualified and conditional waiver of the original stipulation and
continues no more than a promise not to elect to rescind before the extended time. Tropical
Traders v Goodman

Innocent party may elect to terminate for original breach only after extended time passes.
McPhee v Zarb
Termination for failure to pay by the original date may occur prior to expiry of the stated date
unless grounds for estoppel exist.
Scott Thompson

REQUIREMENTS OF VALID ELECTION

An election will occur if there are words or conduct consistent only with the exercise of one of two
sets of rights and inconsistent with the exercise of the other party with the requisite knowledge
and the time for making the election has arisen. Sargent v ASL Developments

1.HAS PARTY ELECTED BY UNEQUIVOCAL WORDS OR CONDUCT

Whether the electors words are unequivocally consistent with the exercise of one of the two rights
and inconsistent with the other is a question of fact. Dee Tech Pty Ltd v Neddam Holdings
Court will be concerned with whether the elector has acted in a manner consistent with the
continued existence of a contract. Tropical Traders v Goonan

Conduct is viewed objectively and election can be found even where there is no subjective
intention to elect. Champtaloup v Thomas

Unequivocal conduct clearly showing a choice between inconsistent rights will be required.
Khoury v Government Insurance Office
i.e tendering purchase price, continuing to accept rent.
Issuing a writ claiming termination and damages will be viewed as an election to terminate
Heymans v Darwins

Selling the property under contract to a third party will be viewed as an election to terminate
Holland v Wiltshire
Legal consequences of conduct amounting to an election cannot be avoided by using the phrase
Without Prejudice Haynes v Hirst
A party is entitled to reserve their right to terminate despite conduct that would ordinarily be
viewed as an election. Champtaloup v Thomas

2. DID PARTY HAVE KNOWLEDGE OF NECESSARY FACT THAT IMPLY

ELECTION WAS MADE
An elector must at least have knowledge of the facts that give rise to the right to terminate
Sargent v ASL Developments
The terminating party must have full knowledge of the material facts to know the other party
breached the contract. Bennett v L&W Whitehead
Must have knowledge of the legal right to elect between the two available inconsistent legal rights
POSITION IS NOT CLEAR, AUS COURTS HAVE ACCEPTED
Requiring knowledge of the facts Matthews v Smallwood
Expressly denying the need for knowledge of legal rights. OConnor v SP Bray
Requiring actual knowledge of the right to elect Young v Bristol Aeroplane

Knowledge of the right to elect is not relevant where the electors words or conduct are clear. Only
if equivocal issue becomes relevant. Elders Trustee v Commonwealth Homes

3.HAS TIME FOR MAKING AN ELECTION ARISEN

Will only occur where the party is faced with a choice in relation to inconsistent rights
Scott Thompson

TERMINATION VS SPECIFIC PERFORMANCE

If an order for specific performance is brought, plaintif can elect to abandon the claim and
terminate the contract where there was a further breach of an essential term or the conduct of the
other party constituted repudiation Carr v JA Berryman

If party claiming specific performance seeks to abandon their claim and terminate the contract,

the court will exercise its discretion to refuse a discontinuation of the claim if such a step would
be inequitable to the other party. Ogle v Comboyuro Investments

JUSTIFICATION OF TERMINATION
A party who acts to terminate may be called upon to justify that termination in court. Party will not
be limited to the reason for termination originally and may rely on any justifiable ground that existed
at the time of termination, even if they were not aware of it. Rawson v Hobbs
i.e an employee is not performing duties in accordance with the contract, after termination,
becomes aware employee was stealing money would provide another justification for termination
Alternative ground will not be alleged by innocent party where statutory provision precludes
reliance on alternative ground W Devis & Sons v Atkins
or where the innocent party tries to invoke a contractual right but has not complied with
requirements.
Or where party is estopped. Walton Stores v Maher

Are there any restrictions preventing <party> from terminating?

RESTRICTIONS ON RIGHT TO TERMINATE

FURTHER PERFORMANCE IMPOSSIBLE
If the continuation of the performance is dependent upon the cooperation of the other party, the
plaintif may be forced to terminate. White and Carter v McGregor

TERMINATING PARTY READY WILLING AND ABLE

Where the defaulting party has breached a dependent and concurrent obligation, the innocent
party will be unable to terminate the contract unless he or she is ready willing and able to perform
his or her own obligations at the time for performance. Peter Turnbull v Mundus Trading Co

A purchaser of land cannot terminate for failure of the vendor to complete if the purchaser does
not have sufficient funds to complete the contract. Foran v Wight

An innocent party cannot show he or she is ready willing and able without tendering performance
of the contract at the time specified. Jeppersons Road v Di Domenico
UNLESS
The other party intimates prior to performance that performance will be futile or useless and
innocent party acts on that intimation. Foran v Wight
Intimation of non performance may be expressed, implied or by conduct. K&K Real Estate v
Adellos

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i.e if a buyer fails to undertake usual conveyancing preliminaries prior to settlement.

Where a seller relies upon an intimation by the buyer that he or she is unable or unwilling to
settle, the buyer is able to allege the seller was not ready willing and able unless the seller is
provided with a reasonable time to perform Mullins v Kelly-Corbett

Applies whether intimation constitutes anticipatory breach or not, provided innocent party relies
on intimation. Innocent party will not need to continue to prepare for settlement where the other
party indicates tender is futile. Davidson v Bucknell
Proof that innocent party was ready willing and able at time of intimation will entitle innocent party
to terminate and buyer to recover the deposit.
Whether an innocent party who relies upon an intimation of non performance by another party to
the contract and does not tender at settlement can obtain substantial damages for repudiation or
breach will depend upon proof that but for the intimation, the innocent party would have been
ready willing and able to perform on date for settlement Mullins v Kelly-Corbett

Where the obligation is not dependent and concurrent, there is no requirement to prove that the
time for performance the party was ready willing and able to perform. Kelly v Desnoe
Where obligations are not dependent and concurrent there is no require to prove at time of

termination, party was ready willing and able. If repudiation is not accepted and the contract
continues, the repudiating party may be able to exercise a right of termination provided by the
contract or common law. Lantry v Tomule

TERMINATING PARTY NOT IN DEFAULT

Termination for breach is not prevented where the terminating party has breached a non
essential term,
An essential but independent term of the contract. Almond Investors v Kualitree Nursery
A non promissory term Kelly v Desnoe
No causal relationship between breach and default of other party. Ninas Bistro Bar v MBE
Corporation
A party who has acted to ensure that the special condition is not fulfilled or that a certain event
does not occur will be unable to rescind the contract. Rede v Farr
Will also apply to instances of termination for breach. Channel 9 v Hayden Enterprises
Is there possible relief against forfeiture?

RELIEF AGAINST FORFEITURE

Forfeiture is the loss of a proprietary interest that results from a breach of contract Legione v
Hateley

Equity will relieve against forfeiture in only 2 situations:

Where the object of the right to forfeit is to secure payment of money or under the heads of fraud,
accident, mistake or surprise Shiloh Spinners v Harding.

Court will not grant relief to an applicant whose conduct makes it inequitable for relief to be
granted. ING Bank v OShea
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i.e Lessee seeking relief against forfeiture of lease was conducting premises unlawfully.

Relief against forfeiture will only intervene with chattels if a lease allows lessee to to retain
possession indefinitely On Demand Information v Michael Gerson

CONTRACTS FOR SALE OF LAND

Relief will only be granted where the provision amounts to a penalty, or where the provision is not
a penalty, exceptional circumstances such as unconscionable conduct Legione v Hateley

Where the main object of the agreement is to secure a particular result. Shiloh Spinners v
Harding

or a contract for sale akin to a mortgage Stern v McArthur.

IS FORFEITURE A PENALTY
The breach of a non-essential term which results in forfeiture is likely to be a penalty Legione v
Hateley.

Whether it is an essential term or not depends on whether the parties would have entered into
the contract in its absence: Associated Tramways

The test for determining whether the right to forfeiture is a penalty was determined in Dunlop Tyre
Co v New Garage Ltd
The construction of the contract as a whole;

Whether the forfeiture loss is a genuine pre-estimate of loss; and

Whether the forfeiture loss is excessive or unconscionable compared to the maximum loss that
could have occurred as a result of the breach.

STATUTORY RELIEF
Relief cannot be excluded by a contractual term s71A(3)(b) Property Law Act 1974 (Qld)

Definitions s71 PLA

Deposit means a sum:

a)not exceeding 10%; and
b)paid or payable in 1 or more amounts; and
c) liable to be forfeited and retained by the vendor in the event of a breach of contract by the
purchaser
installment contract means: s71A(2) PLA
a)executory contract for the sale of land
b)payment(s) (other than deposit) to be made without conveyance
c) Contracts which the purchaser may perform as an installment contract are installment
contracts unless the purchaser elects otherwise
mortgage: includes any encumbrance or charge other than a charge attaching by the operation
of any statutory enactment.
purchaser person with interest under an installment contract
sale includes an agreement for sale and an enforceable option for sale.
Deposit > 10% payment made without conveyance installment contract
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Vendors right to rescind s72 PLA

The contract must not be determined for failure to pay money under the contract until 30 days
after the service of notice in the approved form on the purchaser s 72(1) PLA
An approved form is notice that is reasonably sufficient fully and fairly to apprise the purchaser of
the purchasers default and of the efect of the purchasers failure to remedy the default within the
time specified in this section s 72(4) PLA .
Payment within the 30 day period results in the vendor not having the right to rescind the contract
for failure to play s 72(3) PLA

Vendors right to mortgage s73 PLA

Vendor cannot mortgage (or sell) without consent of purchaser: s73(1) PLA
If mortgaged
Installment contract voidable by purchaser at any time before completion of contract: s73(2)(a)
PLA
Ofence9 penalty units: s73(2)(b) PLA
Section does not afect the right of bona fide third parties: s71(3)(a) PLA

Right of purchaser to lodge caveat s74 PLA

Purchaser under installment contract has an interest allowing them to lodge a caveat to protect
their interest against other instruments to be lodged: s71(1) PLA

Right to require conveyance s75

After one third of the installments have been paid, a purchaser not in default, may require the
vendor to convey the land s75(1) PLA.
purchaser at the same time mortgages land in favour of the vendor or 3rd party to secure
payment of all money payable
Same may be required by a vendor: s75(2) PLA
Where vendor serves noticevendor must advance the following amounts to the purchaser, but
then add them to the mortgage so the purchaser pays them in the end
a) Transfer duties under Duties Act 2001: s75(3)(a) PLA
b) Legal costs of preparing & executing documents: s75(3)(b) PLA
Mortgage preparation funded by the party requesting it: s75(4)(b) PLA
Mortgage must accord with all obligations of the purchaser under the purchase contract: s75(4)
(a) PLA
Failure to comply
Deemed to be in breach of contractnormal remedies apply
Ofence9 penalty units

EQUITABLE RELIEF
Installment contracts in nature of a mortgage
Where the parties relationship is viewed in equity as or analogous to, that or mortgager and
mortgagee. Stern v McArthur
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Traditional Heads
Relief against forfeiture may be granted under the heads of fraud, accident, mistake or surprise
Shiloh Spinners v Harding

Forfeiture of payments made under contract of sale:

In absence of forfeiture clause, common law entitles purchases under contract for sale of land to
return any money advanced in part payment (excluding deposit) when vendor terminates contract.
Mason v Clouet
Equity will ordinarily grant relief against forfeiture of sums paid by way of part payment on ground
their retention is unconscionable. McDonald v Dennys Lascelle

Exceptional circumstances

Equity will intervene if the conduct of the vendor has efectively contributed or caused the
purchasers breach of contract Legione v Hateley
If it appears the object of the rescission is not to safeguard vendor but to take advantage of
benefits, there is even stronger grounds for Legione v Hateley
Factors
Did the conduct of the vendor contribute to the purchasers breach
Was the purchasers breach trivial or slight and inadvertent not wilful
What damage did the vendor sufer by reason of the purchasers breach
What is the magnitude of the purchasers loss and vendors gain if forfeiture is to stand.
Is specific performance with or without compensation an adequate safeguard for the vendor.

Time Breaches

1) Character of the contract in which the stipulation appears (commercial, domestic or personal)
2) relevant background facts stipulating any special significance as to time
3) Where parties have access to appropriate legal advice
4) Any degree to which party in default may be regarded as disadvantaged vulnerable or in need of
equitys protection Tanwar Enterprises v Cauchi
Where vendor has aforded purchaser ample opportunity to complete contract, courts will not
relieve against forfeiture Tanwar Enterprises v Cauchi
i.e vendor has granted substantial concessions or gone to lengths to accommodate purchasers
difficulty.
Absent evidence of unconscionable conduct by vendor merely because vendor secures windfall
gain, is not by itself justification to relieve against forfeiture. PC Developments v Revell

RELIEF AGAINST FORFEITURE OF LEASE

The factors that the courts look at when deciding whether to grant relief against forfeiture for a
lease:
a) The conduct of the applicant for relief, especially as to whether the breach was willful;
The nature and gravity of the breach
b) The diference between the value of the property and the loss sufered; and
c) Whether monetary compensation is sufficient. Shiloh Spinners v Harding
Sections 123 128 of the PLA set out the equitable right of relief against forfeiture in relation to the
failure to pay rent or breaches of other covenants.
The lease of greater than 1 year may not be forfeited unless the lessor service a notice on the
lessee that identifies the breach and in the case of a breach capable of being rectified (payment
Scott Thompson

or otherwise), requires the lessee to rectify the breach, and a reasonable time is given to rectify
such a breach s 124 PLA.
Such relief is at the discretion of the court s 124 PLA.

Deposits

Equity will not relieve against the loss of a deposit, even in an absence of a forfeiture clause.
Yardley v Saunders
Only unconscionability will grant relief against forfeiture of deposit Romanos v Pentagold
Investments Pty Ltd
windfall gain made by the vendor is not sufficient to constitute unconscionable conduct, there
must me something unconscionable in the vendor relying on rights to rescind the contract and
retain the deposit Romanos v Pentagold
Relief against forfeiture cant be claimed where the balance of a deposit is paid late. Romanos v
Pentagold Investments
The exception being accident, sickness or misadventure. Jeppesons Road v Di Domenico
If a vendor stipulates a deposit far exceeds what is acceptable, Equity will not allow the vendor to
retain the money. James v Hill It is usually 10%
If the sale is on extended terms, parties might be expected to fix a larger sum on deposit. Coates
v Sarich.
i.e Contract for sale of farm, which was to be completed in 16 years. Deposit was 30%
If subject matter of sale is wasting asset or a business which can be seriously prejudiced in short
time, larger deposit will be acceptable. Re Hoobin
i.e Sale of hotel payment of balance postponed for 8 years, where purchaser has possession
vendor at risk because value of hotel depended on good management. (25% deposit)
Courts are hesitant in interfering with deposits in commercial contracts where parties are on
equal footing and there is no element of pressure or duress. Tropical Traders v R&H Goonan
Where relief against forfeiture is granted against a deposit exceeding 10%, the court may allow
the vendor to retain the normal 10% of the purchase price. Smyth v Jessup

PROCEDURE FOR TERMINATION

The innocent party must elect by unequivocal words or conduct to terminate the performance of
the contract. Al Jadeed TV v United Broadcasting International
i.e service of write claiming termination, selling property after repudiation
A writ claiming specific performance OR termination is not equivocal and not efective as
termination of agreement. Ogle v Comboyuro Investments

Clear words are needed to rebut the presumption that the contracting party does not intend to
abandon any remedies for breach of contract arising by operation of law. Concut v Worrell

Common law right to terminate can only be excluded or limited by clear words in contract. Amann
Aviation v Commonwealth
If right arises under statute, notice requirements by statute must be complied with

What will happen to the parties after termination?

CONSEQUENCES OF TERMINATION
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 After termination for breach or repudiation, both parties are relieved of their obligations under the
contract for that time. McDonald v Dennys Lascelles
Although discharge of the parties obligations occurs at the time of termination and does not relate
back to the breach or repudiation. Laratt Bankers v Traders Insurances
Vendor cant enforce payment balance of contract price, but they can enforce deposit
Unconditional rights are not divested or discharged. Rights and obligations which arise from
partial execution of contract and causes of action which accrue from breach continue. McDonald
v Dennys Lascelles

Right to damages survives termination

An obligation to pay money that has accrued due is enforceable as a debt following termination.
Rapid Roofing v Natalise

RECOVERY OF CONTRACT PRICE

Contract price can only be recovered if it has been earned prior to termination by performing
obligations substantially or exactly

In land, the price is only recoverable if land has passed to the purchaser. Sunbird Plaza v
Maloney

INSTALMENTS OF PRICE
installments of contract price are recoverable if they are unconditionally accrued prior to
termination. If there is total failure of consideration for that installment, obligation is
unenforceable. McDonald v Dennys Lascelles
HOWEVER
If payments are not conditional (i.e payments due at certain time or date), the obligation is
enforceable. Hyundai Heavy Industries v Papadopoulos
i.e building contract provided installments be paid on dates irrespective of work done, contract
terminated, builder entitled to payment without proof of work done
HOWEVER
If installment is dependent upon performance of whole contract and contract is terminated prior to
completion, consideration will fail. McDonald v Dennys Lascelles
Installments are recoverable on the basis of total failure of consideration if the contract has no
forfeiture provision and the contract does not provide the payments may be retained. Sport
Developments v Del Fabbro

Installments may also be relived through equity or statute. McDonald v Dennys Lascelles

DEPOSITS
Deposit is a bond for performance of contract. Brien v Dwyer.
Forfeiture of deposit to other party is seen as compensation for breach. Right to forfeiture may be
express or implied. Howe v Smith

Innocent will not be required to pay deposit after breach, defaulting party will have to pay.

TERMS OPERATING AFTER TERMINATION

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 Clauses such as restraint of trade, exclusionary provisions, arbitration clauses, confidentiality

clauses or agreed damages clauses will be enforced after termination because they are primarily
secondary obligations. They may be enforced by either party. Heymans v Darwins
CONCLUDE: PARTY X CAN TERMINATE Y OR N, AND THIS WILL BE THE EFFECT

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REMEDIES
DAMAGES
An obligation to pay damages arises for a failure to perform an obligation whether by breach or
repudiation assumed under a contract arises impliedly from entry into contract. The Herron

Damages are to compensate a party for the actual loss sufered as a result of other partys failure
to perform the contract. Hungerfords v Walker
If no loss is sufered, only nominal damages are recoverable to award for breach of contract Luna
Park v Tramways Advertising
i.e Between $1-$100
Damages will not be used to punish a contract breaker Whitfield v De Lauret & Co
Actual loss must be proved by plaintif. Golburg v Shell Oil

ONUS OF PROOF

On plaintif to prove on balance of probabilities, the elements of cause of action, amount sufered,
causation and remoteness. Defendant to prove that plaintif failed to mitigate their losses.
Golburg v Shell Oil Co
HOWEVER
It is not applied rigidly Sellars v Adelaide Petroleum

CAUSE OF ACTION
Can causation be satisfied?

1.CAUSATION

Has the defendants breach of contract in fact caused the plaintif to sufer a loss?
Causation does not need to be proven as a scientific theory. Fitzgerald v Penn

BUT FOR TEST

Would the loss have occurred but for the breach of the defendant. Alexander v Cambridge Credit
Corp
If loss would have been sufered anyway only nominal damages are available. Reg Glass v
Rivers Locking System

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 It need not be the sole contributing factor of plaintifs loss, provided it is a cause of loss. Norton v
Streets Ice Cream

COMMON SENSE TEST (ONLY APPLY IF TWO OR MORE CAUSES OF

LOSS)
As a matter of common sense, Was the relevant act or omission a cause of the loss. It need not
be the only cause. Alexander v Cambridge Credit Corp

NOVUS ACTUS
If the chain of causation has between broken, the defendant is not liable for the loss: (Monarch
SS v A/B Karlshamns
Whether an act or omission will break the chain of causation is a question of legal liability and
policy, not fact. Mahoney v J Kruschich

ACTIONS OF PLAINTIFF
Contributory negligence will only be relevant in a claim for damages of breach of contract, where
the conduct is as such to break the chain of causation between the defendant and loss. Lexmead
(Bassingstoke) v Lewis
i.e farmer bought a towing hitch which was defective and continued to use it for six months before it
broke off and caused a fatal car accident. Farmer did not take steps to have it repaired, refunded or
even check to see if it was safe. Chain broken.

ACTIONS OF THIRD PARTY/ OTHER EVENT

The intervening act of a third party must act to supersede the potency of the breach of contract
so it could be no longer be considered as a cause either in common sense or law. Quinn v Burch
Bros
Building contractor failed to supply stepladder to subcontractor. Subcontractor obtained his own
which was defective.
Where a defendant is under a contractual duty to guard against very act of intervener or class of

act, the chain of causation wont be broken. London Joint Stock Bank v MacMillan
i.e cheque written in a way which means it can be altered and third person cashes cheque chain of
causation remains.
For an act to break the chain of causation, event must not be a kind that was reasonably
anticipated. Monarch Steamship Co v Karlshams Oljefabriker.
Seaworthy ship part of contract was intercepted by British Navy and ordered to dump cargo at
Glasgow when it was bound for Sweden. Took pace in 1939 so WWII was foreseeable
Is the loss not too remote?
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2.REMOTENESS
Not all loss is recoverable, the law must abstract some concepts as relevant and exclude others
as a policy decision for practicality. Liesbosch v Dredger
MUST SATISFY THE TWO LIMBS OF HADLEY V BAXENDALE

1.The parties must be able to contemplate the loss would arise because
the loss that actually occurred rose naturally according to the normal
course of things as a probable result of the breach
Loss must flow naturally from the breach of the contract in the great multitude of such cases
occurring under ordinary circumstances, or a result not unlikely to occur. Koufos v Czarnikow
It is only necessary to foresee the type of damage, not the degree of damage which may result H
Parsons Livestock v Uttley Ingham & Co
OBJECTIVE TEST
To determine what loss would be within reasonable contemplation of the parties at the time of
entry, the court in the absence of special knowledge, will look to the knowledge of a reasonable
person in the position of the parties to the contract. Koufos v Czarnikow
Disappointment may be considered a likely result from the breach for a function or holiday. Jarvis
v Swan Tours
i.e Ship was delayed for 10 days and market price dropped causing loss of profit. Held because
plaintiffs were sugar merchants and there was a market for sugar in Basrah

2.Where the parties should be able to contemplate loss arising from a

breach where the loss is reasonably supposed to have been in
contemplation of both parties at the time they made the contract as a
probable result of the breach.
A defendant with actual knowledge of special circumstances is undertaking to bear a greater loss
as a result of particular facts. Koufos v Czarnikow
In addition to special knowledge, it is necessary either
For the defendant to acquire this knowledge from the plaintif Panalpina International Transport v
Densil Underwear

For the plaintif to know the defendant is possessed of the knowledge at the time the contract is
entered into Hadley v Baxendale
So that the inference can be drawn that the defendant impliedly undertook to bear any special
loss relating to those circumstances. McRae v Commonwealth

Defendants warranted to plaintiff that a tanker was on a reef and required salvage, Plaintiff wasted
money trying to locate the ship, which was not where defendants specified. Expenditure was under
second limb because defendant had actual knowledge of need for salvage operation
If loss arising from special facts is likely to occur only in a minority of cases, it may not a probable
result even if it is reasonably foreseeable. Stuart v Condor Commercial Insulation

EXTENT OF LOSS
Parties need only contemplate the type of injury, not the full extent of loss. H Parsons Livestock v
Uttley Ingham & Co
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i.e Pigs died from eating nuts from faulty hopper. Although the parties didnt contemplate the pigs
dying was probable result. Question for court was actually whether the breach of term stating
hopper was fit for purpose would lead to injury of animals.
Did <Party> attempt reasonably to mitigate loss?

4.

DID PLAINTIFF ACT REASONABLY TO MITIGATE LOSS

A plaintif is unable to claim for any damage flowing from a breach of contract that is a result of a
plaintif failing to take all reasonable steps to mitigate the loss. Dunkirk v Colliery Co v Lever

Onus is on defendant to prove they acted unreasonably. TC Industrial Plant v Roberts

Queensland
Whether a plaintif acted unreasonably is a question of fact that will depend upon individual case.
Payzu Limited v Saunders
Plaintif doesnt need to go to steps that are costly or extravagant. Metal Fabrications v Kelcey
Mitigation must occur when the contract is entered into, not beforehand

FURTHER CONTRACT NEGOTIATIONS

If the parties had the opportunity of entering into a new bargain after breach which might have
eliminated the loss sufered, did the plaintif act reasonably by refusing a new contract? Shindler
v Northern Raincoat Co

COMMERCIAL

In a commercial context, where the defendant makes a reasonable ofer to resume the contract, it
should generally be accepted by the plaintif. Payzu Limited v Saunders
Where the new ofer requires the plaintif to risk capital that must be borrowed, or to take steps
which may lead to financial ruin, a refusal may be reasonable Payzu Limited v Saunders
Refusal due to ulterior motive will be unreasonable Payzu Limited v Saunders

EMPLOYMENT

If an ofer is made at same salary with same benefits, it will be unreasonable to refuse the ofer.
Bruce v Calder
It may be reasonable to refuse a defendants ofer in an employment context if
The new ofer is at lower status. TCN Channel 9 v Hayden Enterprises
New ofer of employment requires plaintif to abandon his or her legal rights arising from the
breach. Shindler v Northern Raincoat Co

Where the ofer of employment is made during proceedings to reduce the damages awarded.
Shindler v Northern Raincoat Co

INCREASES/ REDUCTIONS IN LOSS

Mere fact the loss of plaintif has increased will not bar the plaintif from recovering the loss from
the defendant if the plaintif has acted reasonably Banco de Portugal v Waterlow & Sons
Where plaintif obtains benefits as a result of breach, it must be accounted for when assessing
damages. Lavarack v Woods of Colchester
i.e employee was unfairly dismissed. damages calculated minus amount earned from new
employer.
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PURCHASE SUBSTITUTE
If there is no available market to on-sell goods from a reach, it will not be a failure to mitigate. As
are losses sustained by entering the marketplace to either buy or sell goods. Onesteel
Manufacturing v Bluescope Steel

Extra profit made by mitigation will be taken into account. Ruthol v Tricon

ANTICIPATORY BREACH

Duty to mitigate does not arise until there is a breach. An anticipatory breach means whether the
plaintif behaved reasonably in deciding to terminate or continue with performance is not a
question of mitigation. White and Carter v McGregor

READY WILLING AND ABLE

A plaintif seeking to claim damages for the loss of a contract terminated for the breach will need
to prove they were ready, willing and able to perform where the obligations were dependent and
concurrent. Foran v Wight

DEPENDS ON

Whether the party was at the time of the refusal to complete, substantially capable of completing
the contract

Whether it is likely that the party actually would have completed the contract.
Onus is on party claiming to prove on balance of probabilities they could have completed the
contract. Foran v Wight
A plaintifs right to seek damages for breach that accrued prior to termination will survive.
McDonald v Dennys Lascelles
Applies even where defendant terminates contract for plaintifs breach. Eltridge v Vermin Board
of the District of Murat Bay

ASSESSMENT OF DAMAGES
Damages aims to put the party in the same position as far as money can do as if it HAD BEEN
COMPLETED. Robinson v Harman
The fact that damages may be difficult to calculate will not bar a claim. Fink v Fink
Events occurring after the date of breach are irrelevant except where they result in plaintif
receiving a benefit that would not have occurred but for the breach, or events that were
predestined or inevitable but not for vague possibilities or possibilities of the contract. Tele2
International Card Company SA v Post Office Ltd
Loss occurring to income earning asset after date of breach will be recoverable. Wehnham v Ella

DATE
Damages are generally assessed at date of breach. Commonwealth v Amann Aviation Pty Ltd

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 Rule applies where there is an available market for the subject matter of the contract and the
injured party is expected to go into the market to make a substitute contract to mitigate their loss.
Golden Strait Corp v Nippon Yusen Kubishika
However rule may be altered to ensure plaintif receives adequate compensation Johnson v
Perez
FOREIGN CURRENCY
Date will be where debt should have been paid. Cummings v London Bullion Co
Where date when action arose and date when debt needs to be paid conflict, later date is more
appropriate. Phillips v Ward

SALE OF GOODS

If there is a market in which injured party can buy a substitute, the appropriate date is the date of
non-delivery of the goods.
HOWEVER
If there is no available market, reasonable time after breach calculated by period after which the
plaintif might be reasonably expected to mitigate his or her loss seeking an alternative to
performance. Radford v De Froberville

ANTICIPATORY BREACH

Date for anticipatory breach is assessed on date for performance of contract because the
innocent party is to be put financially in the same position, but in no better position than they
would have been had contract not been repudiated but performed. Hoffmann v Cali
If defendants liability has been accelerated, it must be taken into account

ONCE AND FOR ALL RULE

Damages are assessed once and for all, there is no right to return to court to recover additional
payment

UNLESS

There is more than one cause of action

There is a continuous breach. Larking v Great Western (Nepean) Gravel

What type of loss can <party> claim?

TYPES OF LOSS RECOVERABLE

The object of damages in contract law is, so far as money can do, to restore the innocent party to
the position he or she would have been HAD THE CONTRACT BEEN PERFORMED Robinson v
Harman

EXPECTATION LOSS
ASSET VALUE IN PLAINTIFFS HANDS

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 If plaintif purchased assets as part of performance of the contract and those assets are retained
by the plaintif, the residual value of those assets will be taken into account to assess loss.
Commonwealth v Amann Aviation
i.e Aircraft purchased in performance of the contract was deducted from the final award
Where a plaintif purchases an asset for the purposes of making profit under a contract and a
warranty concerning performance is breached, residual value of the machine will be necessary to
calculate. Cullinane v British Manufacturing Co

i.e If manufacturer purchases a $10,000 vacuum cleaner and expects to make $80,000 net profit
and the machine is worthless or returned, manufacturer will receive $80,000, but residual value will
be taken into account

LOSS OF PROFIT OR VALUE

Usual measure of loss for a breach of contract will be the diference between the contract price
and the value of the subject matter of the contract at the date of breach. Robinson v Harman
i.e 10 tonnes of apples at $1200 per tonne. Failure to deliver. If apples increase and buyer has to
pay $1500 per tonne, seller must compensate buyer $300 per tonne ($3000)

EXPENDITURE NECESSARY FOR PERFORMANCE OR SAVED EXPENSE

Where the plaintif is to perform services under the contract, account must be taken of any
expienditure that is required for completion of the contract following breach. Foxden v IOOF
Building Society

HEADS OF DAMAGE

Heads of damage include compensation for physical injury, mental distress, loss of reputation, loss
of opportunity. They are simply manifestations of central principles rather than discrete and truly
alternative measures of damages which a party may elect to claim. Commonwealth v Amann

RELIANCE LOSS
WASTED EXPENDITURE
Moneys expended in the performance of a contract may be recovered as part of the loss of
expectation sufered as a result of the breach. It is recoverable in action where expenditure along
with profit would have been recovered upon completion of contract Commonwealth v Amann

Aviation
i.e Contract price of $200,000, expenditure is $60,000 and cost of completion is $90,000. Builder
may claim $60,000 in performing or preparing to perform and profit made on whole contract
$50,000. Net profit - expenditure. $200,000 minus $150,000

LOSS OF OPPORTUNITY
Damages for loss of opportunity or chance caused by breach of contract are recoverable.
Commonwealth v Amann
i.e loss of opportunity to enter new lease, acquire property, enter further contract
Court must be satisfied the breach caused the loss of opportunity on the balance of probabilities.
Heenan v Di Sisto

Speculative loss is not recoverable. Ryding v Miles

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 Must be shown the claimant would have taken advantage of opportunity on balance of
probabilities if breach did not occur. Sykes v Midland Bank Executor
Even if chance of event occurring is less than 50% the lost opportunity may still be found to be
probable. TS & B Retail Systems v 3Fold Resources Pty Ltd
Loss of chance to win prize in a competition is subject to compensation despite difficulty of
assessment. Chaplin v Hicks
Loss of commercial advantage is compensatable even if less than 50% likelihood commercial
advantage would have been realised. Malec v JC Hutton

RECTIFICATION COSTS

In deciding between diminution in value or rectification, the appropriate test is reasonableness of

the plaintifs desire to reinstate the property. Ruxley Electronics v Forsyth
If cost of rectification is disproportionate to the end to be attained, the damages fall by what the
value of the item had it been constructed as required by contract less value where it stands.
Value of damages is the diference between the contract price and the cost of making the work
conform to the contract. The work must be necessary and reasonable. Tabcort Holdings v Bowen
Investments

If work is not necessary and reasonable, damages on basis of diminution in value will be
awarded instead. Tabcorp Holdings v Bowen Investments

Necessity means to conform with plans that have not been conformed with. Tabcorp Holdings v
Bowen Investments
Reasonable means the decision to undertake works to achieve compliance. Unreasonableness is
only satisfied by fairly exceptional circumstances or where party is using a technical breach to
secure an uncovenanted profit. Bellgrove v Eldridge
Following factors indicate whether a court will order damages for rectification
Comparative cost of rectification and loss of value. It must be proportionate to loss in value.
Ruxley Electronics v Forsyth

Purpose of work and whether it was fit for purpose. Brewarra Shire Council v Beckhaus Civil
Whether the owner intended to undertake rectification work. Ruxley Electronics

Whether the building was sold prior to undertaking work. Director of War Service Homes v Harris

DELAY IN PAYMENT OF MONEY

A court has no power to award interest as compensation for late payment of debt or damages
unless there is a contractual agreement or statutory provision. Norwest Refrigeration Services v

Bain Dawes
HOWEVER
Damages may be recoverable for the cost of borrowing money to replace money paid or withheld
as a consequence of the defendants breach of contract provided they arent too remote.
Hungerfords v Walker
s58 Civil Proceedings Act allows interest on a judgment from the date the cause of action arose

MENTAL DISTRESS

Damages for Injured feelings, disappointment and mental distress are not recoverable in
contract. Shaw v State of NSW

UNLESS

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 The breach of contract actually causes personal injury to the plaintif. Mt Isa Mines v Pusey
The plaintif sufers actual physical discomfort and inconvenience and mental sufering is directly
related to inconvenience. Fawzi El Saiedy v New South Wales Land & Housing Commission

Where an object of the contract is the provision of pleasure and the enjoyment or freedom from
mental distress. Baltic Shipping Co v Dillon
i.e Lost enjoyment of a holiday etc

NO LOSS OR IMPOSSIBLE TO CALCULATE

Where evidence indicates the plaintif although unlikely to make a profit was not going to make a
loss, all of the plaintifs wasted expenditure can be recovered. Commonwealth v Amann Aviation
Loss can be reduced if it can be show the contract was a losing contract. Onus is on the
defendant. Commonwealth v Amann Aviation
It is limited to the amount that would have been recovered had the contract been performed.
Robinson v Harman
Wasted expenditure will be the primary measure of loss when it is the only means of determining
the detriment sufered as a result of the breach. McRae v Commonwealth Disposals Commission
Are there any restrictions on recovery?

RESTRICTIONS ON RECOVERABLE DAMAGES

There is NO general requirement for a plaintif to terminate a contract prior to making a claim for
damages. Luna Park v Tramways Advertising

HOWEVER

1.If the claim is for a anticipatory breach, the innocent party must accept conduct as repudiation
and the contract MUST be terminated or no cause action for damages will arise.
2. Loss of bargain damages. As general object of such damages is to compensate for the loss of
the bargain, it is only once the agreement is at an end permanently that the plaintif can be said
to lose the benefit of bargain. Sunbird Plaza v Maloney

AFFIRMATION
An election to affirm a contract does not act as a waiver of the breach for other purposes so a
party can claim damages. Banning v Wight
UNLESS
It is an anticipatory breach, because it must be accepted by the other party

PROPORTIONATE LIABILITY
Joint wrongdoers will only be liable for property damage or economic loss relative to their
culpability. s28(1)(a) Civil Liability Act 2003 (Qld)

LIQUIDATED DAMAGES
Liquidated damages are a stipulated amount paid in the event of breach of contract or default.
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 It is a genuine pre-estimate of loss and the plaintif does not need to prove loss sufered. Dunlop
Pneumatic Tyre Co
Liquidated sum will be recoverable after termination of contract for breach. Boucat Pay v
Commonwealth

HOWEVER

If the amount stipulated bears little resemblance to the greatest loss that could occur, it is likely to
be a penalty and the court will not enforce it.

Whether a clause is a penalty depends on whether

Is the clause is a type to which the rule concerning penalties applies
the clause a genuine pre-estimate of loss

PENALTIES
Doctrine of penalties applies where the contract provides for the payment of a sum of money or
monies worth in the event of failure of a stipulation in the contract. Ringrow v BP Australia
Whether a sum of money is a penalty must be judged at the time of the making of the contract
and is a question of substance. Bridge v Campbell Discount Co

PAYMENT OF MONEY AFTER DEFAULT

Where a contract was terminated for a specified event that is also a breach of contract, the
doctrine of penalties will apply. AMEV-UDC Finance v Austin
The fact a term is described as agreed damages will not prevent clause from being penalty if it is
out of all proportion to, extravagant or unconscionable compared with the greatest loss that could
conceivably flow from the breach. Essanda Finance Corp v Plessnig
Rules determining whether amount paid is unconscionable.
1. If sum stipulated is extravagant or unconscionable
2. Breach consists only in not paying a sum of money and sum stipulated is greater than sum that
ought to be paid
3. If a single lump sum is made payable by way of compensation on occurrence of one or more or
several events some of which may occasion serious or trifling damage
4. Consequences of the breach make an exact pre estimation almost an impossibility
Doctrine of penalties will apply when penalty is non-monetary Ringrow v BP Australia

EFFECT OF PENALTY

Clause construed as a penalty is void and unenforceable, but plaintif may still claim damages. WJ
Investments v Bunting
Suggested that the damages claimed are limited to the maximum under liquidated damages clause

Can <party> claim restitution?

RESTITUTION
Restitution is the claim for a return of a benefit, as opposed to damages which is for loss caused
another partys default. Air Canada v Ontario (Liquor Control Board)
Restitution is mostly claimed for
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 Recovery of money paid under mistake. ANZ v Westpac

Total failure of consideration Baltic Shipping v Dillon
Compensation for work done in anticipation of contract. Brewer Street Investments v Barclays
Woollen Co
Compensation for work done under an unenforceable, void or partly performed contract
Unjust enrichment is not a recognised cause of action but provides a unifying legal concept that
explains why the law recognises an obligation to make fair and just restitution derived at expense
of plaintif. Pavey & Matthews v Paul

ELEMENTS OF RESTITUTIONARY CLAIM

Claim must satisfy three elements outlined in Pavey & Matthews v Paul
NOTE: APPLY QUANTUM MERUIT FROM PERFORMANCE

1.DEFENDANT ENRICHED

The defendant must receive a benefit. Pavey Matthews v Paul

Benefit should be assessed objectively as something of market value. Pavey Matthews v Paul

MONEY

Money is seen as a benefit as money has the peculiar character of a universal medium of
exchange, by its receipt, the recipient is invariably benefitted. BP Exploraiton Co v Hunt No 2

SERVICES

The law will not allow a defendant to subjectively devalue services or the product of services
where:
I) The services were requested Rowe v Vale of White Horse District Council
Free acceptance can be used to show benefit even in absence of request. Damberg v Damberg
The defendant must take a reasonable opportunity to reject the services where both parties
acknowledge they are not gratuitous. Brenner v First Artists Management
If defendant, by their own breach prevents completion of contract plaintif will be entitled to recover
via Quantum Meruit
II) The defendant accepted the services Steele v Tardiani
A request may be implied in circumstances that are not obvious on the facts. Lumbers v Cook
Builders

Free acceptance means the defendant had a choice between accepting and rejecting the work
and freely decided to accept the work even though it does not comply with the contract. Oliver v
Lakeside Property Trust
III)The defendant obtains an incontrovertible benefit from the services Steele v Tardiani
An incontrovertible benefit is one no reasonable person could deny.
Money is always an incontrovertible benefit. BP Exploration v Hunt
Services will only be a benefit if they confer a positive gain to the wealth of defendant or
represent a saved expense. Monks v Ponyice
If item is a chattel, if the defendant is unaware of benefit they may still be liable. Greenwood v
Bennett
If item is land, the defendant must be aware the land has increased in value. Republic Resources
v Ballem
GOODS
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Restitution is only available with goods if the plaintif chose to accept the goods knowing they were
not gratuitous by using or consuming them. Sumpter v Hedges

2.ENRICHMENT MUST BE AT PLAINTIFFS EXPENSE

In a claim for restitution based on unjust enrichment, the benefit will be provided at the expense
of the plaintif if there is a subtraction from the wealth of the plaintif. Pavey & Matthews v Paul
Under mistake, if the plaintif acts as a conduit for a third party, the payment is at the expense of
the third party not the plaintif. Commissioner of State Revenue v Royal Insurance Australia

3. ENRICHMENT MUST BE UNJUSTIFIED

It is not sufficient for plaintif to allege the retention of a benefit is unfair or unconscientious, a
specific ground or unjust factor must be present. David securities v Commonwealth Bank of
Australia

Plaintif must prove, but for the unjust factor, the defendant would not have recieved a benefit
If unjust factor concerns duress, it need not be the sole factor. Crescendo Management v
Westpac

TOTAL FAILURE OF CONSIDERATION

Total failure of consideration will arise where the plaintif receives no payment for his or her
payment and the contract does not provide the money to be retained by the defendant. Baltic
Shipping Co v Dillan
If plaintif receives part of consideration they cannot recover
HOWEVER
This rule may be softened where specific portions of the contract price are paid in return for

discrete portions of the agreed return McDonald v Dennys Lascelles

What did I bargain to receive from my money and have I received it Rowan v Divall (Baltic
Shipping)
i.e Plaintiff bought a car which was revealed to be stolen and plaintiff had to return car to true
owner. Total failure because plaintiff did not receive property and right to possession which is what
he bargained for
In land sale, if plaintif uses the premises it may NOT amount to a total failure. Shaw v Ball
Plaintiff sought to purchase business for $5000, he paid $2000 and took early possession and
enjoyed it. Defendant terminated and court denied restitution because the $2000 was for goodwill
An entire and indivisible consideration will not wholly fail if part is tendered and accepted. Baltic
Shipping Co v Dillon

Total failure may also occur in relation to a severable part of the contract. Roxborough v
Rothmans

VALUATION OF A BENEFIT
When valuing non-monetary benefits, the court will fundamentally be concerned with what is fair
and reasonable remuneration for benefit accepted by defendant. Brenner v First Artists
Management

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1.FAIR AND REASONABLE RENUMERATION OR COMPENSATION

Where plaintif performs work at request of defendant, the fair value of the work will be calculated
at a reasonable rate for work actually done. Assessment will have regard to what defendant
would have to pay had the benefit conferred under normal commercial arrangement. It is not
directed at the cost to the plaintif of performing the work, Renard Construction v Minister for
Public Works

2.AGREED PRICES
Where the parties have agreed upon a price for certain services, services have been performed,
but he agreement is no longer on foot, the agreed price may be evidence for renumeration.
Pavey Matthews v Paul
Court may also have regard to contract price where services are not totally performed, but there
may be difficulties in calculating a pro-rata amount for the agreed prices to the incomplete works.
Jennings Construction v OH & M Birt Pty Ltd
Court is not bound to implement pro-rata method of calculation and may modify to determine
what is fair recompense. ASIC v Edwards

3.HOURLY RATE

If applying an hourly rate is the court may have regard to the rate of renumeration which is
commonly accepted in the industry. Court should look at standing of person performing the
services, the difficulty of the task, the fact the services required imagination and creativity that
may be difficult to discern the end product.

4.HOURS PERFORMED

If services are of a kind where it is difficult or impossible to assess the number of hours involved or
to itemise precise services, court may make global assessment of renumeration which is fair and
reasonable and the value of improvements in hands of defendant

5.COMMISSIONS

Where it is customary for services to be recompensed by commission, the court may have regard
to what is a reasonable commission and apply it where appropriate. Way v Latilla

RESTITUTION BETWEEN CONTRACTING PARTIES

An action for restitution is generally NOT possible when a contract is on foot Update
Constructions v Rozelle Child Care Centre
Where a contract has been breached, the plaintif may bring alternative claims in contract or
restitution but CAN ONLY PURSUE ONE. Baltic Shipping Co v Dillon

PARTLY PERFORMED CONTRACTS

A party will be able to recover monies paid under the frustrated contract if there is a total failure of
consideration. Fibrosa Case

RECOVERY OF MONEY PAID

Money paid under a contract discharged for breach or frustration will be recoverable if there is a
total failure of consideration. It will NOT be unjust for the defendant to retain the money if
consideration only partially fails. Yeoman Credit v Apps
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i.e Defendant hired car from plaintiff, car was unroadworthy but defendant drove it and paid three
instalments of hire before defaulting. Was no total failure as he used the car.
Party in default will not get deposit back

SERVICES RENDERED

Restitution cannot be claimed if contract is enforceable,

An innocent party who terminates the contract for the breach of the other party will be entitled to
elect between a claim for damages and restitution. Automatic Fire Sprinklers v Watson

DEFENCES

SIX FACTORS That will bar claim for restitution

Services goods or money that are part of a valid gift or benefit conferred in the course of an
obligation owed at law or by statute.
The plaintif submits a honest claim of the defendant in monies paid under a mistake of law
The benefit was conferred

CHANGE OF POSITION
Defendant must prove
They acted to their detriment

On the faith of the receipt of the benefit

Such that it would now be inequitable for the money to be returned. David Securities v
Commonwealth Bank of Australia

Mere payments on ordinary living expenses or payments to others will not qualify. David
Securities v CBA
Anticipatory expenditure of funds prior to payment may not attract the defence. South Tyneside
Metropolitan Borough Council v Svenska International
Defence does not prevent the recovery of money remaining in the hands of the defendant at the
time of the claim. Heperu v Bell
Has been applied where money is paid to defendant under mistake and then spent before
learning of the mistake. ANZ Banking Group v Westpac Banking Corporation
Defendant must be able to prove not only that it acted to its detriment on the faith of the payment
but also that it committed to some expenditure or financial commitment that was attributable to
the mistaken payment. State Bank of NSW v Swiss Bank Corporation

Defence is not open to someone acting in bad faith

Merely disposing of money in good faith is not enough to render it inequitable that it be repaid

because ordinary expenditure might in any event have been incurred by him or her in ordinary
course of things

Although there are resemblances between bona fide purchase and change of position, the two
cannot properly be equated because in the former there is no inquiry into the adequacy of the
consideration while in the latter the defence only operates pro tanto to the extent of the change.
Lipkin Gorman v Karpnale Ltd

LIMITATIONS

For actions based on contract within the jurisdiction of Queensland, the plaintif has 6 years from
the date the claim arose to bring the action s 10(1)(a) Limitations of Actions Act 1974
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 The cause of action accrues at the time of breach Ward v Lewis.

UNLESS

Where the action is one to relieve from fraud or mistake, the cause of action accrues when the
party discovers the fraud or mistake s38 LOAA
Where the person founding the action is under a disability {under age or not of sound mind} at
the time the action accrues, the period of six years starts from the date at which the person
ceases to be disabled s 10(2) & 10(3) LOAA .

EQUITABLE REMEDIES
SPECIFIC PERFORMANCE
1. VALID BINDING CONTRACT
There must be a valid binding contract Zucchiatti v Ferrara.
Specific performance is generally premised upon breach or at least reasonable apprehension of
breach of contract. Turner v Bladin
Contract cant be illegal

IF CONTRACT FOR LAND, MUST SATISFY FORMALITIES

No action may be brought upon a contract of the sale or other disposition of land unless
that contract or memorandum of it is in writing signed by the party to be charged s59
Property Law Act 1974 (Qld)
Does the agreement, memorandum or note contain all essential terms? If not, go to joinder BELOW
Requirements of writing
Sufficient description of parties. Williams v Byrnes
Adequate description of property:

If only portion of property is to be sold, description of part must be precise. South Coast Oils v Look Enterprises

Consideration for promise:

i.e the price Burgess v Cox

If a time period is specified, this must be included + any other essential terms
Acknowledgement of agreement:

May be expressed or implied in writing. Pirie v Saunders

Signed by party to be charged

RULES ABOVE

A real estate agent, solicitor, joint tenant and tenant in common must be expressly authorised. Nowrani Pty Ltd v
Brown

If NO SINGLE DOCUMENT EXISTS: Is the agreement sufficiently evidenced in a joinder?

JOINDERS:

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Several documents may be joined to form a single memorandum where one expressly or impliedly refers to the
other. Timmins v Moreland Street Co.

You cannot join documents that were not in existence. Todrell v Finch

Reference to document:
Signed Document:

Where the writing signed by the party to be charged refers to another document, that document can be joined in
writing to the party to be charged Harvey v Edwards

Physically joined:

Where two documents are physically connected, the documents may be joined MEwan v Dynon

Letter and envelope

A letter implicitly refers to the envelope it was sent in Pearce v Gardner

Cheque joined to letter may be allowed due to closeness physically

Documents executed at same time:

Where documents are executed at the same time, such as when cheque and receipt issued a reference can be
implied Timmins v Moreland Street Property Co.

Cheque and Receipt

A receipt can be seen to be referring to the cheque for payment if seller is to be charged

HOWEVER

Will not work if buyer is to be charged, unless exchanged at the same time as buyer signs first blank cheque and
cant refer to a later document

Cheques do not refer to anything even if prior letter referring to it, Saunderson v Purchase

Reference to transaction:

Where the writing signed by the party to be charged refers to a transaction, rather than a document, parol
evidence can be given to explain the transaction and to identify document relating to it. Fauzi Elias v George
Sahely & Co.

NON COMPLIANCE
Can <Party> Rely on Part Performance or Estoppel?

Part Performance

A plaintif may obtain specific performance of a contract not complying with the formalities
requirements of the PLA if the plaintif can show sufficient acts of part performance Regent
v Millet

MUST PROVE

1.Acts relied upon by plaintiff unequivocally point to some agreement as it is

alleged Regent v Millet
Acts in question need not point to the VERY contract alleged, but within a general class to which
the agreement alleged belongs. Francis v Francis
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2.Acts relied upon by plaintiff must be done in reliance of contract with knowledge of
defendant,
although the acts are not necessarily required by contract McBride v Sandland
Handing over the title deed is insufficient as acts of part performance. Cooney v Burns
Entering into premises and paying rent is sufficient for part performance of lease. McMahon v
Ambrose
Remaining in possession on same conditions upon expiry of terms of written lease may be
equivocal if the agreement is to extend original lease Lightning By Design v Cannington
Nominees
Payment of money ON ITS OWN is not sufficient. Cooney v Burns
Just handing over the key is not. Competative Funerals v Gurmit Singh Rai
3. Acts must be performed by person trying to enforce contract (in most cases the plaintiff)
King v Grimwood
4. Agreement must be sufficiently concluded so that if it were in writing it could be
enforced. Regent v Millet.
Does not need to be concluded in writing Masters v Cameron
Estoppel

Can be used to stop party reneging on a promise when that party acted unconscionably.
Walton Stores v Maher.

Defendant must have represented that an enforceable contract actually existed

Powercell v Cuzeno

APPLY SIX TESTS OF ESTOPPEL HERE

Contract rendered invalid due to fraud in equity can be used as an exception here. Wakeham v
Mackenzie

2. VALUABLE CONSIDERATION

Valuable consideration must be provided Thomas v Thomas.

Valuable consideration does not include deeds under seal Jefferys v Jefferys

Valuable consideration does not include marriage consideration In Re Cooks Settlement Tusts

3. COMMON LAW DAMAGES INADEQUATE

No order of specific performance will be made where damages for breach of contract adequately
compensates plaintif for loss. McIntosh v Dalwood

LAND

Land is unique so a court of equity will often degree a remedy for specific performance for the
sale of land Dougan v Ley
Court may grant specific performance and an abatement where purchaser is unable to secure
their entitlements under the contract. Flight v Booth
Specific performance cannot be sought for an option to purchase. Alexander v Tse
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 Contract to erect a building can only be enforced where the building work is specifically contained
in the contract, performance cannot be compensated by damages, and the defendant has
obtained possession of the land where the work is being done. Mayor of Wolverhampton v
Emmons

Repairing covenants can be enforced if it is sufficiently defined in the contract, damages would
be inadequate and the lessee is in possession such that the lessor cannot have the work done
without committing a trespass. Jeune v Queens Cross Properties
Specific performance will be refused if the consideration for land is performance of a service
Maiden v Maiden

GOODS AND CHATTELS

Contracts for the sale of chattels or goods will not support specific performance as damages
usually suffice. Holroyd v Marshall

DOES NOT APPLY IF

Items are unusual, rare or of special value to the plaintif. Smythe v Thomas
If availability of item is reduced by law or statute it may bring about specific performance. Dougan
v Ley
i.e Sale was for taxi, only specific number of taxi licences issued every year by law
Market difficulties of temporary nature, being an excess demand for a good of no particular value
will not attract specific performance. Cook v Rogers.
i.e There was a shortage of cars after WWII, and plaintiff sought specific performance to get car

SHARES

Specific performance cannot be brought for transfer of shares in a PUBLIC company Re

Schwabacher
If shares are not readily available in market, or controlling interest is of size or nature meaning it
would be difficult to acquire them elsewhere, specific performance may be brought. Lionsgate
Australia v Macquarie Private Portfolio Management
Time to test is not when contract is made but when relief is granted. CLC Corp v Cambridge Gulf
Holdings

CONTRACTS TO PAY OR LEND MONEY

Contracts to lend money cannot be enforced with specific performance. Loan Investment Corp of
Australasia v Bonner

UNLESS IN RARE CIRCUMSTANCES WHEN

Damages cant be reasonably assessed with accuracy Wight v Haberdan

Loan is part of wider arrangement involving sequential or associated responsibilities Georges v
Wieland
Plaintifs enterprise will be lost if promise is not fulfilled Corpers No 664 v NZI Securities
Australia
Indemnity agreements will only bring specific performance if the debtor is in a financially bad

situation and the indemnifying party will instead pay the debt. McIntosh v Dalwood (No 4)
Transfer of money to a third party will bring specific performance if there is a contractual obligation.
Beswick v Beswick

PERSONAL SERVICES
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 Specific performance of a personal service will not be granted because it is akin to slavery De
Francesco v Barnum
If the service in question relates to a service which is unique, specific performance may be
granted. Dougan v Ley
i.e something involving a person such as a celebrity or uniquely gifted professional
And it is usually impossible to have the services performed adequately as the relationship
between parties is broken. Stowe v Stowe.

DEFENCES/ DISCRETION
Constant supervision
Court will not order performance of a contract if it requires constant supervision of defendants
performance. JC Williamson v Lukey and Mulloholand
HOWEVER
This will not apply where the duties of an ongoing nature simply require a result Mayor of
Wolverhampton v Emmons
i.e building something

Insufficient definition

Court will not order specific performance, if it cant determine what needs to be done to comply
with the order. Tito v Waddell (No 2)
HOWEVER
It is possible for the courts to settle certain terms if the content is determined with sufficient
certainty by the time the action for specific performance has commenced. Adams v Broke

Want of Mutuality

Court will not order specific performance if a contract could not be enforced against himself or
herself. Thomas v Harper
Want of mutuality is discretionary and the court may grant specific performance if it can be done
without injustice or unfairness to defendant Price v Strange
Defence is governed by state of afairs at the hearing. Hume v Munro

Unlawfulness

Court will not order specific performance if its practical efect is to require the defendant to do the
act which they are lawfully not competent to do. Warrnington v Miller
Court will not order specific performance if the performance requires the defendant to perform an
unlawful act. Seawell v Webster

Futility and impossibility

Specific performance will not be ordered if the actions required are futile. Tito v Waddell (No 2)
i.e specific performance to replant trees on an island ruined by mining. Would only relate to 15
small scattered pieces of land
If defendant cannot perform the obligations required of them, specific performance will be denied.
Wenham v Ella
i.e land has been transferred to an innocent third party
Financial difficulty will not be relevant in raising defence of impossibility. Boyarksy v Taylor

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Undue hardship
Court will not enforce a bargain on defendant which would cause them great hardship. Dowsett v
Reid
Must be some unconscionable bargain, or some compassionate grounds which would make
specific performance unreasonable. Longtom v Oberon Shire Council
Financial difficulty alone will not suffice. Nicholas v Ingram
A potential gain by the defendant in an intervening period is not a basis to find financial hardship.
Broulee Developments v Mackay
i.e land increases in value during intervening period
Hardship is usually determined at date of contract or that is in some way due to the plaintif.

Bossaid v Andy
HOWEVER
In rare circumstances a change in circumstances after the contract which is not attributable to the
plaintif will be successful. Patel v Ali
i.e The vendor and husband co owned house contracted to sell in 1979. Husband went bankrupt
and after completed contract the vendor got bone cancer, had a leg amputated and gave birth to
two kids
Harship of third parties is only relevant when connected to subject matter, and defendant owes the
third party legal or moral duty. Gall v Mitchell
Defendant bares onus of proving that upholding contract would inflict hardship and injustice on
them. Suttor v Gundowa
Must be weighted against hardship plaintif will sufer through refusal of the remedy Wedgwood v
Adams

Plaintiffs inequitable conduct

Where there is real ground for believing the judgement of the defendant was, to the knowledge of
the plaintif, seriously afected by some disadvantage, equity will refuse specific performance
because of unconscionable dealing. Blomley v Ryan

i.e plaintiff knowingly took advantage of defendants weakness stemming from defendants age,
drunkenness and health
A misrepresentation may constitute ground for refusing specific performance, as will undue
influence or duress. Public Trustee v Taylor
Behaviour short of unconscionable dealing may sometimes deny specific performance. Summers
v Cocks
i.e Party sold hotel premises to respondent because they knew their pub licence was in jeopardy,
plaintiffs ommission to keep premises in repair lead to loss of licence.
An unwise, risky or regrettable transaction is not regarded as inequitable conduct. Alexelsen v
Obrien

Demanding an exorbitant price for an item or land which is known to be of importance to plaintif
is not unconscionable. ANZ Executors and Trustees v Humes
A misrepresentation of a purchasers access to finance to complete purchase is not sufficient.
Coglan v Pyoanee
If defendant is under some disability in making a judgement to his or her best interests, may
block specific performance. Kurth v McGavin
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I.e plaintiff disabled or in this case drunk, even though he showed no signs of intoxication. Also was
under family
Inequitable conduct is at the discretion of the court. Legione v Hateley

Absence of readiness and willingness to perform

An applicant for specific performance (PLAINTIFF) must prove he or she has performed or is
willing to perform the essential terms he or she ought to have performed and is willing to perform
all future obligations under the contract. King v Poggioli
Inaction by plaintif over period of time may constitute unwillingness Poulos v Svoboda
Readiness and willingness does not correspond with the actual ability to perform. Gurney v
Gurney
I.e plaintiffs financial situation was insufficient
Where it is the plaintifs breach that results in termination of the contract, court is unlikely to find
plaintif ready and willing to perform

Readiness and willingness are judged at time suit is instituted. Green v Sommerville

Defendants Unilateral Mistake

Specific performance will only be granted on the ground of a defendants unilateral mistake
unless the plaintif induced it. Heath v Heath
Unless it is too harsh on the defendant Tamplin v James

Laches

Specific performance is only available to those who are prompt to claim it. Eads v Williams
Depends upon nature of case and circumstances Norgard v Abco Holdings
Not essential to pinpoint exact moment right to specific performance disipates, it is enough that
over a continuum of time a point has been reached when it would be inequitable to allow
enforcement by specific performance Pitblado & Hoskin v Sweird
Delay in prosecution will also bar specific performance Lamshed v Lamshed
I.e case was initiated but action lay dormant for five years
Delay on its own, even if substantial is no bar to specific performance if

There is mutuality in delay Norgard v Abco Holdings

Defendant sufers minimal prejudice. Broulee Developments v Mackay
The equitable doctrine of Laches will operate to bar an action if the plaintif has been guilty of an
unreasonable delay that amounts to acquiescence of the defendants breach Limitations of
Actions Act 1974 s 41.

INJUNCTIONS
Injunctions granted to restrain breach of contract or threatened breach of contract.. Injunction
wont be granted where damages are an adequate remedy: Aristoc Industries Pty Ltd v RA
Wendam (Builders) Pty Ltd.

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CONSUMER GUARANTEES
Due to constitutional limitations, actions are restricted to corporations s313 Australian Competition
and Consumer Act (Cth)
However, by virtue of s27 of the Fair Trading Act 1989 (Qld) a claim can be made against a noncorporate entity

SUPPLY
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 Supply in relation to goods means to supply, re-supply by way of sale, exchange, lease, hire or
hire-purchase s2 Australian Consumer Law 2010 (Cth)
Where the goods in question are given as a gift the recipient of gift may exercise the same rights
as the consumer s266 ACL
Supply also includes where a person is supplied with goods by means of promotion or donation.
s5
Goods are taken to have been supplied to a consumer even if the goods are affixed to land or
premises at the time of supply. s8 ACL

MANUFACTURERS
Manufacturer includes a person that grows, extracts, produces, processes or assembles goods.
A person held out as the manufacturer of the goods, a person whose name, brand or mark is
applied to the goods supplied, a person who allows another to hold the first person out as the
manufacturer of the goods together with a person who imports goods into Australia, when, at the
time, the manufacturer does not have a place of business in Australia s7 ACL

GOODS
Goods includes:
Ships, aircraft and other vehicles s2(a) ACL
Animals, including fish s2(b) ACL
Minerals, trees and crops, whether on, under or attached to land or not s2(c) ACL
Gas and electricity s2(d) ACL
Computer software s2(e) ACL
Second-hand goods s2(f) ACL
Any component part of, or accessory to, goods. s2(g) ACL

CONSUMER
GOODS

A person is taken to have acquired goods as a consumer if, and only if

The amount paid for the goods did not exceed $40,000

The goods were of a kind ordinarily acquired for personal domestic or household consumption
The goods consisted of a vehicle or trailer acquired for use principally in the transport of goods
on public roads s3 ACL
A person is NOT a consumer if:
The goods are acquired for re-supply
The goods are acquired to be used up or transformed in trade or commerce in course of
production or manufacture
The goods are used up, transformed, in trade or commerce to repair or treat other goods or
fixtures on land s3(1)

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 If the goods exceed $40,000 a person will still be held to be a consumer if they were ordinarily
acquired for personal domestic or household use or consumption depending on their use,
ascertained objectively. Atkinson v Hasting Deering (Qld)

i.e In this case it was a large tractor. Held not to be consumer because the tractor, objectively, was
not something ordinarily used for personal, domestic or household use.
Mere fact a goods were acquired in a business setting will not prevent acquirer from being
deemed a consumer. Cinema Centre Services v Eastaway Air Conditioning
i.e Air conditioning units purchased for motel. Air conditioners purchased were a kind ordinarily
acquired for personal domestic or household consumption

TRADE OR COMMERCE.

The goods must be supplied in trade or commerce

Trade or commerce means any trade or commerce within Australia or between Australia and
places outside Australia and includes any businesses or professional activities whether or not
carried out for profit. s2 ACL

Trade or commerce are words of wide import and will apply to conduct in a course of dealings
activities or transactions which by their very nature have a trading or commercial character.
Concrete Constructions v Nelson

The consumer guarantees do NOT apply to private sales

The consumer guarantees do not apply to supply by way of auction

Sale by auction means in relation to the supply of goods by person a sale by auction that is
conducted by an agent of the person, whether they act in person or by electronic means. The
goods must be sold upon the fall of auctioneers hammer s2 ACL

i.e Ebay is not sale by auction because there is no agency relationship

GUARANTEE AS TO TITLE

If a person supplies goods to a consumer, there is a guarantee that the supplier will have a right
to dispose of the property in the goods when that property is to pass to the consumer.
Property passes when parties intend it to pass s20 Sale of Goods Act 1896 (Qld)
s51(1) will also be applied where the supplier may be prevented by law from disposing in
property in the goods. Nibblett v Confectioners Materials Co
Section 51(1) does not apply where supply is by way of hire or lease s51(3) ACL

UNDISTURBED POSSESSION
If a supplier supplies goods to a consumer and the supply is not one of limited title, there is a
guarantee that the consumer has a right to undisturbed possession of the goods. s52(1) ACL
It does not apply to the extent that a consumers undisturbed possession of goods by a person
who is entitled to the benefit of any security charge or encumbrance disclosed to the consumer
before the consumer agreed to supply. s52(3) ACL
Where supply is of limited title the following persons will not disturb possession:
The supplier
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 If the parties to the contract for the supply intend that the supplier transfer only such title that
another person may have - that other person
Anyone claiming through or under the supplier or that other person (otherwise than under a
security, change or encumbrance disclosed to the consumer before the consumer agreed to the
supply

UNDISCLOSED SECURITIES
If
a person (the supplier) supplies goods to a consumer s53(1)(a) ACL
and the supply is of limited title s53(1)(b) ACL
there is a guarantee that
The goods are free from any security charge or encumbrance s53(1)(c) ACL

That was not disclosed to the consumer in writing before the consumer agreed to the supply
s53(1)(c)(i) ACL
That was not created by or with the express consent of the consumer s53(1)(c)(ii) ACL

The goods will remain free from such a security or encumbrance until the time when the property
in the goods passes to the consumer s53(1)(d) ACL
The guarantee applies regardless of whether the goods are supplied in trade or commerce
The supplier does not fail to comply with this guarantee only because the existence of a floating

charge over the suppliers assets unless and until the charge becomes fixed and enforceable by
the person to whom the charge is given s53(2) ACL

Where the supply is of limited title to goods there is a guarantee that all securities, charges or
encumbrances known to the supplier and not known to the consumer were disclosed to the

consumer before the consumer agreed on the supply. Failure to disclose such interests known to
the suppler will entitle the consumer to a remedy s53(3) ACL

Guarantee as to undisclosed securities does not apply if where the supply is made by way of hire
or lease. s53(4) ACL

ACCEPTABLE QUALITY
If a person supplies, in trade or commerce, goods to a consumer and the supply does not occur
by way of sale by auction, there is a guarantee the goods are of acceptable quality. s54(1) ACL
Goods are of acceptable quality if they are:
Fit for all the purposes for which goods of that kind are commonly supplied s54(2)(a) ACL
i.e A toaster must toast bread
Acceptable in appearance and finish. s54(2)(b) ACL

i.e a new toaster should be free from scratches, blemishes etc

Free from defects s54(2)(c) ACL
i.e the toasters time knob should not fall off when first used
Safe s54(2)(d) ACL
i.e the toaster should not explode
Durable s54(2)(e) ACL

i.e the toaster should function for a reasonable time after the purchase without breaking down
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 As a reasonable consumer fully acquainted with the state and condition of the goods (including
any hidden defects of the goods) would regard as acceptable having regards to the matters in
subsection s54(3) ACL

The matters for the purpose of subsection (2) are:

The nature of the goods s54(3)(a)
i.e for example a major appliance such as a fridge is expected to last longer than a toaster
The price of the goods s54(3)(b)
i.e a cheap toaster will not last as long as a top of the range one
Any statements made about the goods on any packaging or label on the goods s54(3)(c)
i.e toaster box shows special defroster function
Any statements made about the goods by the supplier or manufacturer of the goods s54(3)(d)
i.e if the supplier says the crumb tray is easy to detach and clean
Any other relevant circumstances relating to the supply of the goods s54(3)(e)
i.e was the toaster marketed as being safe and simple to use
If the goods supplied to a consumer are not of acceptable quality and the only reason or reasons
why they are not of acceptable quality were specifically drawn to the consumers attention before
the consumer agreed to supply, the goods are taken to be of acceptable quality s54(4) ACL
If goods are displayed for sale or hire, and the goods would not be of acceptable quality if they
were supplied, the reason or reasons why they are not of acceptable quality are taken for the
purposes of subsection (4) to have been specifically drawn to a consumers attention if those
reasons were disclosed on a written notice that was displayed with the goods and was
transparent s54(5) ACL

Goods do not fail to be of acceptable quality if the consumer to whom they are supplied causes
them to become of unacceptable quality or fails to take reasonable steps to prevent them from
becoming of unacceptable quality or they are damaged by abnormal use s54(6) ACL
Goods do not fail to be of acceptable quality if the consumer acquiring the goods examines them
before the consumer agrees to the supply of the goods and the examination ought reasonably to
have revealed the goods were not of an acceptable quality. s54(7) ACL

Fault is irrelevant

FITNESS FOR ANY DISCLOSED PURPOSES

A person who supplies in trade or commerce, goods to a consumer, and the supply does not
occur by way of sale by auction, there is a guarantee that the goods are reasonably fit for the
disclosed purpose, or any purpose for which the supplier represents that they are reasonably fit.
s55(1) ACL
i.e a diver buys a watch which is represented to be waterproof. Diver goes diving only to the
surface and the dial fills with water. Diver would have a right to remedy from the supplier.
Disclosure of the goods purpose is not required where the goods are required for common
purpose rather than special purpose. Frank v Grosvenor Motor Auctions
Provided disclosure is made of the particular purpose for which the goods are acquired, it is
irrelevant whether the particular disclosed purpose is a purpose for which the goods are
commonly supplied. s55(2) ACL
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A disclosed purpose is a particular purpose for which the goods are being acquired that the
consumer makes known expressly or by implication to
The supplier s55(2)(a)(i) ACL

A person by whom any prior negotiations or arrangements in relation to the acquisition of the
goods were conducted or made s55(2)(a)(ii) ACL
The consumer makes known to the manufacturer of the goods either directly or through the
supplier or the person referred to in paragraph (a)(ii) s55(2)(b) ACL

i.e A consumer tells a car dealer he wants a car capable of towing his boat. Dealer sells car which
he says will do the job. Cars normal purpose is to transport people, but the consumer wants a car
to tow a boat so the car must be able to do so
Section 55 has no application if the circumstances demonstrate the consumer did not rely on or it
was unreasonable for the consumer to rely on the skill or judgment of the supplier, the intermediary
or the manufacturer as the case may be. s55(3) ACL

SUPPLY OF GOODS BY DESCRIPTION

if a person supplies in trade or commerce goods by description to a consumer and the supply
does not occur by way of sale or by auction, there is a guarantee that the goods will correspond
with the description. s56(1) ACL
i.e if consumer acquires foods placing a reliance upon contractual description of goods in TV
commercial or catalogue, goods must correspond with description
A supply of goods is not prevented from being a supply by description only because, having been
exposed for sale or hire, they are selected by the consumer. s56(2) ACL
A statement will only fall into this category where the statement is essential to the identification of
the goods

SUPPLY BY WAY OF SAMPLE OR DEMONSTRATION MODEL

If a person supplies in trade or commerce goods to a consumer by reference to a sample or
demonstration model and s57(1)(a) ACL
The supply does not occur by way of sale by auction s57(1)(b) ACL
There is a guarantee that
The goods correspond with the sample or demonstration model in quality state or condition
s57(1)(c) ACL

If the goods are supplied by reference to a sample, the consumer will have a reasonable
opportunity to compare the goods with the sample s57(1)(d) ACL
The goods are free from any defect that:
Would not be apparent on reasonable examination of the sample or demonstration model s57(1)
(e)(i) ACL

Would cause the goods not to be of acceptable quality s57(1)(e)(ii) ACL

i.e a sample of fabric is used to sell a couch, but couch delivered is different colour, consumer will
get a remedy
Provided the diferences are substantial, they are still applied even if unavoidable
i.e if shading piling or colouring in an installed woolen carpet is substantially different from the
sample used to sell it, the consumer may be entitled to a remedy.
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Where goods are supplied both by reference to a sample or demonstration model as well as by
description, the consumer guarantees provided for by both s57 and 56 will apply s57(2) ACL

REPAIRS AND SPARE PARTS

If a person supplies in trade or commerce, goods to a consumer and the supply does not occur
by way of sale or auction, there is a guarantee the manufacturer of the goods will take reasonable
action to ensure the facilities for the repair of the goods are reasonably available for a reasonable
period after the goods are supplied. s58(1) ACL

i.e a consumer drops a camera which he bought a year ago. He contacts importer and asks where
it can be repaired and importer says it cant. Reasonable consumer would expect 1-Y-O camera to
be repairable.
This guarantee will not apply where the manufacturer takes reasonable action to ensure the

consumer would be given written notice before the supply was made that facilities for the repair of
the goods would not be available or would not be available after a specified time or parts of the
goods would not be available or would not be available after specified period. s58(2) ACL

EXPRESS WARRANTIES
If a person supplies in trade or commerce, goods to a consumer and the supply does not occur
by way of auction, there is a guarantee that the manufacturer of the goods will comply with any
express warranty given or made by the manufacture in relation to the goods. s59(1) ACL

In like circumstances the supplier will comply with any express warranty given or made by the
supplier in relation to goods. s59(2) ACL
Express warranty in relation to goods means an undertaking, assertion or representation that
relates to
The quality, state, condition, performance or characteristics of the goods or Sch 2 ACL

The provision of the services that are or may be at any time required for the goods Sch 2 (a)(ii)
ACL
The supply of parts that are or may be at any time required for the goods Sch 2 (a)(iii) ACL
The future availability of identical goods or of goods constituting or forming part of a set of which
the goods, in relation to which the undertaking, assertion or representation is given or made form
part Sch 2(a)(iv) ACL

That is given or made in connection with the supply of the goods or in connection with the
promotion by any means of the supply or use of the goods Sch2 (b) ACL
the natural tendency of which is to induce person to acquire goods Sch 2 (c) ACL
i.e a supplier tells a consumer that bed will last for 10 years, only lasts for 6, consumer entitled to a
remedy
s59 also encompasses warranties against defects
Warranty against defect is a representation communicated to a consumer in connection with the
supply of goods or services at or about the time of supply to the efect that a person will
(unconditionally or on specified locations) s102(3) ACL
Repair or replace the goods or part of them s102(3)(a) ACL
Provide again or rectify the services or part of them s102(3)(b) ACL
Wholly or partly compensate the consumer s102(3)(c) ACL
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FORM AND CONTENTS OF WARRANTY

Regulations prescribe requirements relating to the form and content of warranties against
defects. s102(1)
Regulation 90 of Competition and Consumer Regulations Provides for subsection 102(1) of the
ACL the following requirements are prescribed s90(1) ACL
A warranty against defects must be in a document that is transparent s 90(1)(a) ACL
A warranty against defects must precisely state:
What the person who gives the warranty must do so that the warranty may be honoured s90(1)
(b)(i) ACL

What the consumer must do to entitle the consumer to claim the warranty s90(1)(b)(ii) ACL
A warranty against defects must include the text mentioned in sub regulation 2 s90(1)(c) ACL
A warranty against defects must prominently state the following information about the person who
gives the warranty
The persons name s90(1)(d)(i) ACL
The persons business address s90(1)(d)(ii) ACL
The persons telephone number s90(1)(d)(iii) ACL
The persons email address s90(1)(d)(iv) ACL
A warranty against defects must set out the procedure for the consumer to claim the warranty
including to address to which a claim may be sent s90(1)(f) ACL
A warranty against defects must state who will bear the expence of claiming the warranty and if
the expense is to be borne by the person who gives the warranty, how the consumer can claim
expenses incurred in making a claim s90(1)(g) ACL

A warranty against defects must state that the benefits to the consumer given by the warranty are
in addition to other rights and remedies of the consumer under a law in relation to the goods or
services to which the warranty relates s90(1)(h) ACL
For paragraph 1 c, the text is our goods come with guarantees that cannot be excluded under
the ACL. you are entitled to a replacement or refund for a major failure and compensation for any
other reasonably foreseeable loss or damage. You are entitled to have the goods repaired or
replaced if the goods fail to be of acceptable quality and the failure does not amount to a major
failure. s90(2) ACL

REMEDIES: GOODS
MAJOR FAILURE

A major failure will occur where

The goods would not have been acquired by a reasonable consumer fully acquainted with the
nature and extent of the failure s260(a) ACL
i.e a reasonable consumer would not buy a washing machine if they knew the motor would burn
out within 3 months
The goods depart in a significant respect from their description
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 Where supplied by description s260(b)(i) ACL

or from a sample or demonstration model where supplied by reference to a sample or
demonstration model. s260(b)(ii) ACL
i.e a red bicycle is ordered from a catalogue but person gets a yellow bicycle
The goods are substantially unfit for a normal purpose for such goods and they cannot easily and
within a reasonable time be remedies to make them fit for such a purpose. s260(c) ACL
i.e a ski jacket is not waterproof as it is made from wrong material
The goods are unfit for a purpose disclosed to the supplier or the person who conducted
negotiations preceding the acquisition of the goods and they cannot easily within a reasonable
time be remedies to make them fit for such a purpose s260(d) ACL

i.e Car is needed to tow a boat but cannot as its engine is too small
Goods are not of acceptable quality because they are unsafe. s260(e) ACL
Electric blanket with faulty wiring

REMEDIES AGAINST SUPPLIERS FOR MAJOR FAILURES

A consumer must notify the supplier that the goods are rejected and the ground or grounds for
rejection. s259(3)(a) ACL
Rejected goods must be returned to supplier unless they have already been returned or retrieved,
or the goods cant be returned, removed or transported without significant cost to the consumer
due to the nature of the failure to comply with the consumer guarantee to which the rejection
relates or size or height or method of attachment of the goods. s263(2) ACL
In this case, the supplier must within a reasonable time collect the goods at the suppliers expense.
s263(3) ACL
A consumer is not entitled to reject goods if
A consumer is not entitled, under section 259, to notify a supplier of goods that the consumer
rejects the goods if:
The rejection period for the goods has ended 262(1)(a) ACL
The goods have been lost, destroyed or disposed of by the consumer 262(1)(b) ACL
The goods were damaged after being delivered to the consumer for reasons not related to their
state or condition at the time of supply 262(1)(c) ACL
The goods have been attached to, or incorporated in, any real or personal property and they
cannot be detached or isolated without damaging them. 262(1)(d) ACL

REJECTION PERIOD

The rejection period for goods is the period from the time of the supply of the goods to the
consumer within which it would be reasonable to expect the relevant failure to comply with a
guarantee referred to in section 259(1)(b) to become apparent having regard to:
The type of goods s262(2)(a) ACL
The use to which a consumer is likely to put them S262(2) ACL
The length of time for which it is reasonable for them to be used S262(2)(c) ACL
The amount of use to which it is reasonable for them to be put before such a failure becomes
apparent. S262(2)(d) ACL

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REFUND/ REPLACEMENT
The supplier must, in accordance with an election made by the consumer:
Refund any money paid by the consumer for the goods s263(4)(a)(i) ACL
Refund an amount that is equal to the value of any other consideration provided by the consumer
for the goods s263(4)(a)(ii) ACL
Replace the rejected goods with goods of the same type, and of similar value, if such goods are
reasonably available to the supplier. s263(4)(b) ACL

COMPENSATION FOR DROP IN VALUE

Where the problem is major, rather than rejecting the goods, the consumer may elect to retain the
goods and seek compensation for any reduction in value of the goods below the price paid or
payable by the consumer for the goods. s259(3)(b)

LINKED SERVICE CONTRACTS

The consumer may also terminate a contract for the supply of services connected with rejected
goods. s265 ACL

i.e A defective mobile phone. Can get a refund for the phone and terminate contract for supply of
services
Where a linked service contract is validly terminated, the consumer is entitled to a refund of any
money or equivalent paid for the services to the extent that the consumer has not already
consumed the services at the time the termination takes afect. s264 ACL

MINOR FAILURES
If the failure to comply with a consumer guarantee can be remedies and is not a major failure, the
consumer is not entitled to reject the goods and demand a refund but is entitled to request that
the supplier remedy the failure within a reasonable time. s259(2) ACL

If the supplier refuses or fails to comply with a requirement to remedy the failure or fails to comply
with the requirement within a reasonable time the consumer may
Otherwise have the failure remedies and recover all reasonable costs incurred by the consumer
in having the failure so remedied s259(2)(a) ACL
Notify the supplier that the consumer rejects the goods and of the grounds for rejections. s259(2)
(b) ACL

CONSEQUENTIAL LOSS FROM SUPPLIER

A consumer may also by action against the supplier recover damages for any loss or damage
sufered by the consumer because of failure to comply with the guarantee if it was reasonably
foreseeable that the consumer would sufer such loss or damage as a result of such failure.
s259(4) ACL
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Right to recover damages is equally applicable to both major and minor failures. S259(6) ACL
Damages will not be recoverable if the failure to comply with the guarantee occurred only because
of a cause independent of human control that occurred after the goods left control of the supplier.
S259(5) ACL
I.e Car leaks oil due to faulty manufacturing. A dog walks through oil and walks it onto ladies
carpet. Manufacturer will not have to pay for ruined carpet
If broken washing machine floods a house, supplier will be responsible for the water damage
Damages will not automatically be awarded for the full amount of the reasonably foreseeable loss
when there is more than one cause of loss. Contact Energy v Jones

REMEDIES AGAINST MANUFACTURER OF GOODS

Damages may be sought from a manufacturer of goods in four instances

1. if the consumer guarantee as to acceptable quality provided for by s54 of the ACL is not

complied with, damages may be recovered against the manufacturer by an afected person.
S271(1) ACL
UNLESS
There is an act, default or omission of or any representation made by any person other than a
manufacturer or an employee or agent of the manufacturer s271(2)(a) ACL
A cause independent of human control that occurred after the goods left control of the
manufacturer
The fact that the price charged by the supplier was higher than the manufacturers recommended
retail price or the average retail price of the goods

2. If goods are supplied in trade or commerce by description to a consumer and the description

was applied to the goods by the manufacturer of the goods or with the manufacturers express or
implied consent, and the guarantee under s56 of the ACL is not complied with, damages may be
claimed against the manufacturer by an afected person s271(3) ACL
UNLESS
There is an act, default or omission of any person other than the manufacturer or an employee or
agent of the manufacturer or
There is a cause independent of human control that occurred after the goods left control of the
manufacturer. S271(4)(a) ACL

3&4. If the consumer guarantee under s58 and 59(1) applies to a supply of goods to a consumer

and the guarantee is not complied with, damages may be recovered against the manufacturer.
S271(5) ACL
Action is available irrespective of whether or not the goods are in their original package. S271(7)
ACL

Time limit is 3 years after the day on which the afected person first became aware or ought
reasonably to become aware that the guarantee has not been complied with s273 ACL

DAMAGES MAY BE RECOVERABLE FOR...

Any reduction in the value of the goods resulting from the failure to comply with the guarantee to
which the action relates, below the lower of the price paid by the consumer for the goods or the
average retail price of the good at the time of supply. S272(a)
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 Any loss or damage sufered by the afected person because of the failure to comply with the
guarantee if it was reasonably foreseeable that the afected person would sufer such loss or
damage as a result of such failure (which is deemed to include the cost of inspecting and
returning the goods to the manufacturer. S272(b) ACL
If an afected person in relation to goods has in accordance with express warranty given or made
by the manufacturer of the goods, required the manufacturer to remedy a failure to comply with
one or more of the four consumer guarantees provided for by s 54, 56, 58, or 59(1) by repairing
the goods or replacing the goods with goods of an identical type, then the afected person is not
entitled to commence an action to recover damages unless the manufacturer has refused or
failed to remedy the failure or has failed to remedy the failure within reasonable time. S271(6)
ACL

MANUFACTURERS LIABILITY TO INDEMNIFY SUPPLIER

A manufacturer of goods is liable to indemnify a supplier who supplies the goods to a consumer if
the supplier is liable to pay damages under s259(4) to the consumer for loss or damage sufered
by the consumer and the manufacturer is or would be liable under s271 to pay damages to the
consumer for the same loss or damage. S274(1) ACL

A manufacturer of goods is liable to indemnify a supplier for costs incurred by the supplier
including replacing, or repairing goods due to the manufacturers failure to comply with:
A guarantee under s 54 of acceptable quality s274(2)(i) ACL
The guarantee under s55 in relation to fitness for a purpose that was disclosed to the
manufacturer

The guarantee under s56 in relation to a description that was applied to the goods by or on behalf
of the manufacturer or with express or implied consent of manufacturer.
Time limit for a supplier to seek an indemnity from a manufacturer is within 3 years from the
earlier of the date that the supplier discharge the liability of the supplier to the consumer or the
date the consumer took legal action against the supplier. S274(4) ACL

CONSUMER GUARANTEES FOR SERVICES

SUPPLY
Supply means to provide grant or confer services. s2 ACL

SERVICES
Services includes any rights (including rights in relation to and interests in, real or personal
property) benefits privileges or facilities that are or are to be proceeded, granted or conferred in
trade or commerce s2 ACL

Does not apply to financial services which are separately regulated in the Australian Securities
and Investments Commission Act 2001 and Corporations Act 2001 (Cth) 131A ACL

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CONSUMER
A person is taken to have acquired particular services as a consumer if and only if
The amount paid for the services did not exceed $40,000 s3(a) ACL
If the amount paid for the services exceeds $40,000, if the services were of a kind ordinarily
acquired for personal, domestic, or household use or consumption s3(b) ACL

IN TRADE OR COMMERCE

The words 'in trade or commerce' refer to the 'central conception' of trade or commerce and not
to the immense field of activities in which corporations may engage in the course of, or for the
purposes of, carrying on some overall trading or commercial business. Concrete Constructions v

Nelson
Consumer guarantees will not apply to following services:
Services costing more than $40,000 for commercial use
A contract for or in relation to the transportation of storage of goods as part of a consumers
business, trade, profession or occupation. s63(a) ACL
Contracts of insurance s63(a) ACL
Other than a linked credit account, the supply or possible supply of financial services. s131A ACL

DUE CARE AND SKILL

A person who supplies in trade or commerce services to a consumer there is a guarantee that
the services will be rendered with due care and skill s60 ACL
Due care and skill is not defined.
To comply with s60 a supplier must demonstrate an acceptable level of skill or technical

knowledge and must ensure all necessary care is taken when providing the service to avoid loss
or damage, Explanatory Mem Trade Practices Amendment Bill No 2

i.e When painter paints house, he knocks over can of paint which spills over driveway. Painter
must repair the driveway

FITNESS FOR PURPOSE OR RESULT

If a supplier supplies services to a consumer in trade or commerce and the consumer expressly
or by implication makes known to the supplier any particular purpose for which the services are
being acquired by the consumer, there is a guarantee that the services and any product resulting
from the services will be reasonably fit for that purpose. s61(1) ACL
i.e Carpenter asked to build a carport 2m wide and only builds one 1.8m wide, they will be entitled
to a refund
If a supplier supplies services to a consumer in trade or commerce and the consumer expressly
or by implication makes known to the supplier or a person by whom any prior negotiations or
arrangements in relation to the acquisition of the services were conducted or made, the result
that the consumer wishes to achieve, there is a guarantee that the services and any product
resulting from the services will be of such a nature and quality state or condition that they might
be reasonably be expected to achieve that result. s61(2) ACL
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i.e Consumer hires guy to fix broken gate. Consumer tells handyman he wants to stop noise. After
the gates are fixed, problems arise 2 weeks later. Handyman will have to fix problem free of charge,
as services did not achieve desired result.
s61 will not apply where the circumstances show that the consumer did not rely on, or that it was
reasonable for the consumer to rely on, the skill or judgment of the supplier. s61(3) ACL
s61 will not apply to services of a professional nature by a qualified architect or engineer. s61(4)
ACL

HOWEVER

Architects and engineers must still render their services with due care and skill as required by
s60 and within a reasonable time s62 ACL

REASONABLE TIME FOR SUPPLY

If a supplier supplies services to a consumer in trade or commerce and at the time within which
the services are to be supplied is not fixed by the supply contract or is not to be determined in a
manner agreed to by the consumer and the supplier, there is a guarantee that the services will be
supplied within a reasonable time. s62 ACL

REMEDIES FOR SERVICES

MAJOR FAILURE

A major failure with respect to services will occur where

The services would not have been acquired by a reasonable consumer fully acquainted with the

nature and extent of the failure. S268(a) ACL

I.e reasonable consumer would not pay to have acrylic nails attached if they knew they would
quickly fall off
The services are substantially unfit for a normal purpose for such services and they cannot easily
and within a reasonable time, be remedied to make them fit for such a purpose. S268(b) ACL
I.e carpet cleaner changes colour of persons carpet
Both of the following apply
The services and any product resulting from the services are unfit for a particular purpose for
which the services were acquired by the consumer that was made known to the supplier s268(c)
(i) ACL

The services and any of those products cannot easily and within a reasonable time be remedied
to make them fit for such a purpose s268(c)(ii) ACL

I.e Consumer tells pay TV company they want to watch game of thrones, they sign up to the
contract but Game of Thrones has finished before service is installed
Both of the following apply
The services and any product resulting from the services are not of such a nature or quality state
or condition that they might reasonably be expected to achieve a result desired by the consumer
that was made known to the supplier. s268(d)(i) ACL

The services and any of those products cannot easily and within a reasonable time, be remedies
to achieve such a result. s268(d)(ii) ACL
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I.e Consumer asks technician to increase hard drive space. Damages hard drive during instalation.
Repair to take six weeks but hard drive needed in 1.
The supply of the services creates an unsafe situation s268(e) ACL
I.e electrician incorrectly wires wall sockets creating unsafe electrical outlets

REMEDIES

If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer
may:
Terminate the contract for the supply of the services. s267(3)(a) ACL
By action against the supplier, recover compensation for any reduction in the value of the
services below the price paid or payable by the consumer for the services. s267(3)(b) ACL
If election is made to terminate, termination takes efect at the time the termination is made
known to the supplier of services, or if not reasonably practical, at the time the consumer
indicates by reasonable means in the circumstances, the intention to terminate a contract.
S269(2) ACL

Following termination, the consumer is entitled to a refund of any money paid or consideration
provided for the services to the extent that the consumer has not already consumed the services
at the time the termination is efective. S269(3) ACL

MINOR FAILURES

If the failure to comply with consumer guarantee can be remedied and is not a major failure, the
consumer is not entitled to terminate the contract and demand refund, but is entitled to request
that supplier remedy the failure without charge and within a reasonable time. S267(2)(a) ACL
If the supplier refuses or fails to comply with a requirement to remedy the failure, or fails to
comply with the requirement within a reasonable time the consumer may
Otherwise have the failure remedied and recover all reasonable costs incurred by the consumer
in having the failure so remedied
or terminate the contract for the supply of the services s267(2)(b) ACL

And obtain a refund of any money paid or consideration provided for the services to the extent
that the consumer has not already consumed the services at the time that the termination of the
contract is efective. S269(3)

LINKED GOODS
Where a consumer validly terminates a contract for the supply of services, a person is also taken
to have rejected goods that were supplied in trade or commerce in connection with the contract
for the supply of services. S270 ACL

Rejection takes efect at the time the termination of the contract for the supply of services takes
afect. S270(1)(c) ACL
Consumer is entitled to a refund of any money paid or consideration provided for the goods.
S270(1)(e) ACL

CONSEQUENTIAL LOSS
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 The consumer may also by action against the supplier recover damages for any loss or damage
sufered by the consumer because of the failure to comply with the guarantee if it was reasonably
foreseeable that the consumer would sufer such loss or damage as the result of such failure.
s267(4) ACL
This right is equally applicable to both major and minor failures s267(5) ACL
Action is limited where the failure to comply occurred only as a result of an act default or
omission of, or a representation made by any person other than the supplier or an agent or
employee of the supplier or cause independent of human control after services were supplied.
S267(1)(c) ACL

CONTRACTING OUT OF CONSUMER GUARANTEES

A term of a contract is voided to the extent that the term purports to exclude, restrict or modify the
application of consumer guarantee provisions, the exercise of a right conferred by such a
provision or any liability of a person for a failure to comply with a guarantee applicable to a supply
of goods or services s64 ACL
Provisions of the ACL will apply notwithstanding a term will substitute the provisions of a law
other than Australia s67(b) ACL

LIMITATION OF LIABILITY
A supplier may limit liability for failure to comply with consumer guarantees for supply of goods or
services not ordinarily of a kind acquired for personal domestic or household use of consumption
and the contract contains a term limiting the suppliers liability for the following: s64A ACL

Replacement of goods or supply of equivalent goods

Repair of goods

Payment of cost of replacing the goods or of acquiring equivalent foods

Payment of the cost of having the goods repaired
In case of services:
The supplying of the services again

The payment of the cost of having the services supplied again

Provided these requirements are met and it is fair and reasonable for supplier to rely on limitation
of liability term in contract, the term will not be void. s64A(3) ACL
In determining whether a limitation of liability of a term is fair and reasonable, a court is required
to have regard to all circumstances of the case and the matters listed here
The strength of the bargaining position of the person who supplied the goods or services and the
person to whom the goods or services were supplied relative to each other taking into account
amongst other things the availability of equivalent goods or services and suitable alternative
sources of supply s64A(4)(a) ACL

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 Whether the buyer received an inducement to agree to the term or in agreeing to the term, had
an opportunity of acquiring the goods or services or equivalent goods or services from any
source of supply under a contract that did not include that term s64A(4)(b) ACL

Whether the buyer knew or ought reasonably to have known of the existence and extent of the
term, having regard among other things, to any custom of the trade and any previous course of
dealings between the parties s64(4)(c) ACL
Whether the goods were manufactured processed or adapted to the special order of the buyer.
S64A(4)(d) ACL

RECREATIONAL SERVICE PROVIDERS

Recreational services as services that consists of participation in a sporting activity or similar

leisure time, pursuit of any other activity involving a significant degree of physical exertion or
physical risk undertaken for enjoyment, recreation or leisure. s139A(2) ACL
A supplier of recreational services may limit liability for death, physical or mental injury,
contraction aggravation or acceleration of a disease or any other condition, circumstance or the
like that it may be harmful or disadvantageous without the limitation provision being void under
s64 s139A ACL
139 Does not apply to property loss
Exclusion does not apply if the exclusion restriction or modification would apply to significant
personal injury sufered by person caused by reckless conduct of supplier of the recreational
services. s139A(4) ACL
A suppliers conduct is reckless if the supplier is aware or should reasonably be aware of significant
risk that the conduct could result in personal injury to another person and engages in conduct
despite the risk and without adequate justification. s139A(5) ACL

PROOF OF TRANSACTION
Where goods or services are provided in trade or commerce and the total price of the goods is
$75 or more, the supplier must give the consumer a proof of transaction as soon as practicable
after the goods are supplied. S100(1) ACL

Proof of transaction may be:

A document that identifies the suppliers ABN or ACN and it states the date of supply, goods or
services supplied and the relevant price s100(4) ACL
The following are proof:
Tax invoice within the meaning of the A New Tax System (GST) Act 1999 (Cth)
Cash register receipt
Credit or debit card statement
Handwritten receipt
Lay by agreement
Confirmation or receipt number provided for internet or telephone transaction

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VITIATION OF CONTRACTS
MISREPRESENTATION (COMMON LAW)
A misinformed party may pursue any claim of misrepresentation or misleading and deceptive
conduct, but they must elect which one to pursue at judgment. Bissett v Wilkinson
Misrepresentation is a false statement of past or existing fact made by the representor to the
representee at or before the contract was entered into, which induced and was intended to induce
the contract.
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Has there been a false statement?

FALSE STATEMENT OF PAST/EXISTING FACT

The statement made by the representor must actually be false in fact, determined objectively. John
McGrath Motors v Applebee
i.e Representation that the car was new was false even though it was being sold for first time.
Actual age of the car was 18 months old.
A nod, wink, or shake of head or smile intended to induce may be held to form a representation
of fact, particularly if in response to a question Walters v Morgan
Generally, opinions, law, intention, promises and pufs are not actionable as representations
unless the person making the statement has misrepresented the state of his or her mind.
Edgington v Fitzmaurice

FUTURE INTENT PROMISE OR ASSURANCE

A representation about a persons intention or a future state of afairs will not amount to a
misrepresentation where the statement amounts to a promise or assurance not to do a certain
act in future. Civil Service Co-operative Society of Victoria v Blyth.

HOWEVER

If a statement of present fact is couched in future tense, it will be actionable. Balfour & Clark v
Hollandia Ravensthorpe NL
i.e Salesman said: in two years time purchasers could borrow from building society sum equal to
90% of value of property secured by first mortgage only. Bank would lend subject to two conditions.
A statement relating to the intention of a person can relate to a statement of fact and can be a
misrepresentation if they have no intention of performing the future event. Edgington v
Fitzmaurice
i.e In six months time I will repay a debt. If person doesnt presently hold that intention, statement
is misrepresentation

STATEMENT OF OPINION

A statement of opinion or expression may be considered similar to a statement of future intention

is not a statement of fact. Fitzpatrick v Michael
HOWEVER
Ultimate result depends upon circumstances including form in which statement is made, personal
knowledge of the person making the statement and the subject matter. Middleton v Aon Risk
Services Australia

Where a representation is found to be opinion it will not be itself a statement of present fact but
may convey inherent representation that person making statement holds that opinion or is aware
of facts that justify that opinion. Smith v Land and House Property Corporation

i.e property seller said occupant was most desirable tenant. Was statement of opinion, but tenant
was always late paying rent etc.
Following matters will determine whether opinion is misrepresentation:
Relative knowledge and position of each of the parties
Actual words used and meanings conveyed
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 Whether the person giving the opinion have a genuine relief in his or her opinion no matter how
erroneous Smith v Land and House Property Corporation
Where maker of statement is in exclusive possession of facts relevant to opinion, person is
actually stating facts within his or her knowledge which make the opinion reasonable. Smith v
Land and House Property Corporation
If, based upon the facts known, a reasonable person would not hold that opinion, or opinion is not
actually held, fraudulent misrepresentation will exist. Bissett v Wilkinson
i.e Plaintiff represented in his opinion that farming property should carry 2000 head of sheep.
BOTH Parties knew vendor had never operated sheep farm. Purchasers went into difficulties. Court
held that because both parties knew there were never sheep on property. No misrepresentation

STATEMENT OF LAW

A statement of law will only be considered to be a misrepresentation where:

The statement of law is made fraudulently, without belief in the truth of the statement. Public
Trustee v Taylor

The statement of law is given in a situation where the representor owes the representee a duty of
care to ensure advice given is accurate and is reasonable for representee to rely on it. L
Shaddock v Paramatta City Council.

It would be unconscionable to allow the representor to escape liability

PUFF

Sales talk or flourishing statements such as:

Where land is fertile and improvable or immaculate throughout Dimmock v Hallet

A property or chattel is in perfect presentation - nothing to spend Mitchell v Valherie

i.e Land purchased had termite infestation, still held to be puff

HOWEVER

May still be grounds for misleading and deceptive conduct under the ACL Byers v Dorotea
i.e unit represented to be the biggest on the coast was held to be misleading

SILENCE

Mere silence will not give rise to a misrepresentation unless a special relationship imposes an
obligation to disclose
Silence will be misrepresentation in 3 circumstances:

HALF TRUTHS

Half truth is a statement that is although quite literally true, creates a false impression in the mind of
the representee because essential qualifying facts are not disclosed. Tipperary Developments v
Shire of WA
If a statement is true and a detail is left out that would have qualified it, it will be a false statement.
Arkwright v Newbold
If statement is deliberately withholding information, or representor is reckeless, statement will be a
fraudulent misrepresentation. Jennings v Zihali-Kiss

STATEMENTS THAT BECOME FALSE PRIOR TO CONTRACT

A statement that was originally correct but becomes false may found a claim for
misrepresentation as the representor owes a duty to correct any untrue statements prior to a
contract being exercised. With v OFlanagan

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 If statement is untrue from beginning and the representor discovers prior to contract that it is
untrue, a duty arises to disclose this fact to the other party. Davies v London Marine Insurance

Co.
i.e Secretary ordered arrest of company agent who he believed was stealing money, Friends of the
agent offered to deposit a sum of money as security for any deficiency. Arrest was withdrawn and
company did not tell the plaintiffs before money was deposited.

DUTY OF DISCLOSURE

Fiduciary relationships require information to be disclosed McKenzie v McDonald

If contract is uberrimae fidei (utmost good faith) parties are required to make full disclosure of all
material facts. Khoury v Government Insurance Office of NSW
Insurance contracts must disclose all material facts. s21 Insurance Contracts Act 1984

Was statement addressed to representee before or when the contract was made?

ADDRESSED TO REPRESENTEE
Representation that induces the contract should be made by the other party to the contract or their
authorised agent.
A misrepresentation which induces representee to contract with a third party will not allow
representee to rescind the contract with the third party unless the representor was acting as
agent for the third party. MacCormick v Nowland

HOWEVER

The representor or agent may be liable to compensate the representee if reliance on statement is
proved. Shaddock v Parammatta City Council

BEFORE OR WHEN CONTRACT IS MADE

Only representations made prior to contract and intended to induce the contract can be
misrepresentations

Did the statement induce the contract?

INTENDED TO INDUCE AND INDUCING THE CONTRACT

A representation need not be the sole or decisive inducement, it suffices if it was the real
inducement. Edgington v Fitzmaurice
A plaintif is entitled to take a representors word and need not make their own enquiries as to
whether a statement is false. Redgrave v Hurd

If statement is not made during negoitations, it will not be intended to induce. Peek v Gurney
i.e Plaintiff bought shares in reliance upon statement given to original prospectus. Had been
addressed to original allottees of shares and not the plaintiff.

RELIANCE BY REPRESENTEE
FOUR RULES OF INDUCEMENT
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1. If the representee does not rely on the statement, there is no misrepresentation. Gould v
Vaggelas
2. If material representation was calculated to induce the representee, there is a fair inference that
he or she was induced to do so by the representation. Gould v Vaggelas
3. Inference may be rebutted by showing the representee
a) before he or she entered the contract, either was possessed of actual knowledge of the true
facts and knew them to be true or
b) made it plain that whether he or she did not know the true facts, they did not rely on the
representations. Gould v Vaggelas
The knowledge of the representation mus be such as to destroy the efect of the statement of the
inducement to enter the contract. Holmes v Jones
Knowledge that the information is partly untrue is not enough to bar a claim. Gipps v Gipps
A person will still be held to have relied upon the statements of enough despite the facts they
could have, with due diligence discover the falsity of the statement. Gould v Vaggelas
Carelessness of the representee will not bar recovery if it is proved the representee relied upon
the statement. Gould v Vaggelas
CONCLUDE: HAS THERE BEEN A MISREPRESENTATION Y OR N

What sort of representation has been made?

INNOCENT

An innocent misrepresentation occurs when the representor had been neither fraudulent or
negligent.
Onus lies on the representee to allege and prove either fraud or negligence. Dorotea v Christos
Doufas Nominees Pty Ltd.
Damages are not available for innocent misrepresentation. Redgrave v Hurd

NEGLIGENT (WILL NOT BE ASSESSED)

A person to whom a negligent statement is made owes a duty of care to that person if a special
relationship exists. Hedley Byrne & Co v Heller

SPECIAL RELATIONSHIP

A special relationship for the establishment of a duty of care requires an assumption of

responsibility by the speaker and reasonable reliance by the recipient upon the
misrepresentation. Mutual Life & Citizens Assurance Co v Evatt

Defendant insurance company, gave plaintiff incorrect advice as to investment advice in company
which was subsidiary to MLC. Plaintiff personally requested info it knew def could obtain. Def knew
it was going to rely on this info for investment decisions. no disclaimer and info wasnt paid for. No
intention of wrongdoing.

It is unlikely there is a special relationship between <parties> because... Any

analysis of the special relation is beyond the scope of this course
Scott Thompson

FRAUDULENT
A statement will be fraudulent where a false representation has been made:
Knowingly without belief in its truth Atlai v Kruger
Recklessly, carelessly whether it be true or false.
i.e they couldnt care less whether their statement was true or not
With the intention that it should be acted upon by another party who is thereby induced to act
upon it. Derry v Peek

The court requires evidence regarding the state of mind of the particular person. Derry v Peek
A statement is fraudulent if it is made without any genuine belief that it is true. Negligence, even
gross negligence is not fraud. Middleton v Aon Risk Services Australia
Recision of a contract induced under fraudulent misrepresentation is not barred by contract
completion Atlai v Kruger
Damages will also be available, measured by same as those for deceit. Gould v Vaggelas

Can <party> claim recision and are there restrictions?

REMEDIES

RESCISSION
If any type of misrepresentation has occurred, the representee may elect to rescind the contract.
The representee should take steps within a reasonable time to bring the contract to an end and
communicate this decision in clear and unequivocal terms to the representor. Ivanof v Philip Levy
Recision will only be granted if the parties can be returned substantially to their pre-contractual
positions. Maguire v Marakonis

A representee who elects to rescind a contract will be entitled to a refund of their purchase price
provided the property is returned to the misrepresenter. Myers v Transpacific Pastoral Co Pty Ltd

LIMITS ON RESCISSION
AFFIRMATION

If the representee elects to affirm the contract, the right to rescind for that misrepresentation is
lost and it cannot be retracted. Sargent v ASL Developments

Elector must require knowledge of the facts which give rise to the legal right to rescind, and there
must be words or conduct sufficient to the making of an election. Sargent v ASL Developments
If election is between contractually conferred rights, it is clear an election is made where the
elector does not have knowledge of the legal efect of his or her election. OConnor v SP Bray

LAPSE OF TIME

The right to rescind must be exercised within a reasonable time of the representee having time to
prove or disprove the statement. Leaf v International Galleries

IMPOSSIBILITY
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Recision will be granted provided the parties can be substantially restored to their pre-contractual
positions. Vadasz v Pioneer Concrete
Equity may grant compensation or indemnity to restore parties. Brown v Smit

3RD PARTY INTERVENTION

Where a third party has acquired an interest in property, the subject of the contract, a court will not
grant recision as the parties cannot be placed in their original position. McKenzie v McDonald
3rd party will have valid and enforceable rights in the property as against other parties. Phillips v
Brooks Limited.

CONTRACT IS PROPERLY PERFORMED

ONLY APPLIES TO INNOCENT MISREPRESENTATION

Once a contract is fully performed by the parties, the representee is unable to rescind the contract
for innocent misrepresentation. Seddon v North Eastern Salt Company.

HOWEVER

Recision is possible for contract for sale of goods Wilde v Gibson

Can damages be claimed?

DAMAGES
Damages for misrepresentation are calculated under the rules of Tort, aiming to put the plaintif
back in the position had the misrepresentation never taken place. Gould v Vaggelas
Consequential damages will also be awarded for losses sufered from operating a business.
Kizbeau v WG & B Pty Ltd
Lost expectation will generally not be recoverable Marks v GIO Australia Holdings
Where misrepresentation has become a term in the contract there MUST BE DAMAGE. Ellul v
Oakes

CAUSATION AND REMOTENESS

Damage claimed must be a reasonably foreseeable consequence of the misrepresentation. The

Wagon Mound Case
If misrepresentation is fraudulent, no need to prove reasonable foreseeability. Gould v Vaggelas

MEASURE OF DAMAGES

AFFIRMATION
If contract is affirmed, damages for misrepresentation will be diference between real value of
property at time of purhcase and what person actually paid for property. Gates v City Mutual Life
Assurance Society Ltd.
Consequential damages may also be claimed if proven. Archer v Brown

MISLEADING OR DECEPTIVE CONDUCT

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A person shall not, in trade or commerce, engage in conduct that is misleading and deceptive or is
likely to mislead or deceive. s18 Australian Consumer Law 2010 (Cth)

Can <party> claim a statutory remedy?

PERSON
The ACL applies to the conduct of corporations s131 Competition and Consumer Act 2010 (Cth)
A corporation means a body corporate that is
Is a foreign corporation s4(1)(a) CCA

Is a trading corporation formed within the limits of Australia or is a financial corporation so formed
s4(1)(b) CCA
Is incorporated in a Territory; s4(1)(c) CCA
is the holding company of a body corporate of a kind referred to in paragraph (a),(b) or (c) s4(1)
(d) CCA
S18 of the ACL is extended to persons who engage in misleading and deceptive conduct while in
the course of or in relation to:
S6(2) This Act, other than Parts IIIA, VIIA and X, (s18) has, by force of this subsection, the efect it
would have if:
Any references in this Act other than in section 45DB, or section 33 or 155 of the Australian
Consumer Law, to trade or commerce were, by express provision, confined to trade or commerce:
between Australia and places outside Australia; or S6(2)(a)(i)
among the States S6(2)(a)(ii)
within a Territory, between a State and a Territory or between two Territories S6(2)(a)(iii)

by way of the supply of goods or services to the Commonwealth or an authority or instrumentality

of the Commonwealth; S6(2)(a)(iv)
the use of postal telegraphic or telephone services or a radio or television broadcast
Where an individual engages in misleading and deceptive conduct over a phone or email s18 will
apply providing it is in trade or commerce Data Flow Computer Services v Goodman
Telephone service includes a directory pursuant to the Telecommunications Act 1975 (Cth)
Snyman v Cooper
i.e Misleading advertisement in yellow pages.
Person will apply to an individual seller of goods, services or land, resident in the jurisdiction,
conducting business in the jurisdiction or selling land in the jurisdiction providing they are acting
in trade or commerce. s24 Fair Trading Act 1989 (Qld)

CONDUCT OF AGENTS

A person acting on behalf of a corporation is deemed to be the conduct of the corporation.

s139B(2) ACL
Servants or agents acting on behalf of persons are deemed to be the conduct of the person
s139C ACL

Will also apply where the director or agent is acting with authority that is forbidden by the
corporation including fraud. Serata Investments v Rajane

HOWEVER

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 Where the director or agent acts on their own behalf and not as a representative of the
corporation, s139B(2) will not apply. Trade Practices Commission v Tubmakers of Australia
On behalf of means the actor engaged in conduct intending to do so as a representative of or
for the corporation or that the actor engaged in the conduct in the course of the corporations
business, afairs or activities. NMFM Property v Citibank
It is necessary to establish the state of mind of the body corporate, it is sufficient to show that a
director, servant or agent of the body corporate, being a director servant or agent by whom the
conduct was engaged in is within the scope of the persons actual or apparent authority had state
of mind s139B(1) ACL

It is not possible to aggregate the knowledge of a number of servants or agents, often in

unrelated transactions to create a notional state of mind. Krakowski v Eurolynx Properties

GOVERNMENT ENTITIES

The commonwealth government and its instrumentalities are bound when carrying on a business
by the provisions of the act including provisions of the ACL s2A Competition and Consumer Act
2010 (Cth)

The act applies to those bodies corporate either established under a law of the commonwealth or
in which the commonwealth has a controlling interest. s4(1) CCA
Carrying on of a business connotes activities carried on in a commercial enterprise or going
concern, Hope v Bathurst City Council
Business also includes non profit activities s4(1) CCA
An act of government whether directly or indrectly through an authority which is merely carrying out
the functions of government in performance of statutory duty unlikely to be carrying on the
business. Mid Density Developement v Rockdale Municipal Council.
The crown in right of state is not bound by the ACL as a law of the commonwealth
The crown in right of states and territories is bound by Part IV of the act relating to competition
policy. 2B-2C CCA
The Crown in Qld and Crown instrumentalities are bound by s7 of the Fair Trading Act 1989 (Qld)
The crown in right of state is subject to s18 as a law of the relevant state or another state where
the state is carrying on a business activity
The following are not examples of carrying on a business
Managing a national park Easts Van Villages
Operating a public hospital through an outsourced contractor. ACC v AMA
Providing police and corrective services. Hamod v State of NSW

PERSONS INVOLVED

A remedy may be claimed against a corporation or person and any person involved in the
contravention. s236-237
A person is involved in a contravention if they are a person who
Has aided, abetted, counselled or procured the contravention s2(a) ACL

Has induced whether by threat promises or otherwise, the contravention s2(b) ACL
Has been in any way directly or indirectly knowing concerned in or party to the contravention
s2(c) ACL

Has conspired with others to efect a contravention. s2(d) ACL

ACCESSORIAL LIABILITY
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 Accessorial liability will only flow where the accessorys acts are sufficient to bring the person
within the terms of the section.
For a person to be knowingly concerned in a contravention, the person must have knowledge of
the essential facts constituting the contravention. Yorke v Lucas
Reckless indiference or wilful blindness is not enough Yorke v Lucas

Constructive knowledge is not enough. Crocodile Marketing v Griffith Vintners

HOWEVER

The existence of actual knowledge may be inferred from wilful blindness. ACC v IMB
Or from dishonest or deliberate ignorance Georgiani v R
A person cannot be involved in a misleading prediction about a future matter unless it is
established they knew of the representation and that it was false or misleading or that the
representor did not have reasonable grounds for the prediction. ACCC v Universal Sports
Challenge.

In order to know the essential facts, it is not necessary to know those facts are capable of
characterisations in the language of the statute. Rural Press Ltd v ACCC

Knowledge that a statement is untrue or erroneous will be sufficient to found liability. Ferguson v
Swevenings Pty Ltd.
i.e company director knew there were errors in book of accounts.

PASSING ON MISLEADING INFORMATION

Where a person uses information from other sources as their own and is not merely passing on
the information for what its worth, the person incurs a risk of liability for misleading conduct either
as an accessory or principal. Yorke v Lucas

The person must know the information is erroneous. Butt v Tingey.

The fact the information is within the expertise or knowledge of the agent will also be a significant
factor in whether the agent was endorsing the representations. Hayvn v Webster
To determine whether an agent is misleading, the court will consider the nature of the
information. Havyn v Webster
Where it is clear the agent is only acting as a conduit for information and is not adopting or
endorsing the information, they will not be liable. Orix Australia Corporation v Moodey Kidell and
Partners

A person may be liable if they adopt information as their own. It does not require that the person
knew the information adopted was untrue or misleading. Ganitgard v Termicide Pest Control.

NATURE OF ACCESSORIAL LIABILITY

Both an individual and corporation who contribute to the breach may be liable. Hamilton v
Whitehead
A plaintif may sue both the director and the corporation even though a successful claim against
the director does not depend upon the corporation being party to the action. Richardson &
Wench Holdings v Ligon No 174

IN TRADE OR COMMERCE
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 Trade or commerce means trade or commerce within Australia or between Australia and other
places outside Australia and includes any businesses or professional activity whether or not
carried on for profit. s2 ACL

Trade and commerce are ordinary terms which describe all material communities, the

negotiations, verbal and by correspondence, the bargain, the transport and the delivery which
comprised commercial arrangements. Re Ku Ring Ga Corporation Building Society (No 12)
A corporation will be acting in trade or commerce where its conduct is towards persons with
whom it has or may have dealings in the course of those activities or transactions which of their
nature bear a trading or commercial character Concrete Constructions v Nelson
i.e Misleading statements to employees or negligent driving by an employee while delivering
materials were not IN trade or commerce but incidental to.

EXAMPLES OF BEING IN TRADE OR COMMERCE

A statement made by employees of corporation made to third parties in course of employment is

in trade or commerce because the context makes them a commercial charter. Houghton v Arms
It does not matter that the employees are not engaged personally in a business provided the
representations are made in the course of employers business. TCN Channel 9 v Ilvairy
Representations made about establishing, operating and financing a business venture are of
commercial character. Taylor v Crossman
Sale of a business or commercial venture is in trade or commerce. Bevanere Pty Ltd v
Lubidineuse
A real estate agent who gives misleading statements to purchasers of property will be liable.
Argy v Blunt and Lane Cove Real Estate

Sporting bodies may engage in trade or commerce where renumeration is involved. News Ltd v
Australian Rugby Football League
Ordinary contracting activities by government statutory and regulatory bodies may be regarded
as commercial. Mid Density Develoments v Rockdale Municipal Council

The state in right of the Crown in each jurisdiction will be subject to the ACL if involved in
business activities. State of NSW v RT & YE falls investments.

A professional will be liable for misleading conduct done in course of professional activity. Aliotta
v Broadmeadows Bus Service
i.e Solicitors, Real Estate Agents, Auditors.

NOT IN TRADE OR COMMERCE

Misleading statements in email about conduct of corporation are in relation to not in trade or
commerce. Dataflow Computer Services v Goodman
Purely domestic transactions such as sale of private dwelling is not in trade or commerce.
Obrien v Smologonov

It will still not be in trade or commerce if an agent is appointed. Argy v Blunt and Lane Cove Real
Estate
Government activities related to statutory or regulatory functions are generally not in trade or
commerce. Mid Density Develoments v Rockdale Municipal Council
A speech given by a minister about a policy decision will not be in trade or commerce. Unilan
Holdings v Kerin
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Minister for Primary Industries said there was a cast iron guarantee that the Aus gov would not
contemplate further downward movement in fall price of wool. Gov suspended wool marketing
scheme causing price to fall
Politicians and priests are not engaged in trade or commerce (sadly) Durant v Greiner

ENGAGES IN CONDUCT

Engaging in conduct includes doing or refusing to do any act (other than inadvertently) or making
it known that act will not be done s2(2)(c) ACL
Silence will also be construed as being engaged in conduct. Henjo Investments v Collins
Marrickville Pty Ltd. s2 ACL

MISLEADING/ DECEPTIVE OR LIKELY TO BE MISLEADING/

DECEPTIVE
Whether the impugned conduct is deceptive should be viewed from the perspective of the type of
persons or class of persons exposed to the conduct. Intention is irrelevant Campbell v Backoffice
Investments

Most applicants will need only prove they were mislead. Henjo investments v Collins Marrickville
Proof that a person has been misled requires evidence that they have been led astray in reliance
on the action or conduct, or led into error, or caused to err. Henjo Investments v Collins
Marrickville
HOWEVER
Proof that a person has been deceived requires evidence that the party has been induced to
believe a thing that is false and which the person practicing the deceit knows or believes to be
false. Re London & Globe Financial Corporation

In determining whether conduct is misleading, regard must be had to the whole of circumstances
in which the conduct took place Parkdale Custom Built Furniture v Puxu
The conduct to be characterised must be identified. Campbell v Backoffice investments
Where a statement is to a class of persons, it will be necessary to consider the efect of that

statement on an ordinary or reasonable member of the class. A statement will be misleading if

a representative member of the class is likely to be led into error by the statement or acts
in reliance upon an erroneous assumption. Campomar Sociedad Limitada v Nike
International
Erroneous assumptions that are extreme or fanciful will not be misleading. Campomar v Nike

High court disregarded evidence of witness who considered that Australian brand name laws
would have restricted anyone else from putting the Nike name on a product other than endorsed by
Nike including pet food and toilet cleaner. High Court considered assumptions extreme.
Likely means a real or not remote chance of possibility regardless of whether it is 50%. Global
Sportsman v Mirror Newspapers

The impact of the medium in which the advertising appears will also be important. ACCC v
Telstra
i.e Adverts on TV will be viewed different to newspapers
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 The attributes of the class or age or sophistication may also impact the standard of accuracy. MK
Hutchence (Trading as INXS) v South Sea Bubble Co
i.e target audience was teenagers.
Where the representation is made to identified persons, the assessment of whether the conduct
is likely to mislead can proceed by reference to What a reasonable person in the position of the
representee taking into account what they know, would make of the representors behaviour.
Campbell v Backoffice Investments
This will include consideration of the nature of the parties to the transaction and their knowledge,
the nature of the information, the character of the transactions, contents of disclaimer, extent to
which alleged victims of the conduct through their obvious intelligence, shrewdness and self
reliance should have been able to protect their own position or the extent to which they had
professional advice. Downey v Carlson Hotels Asia Pacific Pty Ltd

Evidence that a person was mislead is not necessary for a finding. Taco Bell v Taco Co of
Australia
Where there are oral pre-contractual statements, it is necessary for the representee to prove
there was a causal link between the misleading conduct and the loss sufered where damages or
recision are being claimed. Brown v Jam Factory

SILENCE
Silence or reframing from engaging in conduct that is, in all the circumstances, misleading will be
misleading and deceptive conduct. s2(2) ACL
Was there a reasonable expectation on the part of the plaintif that if some relevant fact existed it
would have been disclosed to the respondent. Demagogue v Ramensky
This section imposes a minimum level of probity upon parties to commercial transactions rather
than a duty of disclosure. Commonwealth Bank of Australia v Mehta

If the conduct of one party is such to create an impression that a certain matter does exist, or that
there is nothing unusual in the transaction, then disclosure may be necessary to ensure the
conduct is not misleading. Demagogue v Ramensky
A failure to disclose may mislead, but it will only be actionable if the failure is intentional. Egar v
Farrow Mortgage
An expectation of disclosure will generally arise if the respondent has knowledge of the
undisclosed fact and is aware that a reasonable plaintif would expect disclosure of the particular
fact given the context of the transaction. General Newspapers v Telstra Corporation.

HOWEVER

reasonable expectation is not required where the statement of representation itself conveys false
representation that the statement is complete or where the undisclosed fact is the falsity of
representation. Miller and Associates Insurance Broking v BMW Australia Financing
Relevant contextual facts:
Common assumptions and practices established between parties or prevailing in particular
profession Miller and Associates Insurance v BMW Australia Finance
Relationship between parties Henjo Investments v Collins Marrickville
Knowledge of silent party. Semrani v Manoun
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 Experience and consequent expectation of the plaintif. Lam v Ausintel Investments Australia Pty
Ltd
Nature of the information not disclosed. Dawson v LNG Holdings
i.e failure to disclose director of joint venture corporation as discharged bankrupt
If information or advice is given to a buyer and this creates a misleading impression in the mind
of the other party usually because of information that has not been disclosed, then a failure to
speak up at that point will be regarded as misleading and deceptive. Demagogue v Ramensky

Mere silence will not be a misrepresentation

HOWEVER
If the buyer indicates to the seller there is an expectation of disclosure, the surrounding

expectation will create an expectation. Noor Al Houda Islamic College v Bankstown Airport
i.e Agent knew plaintiff was purchasing land for school. Failed to disclose existence of
contamination on said property
Mere silence will be misleading where a particular fact must be disclosed by law or statute.
Turrisi Properties v LJ & BJ Investments

If the conduct of one party is such as to create an impression that a certain matter does exist, or
that there is nothing unusual in the transaction, then disclosure may be necessary to ensure
conduct is not misleading. Demagogue v Ramensky

FACT, LAW AND OPINION

A statement of opinion which turns out to be wrong will not of itself amount to be misleading or
deceptive. Elders Trustee v EG Reeves
An unqualified assertion by a person who has or is reasonably expected to have personal
knowledge of a matter may be a statement of fact, not opinion. ASIC v Fortescue Metals
Where an expression of opinion is identifiable as such conveys no more than that the opinion
expressed is held and perhaps there is a basis for that opinion, then an expression of opinion, no
matter how erroneous, will not amount to misleading or deceptive conduct. Global Sportsman v
Mirror Newspapers.

Where an opinion is not held where it was given, or person lacks reasonable foundation for
opinion, it may be misleading or deceptive. Elders Trustee Executor v EG Reeves

Where an opinion is based on fact, it may be found to be misleading where the person knows the
facts do not support the opinion or the opinion does not represent the state of mind of the person.
Global Sportsman v Mirror Newspapers

An opinion will be misleading if it leads a reasonable person in position of claimant into error.
Cohen v Centrepoint Freeholds

STATEMENTS CONCERNING FUTURE MATTERS

A representation as to a future matter will be misleading if the maker of the statement does not
have reasonable grounds for the statement. s4 ACL
A corporation that makes the statement in relation is deemed to make it without reasonable
grounds unless they produce evidence to the contrary. s4(2) ACL

Burden of proof is evidentiary and does not place a legal burden on defendants to prove their
representations are not misleading.
s4 acts against accessories as well as primary contraveners. s4(3) ACL
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 Evidence that a representor had a present intention to carry out representation that existed may
be sufficient to establish reasonable grounds. Carpet Fashion v Forma Holdings
A representor must adduce evidence that that the time of the statement, facts existed that were
objectively reasonable and which supported the representation. Sykes v Reserve Bank of Aus
Predictions would normally only be misleading or deceptive if the person making the prediction
either knew it to be false or made it with reckless disregard for whether it was true or false.
Thompson v Mastertouch TV Service

PUFFERY

Pufery will be caught by s18 if it leads the recipient into error. Byers v Dorotea
Whether pufery is misleading depends upon the context in which the statement is made and the
understanding of the statement a reasonable person would have considered in light of ordinary
incidents and character of commercial behaviour. General Newspapers v Telstra
Statements that are so vague as to be incapable of being given any reasonably precise meaning or
because they are exaggerated opinion rather than statement of actual matter do not give rise to
misrepresentation. Mitchell v Valherie

INTENTION

Generally, the court will not inquire as to whether the person engaging in conduct actually
intended to mislead or deceive. Parkdale Custom Built Furniture v Puxu
EXCEPTIONS
Where the conduct is characterised as a statement of opinion or intention or concerns some
future matter then the statement will not be misleading unless it is proved that the statementmaker made the statement dishonestly, recklessly or without belief in its truth

Where the person was knowingly concerned in the contravention of the legislation.
Where the conduct complained of is characterised as silence, the definition in s2(2) requires the
person has refused or reframed from disclosing the information other than indadvertedly.

TIME LIMITS

Proceedings for damages must be commenced within six years of the date on which the cause of
action accrued.
This time limit will not commence until the party sufers loss or damage. Coleman v Gordon M
Jenkins & Associates
The loss must have actually occurred. Wardley Ltd v Western Australia

FOUR CLASSES OF LOSS

Where an overvalued asset is purchased - From the date of purchase HTW Valuers
Where a contingent obligation is incurred in reliance upon misleading conduct - When the liability
crystallises Wardley Aus v WA
Where a contingency is hidden by the defendants conduct - When the conduct is uncovered or
exhibited. Energex v Alstom Australia
Where an asset is purchased for an unsuitable purpose - When loss accrues from use etc of asset.
Karedis Enterprises v Antoniu
An action for recision or some other remedy under s237 must also be commenced within 6 years
of the cause of action accruing. s237(3) ACL
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 Relief can be claimed under s237 where loss or damage is likely to be sufered
If an action is brought outside of these time periods, it may act as a defence. James v ANZ
Banking Group
These time limits cannot be extended
Limitation of Action Act 1974 (Qld) cannot be relied upon Vink v Schering Pty Ltd
Equitable discretion cannot be relied upon Wardley Australia v Western Australia

Can <party> claim a remedy for Misleading and Deceptive Conduct?

REMEDIES
A contravention of s18 of the ACL is not a criminal ofence. s152 CCA

DAMAGES

If A person (the claimant) sufers loss or damage because of the conduct of another person
s236(1)(a) ACL
The conduct contravened a provision of Chapter 2 or 3 (s18) s236(1)(b) ACL

the claimant may recover the amount of the loss or damage by action against that other person, or
against any person involved in the contravention.
An action under subsection (1) may be commenced at any time within 6 years after the day on
which the cause of action that relates to the conduct accrued. s236(2) ACL
Pursuant to ACL s237 the court, at its discretion may make an order for the payment of
compensation in the amount of any loss or damage sufered. s243(e) ACL
Court may order
The contract be made void ab initio or from a certain date and order repayment of monies. Byers
v Dorotea

Vary the agreement. Kizbeau v WG & B Pty Ltd

payment of compensation. I&L Securities v HTW Valuers

MEASURE OF DAMAGES

Actual loss or damage must be proven as a result of the misleading and deceptive conduct.
Sellars v Adelaide Pertrolium
Only loss sufered as a result of the conduct is recoverable. Gates v City Mutual Life Assurance
Society

The applicant is entitled to recover the monies spent in reliance on the representation. Gates v
City Mutual Life Assurance Society
Recovery that puts the applicant in the position as if the representation had been true is only
recoverable if the applicant can prove that but for the reliance on the misleading conduct, the
applicant would have obtained the expected benefit by entering into another contract. Gates v
City Mutual life Assurance Co

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 Where misleading conduct induces a person to enter a contract to purchase property, the usual
measure of damages will be the diference between the real value at the time of purchase and
what the person actually paid for the property. Kenny & Good v MGICA

Reasonable cost of rectifying damage to property may be appropriate in some circumstances.

WA Green Centre v White
Mere fact a person entered contract which confers diferent rights and obligations does not that
loss or damage has been sufered. Jobbins v Capel Court Corp
Consequential loss may also be compensated including
Economic loss resulting from the transaction such as loss of profit Murphy v Overton
Loss of an opportunity. Sellars v Adelaide Petrolium
Mental distress Whitaker v Paxad
Interest. s51A Federal Court of Australia Act 1974 (Cth)

Trading losses of a business providing they are additional losses and and not compensated by
the diference between the contract price and value.
CANT BE CLAIMED:
Losses arising from a supervening event such as incompetence or error of claimant. Gould v
Vaggelas

Lost expectation or anticipated profit. Marks v GIO Australia Holdings

UNLESS
The plaintif can prove but for the misrepresentation, the plaintif would have entered into another
arrangement which would have resulted in expectations being met. Marks v GIO Australia
Holdings
Where property declines sharply after purchase or due to external factors. Bennett v Elysium
UNLESS
It can be shown the applicant would not have entered into the contract but for the misleading
conduct. Kenny v Good pty ltd.
No actual loss or damage is needed to be proven for recision. Demagogue v Ramensky

CAUSATION & REMOTENESS

In order to recover loss under s237 & s236, the party must sufer loss because of conduct in
contravention of the ACL

Whether conduct has caused the loss is determined by applying the but for test and common
sense approach McCarthy v McIntire

It is not necessary for the misleading conduct to be the sole cause of the loss, provided it was
one of the causes. Henville v Walker
Where a buyer of goods, services or land is induced directly by the respondent or some other

person acting on their behalf to enter a contract of sale, it is necessary to prove the buyer relied
upon the conduct in entering the contract. Henville v Walker

i.e Buyer of development property was misled by a real estate agent and also a feasibility study
which had flawed information
The chain of causation will be broken where the misleading statement is no longer an operative
cause of the loss. Tiplady v Gold Coast Carlton
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 Chain of causation will NOT be broken by a failure to check accuracy or reasonableness of a

representation or an unreasonable failure to take other steps by way of self-protection. Nifsan

Developments v Buskey
Chain will be broken in the following circumstances:
Loss is caused by buyers conduct, or choice made by buyer upon happening of a contingency
that fails to avoid loss. Marks v SGIO
The buyers lawyers conduct. Henderson v Atkinson
A Financier who lends funds on basis of misleading valuation failed to show the money would not
have been lent even if valuation were true. Actual risk was irrespective of conduct. Kenny v Good
A person who entered an agreement on reliance of bank was an intelligent and experienced
businessman who relied on own commercial judgment. Lam v Austinel Investments Australia
A supervening event breaks the chain of causation. Kizbeu Pty Ltd v WG & B Pty Ltd

PASSIVE VICTIM OF MISLEADING CONDUCT

Indirect causation occurs when the defendant exhibits misleading conduct inducting an innocent
party to act in a way. The innocent partys act by its very nature causes the plaintifs loss

meaning no act of the plaintif causes the loss. The chain of causation is still complete without the
plaintif needing to act or reframe from acting. Digi Tech v Brand

FAILURE TO TAKE REASONABLE CARE

A court has the power to reduce damages awarded where the failure of the claimant to take
reasonable care contributed to the loss. s137B ACL

HOWEVER
The power in s137B is expressly limited to claims for economic loss or property damage under
s236 a contravention of ACL s18.
A court will only reduce the compensation where the claimants failure to take reasonable care
contributes to the loss. Collins Marrickville v Henjo
A court is likely to take a lenient approach and apply the objective test having regard to the
attributes of the buyer. Rinehold v NSW Lotteries Corporation
If an alleged failure relates to a failure to check the veracity of the misleading statements, the
court is unlikely to conclude an applicant failed to take reasonable care. Jainran v Boyana
A person will be taken to have failed to protect their interests where
Undertake usual searches in a purchase or lending transaction. I&L Securities
Failing to follow standard business and management practices by virtue of inexperience or
incompetency after the purchase of a business induced by misleading conduct.
Failing to maintain machinery in good condition in order to maintain resale value. Lovick & Son
Developments v Doppstadt Australia
The negligent conduct must be such that the conduct of representations complained of are not
the real inducements for entry into the contract. Tiplady v Gold Coast Carlton Pty Ltd.
The court does not have the power to apportion zero percent to a plaintif. I&L Securities

STATE LEVEL

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There is no provision for a court to reduce an award of damages under s137B at a state level
because contributory negligence only arises out of tort or breach of contractual duty concurrent
with a tort. s10(1) Law Reform Act

APPORTIONMENT

A court can apportion liability for loss between concurrent wrongdoers but only if it relates to
economic loss or property damage. 87CB-87CI ACL

The liability of the wrongdoer will be for the proportion of the claim that reflects the persons
responsibility for the loss or damage. s87CD CCA ACL
Court will determine apportionment of loss on basis of:
The degree of departure from the standard of care of the reasonable man as the regards the
causative conduct of the putative concurrent wrongdoer and the defendant
The relative importance of the acts of the putative wrongdoer and the defendants in causing the
loss sufered. Reinhold v NSW Lotteries Commission
The concurrent wrongdoer cannot be required to contribute any damages recovered from another
concurrent wrongdoer in respect of the apportionable claim or to indemnify such wrongdoer.
s87CF CCA
Section does not apply where the wrongdoer intends to cause or fraudulently causes loss or
damage. CBA v Mohamad Saleh

CONCURRENT WRONGDOER
A concurrent wrongdoer is one or two or more persons whose acts or omissions caused
independently of each other or jointly, the damage or loss that is the subject of the claim. s87CB
CCA
An apportionable claim is a claim for compensation under s236 for a contravention of s18 involving
economic loss or property damage. s87CB(1)
A single apportionable claim will exist in respect of the same loss or damage even if the claim is for
the loss or damage is based on more than one cause of action. s87CB(2)

INJUNCTION

A court may grant an injunction, in such terms as the court considers appropriate, if the court is
satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or
would constitute:
A contravention of a provision of Chapter 2, 3 or 4; or (s18) s232(1)(a) ACL
Attempting to contravene such a provision; or s232(1)(b) ACL
Aiding, abetting, counselling or procuring a person to contravene such a provision s232(1)
(c) ACL
Inducing, or attempting to induce, whether by threats, promises or otherwise, a person to
contravene such a provision s232(1)(d) ACL

Being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a
person of such a provision s232(1)(e) ACL
Conspiring with others to contravene such a provision. s232(1)(f) ACL
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The power of the court to grant an injunction under subsection (1) restraining a person from
engaging in conduct may be exercised:
Whether or not it appears to the court that the person intends to engage again, or to continue to
engage, in conduct of a kind referred to in that subsection s232(4)(a) ACL
Whether or not the person has previously engaged in conduct of that kind s232(4)(b) ACL

Whether or not there is an imminent danger of substantial damage to any other person if the
person engages in conduct of that kind. s232(4)(c) ACL
Without limiting subsection (1), the court may grant an injunction under that subsection requiring a
person to do any of the following:
Refund money s232(6)(a) ACL
Transfer property s232(6)(b) ACL
Honour a promise; s232(6)(c) ACL
Destroy or dispose of goods. s232(6)(d) ACL

RECISION AND VARIATION

Without limiting section 237(1), 238(1) or 239(1), the orders that a court may make under any of
those sections against a person (the respondent) include all or any of the following:
An order declaring the whole or any part of a contract made between the respondent and a person
(the injured person) who sufered, or is likely to sufer, the loss or damage referred to in that
section, or of a collateral arrangement relating to such a contract:
To be void s243(a)(i)
If the court thinks fitto have been void ab initio or void at all times on and after such date as is
specified in the order (which may be a date that is before the date on which the order is made)
s243(a)(ii)
An order:
Varying such a contract or arrangement in such manner as is specified in the order s243(b)(i)
If the court thinks fitdeclaring the contract or arrangement to have had efect as so varied on
and after such date as is specified in the order (which may be a date that is before the date on
which the order is made) s243(b)(ii)
An order refusing to enforce any or all of the provisions of such a contract or arrangement;
s243(c)

An order directing the respondent to refund money or return property to the injured person
s243(d)
Except if the order is to be made under section 239(1)an order directing the respondent to pay
the injured person the amount of the loss or damage s243(e) ACL
An order directing the respondent, at his or her own expense, to repair, or provide parts for,
goods that had been supplied by the respondent to the injured person; s243(f) ACL
An order directing the respondent, at his or her own expense, to supply specified services to the
injured person s243(g) ACL

An order, in relation to an instrument creating or transferring an interest in land, directing the

respondent to execute an instrument that:

Varies, or has the efect of varying, the first mentioned instrument; s243(h)(i) ACL
Terminates or otherwise afects, or has the efect of terminating or otherwise afecting, the
operation or efect of the first mentioned instrument. s243(h)(ii) ACL
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 Court is not bound by equitable principles of recision and recision is possible even where the
status quo cannot be completely restored. Altai v Kruger
Question for court is whether an order for recission is appropriate to compensate the applicant for
the loss sufered or likely to be sufered or serves some other purpose in doing justice between
the parties. Bullabidgee v McLeary

EXCLUSION OF LIABILITY
EXEMPTION CLAUSES

It is not possible to evade operation of the ACL by inserting an exclusion clause because it is
against the policy of the legislation Henjo Investments v Collins Marrickville
The insertion of the clause in he contract will usually not afect the partys reliance on the
contract. Petera v EAJ
An exclusion provision is only one factor the court analyses. Netaf v Bikane

An entire agreement may only be efective if it breaks the chain of causation between the conduct
and the entry into the contract such that the party could not have relied upon the conduct when
entering the contract. Kewside v Warman International

A disclaimer will be efective if, when considered with the whole of the facts, it indicates the
statements are no longer misleading. Benlist v Olivetti

A disclaimer will be efective if a claimant does not rely upon statements when entering into the
contract. Lezam v Seabridge Australia

INFORMATION PROVIDERS
Misleading and Deceptive Conduct does not apply to a publication of matter by an information
provider if:
In any casethe information provider made the publication in the course of carrying on a
business of providing information s19(1)(a) ACL

If the information provider is the Australian Broadcasting Corporation, the Special Broadcasting
Service Corporation or the holder of a licence granted under the Broadcasting Services Act 1992
the publication was by way of a radio or television broadcast by the information provider.
S19(1)(b) ACL
Exemption does not apply to a publication of an advertisement. s19(2) ACL
An information provider is a person who carries on a business of providing information. s19(5)
ACL
Without limiting subsection (5), each of the following is an information provider:
The holder of a licence granted under the Broadcasting Services Act 1992 s19(6)(a)
A person who is the provider of a broadcasting service under a class licence under that Act
s19(6)(b) ACL
The holder of a licence continued in force by section 5(1) of the Broadcasting Services
(Transitional Provisions and Consequential Amendments) Act 1992; s19(6)(c) ACL
The Australian Broadcasting Corporation s19(6)(d) ACL
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 The Special Broadcasting Service Corporation. s19(6)(e) ACL

MISTAKE
At common law, a mistake may operate to negative or nullify contractual assent so the contract is
void ab initio. Bell v Lever Bros
In equity mistake will render the contract voidable and not void, The contract may be rescinded
by innocent party or set aside by courts. Solle v Butcher

Have the parties made a common mistake?

COMMON MISTAKE
Where both parties make the same mistake
i.e A sells B his Lamborghini but unbeknownst to both parties, the car is destroyed in accident prior
to sale

COMMON LAW

A court will only grant a remedy under the common law for mistake if these five elements are
satisfied
1. Common assumption as the the existence of a state of affairs
2. No warranty by either party that the state of affairs exists
3. The non existence of the state of affairs must not be attributable to the fault of other party
4. The non existence of the state of affairs must render performance of the contract
impossible
5. The state of affairs may be the existence of a vital attribute of the consideration to be
provided or circumstances which must subsist if performance of the contract is to be
possible. Australia Estates v Cairns City Council

MISTAKE AS TO EXISTENCE: RES EXTINCTA

Where, unknown to the parties, the subject matter of the contract no longer exists, the contract is
clearly impossible to perform and is void. Couturier v Hastie
Corn was shipped to England and began to ferment on the way so the cargo was sold. Cosignor in
England tried to sell the corn but the buyer in England didnt pay up. Purchaser had agreed to
purchase specific goods which had already perished.
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 Where there is a contract for the sale of specific goods and the goods without the knowledge of
the seller, have perished at the time of the contract, the contract is deemed to be void. s11 Sale
of Goods Act 1896 (Qld)

HOWEVER
Where one party warrants the subject matter is in existence and it transpires the goods are no
longer in existence or never existed, it is a breach of contract. McRae v Commonwealth
Disposals Commission
Newspaper ad was placed calling for tenders to purchase an oil tanker described as lying on
Jourmaund Reef. Tender was accepted and plaintiff expended money looking for boat. No oil
tanker existed and the reef did not exist either.

Where a mistake is caused by the fault of one party, that party is precluded from relying on
mistake as a basis for relief. McRae v Commonwealth Disposals Commission.

A mistake as to quality of subject matter will not yield a remedy.

HOWEVER

If the mistake is as to the existence of some quality which makes the thing without the quality
essentially diferent from what it was believed to be, the contract will be void. Bell v Lever Bros

IF SUBJECT MATTER CEASES TO EXIST AFTER CONTRACT IS FORMED, IT IS

FRUSTRATION

MISTAKE AS TO TITLE: RES SUA

If the buyer or lessee of property is already the owner of that property, the contract is VOID Belle
v Lever Brothers
If vendor undertakes to make title, it is a breach of contract. Svanioso v McNamara
i.e Defendant tried to sell hotel which was partly built on land not owned by vendor. Vendor could
not make title and was in breach of contract.

MISTAKE AS TO SUBSISTING CIRCUMSTANCES.

A common mistake as to the circumstances subsisting at the time of contract may void a
contract. Griffith v Burner

i.e Plaintiff contracted to hire room to view coronation of Edward VII. King became ill. Unknown to
both parties, 1hr before contract was formed, King was operated on making performance
impossible. Both parties had contracted on basis that procession would take place and nothing
happened to make performance impossible

CONCLUSION: Therefore, under common law, the mistake has voided the contract
Can <Party> seek a remedy for equity for the common mistake

EQUITY
RESCISSION
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 A party having legal right shall not be permitted to exercise it in a way that amounts to
unconscionable conduct for common mistake. Solle Butcher
MUST BE SHOWN
1. A common misapprehension as to facts or as to parties rights
2. Which is of a fundamental nature
3. An absence on the fault of the party seeking to have contract set aside. Taylor v Johnson
While common mistake as to quality will not render contract void at common law, a party may
rescind contract in equity. Grist v Bailey
Requisite unconscionability may be satisfied merely by a party seeking to uphold a bargain when
he or she is receiving an unexpected windfall under the contract due to the mistake. Lukacs v
Wood
i.e Parties reached agreement on sale of 3 blocks of land. Mistake in relation to volume and folio
number inserted in contract and transfer document, purchaser acquired two vacant blocks of land
and one on which flats were built. Purchaser did not want to give up windfall. Total failure because
contemplated block not bought and sold
A contract may only be set aside in equity in case of fraud when there is such discrepancy

between what was sold and what was conveyed that it amounts to a total failure of consideration.
Svanosio v McNamara

Recision will be refused where the plaintif elects to affirm the contract after mistake is
discovered. Hudson v Hope

RECTIFICATION

In order to rectify a common mistake in recording of an agreement, two elements must be shown.
1. Prior concluded contract, or at least common intention that continued unaltered until execution of
the document and
2. Convincing proof, that the written document does not embody the final agreement. Pukallus v
Cameron
Relief will not be denied simply because claimant did not read contract before it was signed.
Coset No 15 v Blagojevic

There does not need to be a formal contract. United States v Motor Trucks
Or a concluded contract, if there is intention common to both parties continuing down to
execution of the contract. Slee v Warke
common intention can be proved by other means including by inference from pre and post
contractual facts. NSW Medical Defence Union v Transport Industries Insurance
There can be no rectification where the change in the common intention and the document
accurately reflects the final agreement between the parties. Maralinga v Major Enterprises
Rectification will not be ordered where the parties are mistaken as to the meaning or practical
efect of the words they used, there being no disconformity between the words used and common
intention. Eroc Pty Ltd v Amalg Resources
Rectification will be refused where the parties are labouring under common mistake that
something can be done when it is actually impossible but written words give efect to common
intention. Club Cape Schank Resort Co
The omitted ingredient must be capable of such proof in clear precise terms. Warburton v
National Westminster Finance Australia
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 Where court orders document to e rectified, it is treated as having been in its rectified form as
from the date of execution. Isa v Berisha
Rectification will not be ordered where it afect rights of third parties. Coolibah Pastoral Co v
Commonwealth

SPECIFIC PERFORMANCE

Court will withhold specific performance where it would be a hardship on promisor to specifically
enforce the contract. Dell v Beasley

LIMITS TO RECISION
If representee elects to affirm contract, right to rescind for mistake is lost. Once election is made it
cannot be retracted: Sargent v ASL Developments Ltd
Election to rescind for innocent misrepresentation should be exercised within reasonable time of
representee having opportunity to prove/disprove statement: Leaf v International Galleries
In equity, rescission will be granted where parties can be substantially restored to their precontractual positions: Vadasz v Pioneer Concrete (SA) Pty Ltd
If third party gains interest in property, court wont grant rescission as parties cant be placed in
original positions: McKenzie v McDonald.
Third party may gain enforceable rights against other parties: Phillips v Brooks Limited
If contract is completed, it cannot be rescinded. Seddon v North Eastern Salt Company

MUTUAL MISTAKE
Where both parties are mistaken but each party makes diferent mistake.
i.e A contracts to sell his car intending to sell red Commodore while B contracts to buy As car
intending to buy black Commodore

COMMON LAW
Where parties are at cross purposes, each making a diferent mistake, the position at common
law depends upon whether any meaning may be objectively ascribed to the parties apparent
agreement. If it is not possible for a reasonable third party to prefer one meaning over the other,
the mutual mistake will void the contract. Raffles v Wichelhaus
Parties contracted for sale of goods ex peerless from Bombay two ships of same name sailed
from Bombay, one in october one in december. Purchaser intended to refer to october shipment
while vendor meant December. Description matched both cargoes equally, court could not assign
meaning, contract voided.
Where parties agreement may bear a particular meaning, that meaning will be imputed to it.
Goldsbrough Mort & Co Ltd v Quinn

EQUITY

Because neither party knows nor ought to know of the others mistake, there is no
unconscionability to justify relief. Riverlate Properties Ltd v Paul
At most, specific performance will be witheld where particular hardship will result from holding
party to contract. Malins v Freeman
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 Where common law assigns a meaning, that meaning will also be adopted in equity. Tamplin v
James

UNILATERAL MISTAKE
Where one party is mistaken and the other knows or ought to know of the mistake

COMMON LAW

UNILATERAL MISTAKE IN GENERAL

A mistaken party cannot rely on his or her own mistake as making the contract a nullity even if it
were a fundamental mistake and the other party knew about it, because to all outward
appearances, the parties will have reached an agreement that is the version of the party who is
not mistaken. Taylor v Johnson

i.e Mrs Johnson granted option to Taylor to purchase 2 5 acre pieces of land for total price of
$15,000. Johnson refused to perform because she believed price was $15,000 per acre.
Objectively sale price was $15,000 in total so contract not voided.
Common law no longer renders a contract void for unilateral mistake. Taylor v Johnson

Does <party> have a remedy under common law for the mistake?

MISTAKE AS TO IDENTITY
INCLUDES FACE-TO-FACE

If the contract is made by parties in each others presence, face-to-face a rebuttable presumption
arises that the contract is concluded with the person who is present. Phillips v Brooks
A mistake as to the identity of the other party will void the contract where
1. At the time of the agreement between A and B, A regarded the identity of the other party to the
contract as material. Boulton v Jones
2. A intended to contract not with B but with someone else. Cundy v Lindsay
3. That intention was known or ought to have been known by B. Porter v Latec Finance Qld
A contract may be void for mistaken identity where a plaintif does NOT want to contract with
someone but is deceived by a rogue into doing so. Said v Butt
Merely seeking to confirm an alleged identity by reference to a directory will be insufficient
Attempting to rely on ID profered by other person will not be sufficient to show either the identity
of the other person is material or that was intention to contract with another person. Papas v
Bianca Investments

Any distinction between a person and that persons attributes does not provide valid basis for
rebutting presumption. Lewis v Averay

MISTAKES AS TO NATURE OF CONTRACT: NON EST FACTUM

In order to make out a plea of non est factum, three elements must be shown
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1. The claimant belongs to the relevant class

Plaintif must be unable to read through blindness illiteracy and must rely on others as to what
they are signing Petelin v Cullen
HOWEVER
If mental incapacity is that person does not understand or evaluate document, it will fail and only
be voidable. PT Ltd v Maradonna
Through no fault of their own are unable to have an understanding of the purport of the particular
document. Petelin v Cullen
2. The claimant signed the document in the belief it is radically different from what was in
fact
It is a question of fact determined subjectively as to whether the document is radically or
fundamentally diferent from what the signer thought it to be. Petelin v Cullen
Document must be essentially diferent in substance or kind from the transaction intended. Gallie
v Lee
Plea will not succeed where document while difering from what signer thought it would be, is still
essentially the same. Saunders v Anglia Building Society
3. At least as against innocent persons, the claimants failure to read and understand the
document was not due to carelessness on his or her part. Petelin v Cullen
Where plea is established, contract is void ab initio
VOID UNDER COMMON LAW - TITLE WILL NOT MOVE
CONCLUSION: THE PARTY BETWEEN X AND Y IS VOID AT COMMON LAW
Does party have remedy in equity for the mistake?

EQUITY
VOIDABLE CONTRACT
Equity will set aside the contract in a case of unilateral mistake where the court is of the opinion
that there has been sharp practice and it is unconscientious for parties to avail themselves of

the legal advantage they would have obtained by virtue of the contract. Torrance v Bolton
1. A party enters into a written contract under a serious mistake about its contents in relation to a
fundamental term.
2. The other party is aware or has reason to be aware that circumstances exist that indicate the
first party is entering the contract under some serious mistake or misapprehension
3. The other party deliberately sets out to ensure that the first party does not become aware of the
existence of her mistake or misapprehension. Taylor v Johnson
Merely remaining silent with the knowledge or means of knowledge of the mistake may amount to
unconscionable conduct and constitute deliberately setting out to ensure that the mistaken party
does not become aware of the existence of the mistake. Misiaris v Saydels

Less than actual knowledge of mistake may suffice where there is

A strong suspicion Misiaris v Saydels
having reason to know Everglades Country Club v Eadie
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 willful blindness or willful failure to make enquiries that an honest and reasonable person would
make Commission for the New Towns v Cooper
Contract will not be set aside where it is affirmed or an innocent third party has acquired interest
in the subject matter McKenzie v McDonald
or restitutio in intengrum is no longer possible. Spence v crawford.

LIMITS TO RECISION

Contract wont be set aside for unilateral mistake where contract has been affirmed, innocent third
party acquires interest in subject matter (McKenzie v McDonald) or restitutio in integrum no longer
possible (Spence v Crawford).

RECTIFICATION
Equity rectifies written document only where one party mistakenly believes document reflects
agreement and the non-mistaken party engages in unconscionable conduct or sharp practice:
cunningness, deceit, misrepresentation, just short of fraud. Riverlate Properties Ltd v Paul

ELEMENTS
Plaintif wrongly believes written document contains particular term or doesnt contain particular
term
Defendant is aware of plaintifs wrong belief
It is sufficient for defendant to have ought to have known or strongly suspect that plaintif is
making a mistake: Misiaris v Saydels Pty Ltd
Defendant doesnt say anything to correct plaintifs wrong belief
Mistake either provides advantage to defendant or is detriment to plaintif Thomas Bates & Son
Ltd v Windhams (Lingerie) Ltd

CONCLUSION: THEREFORE THE CONTRACT BETWEEN X AND Y WILL BE

VOIDABLE OR RECTIFIED.

Scott Thompson

DURESS
Duress, in the form of coercion of the plaintifs will through illegitimate pressure or threats to the
plaintifs interests renders a contract voidable. Barton v Armstrong
Is <party> under any form of duress?

THREATS TO PERSON
Actual or threatened violence to a person will make a contract voidable Barton v Armstrong
immaterial that there may be other reasons for entering the contract if a threat is made. Barton v

Armstrong
i.e Defendant wanted to exclude plaintiff from board of directors. Plaintiff and Def reached
agreement to buy def out of company and interest in development. Plaintiff was partly motivated by
defendants threats to have him murdered.
Extends to actual or threatened imprisonment or confinement. Barton v Armstrong
A contract resulting from a threat of criminal prosecution for which there is sufficient ground will
NOT amount to duress provided there was valuable consideration for the contract and no
agreement to stifle prosecution. Ward v Lloyd

THREATS TO PROPERTY
Where conduct amounting to duress to personal property is a reason for the plaintif entering into
a contract, that conduct will enable the plaintif to avoid the contract. Hakwer Pacific v Helicopter
Charter
Helicopter owned by plaintiff required repainting. Poor repainting job and helicopter had to be
rectified. Work completed but defendant would no give back unless there was indemnity for
defective workmanship. Plaintiff agreed because he thought he would not get contract back
Scott Thompson

ECONOMIC DURESS
Money paid as a result of a threat to break an existing contract may be recovered in restitution a
money had and received. Nixon v Furphy
Economic duress is actual or threatened unlawful conduct deleterious to the plaintifs economic
interests Crescendo Management v Westpac Banking Corp

TWO QUESTIONS

1. Was any pressure applied to induce the victim to enter into the contract and then
2. did the pressure go beyond what the law was prepared to countenance as being legitimate.
Crescendo Management v Westpac Banking Corp
Even overwhelming pressure not amounting to unconscionable or unlawful conduct does not
constitute economic duress. Crescendo Management v Westpac Banking Corp
Duress may now be taken as meaning
actual or unlawful threatened conduct that is directed at the person or the property of the victim
or the legitimate commercial and financial interest of that party
OR
There is an unconscientious taking advantage of a persons special disability or special
disadvantage Commercial Bank of Aus v Amadio
A threat to break an existing contract between parties unless it is renegotiated has been held to
be unlawful and amount to duress. North Ocean Shipping v Hyundai Construction
A threat may be held to be regarded as a proposal to bring about an unwelcome event unless the
recipient of the proposal does something. Atlas Express v Kafco
Warning is a prediction that an unwelcome event will happen or that it will happen if special
circumstances arise. Unlike a threat, the speaker has no control over event. Williams v Roffey
Bros
Request occurs where a party to a contract merely asks for new terms
A threat to do a lawful act such as commence legal proceedings or appoint receiver is not duress.
Westpac Bankiing Corp v Cockerill
UNLESS

It is coupled with an unlawful demand. Kaufman v Gerson

i.e threat to prosecute victims husband if they would not undertake a debt = blackmail

There is no need for the defendant to be aware it is unlawful. Spira v Commonwealth Bank of
Australia

CAUSAL CONNECTION
Provided the duress is a material cause, it need not be the sole or dominant inducement, and it
will be immaterial that there are other reasons other than the threat. Barton v Armstrong
Duress will not be proven if it had no material part in forming a contract even if it is extreme.
News Ltd v Australian Rugby Football League

REMEDIES
Scott Thompson

RECISION
A contract entered into under duress is voidable not void so the principle remedy is recision.
North Ocean Shipping v Hyundai Construction
LIMITS
Victim of duress may have affirmed the contract and denied relief if, with full knowledge of the
circumstances, he or she engages in conduct that unequivocally indicates adoption of the
contract or fails to rescind contract North Ocean Shipping v Hyundai Construction
Where a third party has acquired interest in the subject matter or where parties cannot be
restored or for any other reason restitutio in integrum is no longer possible. Phillips v Brooks
Limited

RESTITUTION
Restitution may be claimed for monies paid under coercion for unjust enrichment
HOWEVER

Cant be done if contract is on foot, contract must be discharged or rescinded. The Evia Luck

DAMAGES
Not clear on common law
Duress is a tort if it causes damage or loss and thereby gives rise to a right to claim damages.

Universe Tankship of Monorovia v International Transport Workers Federation

Others have said conduct does not have to be tortious to constutute duress. Universe Tankship
of Monorovia v International Transport Workers Federation

HARASSMENT AND COERCION

A person must not use physical force, or undue harassment or coercion, in connection with:
The supply or possible supply of goods or services s50(1)(a) ACL
The payment for goods or services s50(1)(b) ACL
The sale or grant, or the possible sale or grant, of an interest in land s50(1)(c) ACL
The payment for an interest in land. s50(1)(d) ACL
A pecuniary penalty may be imposed for a contravention of this subsection.

UNDUE INFLUENCE
Undue influence is the improper use by the ascendant person of such ascendancy for the benefit
of himself or herself or someone else so that the acts of the person influenced are not in the
fullest sense his or her free and voluntary acts. Union Bank Of Australia v Whitelaw
That the stronger party is innocent, well-meaning, has no ulterior motive or malign intent is
irrelevant. Carey v Norton

Has there been undue influence?

Scott Thompson

EXPRESS UNDUE INFLUENCE

Plaintif must prove affirmatively the defendant exerted undue influence to enter into the
transaction sought to be impugned Watkins v Combes
MUST BE SHOWN
Defendant had capacity to influence plaintif

The exercise was undue and brought about the transaction Bank of Credit & Commerce
International v Aboody
Mere suspicion will not suffice. Plaintif must show transaction was not of free exercise of
independent will Brunker v Perpetual Trustee Co Ltd

PRESUMED UNDUE INFLUENCE

The law imposes the following relationships are to be of influence unless the contrary is shown
Johnson v Buttress
Dominion and dependence as hallmarks of a presumptive relationship of undue influence
Johnson v Buttress

A relationship where there is a reposing of confidence Jeyns v Public Curator

Analyse: health, age, education, literacy, intelligence, business experience, character and
personality, Equal strength of character and personality, closeness of relationship and opportunity
aforded to influence the weaker party are correlative considerations Union Fidelity Trustee of
Australia v Gibson

Presumed
Trustee and Beneficiary Ellis v Barker
Lawyer and Client Powell v Powell
Doctor and Patient Dean v Bennett
Religious advisor and novice Allcard v Skinner
Guardian and Ward Hylton v Hylton
Power of Attorney s87 Powers of Attorney Act 1998 (Qld)

PRESUMED BUT CIRCUMSTANTIAL

Fiduciary Relationships Johnson v Buttress
Parent and Child

Is presumed until dominion of parent over child ceases. Wright v Landerplank

Age is only a matter taken into account, it is not conclusive Berdoe v Dawson
Presumption is rebutted by showing child was emancipated from influence and received
independent advice Powell v Powell
Parent bears onus of proving there is no parental influence. Elder the child, the lighter the onus
Lamotte v Lamotte

Scott Thompson

 Relevant factors include financial and emotional independence, business experience,

intelligence, education, character, personality and state of health relevant to those of the parent
Union Fidelity Trustee Co of Australia v Gibson

Presumption also applies to loco-parentis (uncles, grandparents etc) Bank of NSW v Rogers
Presumption of children having influence over parents has been rejected ASB Bank v Harlick

HOWEVER

If parent is old, frail, has lack of education or experience, presumption may operate. Hogg v
Hogg

Fiance v Husband

Presumption of undue influence from man to fiance will be less likely due to changing social
conditions and equality Zanet v Hyman

Court is less likely to presume undue influence where benefit of transaction would have accrued
to both husband and wife, especially when not irrational from wifes perspective. European Asian
of Australia v Lazich

De-facto relationships are NOT PRESUMED particularly if there is no disability by efecting a

transaction Xu v Lin
But facts may change the circumstances. Leeder v Stevens

Carers to elderly

Evidence of dependence or dominion on the carer will raise the presumption Law v Mo
Employer and junior employee Credit Lyonnais Bank Nederland v Birch

PRESUMED FROM FACTS

RELEVANT FACTORS
1. Reliance on guidance and advice;
2. Awareness of this reliance by the dominant party;
3. Benefit received by advisor;
4. Element of confidentiality in relationship; Lloyds Bank v Bundy
Examinable attributes
Age, Health, Education, Literacy, Intelligence, Business experience, Character and Personality
relative to the dominant party National Westminster Bank plc v Morgan.
If there is no reliance, then there is no presumption Xu v Lin

NEAR IMPOSSIBLE PRESUMPTION

Business persons bargaining at arms length do not attract undue influence. Walmsley v
Christchurch City Council
Relationship between debtor and creditor only gives rise to presumption if complainant can show
special relation with other party that makes it reasonable to presume transaction was procured by
improper use of influence Wardley Australia v McPharlin
Banker to customer is not presumed unless the will of the customer is overborne because of
wrongful act or threat or by position of influence the bank holds. National Westminster Bank v
Morgan

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 No presumption of undue influence arises in relationship between financial advisor and client
unless there is sufficient influence to attract intervention Calvo v Sweeney

REBUTTAL
Onus on defendant to show the deal was not influenced
Independent advice
Plaintif received independent advice Watkins v Combes
A lack of independent advice will not vitiate a transaction where, had it been obtained, it would
not have altered the outcome because the advisor would have recommended same outcome
Linderstam v Barnett

Absence of independent advice will not be legally relevant where complainant has entered into
transaction voluntarily after not reading the relevant documents although capable of
understanding them Tranchita v Retravision
Advice must be given by a person who has some expertise regarding the nature of the
transaction In question and is privy to all material facts Brusewitz v Brown
The advice must have been requested specifically in relation to that transaction Bester v
Perpetual Trustee Co Ltd
Mere fact a document is explained and no questions are asked or criticisms made of it by the
complainant does not mean they made a deliberate and intelligent choice to adopt it. Bester v
Perpetual Trustee Co.

The more complex the scope and the greater the inequality of knowledge, the more extensive the
advice must be Bank of NSW v Rogers
Solicitors must concentrate on giving a good account in summary of the features of the
transaction in a form likely to be understood by an everyday person. Citibank Savings v
Nicholson

In all cases solicitors must make sure their clients have a full awareness of the transaction.
Citibank Savings v Nicholson

Disclosure:

A person in a position of influence must disclose everything that is or may be material to the others
judgment before the transaction is complete. Moody v Cox and Hatt

Clear intention to enter transaction

Provided the complainant has the capacity to understand the transaction, and freely exercised
their will, the transaction will not be set aside because the financial implications were not
appreciated Jenyns v Public Curator (Qld)
However this may not bar equitable relief as influence can be subtle Harris v Jenkins
I.e Its not what the complainant knew, but how intention was produced

If a gift appears outrageous to a reasonable observer who knows of the circumstances and was

obvious to the persons who conducted the defendants side of the transaction, there may not be
clear intention Hartigan v International Society for Krishna Consciousness

Improvidence (thoughtlessness) of transaction

Is an evidentiary matter relevant in considering whether undue influence existed Blomney v Ryan
But it is not conclusive Brusewitz v Brown
Scott Thompson

 The more disadvantageous the transaction, the easier it is to establish it was produced by
improper means and more difficult for the wrongdoer to rebut Royal Bank of Scotland v Ettridge.
Court will not upset a transaction where it shows the complainant would have entered into the
transaction whether influenced or not. Bank of Credit and Commerce International v Aboody.
If complainant knows the general nature of the transaction and though placing confidence in the
alleged influencers judgment, enters into it without coercion or persuasion from the latter, the
transaction cannot be said to be the approximate result of the influence. Berk v Permanent
Trustee Co of NSW.

DEFENCES

Delay in commencing action once the influence has ceased may undermine claim or may
function as affirmation of transaction. Public Trust v Ottow

Delay begins where defendant commences when plaintif becomes aware of facts upon which
the right to relief is founded. Allcard v Skinner
Will unreasonably prejudice the defendant. Wheatreat v Duff
Hardship when asked to return gift can be pleaded but rarely succeeds, will most likely bar a
Laches claim. Hartigans case
CONCLUSION: HAS THERE BEEN UNDUE INFLUENCE Y OR N
What is the remedy the party can seek?

REMEDIES

The primary remedy for unconscionable dealing and undue influence is recision of the contract,
even where restitutio in integrum is difficult to achieve Alati v Kruger
Right to rescind may be lost where:
trusting party has affirmed the contract or fails to act promptly Whereat v Duff.
restitutio in integrum is not substantially possible Quek v Beggs
innocent third party has acquired interest in subject matter of contract Quek v Beggs

EQUITABLE COMPENSATION

Undue influence operates within Equitys exclusive jurisdiction, so equitable compensation may be
granted to put the parties back into the position they would be in had the contract not taken place.
Nockton v Lord Ashburn

UNCONSCIONABLE CONDUCT
The court will grant a relief where one party unconscientiously takes advantage of a party at a
special disadvantage. Commercial Bank of Australia v Amadio

In order to establish an unconscionable bargain, the person must be at a special disadvantage

and this disadvantage has been unconscientious taking of advantage of this disability

Scott Thompson

Q: Has there been unconscionable conduct?

SPECIAL DISADVANTAGE
The person seeking to avoid the transaction must have a special disadvantage vis--vis the other
party Blomley v Ryan
Wether a person is at special disadvantage is determined according to a number of factors, but
the disadvantage must seriously afects the ability of the innocent party to make a judgment as
to [their] own best interests CBA v Amadio

Factors identifying disadvantage may be Constitutional (personal characteristics) or Situational

(circumstances surrounding transaction)

Factors which may indicate disadvantage:

Poverty or need, sickness, age, sex infirmity of body or mind or explanation where assistance or
explanation is necessary. Blomley v Ryan
Cannot be assumed presence or absence of any one factor is decisive, usually combination of
factors Washband v Buck

MAIN FACTORS:

Financial need
Financial need may seriously afect a persons ability to judge her or his best interests. Moreland
Finance Corp v Luke

Will not constitute a disadvantage by itself. Diera Pty Ltd v Grover

Usually will need to be coupled with other factors Familiar Pty Ltd v Samarkos
Financial need will be less likely to occur in commercial transactions . Micarone v Perpetual
Trustees

Lack of Knowledge and/or experience

Weaker partys level of education, intelligence, and business experience will influence his or her
understanding of the transaction in question. More complex the transaction, greater potential for
disadvantage. Nichols v Jessup
A person may also sufer a disadvantage due to the inadequate understanding of the nature
incidents and consequences of a transaction (situational disadvantage) Melverton v
Commonwealth Development Bank of Australia
i.e May have an understanding of business, but not that a certain party may be in dire economic
straits.
A person who enters a transaction containing no unusual features cannot claim undue influence
because they chose not to understand or attempt to understand the documentation. Swift v
Westpac Banking Corporation
There is no special disadvantage in a banking transaction where the weaker party lacked
knowledge of all maters known to the bank Diera v Grover
Special disadvantage will not exist in a commercial arrangement contracted at arms length. Must
be more than a commercial vulnerability to negate disadvantage ACCC v Samton Holdings
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 Commercial negotiations, at arms length run by people with business experience using lawyers
will not create a disadvantage. Overlook Management v Foxtel
Desperate corporation acting with no professional/legal advice may be acceptable, but economic
duress is more appropriate Commonwealth Bank v Ridout

Age
Advanced age itself is unlikely to be special disadvantage unless coupled with other factors.
Christodoulou v Christodoulou

Independent advice
The fact a person received no independent legal or financial advice concerning a transaction is
by itself no special disadvantage. State Bank of NSW v Watt

Will only be a special disadvantage where the provision was imperative Bridgewater v Leahy
If the transaction is one that would ordinarily be submitted to solicitors for consideration and
advice may indicate need for independent advice for weaker party Nichols v Jessup No 2

When a person exhibits full and clear understanding of substance of transaction in issue, and an
advisor independent or otherwise would not have informed the person of anything they didnt
already know or had full opportunity to evaluate, special disadvantage will be lacking where no
advice is given even if transaction is improvident Frederick v State of South Australia

Inadequacy of consideration/ improvidence of transaction

Inadequate consideration moving from stronger party or transaction otherwise improvident from
the perspective of weaker party may indicate special disadvantage Blomley v Ryan

However evidence is not of itself conclusive Cranfield v Commonwealth Bank

If nature of transaction is not causally related to any special disadvantage, there is no
disadvantage White v Ormsby
Adequate consideration moving from stronger party to a third party may be questionable.
Commercial Bank of Aus v Amadio

Emotional or other dependency

Only an extreme case of emotional dependency would create special disadvantage ON
ITS OWN Louth v Diprose

Usually must be coupled with other factors evidencing disadvantage Smith v Smith

KNOWLEDGE OF DISADVANTAGE

Equity will give relief if the stronger party knew or ought to have known of the disadvantage
Commercial Bank of Aus v Amadio.

Factors indicating whether defendant ought to have known

Improvidence is so apparent on face of transaction may lead a need to enquire whether weaker
party is labouring under special disadvantage. Commercial Bank v Amadio

In absence of of actual knowledge of special disadvantage, the requisite knowledge or at least

need to make enquiry can be derived from improvidence of transaction. Micarone v Perpetual
Trustees Australia

If a weaker party is a long time customer of the financier can influence the financiers duty
National
Aus Bank v Nobile

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 Exact disadvantage need not be known, if facts are drawn to the attention of the stronger party
that indicates the improvidence of the transaction or the weaker partys inability to meet the terms
of the agreement Elkogairi v Permanent Trustee Co Ltd

The inadequacy of consideration, although not essential, will act as important evidence to

substantiate a claim that that the defendant had knowledge and took advantage of the special
disability that the innocent had CBA v Amadio.

UNCONSCIENTIOUS EXPLOITATION
The defendant must have taken advantage of the special disability, Bridgewater v Leahy
i.e entering into an unfair bargain through either inadequate consideration or unfair terms.
The subjective intention of the person is not relevant; the fact that the transaction did exploit the
innocent person is sufficient Bridgewater v Leahy

REBUTTAL
Once weaker party proves special disadvantage, burden shifts to stronger party to prove it was
not behaving unconscientiously Blomley v Ryan
Independent advice

If the weaker party receives independent advice, it is likely that the stronger party will be found to
not have acted unconscionably Australia and New Zealand Banking Group Ltd v Alirezai.

The advice must come from a person who is completely independent of the dominant party, the
advice must be from a person will knowledge of all relevant facts and the advice must be
meaningful Inche v Shaik Allie Bin Omar.

DEFENCES
Laches may act as a defence Whereat v Duff.
The measurement of delay is from the time that the plaintif became informed of the facts which
the right to relief is founded Baburin v Baburin.

Can <party> get remedy under equity?

REMEDIES:

The primary remedy for unconscionable dealing and undue influence is recision of the contract,
even where restitutio in integrum is difficult to achieve Alati v Kruger

Equity will not allow a party to be unjustly enriched so the plaintif may have to pay restitution
Dunbar Bank plc v Nadeem

LIMITS
If representee elects to affirm contract, right to rescind is lost. Once election is made it cannot be
retracted: Elections to affirm must be made in clear terms to be efective. Sargent v ASL
Developments Ltd.

Recision may not be possible where it afects a third party Fenton v Kenny
Election to rescind should be exercised within reasonable time of representee having opportunity
to prove/disprove statement: Leaf v International Galleries
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 In equity, rescission will be granted where parties can be substantially restored to their precontractual positions: Vadasz v Pioneer Concrete (SA) Pty Ltd
Once contract is fully performed, unable to rescind Seddon v North Eastern Salt Company.

Can <party> seek remedy under statute?

STATUTE (EXPANDED REMEDIES)

A corporation must not, in trade or commerce, engage in conduct which is unconscionable
within the meaning of unwritten law from time to time s20 ACL
i.e this provision is designed to allow more remedies than available through common law/ equity
Conduct outlined in s21 is not covered by this provision s20(2) ACL

SEE MISLEADING AND DECEPTIVE CONDUCT FOR RULES REGARDING IN TRADE

OR COMMERCE & REMEDIES
Can <Party> seek remedy under statutory unconscionable conduct?

UNCONSCIONABLE CONDUCT IN CONNECTION WITH GOODS

OR SERVICES
A person must not, in trade or commerce, in connection with:
The supply or possible supply of goods or services to a person (other than a listed public
company) s21(1)(a) ACL
The acquisition or possible acquisition of goods or services from a person (other than a listed
public company) s21(1)(b) ACL
engage in conduct that is, in all the circumstances, unconscionable.

This section will only apply to conduct by corporations

It is the intention of the Parliament that:
This section is not limited by the unwritten law relating to unconscionable conduct s21(4)(a) ACL
This section is capable of applying to a system of conduct or pattern of behaviour, whether or not
a particular individual is identified as having been disadvantaged by the conduct or behaviour
s21(4)(b) ACL
S21 is not limited to conduct that falls within the ambit of of conduct which would attract a remedy
under s20 ACCC v CG Berbatis Holdings
In connection with supply of goods means where it accompanies, goes with or is involved with
the supply of goods. Monroe Topple & Associates v Institute of Chartered Accountants

Unconscionable means that actions show no regard for conscience or are irreconcilable with
what is right or reasonable. Hurley v McDonalds Australia
Will need to involve either a deliberate or reckless act. ACCC v 4WD Systems
Mere negligence is not sufficient. ACCC v Allphones
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 Unreasonableness or unfairness is not sufficient without moral fault. ACCC v 4WD Systems
It will be relevant whether advantage is taken of an innocent individual who, though not deprived
of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in
his or her best interests. ACCC v Lux

SEE ABOVE FOR RULES REGARDING IN TRADE OR COMMERCE

MATTERS TAKEN INTO ACCOUNT BY THE COURT

SUPPLY

Without limiting the matters to which the court may have regard for the purpose of determining
whether a person (the supplier) has contravened section 21 in connection with the supply or
possible supply of goods or services to a person (the customer), the court may have regard to
The relative strengths of the bargaining positions of the supplier and the customer s22(1)(a) ACL
Whether, as a result of conduct engaged in by the supplier, the customer was required to comply
with conditions that were not reasonably necessary for the protection of the legitimate interests of
the supplier s22(1)(b) ACL
Whether the customer was able to understand any documents relating to the supply or possible
supply of the goods or services s22(1)(c) ACL
Whether any undue influence or pressure was exerted on, or any unfair tactics were used
against, the customer or a person acting on behalf of the customer by the supplier or a person
acting on behalf of the supplier in relation to the supply or possible supply of the goods or
services s22(1)(d) ACL
The amount for which, and the circumstances under which, the customer could have acquired
identical or equivalent goods or services from a person other than the supplier s22(1)(e) ACL

The extent to which the suppliers conduct towards the customer was consistent with the
suppliers conduct in similar transactions between the supplier and other like customers s22(1)(f)
ACL
The requirements of any applicable industry code s22(1)(g) ACL
The requirements of any other industry code, if the customer acted on the reasonable belief that
the supplier would comply with that code s22(1)(h) ACL
The extent to which the supplier unreasonably failed to disclose to the customer:
Any intended conduct of the supplier that might afect the interests of the customer s22(1)(i)
(i) ACL

Any risks to the customer arising from the suppliers intended conduct (being risks that the
supplier should have foreseen would not be apparent to the customer s22(1)(i)(ii) ACL
If there is a contract between the supplier and the customer for the supply of the goods or services:
The extent to which the supplier was willing to negotiate the terms and conditions of the contract
with the customer; s22(1)(j)(i) ACL
The terms and conditions of the contract s22(1)(j)(ii) ACL
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 The conduct of the supplier and the customer in complying with the terms and conditions of the
contract; s22(1)(j)(iii) ACL
Any conduct that the supplier or the customer engaged in, in connection with their commercial
relationship, after they entered into the contract; s22(1)(j)(iv) ACL
Without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a
term or condition of a contract between the supplier and the customer for the supply of the goods
or services s22(1)(k)(iv) ACL
The extent to which the supplier and the customer acted in good faith. s22(1)(l) ACL

ACQUISITION
Without limiting the matters to which the court may have regard for the purpose of determining
whether a person (the acquirer) has contravened section 21 in connection with the acquisition or
possible acquisition of goods or services from a person (the supplier), the court may have regard
to:
The relative strengths of the bargaining positions of the acquirer and the supplier s22(2)(a) ACL
Whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply
with conditions that were not reasonably necessary for the protection of the legitimate interests of
the acquirer s22(2)(b) ACL
Whether the supplier was able to understand any documents relating to the acquisition or
possible acquisition of the goods or services; s22(2)(c) ACL
Whether any undue influence or pressure was exerted on, or any unfair tactics were used
against, the supplier or a person acting on behalf of the supplier by the acquirer or a person
acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods
or services s22(2)(d) ACL
The amount for which, and the circumstances in which, the supplier could have supplied identical
or equivalent goods or services to a person other than the acquirer s22(2)(e) ACL

The extent to which the acquirers conduct towards the supplier was consistent with the acquirers
conduct in similar transactions between the acquirer and other like suppliers s22(2)(f) ACL
The requirements of any applicable industry code s22(2)(g) ACL
The requirements of any other industry code, if the supplier acted on the reasonable belief that
the acquirer would comply with that code s22(2)(h) ACL
the extent to which the acquirer unreasonably failed to disclose to the supplier
Any intended conduct of the acquirer that might afect the interests of the supplier s22(2)(i)(i)
ACL

Any risks to the supplier arising from the acquirers intended conduct (being risks that the
acquirer should have foreseen would not be apparent to the supplier) s22(2)(i)(ii) ACL
If there is a contract between the acquirer and the supplier for the acquisition of the goods or
services
The extent to which the acquirer was willing to negotiate the terms and conditions of the contract
with the supplier s22(2)(j)(i) ACL
The terms and conditions of the contract s22(2)(j)(ii) ACL
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 The conduct of the acquirer and the supplier in complying with the terms and conditions of the
contract s22(2)(j)(iii) ACL
Any conduct that the acquirer or the supplier engaged in, in connection with their commercial
relationship, after they entered into the contract s22(2)(j)(iv) ACL
without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally a
term or condition of a contract between the acquirer and the supplier for the acquisition of the
goods or services s22(2)(k) ACL
the extent to which the acquirer and the supplier acted in good faith. s22(2)(l) ACL

BARGAINING STRENGTH

The court will take into account the individuals demeanour in court and ability to express himself
or herself when determining vulnerability. ACCC v Lux
Court will give considerable weight to the fact an individual is illiterate and unable to understand
commercial matters in depth. ACCC v Lux
None of the guidelines is regarded as being conclusive of unconscionability. ACCC v Radio
Rentals
i.e Customer was intellectually impaired. No unconscionable conduct because the terms were no
different to those required of other customers.
s21 does not apply to conduct engaged in relation to financial services. s131A ACL

Remedies may also be applied for people who are involved in conduct

s2(1) sets out definition.

SEE MISLEADING AND DECEPTIVE CONDUCT FOR REMEDIES

UNFAIR CONTRACT TERMS

APPLIES ONLY TO CONTRACTS ENTERED INTO COMMENCEMENT OF ACT ON 1 JAN 2011
OR CONTRACTS RENWED AFTER COMMENCEMENT. s16 Fair Trading Act 1989 (Qld)
If a contract was created after commencement but has option to purchase entered into prior to
agreement, will depend on terms of option and whether it is considered conditional contract or
unequivocal ofer to sell. Braham v Walker
A term of a consumer contract is void if:
The term is unfair; and s23(1)(a) ACL
The contract is a standard form contract. s23(1)(b) ACL
Is contract a consumer contract?

CONSUMER CONTRACT
A consumer contract is a contract for
A supply of goods or services s23(3)(a) ACL
A sale or grant of an interest in land s23(3)(b) ACL
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 To an individual whose acquisition of the goods, services or interest is wholly or predominantly

for personal, domestic or household use or consumption. s23(3)(c) ACL
Under s23, the subjective intention of the consumer governs whether the acquisition of goods
services or land were for for personal, domestic or household purposes. Therefore if a small
business purchases goods that are ordinarily personal or domestic in nature, like a toaster, if they
use it at home s23 will count, but if used at business, not count.
The contract continues to bind the parties if it is capable of operating without the unfair term.
s23(2) ACL

Individual means a natural person s2B Acts Interpretation Act 1901 (Cth)
i.e a corporate buyer cannot rely on this section
GOODS
Includes
Ships, aircraft and other vehicles s2(a) ACL

Animals, including fish s2(b) ACL

Minerals, trees and crops, whether on, under or attached to land or not s2(c) ACL
Gas and electricity s2(d) ACL
Computer software s2(e) ACL

Second-hand goods s2(f) ACL

Any component part of, or accessory to, goods. s2(g) ACL

SERVICES
Includes
any rights (including rights in relation to, and interests in, real or personal property), benefits,
privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce;
and s2(a) ACL
without limiting paragraph (a), the rights, benefits, privileges or facilities that are, or are to be,
provided, granted or conferred under
a contract for or in relation to the performance of work (including work of a professional nature),
whether with or without the supply of goods; s2(b)(i) ACL
a contract for or in relation to the provision of, or the use or enjoyment of facilities for,
amusement, entertainment, recreation or instruction; s2(b)(ii) ACL
a contract for or in relation to the conferring of rights, benefits or privileges for which

remuneration is payable in the form of a royalty, tribute, levy or similar exaction; s2(b)(iii) ACL
a contract of insurance s2(b)(iv) ACL
a contract between a banker and a customer of the banker entered into in the course of the
carrying on by the banker of the business of banking; s2(b)(v) ACL
Any contract for or in relation to the lending of money; s2(b)(vi) ACL

but does not include rights or benefits being the supply of goods or the performance of work under
a contract of service. s2 ACL
Financial services are excluded s131A ACL

Is contract a standard form contract?

STANDARD FORM CONTRACT

Scott Thompson

 If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be

a standard form contract unless another party to the proceeding proves otherwise. s27(1) ACL
In determining whether a contract is a standard form contract, a court may take into account such
matters as it thinks relevant, but must take into account the following:
Whether one of the parties has all or most of the bargaining power relating to the transaction

s27(2)(a) ACL
- There is an imbalance in bargaining power where a party is at a special disadvantage in dealing
with the other party due to illness, ignorance, inexperience, impaired faculties, financial need or
other circumstances which afect his ability to conserve his own interests. Blomley v Ryan
EXAMPLES
- Buyer is elderly. Anthony v Vaclav
- Buyer is unable to speak or understand english ACCC v Dukemaster
- First home buyer Astrilla v Director of Consumer Affairs Victoria
Whether the contract was prepared by one party before any discussion relating to the transaction
occurred between the parties s27(2)(b) ACL
Whether another party was, in efect, required either to accept or reject the terms of the contract
(other than the terms referred to in section 26(1)) in the form in which they were presented s27(2)
(c) ACL

Whether another party was given an efective opportunity to negotiate the terms of the contract
that were not the terms referred to in section 26(1) s27(2)(d) ACL
- Just because a party has legal advice does not mean they have had opportunity to negotiate. UK
Housing Alliance v Francis
- The fact a contract mat be part oral and partly constituted by terms on a website, does not
prevent it from being standard form. Director of Consumer Affairs Victoria v Backloads
Whether the terms of the contract (other than the terms referred to in section 26(1)) take into
account the specific characteristics of another party or the particular transaction s27(2)(e) ACL
Any other matter prescribed by the regulations. s27(2)(f) ACL

EXEMPT CONTRACTS

Unfair contract terms do not apply to

Contract of a marine salvage or towage s28(a) ACL
charter-party of a ship s28(b) ACL
contract for carriage of goods by ship s28(c) ACL

a contract that is a constitution of a company managed investment scheme or other kind of body
s28(d) ACL
A contract of insurance is not capable of being made the subject of relief under any other
Commonwealth Act or state Act. s15 Insurance Contracts Act 1984

Is there any exemption?

EXCLUDED TERMS

Unfair terms provisions apply to all terms of a standard-form consumer contract but do not apply to
terms to the extent to which they
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Define the main subject matter of the contract s26(1)(a) ACL

Whether a term is one that defines the main subject matter of the contract will be a question of
fact dependent upon the subject matter of contract. Director General for Fair Trading v First
National Bank
Regard must be had to what a reasonable person in the position of the consumer would attribute
to the term. Office of Fair Trading v Ashbourne Management Services
A term necessary to give efect to supply is also exempt
i.e buy something on the internet delivered by post. Cant challenge term because post is needed
to send you goods
Set the upfront price payable under contract s26(1)(b) ACL
Upfront price is payable under a consumer contract is the consideration that:
Is provided or is to be provided for the supply, sale or grant under the contract s26(2)(a) ACL
Is disclosed at or before the time the contract is entered into s26(2)(b) ACL
But does not include any other consideration that is contingent on the occurrence or non

occurrence of a particular event. s26(2)(c) ACL

Upfront fee does NOT include taxes and charges
Are required or expressly permitted by law of commonwealth or state or territory s26(1)(c)

Is the term unfair?

UNFAIR TERM
A term of a consumer contract is unfair if:
It would cause a significant imbalance in the parties rights and obligations arising under the
contract s24(1)(a) ACL

It is not reasonably necessary in order to protect the legitimate interests of the party who would
be advantaged by the term s24(1)(b) ACL
It would cause detriment (whether financial or otherwise) to a party if it were to be applied or
relied on. s24(1)(c) ACL
In determining whether a term of a consumer contract is unfair under subsection (1), a court may
take into account such matters as it thinks relevant, but must take into account the following:
The extent to which the term is transparent s24(2)(a) ACL
The contract as a whole. s24(2)(b) ACL
A term is transparent if the term is:
Expressed in reasonably plain language; and s24(3)(a) ACL
Legible; and s24(3)(b) ACL
Presented clearly; and s24(3)(c) ACL
Readily available to any party afected by the term. s24(3)(d) ACL
A term which is drafted without legalese diction will not stop it being unfair. Director of Consumer
Affairs v Trainstation Health Clubs
Court will consider broad business practices in the relevant industries

SIGNIFICANT IMBALANCE
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Requirement is met if term is so weighted in favour of the supplier to tip the parties rights and
obligations under the contract significantly in their favour. Director General of Fair Trading v First
National Bank
Significant means balance must be substantial Jetstar Airways v Free
Mere fact a contract has terns favourable to the buyer will not negate existence of unfair term.
Kucharski v Air Pacific Ltd (General)
FACTORS
Whether there are other terms in favour of consumer Director General of Fair Trading v First
National Bank

Whether term is easy to understand

Whether meaning of term is readily apparent on reading of contract

Where a term is subject of genuine negotiation, it will not be unfair. Director of Consumer Affairs
Victoria v Langley
Was term brought to attention of consumer
Is term common in particular industry Director of Consumer Affairs Victoria v Backloads.com
Is term essential aspect of bargain
Does term follow common law position?
Is the term one listed as an example of unfair terms

TERM IS REASONABLY NECESSARY TO PROTECT

LEGITIMATE INTERESTS
The term must be proportionate to the potential risk and the interest sufficiently outweighs the
detriment to the consumer Director of Consumer Affairs Victoria v AAPT
Court is most likely not going to find a term reasonable if there is adequate common law or
statutory provision

TERM WILL CAUSE FINANCIAL OR NON FINANCIAL

DETRIMENT

Just because a suppliers conduct is unconscionable, immoral or unfair should not be determinative
of whether a term is unfair, but it will be influential Director General of Fair Trading v First National
Bank
Actual detriment is not required, potential detriment is sufficient
No requirement to quantify the detriment or loss as material
The detriment will have to be to a party to the contract
Disadvantaged party has onus
Failure to provide evidence will likely result in failure of claim

EXAMPLES OF UNFAIR TERMS

Without limiting section 24, the following are examples of the kinds of terms of a consumer contract
that may be unfair:
a term that permits, or has the effect of permitting, one party (but not another party) to
avoid or limit performance of the contract s25(1)(a) ACL

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i.e terms that exclude liability for product defects or failure to perform for seller
a term that permits, or has the effect of permitting, one party (but not another party) to

terminate the contract; s25(1)(b) ACL

If clause allows for termination for minor inconsequential breaches it is unfair. Director of
Consumer Affairs Victoria v AAPT
i.e contract allowed for immediate termination for non payment, changing of address etc
- Restrictions on right to terminate will also be held to be unfair. Director of Consumer Affairs
Victoria v Matrix Pillates & Yoga
i.e membership was non refundable and unable to be cancelled during minimum term
A term that penalises, or has the effect of penalising, one party (but not another party) for
a breach or termination of the contract s25(1)(c) ACL
A clause that stipulates a payment of an extravagant and unconscionable amount of money for
default (a penalty) will most likely be held to be unfair. Kowalczuk v Accom Finance
Provisions that provide no refunds or deposits paid under a contract in event of termination by
consumer can be held to be unfair. Kucharski v Air Pacific
A term that permits, or has the effect of permitting, one party (but not another party) to

vary the terms of the contract; s25(1)(d)

A term which allows a party to change significant rights or obligations without notice or agreement
of the consumer or other limitations is most likely unfair, especially if there is no notice
Director of Consumer Affairs Victoria v Trainstation Health Clubs
i.e clause allowed for health club operator to unilaterally change location of club within 12km radius
of original location
Term will only be exempt when
- The circumstances are clearly expressed in the contract
- it is reasonably necessary to protect legitimate interests of the party using the term
- Whether the consumer had the right to cancel the contract without penalty if change is detrimental
A term that permits, or has the effect of permitting, one party (but not another party) to
renew or not renew the contract; s25(1)(e) ACL
Clause that fails to provide consumer with notice of renewal or forces customer to accept renewal
is likely to be unfair
Ability for one party to vary price without corresponding right of termination by the other
party 25(1)(f) ACL
Any term which allows a contract an unfettered right to vary or increase the upfront price is unfair
A term that permits, or has the effect of permitting, one party to vary the upfront price
payable under the contract without the right of another party to terminate the contract
s25(1)(f)
A term that permits, or has the effect of permitting, one party unilaterally to vary the
characteristics of the goods or services to be supplied, or the interest in land to be sold or
granted, under the contract; s25(1)(g) ACL

Clauses that allow a trader to substitute goods of a similar or same quality may be unfair when
consumer is not able to reject the goods or cancel the contract. Director of Consumer Affairs
Victoria v AAPT
i.e term allowed AAPT to vary a supplier or its products or charges from time to time without notice.
Held to be unfair as it would allow things like reduction of calls person could make etc
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 A term that permits, or has the effect of permitting, one party unilaterally to determine
whether the contract has been breached or to interpret its meaning; s25(1)(h)

A term which allows a business to reserve a right to determine whether it has performed its
contractual obligations may be unfair. Director of Consumer Affairs Victoria v Backloads.com.au
i.e Clause provided discretion to supplier to perform contract after variation to the quote given was
a term that permitted trader to unilaterally determine if contract was breached
A term that limits, or has the effect of limiting, one partys vicarious liability for its agents;

s25(1)(i) ACL
Term which limits liability for conduct of agents is form of exclusion clause and may be unfair
A term that permits, or has the effect of permitting, one party to assign the contract to the
detriment of another party without that other party s consent; s25(1)(j) ACL
A clause which allows a trader to assign existing contracts to another party are likely to be unfair if
they cause detriment. Director of Consumer Affairs Victoria v Backloads.com.au
i.e term allowed anyone on behalf of whom its acting to collect all charges and payments from
clients to contractor. Assigned rights to unidentified party
A term that limits, or has the effect of limiting, one party s right to sue another party;
s25(1)(k)
Terms that limit parties right to sue, reverse onus of proof, limiting remedies or requiring customer
to sue in foreign jurisdiction may be unfair. DOCAV v Backloads
i.e clause specified law of ACT to be applied in contract when parties lived in Victoria
A term that limits, or has the effect of limiting, the evidence one party can adduce in
proceedings relating to the contract; s25(1)(l)

A term that imposes, or has the effect of imposing, the evidential burden on one party in
proceedings relating to the contract; s25(1)(m)
A clause is unair if it imposes significant burden to adduce evidence which is only known to a
trader, creating imbalance in parties rights and causes significant detriment to position of
consumer. DOCAV v Backloads
A term of a kind, or a term that has an effect of a kind, prescribed by the regulations.
s25(1)(n)
An implied term is unlikely to be unfair. Baybut v Eccle Riggs Country Park

What remedy can <party> get under statute

REMEDIES

SEE MISLEADING AND DECEPTIVE CONDUCT

DECLARATION
A court may, on the application of a party to a consumer contract or on the application of the
regulator, declare that a term of such a contract is an unfair term. s250(1) ACL
Must be standard from contract s250(2) ACL
Remainder of contract will remain if it is capable of operating without the term.

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 If a regulator seeks a declaration, it will void the term found in all existing contacts between
consumer and trader even though they are not parties to the claim. Office of Fair Trading v
Foxtons

COMPENSATION & ORDERS

Without limiting section 237(1), 238(1) or 239(1), the orders that a court may make under any of
those sections against a person (the respondent) include all or any of the following:
An order declaring the whole or any part of a contract made between the respondent and a person
(the injured person) who sufered, or is likely to sufer, the loss or damage referred to in that
section, or of a collateral arrangement relating to such a contract:
To be void s243(a)(i) ACL
If the court thinks fitto have been void ab initio or void at all times on and after such date as is
specified in the order (which may be a date that is before the date on which the order is made);
s243(a)(ii) ACL
An order varying such a contract or arrangement in such manner as is specified in the order
s243(b) ACL

An order refusing to enforce any or all of the provisions of such a contract or arrangement;
s243(c) ACL
An order directing the respondent to refund money or return property to the injured person;
s243(d) ACL

A compensation order may be made at any time within 6 years after the day on which:
If subsection (1)(a)(i) appliesthe cause of action that relates to the conduct referred to in that
subsection accrued s237(3)(a)
if subsection (1)(a)(ii) appliesthe declaration referred to in that subsection is made. s237(3)(b)

INJUNCTION

A court may grant an injunction, in such terms as the court considers appropriate, if the court is
satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would
constitute:
A contravention of a provision of Chapter 2, 3 or 4 s232(1)(a) ACL
Attempting to contravene such a provision; or s232(1)(b) ACL
Aiding, abetting, counselling or procuring a person to contravene such a provision; or s232(1)(c)
ACL

Inducing, or attempting to induce, whether by threats, promises or otherwise, a person to

contravene such a provision; or s232(1)(d) ACL
Being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a
person of such a provision; or s232(1)(e) ACL
Conspiring with others to contravene such a provision. s232(1)(e) ACL
The court may grant the injunction on application by the regulator or any other person. s232(2)
ACL

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 Subsection (1) applies in relation to conduct constituted by applying or relying on, or purporting to
apply or rely on, a term of a consumer contract that has been declared under section 250 to be
an unfair term as if the conduct were a contravention of a provision of Chapter 2. s232(3) ACL

VOID CONTRACTS
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RESTRAINTS OF TRADE
A restraint of trade is a promise by one party, the covenanter to give up a freedom that he or she
would otherwise enjoy in relation to his or her trade for be benefit of another party, the
covenantee Amoco Aust Pty Ltd v Rocca Bros Motor Engineering

Is the restraint void?

GENERAL RULE
All restraints of trade are prima facie void Nordenfelt v Maxim Nordenfelt Guns and Ammunition
Co Ltd
However this presumption may be rebutted by showing it was justified by demonstrating that it is
Reasonable in the interests of the parties
Reasonable in the interests of the public Buckley v Tutty
The doctrine of restraints of trade does not apply where the restraint in question has become
normal and accepted commercial contractual or conveyancing practice. Esso Petroleum v
Harpers Garage

ONUS OF PROOF
Onus is on the party trying to rely on the restraint to show it is reasonable, before shifting to
covenanter to show it is unreasonable from the perspective of the public interest Amoco Aust Pty
Ltd v Rocca Bros Motor Engineering

TIME OF ASSESSMENT
Validity of restraint must be decided as at the date of the agreement imposing it. Linder v
Murdochs Garage
Court will take into account of probabilities of what might have occurred rather than what actually
occurred. Linder v Murdochs Garage

REASONABLE INTERESTS OF THE PARTIES

Reasonableness involves two issues

1. Whether the covenantee has a legitimate interest
2. Whether the restraint goes no further than is necessary to protect the interest. Amoco v Rocca
Brothers

LEGITIMATE INTEREST
Whether the coventee has a legitimate interest depends upon the nature of the contract.
Informax International v Clarius

FACTORS
The scope of the restraint in terms of both area and duration
- The wider the restraint in geographical terms and longer the restraint in terms of time, more likely
restraint will be unreasonable. Butt v Long
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 The activities covered by the restraint

- If the restraint purports to restrict activities that are unrelated to the covenants legitimate interest,
the restraint is more likely to be unreasonable. Nordenfelt v Max
The relative bargaining power of the parties.

- It will be relevant but not conclusive if the covenantee is in a stronger bargaining position than the
covenantor. A Schroder Music Publishing Co v Macauley
- Court will be more lenient if the parties are on equal footing. Amoco v Rocca Brothers
- But this is not conclusive Cremoata v Rice Equilization Association
The consideration in exchange for restraint
- The court may be prepared to show greater restraint than it might otherwise do when the
covenantor receives a large amount of consideration for the coevenant. Amoco v Rocca Brothers
Context of the contract

- The setting in which the contract takes place may be a legitimate consideration. Bridge v
Deacons
i.e two solicitors who were aware of the laws of restraints
- Where a party sought to be restrained has received legal advice at time of entry, considerable
weight will be given to reasonableness. Seven Networks v Warburton
- In a business sale, the covenantees legitimate interest will be to protect the goodwill of business
from competition by the seller. Informax
- In employment contract, franchise or partner, the legitimate interest will be to prevent the
solicitation of clients or customers. Peters American Delicacy v Patricias Chocolate and Candles
- Or confidential information, trade secrets, business processes and products. Bacchus Marsh
Concentrated Milk Co v Joseph Nathan
HOWEVER
- The possibility of exploitation of existing relationship will only arise where the provision of services
was as such to establish a client connection Birdanco Nominees v Murray
i.e Restraint was over receptionist, more likely over someone like a senior partner
- There needs to be a personal relationship or attachment that is such as to enable the employee
to control the customers business as a valuable asset. Arthur Murray Dance Studios of Cleveland
v Witter
- Restraint will be appropriate when the employee has become the human face of the business.
Koops Martin Financial Services v Reeves
- Legitimate interest may be found in ensuring the stability of a business or industry. Queensland
Co-operative Milling Association v Pamag Pty Ltd
- Ensuring competition between sporting teams is a legitimate reason. Buckley v Tutty
- An employer may have a legitimate interest in staf connection and not having employees
poached. Cactus Imaging v Peters
- A purchaser of capital equipment does not have a legitimate interest in preserving competition
from a later purchaser of similar equipment from same supplier. ICT v Sea Containers
- A promise by a client not to be poached by a contractor in competition is not a legitimate interest.
Informax International v Clarius Group
- General skill and knowledge obtained by employees cannot be restrained. Drake Personnel v
Bedison
- Step or ladder restraints are void for uncertainty Austra Tanks v Running

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INTERESTS OF THE PUBLIC

Where a restraint goes beyond what is reasonably necessary to protect the interest of the parties,
it is contrary to the public policy that underlies the whole doctrine and is void. Nordenfelt v Maxim
Nordenfelt Guns and Ammunition Co Ltd

A restraint may still satisfy the first test but not satisfy the interests of the public. C Covenience
Stores v Wayville Plaza Retirement
i.e covenant restricted land from being used as petrol station, public interest needs to encourage
competition in retail sale of petrol

Is the term in breach of s45 of the ACL

STATUTE
A corporation shall not:
make a contract or arrangement, or arrive at an understanding, if:
The proposed contract, arrangement or understanding contains an exclusionary provision s45(2)
(a)(i) ACL

A provision of the proposed contract, arrangement or understanding has the purpose, or would
have or be likely to have the efect, of substantially lessening competition s45(2)(ii) ACL

Give efect to a provision of a contract, arrangement or understanding, whether the contract or

arrangement was made, or the understanding was arrived at, before or after the commencement of
this section, if that provision:
Is an exclusionary provision s45(2)(b)(i)
Has the purpose, or has or is likely to have the efect, of substantially lessening competition.
s45(2)(b)(ii)
For the purposes of this section, competition, in relation to a provision of a contract, arrangement
or understanding or of a proposed contract, arrangement or understanding, means competition in
any market in which a corporation that is a party to the contract, arrangement or understanding or
would be a party to the proposed contract, arrangement or understanding, or any body corporate
related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or
services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods
or services. s45(3) ACL

For the purposes of the application of this section in relation to a particular corporation, a provision
of a contract, arrangement or understanding or of a proposed contract, arrangement or
understanding shall be deemed to have or to be likely to have the efect of substantially lessening
competition if that provision and any one or more of the following provisions, namely:
The other provisions of that contract, arrangement or understanding or proposed contract,
arrangement or understanding s45(4)(a)
The provisions of any other contract, arrangement or understanding or proposed contract,
arrangement or understanding to which the corporation or a body corporate related to the
corporation is or would be a part s45(4)(b)
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together have or are likely to have that efect.

Part IV of the competition and consumer act does not apply to certain types of contractual
provisions including
a provision in a contract of service or for services restricting the work in which a person may
engage during or after termination of the contract s51(2)(b) ACL

A provision in a contract of partnership relating to competition between the partnership and a

partner before or after cessation of the partnership. s51(2)(d) ACL
A provision in the contract for the sale of a business that is solely for the proteciton of the
purchaser in respect of the goodwill of the business. s51(2)(e) ACL

GO TO SEVERANCE

ATTEMPTS TO OUST COURT JURISDICTION

At common law, it is contrary to public policy to destroy the right to submit questions of law to the
courts through contract and these contracts are void. Baker v Jones
HOWEVER
A clause requiring parties to be referred to arbitration will be upheld. Scott v Avery

PREJUDICIAL TO STATUS OF MARRIAGE

A contract prejudicial to the status of marriage is void. Lowe v Peters
ie contract restraining a person on who they can and cannot marry

ILLEGAL CONTRACTS
No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act.
Holman v Johnson

Is the contract illegal by statute?

ILLEGALITY BY STATUTE
The question of whether a contract is prohibited by statute is one to be decided on the specific
statute and all the facts of the particular case, with little assistance being obtained from any
examination of the terms of other statutes or judicial considerations of them. Fitzgerald v FJ
Leonhardt

EXPRESS PROHIBITION
A contract can be rendered illegal with an express statutory provision against the making of the
contract whether or not the provision was absolute or subject to some qualification such as the
issue of a licence. Nelson v Nelson, Baird v Magriplis
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Baird: i.e defendant leased land to two Greek men who were naturalised but failed a dictation test.
Statute said it was not lawful to sell parcel of land to an alien who had not obtained certificate
saying they could read and write and any agreement was null and void. Contract voided
A statute may prohibit the formation of a contract by forbidding some element in its formation
such as agreeing, ofering, selling or undertaking. Burmic v Goldview

IMPLIED PROHIBITION
A contract can be rendered illegal with an express statutory provision, not of the formation of the
contract, but the doing of a particular act, in which case an agreement that the act be done is
treated as impliedly prohibited by statute and illegal Nelson v Nelson
The efect of legislation must be derived from its language and objective. St Johns Shipping
Corporation v Joseph Rank

FACTORS
A court may be reluctant to imply a prohibition of the contract as formed or performed where the
legislation provides in a detailed way for sanctions and remedies of its terms. Elvidge v BCG
Constructions

The efect of finding invalidity upon innocent members of the public will be an additional
important consideration when determining whether the statute impliedly prohibits the contract.
Yango Pastoral v First Chicago Australia
I.e Plaintiff lent defendant sum of money secured by mortgage and guarantees. Defendant
defaulted. Debtor and guarantors argued that the mortgage and guarantees were illegal based on
the Banking Act 1959. Implied illegality would render all contracts made or performed in course of
business illegal
The fact that a statute was passed for the protection of public safety may be another test for
whether parliament intended the section to render a contract illegal as formed or performed.
Pretorius Pty Ltd v Muir & Neil
I.e plaintiffs sold wholesale therapeutic substances in breach of Therapeutic Goods and Cosmetics
Act. Object of legislature was to forbid selling of substances to protect public
Whether the purpose of the penalty is merely to increase revenue. Cope v Rowlands

PUBLIC POLICY ASSOCIATED WITH STATUTE

A contract can be rendered illegal where there was a contract not directly contrary to the provisions
of the statute by reason of any express or implied prohibition in the statute, but which are
associated or in furtherance of illegal purposes. Nelson v Nelson

Is contract contrary to public policy?

CONTRARY TO PUBLIC POLICY

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IF ONE OF THESE ALWAYS ILLEGAL AS FORMED. THERE IS NO WAY

THESE CONTRACTS CAN BE PERFORMED LEGALLY
A court will not enforce a contract where the plaintif is basing their cause of action upon an
immoral or illegal act. Fitzgerald v FJ Leonhardt

CONTRACT TO COMMIT CRIME OR TORT

A contract to commit a crime is contrary to public policy and is illegal. Cowan v Milbourn
I.e contract was for hire of room for blasphemous lectures. Blasphemy was a crime in 1867
Also extends to a contract to commit a statutory ofence. Farrow Mortgage v Edgar
It is immaterial whether the criminal ofence is one created by common law or statute. Electric
Acceptance v Doug Thorley Caravans
Knowledge of the law contravened is not necessary. Waugh v Morris
The commission of the ofence must be more than incidental or subsidiary to the foundation or
central purpose of the contract. Neal v Ayers
A contract to deliberately commit a tort will be illegal. Apthorp v Neville & Co
I.e contract was to publish a manuscript concerning actions for breach of promise in marriage
which defamed former fiance
A contract to deliberately infringe a fiduciary duty is illegal Thorby v Golberg

CONTRACT TO DEFRAUD REVENUE

A contract to defraud the general public will be illegal. Miller v Karlinski

I.e parties drafted a lease in two separate documents in order to defraud revenue authorities
A contract requiring a taxpayer to sign a tax return which he or she did not believe to be correct is
illegal. Aed Oil v Puffin
A contract to reduce stamp duty without an element of fraudulent conduct is not illegal.
Boulevarde Developments v Toorumba Pty

CONTRACTS PREJUDICIAL TO THE ADMINISTRATION OF

JUSTICE
Contracts which have a tendency to afect the afect the administration of justice are contrary to
public policy. A v Hayden
I.e ASIO agents damaged property and disturbed patrons of Melbourne hotel. Agents wanted to
rely on confidentiality clause to avoid prosecution from Vic police. Contract would interfere with
administration of justice.
A contract designed to stifle prosecution of a PUBLIC nature is against the administration of
justice. Clegg v Wilson
Where the ofence is of a private nature, a valid contract may be made to pay compensation in
return for the victim promising not to pursue any prosecution for the ofence. Kerridge v Simmons
I.e Female plaintiff and defendant had falling out and woman threatened to prosecute for criminal
defamation. Two parties entered into an agreement in which the defendant would pay money in
return for plaintiff agreeing to cease all contact and withdraw action. Contract upheld

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 Contracts involved in maintenance are illegal (Where a person gives assistance or

encouragement to a party to litigation by a person who has no interest in proceedings and who
has no recognised motive for provision of support. Clyne v NSW Bar Association

Contracts involving Chaperty are illegal ( Where a stranger to the proceedings agrees to maintain
the action return for a share in the proceedings or subject matter of the action) Magic Menu
Systems v AFA Facilitation

CONTRACTS CORRUPTING PUBLIC OFFICIALS

A contract will be regarded as being contrary to public policy where it interferes with the
impartial judgment of a public official. Wilkinson v Osborne
I.e NSW MPs agreed to use their influence to purchase property belonging to agents client
in exchange for a fee
Actual corruption need not be shown Horne v Barber

CONTRACTS PREJUDICIAL TO NATIONAL SECURITY OR

FOREIGN RELATIONS

Contracts contrary to national security are illegal. A v Hayden

A contract entering into a country at war with Australia is illegal Ertel Bieber Co v Rio Tinto
A contract entering into a person voluntarily residing in a country at war with Australia or enemy
occupied territory is illegal Anglo-Czechoslovak & Prague Credit Bank v Janssen
A contract assisting a person to contravene the laws of a friendly state is illegal. Forster v Driscoll

CONTRACTS PROMOTING SEXUAL IMMORALITY

Contracts involving immorality are contrary to public policy. H v H

I.e Spouse swapping agreement, offended contemporary standards and held invalid
Contracts that have the purpose of the continuation of unmarried cohabitation are no longer
contrary to public policy. Andrews v Parker
Contracts involving prostitution and contracts that facilitate it will no longer be considered illegal
Barac v Farnell
I.e receptionist was able to enforce employment contract for brothel

is the contract illegal as formed or as performed?

Contracts may be expressly prohibited by statute (as formed) or as performed. Re Mahmoud and
Ispahani
i.e contracts into for the capture of stray dogs are prohibited - AS FORMED
Contracts for the capture of stray dogs are prohibited in the absence of a licence - AS FORMED
illegal as formed = EX TURPI CAUSA
illegal as performed = RESTITUTION
Was there a way the contract could have been performed without infringing the statute
IF YOU CAN DO WHATEVER IT IS YOU WANT TO DO LAWFULLY, BETWEEN TIME YOU MAKE
CONTRACT AND WHEN YOU DO IT = ILLEGAL AS PERFORMED
Look at what is required to comply with statute

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What is the effect of illegality?

EFFECT OF ILLEGALITY
EX TURPI CAUSA: NO ACTION ON CONTRACT
No action may be brought in the event of a breach of contract
No damages may be recovered Adelaide Development Company v Pohlner
Amounts due under contract cannot be recovered. Adelaide Development Company v Pohlner
Contract cannot be terminated for breach. Gerraty McGavin
Specific performance will not be ordered. Robertson v Admans
An injunction compelling observance of a negative promise will not be ordered A v Hayden
Equitable remedies will be refused DJE Constructions v Maddocks

RESTITUTION

CAN ONLY BE ARGUED WHERE THERE IS A TOTAL FAILURE OF CONSIDERATION AND IT

IS NOT EX TURPI CAUSA
Restitution may be allowed to avoid unjust enrichment if it does not defeat or frustrate the policy of
the law. Equuscorp v Haxton
FACTORS
Whether the statutory purpose of the class of persons of whom the claimant seeks recovery
The position of the claimant
Whether the claimant is an innocent party involved in the illegality Equuscorp v Haxton

I.e Money advanced under an illegal loan contract, illegality prevents creditor from suing debtor on
the contract for the return of the loaned monies. Contrary to coherence in law if creditor could
recover same money on the basis that the debtor would be unjustly enriched otherwise.
Title will on good or money will pass under a contract notwithstanding the illegality. Taylor v
Chester

The rights of a third party will not be afected unless he or she is a willing participant in the
illegality. Cannon v Bryce
The defendant will end up in a better position because no action may be brought to recover the
money or property even in the event of a total failure of consideration. Berg v Sadler
If a certain part of a contract is illegal, the illegality may taint a wider scheme.
Question is whether the illegal dealing was an integral part of the whole arrangement entered into
which could not have been performed without that illegal dealing. DJE Constructions v Maddocks

EXCEPTIONAL CASES WHERE REMEDY IS ALLOWED

CLAIMANT MISTAKEN
IGNORANCE OF FACTUAL CIRCUMSTANCES
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 If a contract is on its face lawful, if only one of the parties intended to break the law, the party who
did not intend to break the law may be granted relief in law or equity. Archbolds (Freightage)
Spanglett

Where a contract is ILLEGAL AS PERFORMED buy one party enters into the contract with an
intent to perform it unlawfully, the parties will not be equally at fault. Only the guilty party will be
prevented from obtaining relief and the innocent party may take advantage of remedies
Ambassador Refridgeration v Trocadero Building and Investment Co
If party should have known what they did was illegal, this rule will not apply. Ambassador
Refrigeration

MISTAKE

If a person enters into an illegal contract under mistake of fact, relief will be granted. Radford v
Ferguson
I.e plaintiff recovered money paid to builder who falsely claimed he was registered
If mistake was common to both parties which results in illegal contract, both may recover Oom v
Bruce
I.e Plaintiff was able to recover insurance premium for cargo where both parties were unaware the
contract was illegal due to outbreak of war

STATUTORY PROTECTED CLASS

The parties will be regarded as being equally at fault where the statute that renders the contract
illegal is designed to protect particular class of persons of which plaintif is a member. Kirri Cotton
Co v Dewani
Plaintiff paid money to sublease flat, contrary to rent restriction ordinance. Sublease executed,
plaintiff went into possession. Plaintiff still recovered money despite it being illegal because neither
party knew, but plaintiff less at fault because duty was on person who received the money, and
statute provided no right of recovery.
It is insufficient if the statute is passed not for the protection of a particular group defined as a
class, but for general public as a whole. South Australian Cold Stores v Electricity Trust of SA

FRAUD, OPPRESSION, UNDUE INFLUENCE

An action for misleading and deceptive conduct under s18 ACL or fraudulent misrepresentation
may be pursued even though a contract is illegal. Brownbill v Kenworth Truck Sales
Extends to equitable fraud such as a breach of fiduciary duty. Re Ferguson
I.e company lent money to director to purchase own shares which was illegal under corporations
law. Director owes a duty to the company and the company was not at fault so could recover
money
Parties will not be equally at fault where the plaintif has been subject to oppression or undue
influence or duress when entering into a contract. Williams v Bailey
Father coerced into agreement to stifle prosecution against son

ILLEGAL PURPOSE NOT CARRIED

Mere existence of unlawful intent in transaction is irrelevant where no part of the intent has
manifested. Payne v McDonald
Relief may be granted where the plaintif repented before any performance has taken place.
Payne v McDonald
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 The plaintif must give notice of their repentance either expressly, impliedly or through conduct.
Palyart v Leckie
The repentance must not be the result of the illegal purpose being frustrated by others.
Alexander v Rayson

If a contract is so grossly immoral, the court will not entertain it even if there is repentance
I.e Contract to murder third person and the hitman confesses
Repentance isnt possible where contract is prohibited by statute. George v Greater Adelaide
Land Development Co

A plaintif may rescind the contract even where there has been partial performance provided the
illegal purpose is still wholly executory. Clegg v Wilson

HOWEVER
It is essential the illegal purpose is not fully or substantially carried out. Kearly v
Thompson

FLEXIBLE RELIEF

Courts should not refuse to enforce legal or equitable rights simply because they arose out of an
unlawful purpose unless two situations exist
1. The statute discloses that those rights should be unenforceable in all circumstances.
2.
- The sanction of refusing to enforce those rights is not disproportionate to the seriousness of the
unlawful conduct.
- The imposition of a sanction is necessary having regard to the terms of the statute to protect its
objects or policies
- The statute does not disclose any intention that the sanction and remedies contained in the
statute are to be the only legal consequences of a breach of the statute or the frustration of its
policies. Fitzgerald v FJ Leonhardt Pty Ltd
Water bores were drilled without necessary licence because property owner was supposed to
obtain the licence and would obtain windfall benefit of free bores because denying remedy is
disproportionate to seriousness of offence

ACTIONS INDEPENDENT OF CONTRACT

A persons right to recover property or money paid under an illegal contract will not be prohibited
through other action. Bowmakers v Barnet Instruments
I.e Defendant on sold tools without a licence to dispose of them making contract illegal. However,
defendant had immediate right to possession and was successful in Conversion.

HOWEVER
This rule will not extend to goods that were of such a kind that it was unlawful to deal with them at
all. Gollan v Nugent
I.e If someone onsells your weed, you cant sue in conversion.
EXAMPLES

If a plaintif has title in goods, he or she is entitled to bring an action in tort for any interference
with those goods. Singh v Ali
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 An action may be brought against a collateral contract, notwithstanding the main contract is illegal

Strongman v Sincock
I.e Architect entered into contract with builder and architect assured builder had all licences when
he didnt. Building contract was unenforceable, assurance was collateral contract and was
breached.
HOWEVER

If the consideration for the collateral contract is illegal, so is the collateral contract.

SEVERANCE
Can the offensive part of the contract be severed?
Where a contractual provision is illegal or void, it may be severed and the remaining part of the
contract enforced. Thomas Brown & Sons v Fazal Deen
i.e Plaintiff deposited gold and gems to a company but wartime regulations said gold must be
deposited in Commonwealth Bank. Items disappeared, Plaintiff won because the bailment itself
was not tainted by illegality and divisible. Failure to protect items = breach of contract.
The nature of the illegality will be a factor in deciding whether severance is appropriate in a
particular case. McFarlane v Daniell
Severance may be refused where the illegality is calculated or oppressive. Horwood v Millars
Timber and Trading Co

GENERAL RULE
Question of severance depends upon the parties and must satisfy two tests
Severance must be achieved by taking out the objectionable parts, but the court must not rewrite
the contract. Esso Petroleum v Harpers Garage
Severance must change the extent, but not the kind of contract. McFarlane v Daniell

FORMS OF SEVERANCE
SEVERANCE OF OBJECTIONABLE PART OF TERM
Would a term be enforceable if it was more narrowly drafted, if so part of the term will be severed.
SST Consulting services v Rieson
HOWEVER
The court will not rewrite the promise or destroy the substance of what was agreed. Atwood v
Lamont

Severance will be permitted where the covenant can be divided into distinct promises. Bacchus
Marsh Concentrated Milk v Joseph Nathan
Question is whether the covenant is not a single covenant but a combination of several
covenants. Atwood v Lamont
Contract said the plaintiff must not engage in the trade or business of a tailor, dressmaker, general
draper, milliner, hatter etc Plaintiff argued covenant could sever existing professions after tailor.
Court said no, was designed for protection of entire business and too wide therefore voided.
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If there is a step or ladder restraint, it is taken to reflect intention of the parties unless it is construed
as merely an attempt to abdicate to the court the determination of the intended scope of the
particular covenant. Peters Ice Cream v Todd
The court should not sufer the oppressive burden of having to consider too many permuations
Sear v Invocare Australia

SEVERANCE OF OBJECTIONABLE PROMISE

An ofending term may be severed where it does not form the whole or substantial part of the
consideration promised by one of the parties. OLoughlin v OLoughlin
The court WILL NOT rewrite the promise if it means the substance of what was agreed will be
destroyed Atwood v Lamont
Severance will only be permitted where it was the intention of the parties that the contract would
still work without the term. Brooks v Philip Burn Trustee
A restrictive covenant of ancilliary kind that operates for benefit of party seeking to enforce it may
be one aspect of the circumstances relevant to the wider question of whether the ofending
provision is so material and important in the whole agreement that it should be inferred that the
parties did not intend their contract to operate without it. C Convenience Stores v Wayville Plaza
Retirement

SEVERANCE OF ASSOCIATED DEALING

If the ofending part of a contract cannot be separated from the remainder of the contract and the
contract is one part of a larger enterprise, the question will be whether the ofending contract can
be severed from the rest of the enterprise. Electric Acceptance v Doug Thorley Caravans
Where two or more contracts are so closely connected that they regards them as being a single
commercial transaction, severance will not be possible and the entire enterprise will fail Amoco
Australia v Rocca Bros Motor Engineering
Rocca and Amoco had number of agreements. Rocca to built petrol station with equipment from
Amoco, Rocca leased land to Amoco, Amoco subleased land back to Rocca for 15 years and
would promise to purchase all petrol, oil and other petroleum exclusively from Amoco. Neither
restraint or sublease could be severed as they were too linked. Whole enterprise void.

STATUTORY SEVERANCE
Nothing afects the validity or enforceability of a contract where a provision substantially lessens
competition under s45 in so far as the ofending provision is severable. s4L Competition and
Consumer Act 2010 (Cth)
The act contain its own detailed scheme with dealing with contravension and there is no need to
determine whether severance is possible under common law. SST Consulting v Rieson.

DEFENCE OF ILLEGALITY
Court will usually not entertain a defence of illegality which has not been pleaded unless
The contract is on its face illegal
The plaintif cannot prove his or her case without also proving that he or she is claiming under an
illegal contract
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 Exceptionally, when a fact comes to light in the course of the trial that the contract sued upon is
illegal, in which event the court must be satisfied that all relevant facts are before the court.
Knowles v Fuller

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