Bester v perpetual trustee co ltd

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LAWS104 EXAM NOTES

KEY CASES ............................................................................................................................................................... 2 1 CAPACITY ......................................................................................................................................................... 16 Minors – Common Law ................................................................................................................................................................................. 16 Minors – Statute Law ..................................................................................................................................................................................... 17 Mental Disability ............................................................................................................................................................................................. 17 2 THE REQUIREMENT OF WRITING ...................................................................................................................... 18 Contracts For Sale Of Land .......................................................................................................................................................................... 18 Enforcement In Equity Of Contracts Unenforceable At Law ........................................................................................................ 19 3 EXPRESS TERMS ............................................................................................................................................... 19 Representations And Terms ....................................................................................................................................................................... 20 Incorporation Of Terms By Signature .................................................................................................................................................... 21 Incorporation By Notice ............................................................................................................................................................................... 22 Incorporation By Prior Dealings .............................................................................................................................................................. 22 Parol Evidence Rule ....................................................................................................................................................................................... 23 Collateral Contract .......................................................................................................................................................................................... 24 4 IMPLIED TERMS ............................................................................................................................................... 24 Written Contracts ............................................................................................................................................................................................ 25 Informal, Unwritten Contracts .................................................................................................................................................................. 26 Implication Of Terms By Statute .............................................................................................................................................................. 26 Terms Implied By Common Law .............................................................................................................................................................. 26 Implication By Custom And Usage ........................................................................................................................................................... 26 Implied Terms Of Good Faith ..................................................................................................................................................................... 27 5 CONSTRUCTION OF EXCLUSION CLAUSES ......................................................................................................... 27 General Approach To Construction Of Exclusion Clauses ............................................................................................................. 27 Exclusion Clauses And Negligence ........................................................................................................................................................... 27 Other Relevant Principles ............................................................................................................................................................................ 28 Exclusion Clauses And Legislation ........................................................................................................................................................... 28 6 VITIATING FACTORS ......................................................................................................................................... 28 Misrepresentation .......................................................................................................................................................................................... 28 Misleading or Deceptive Conduct ............................................................................................................................................................ 31 Mistake ................................................................................................................................................................................................................ 33 Duress .................................................................................................................................................................................................................. 34 Unconscionability ........................................................................................................................................................................................... 35 Undue Influence ............................................................................................................................................................................................... 37 Unjust Contracts .............................................................................................................................................................................................. 39 7 DISCHARGE ...................................................................................................................................................... 39 Agreement .......................................................................................................................................................................................................... 39 Performance ...................................................................................................................................................................................................... 41 Breach .................................................................................................................................................................................................................. 42 Frustration ......................................................................................................................................................................................................... 45 8 ILLEGALITY ....................................................................................................................................................... 46 Statutory Illegality .......................................................................................................................................................................................... 46 Common Law Illegality ................................................................................................................................................................................. 47 Effect Of Illegality ............................................................................................................................................................................................ 49 Alternative Causes Of Action ...................................................................................................................................................................... 49 9 PRIVITY ........................................................................................................................................................... 49 The Privity rule ................................................................................................................................................................................................ 49 Privity and consideration ............................................................................................................................................................................ 49 ‘Exceptions’ to Privity ................................................................................................................................................................................... 51

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KEY CASES Topic Case Name Principle Capacity: When contracts a binding on a minor

McLaughlin v Darcy

A contract between two parties for which one or more is a minor is binding if the contract is for a necessity of life or a beneficial service

Capacity: Not necessity

Bojczuk v Gregorcewicz

Minor moving to Australia was not a necessary and the contract was unenforceable. She did not have to pay B back.

Capacity: Necessity

Scarborough v Sturzaker

17 year old bought a bicycle and couldn’t pay for it. The bicycle was found to be a necessary, the boy was obliged to pay for it

Capacity: Beneficial contract of service

Hamilton v Lethbridge

Lawyer clerkship (article clerk) agreed to be trained by master solicitor and when he was trained he would not set up his own practice within 50 miles of the master solicitor’s practice. Master solicitor took it to court to enforce restraint of trade, when article clerk broke it. The article clerk had ‘capacity’ because it benefitted him more than restrained him, thus it was enforceable.

Capacity: Mental capacity/ Ratification

Hart v O’Connor

A contract made by a party of unsound mind – but who appears to be of sound mind – with another party (having no knowledge of the unsoundness) is valid. There is no unfairness that can be imputed to the party having no knowledge of the other’s incapacity. The Court also noted that if a person lacking mental capacity subsequently regains capacity (even temporarily) they may ratify a contract entered into when insane.

Capacity: Drunkenness/ Ratification

Matthews v Baxter

Baxter, while drunk, agreed at an auction to purchase a property. Once sobriety returned affirmed the contract that had been made while drunk. Sometime later he had a change of mind and he sought to rescind the contract, arguing that he lacked capacity to enter the contract by reason of intoxication. Such a contract is not void but merely voidable. If the drunken party, upon coming to his senses, ratifies the contract, he is bound by it.

The requirement of writing: Requirements to form a binding document

Pirie v Saunders

The plaintiff relied upon a note of the defendant's instructions written by the defendant's solicitor. The note referred to the property, and specified the rent and duration of the lease, but there was no statement of the commencement date, and the note contemplated the formulation of further terms. Document was not recognisable as a note or memorandum of a concluded agreement. The note in this case is merely a notation of instructions for the preparation of a draft lease for submission to the other party. They are not indicative of the existence of any binding contract. Document must identify parties to the contract and essential terms of the contract and cannot contemplate the formulation of further special conditions.

The requirement Khoury v The payment of money by is not a sufficient act of part

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of writing: Part performance

Khouri

performance.

The requirement of writing: Part performance

McBride v Sandland

Requirements for Part Performance: 1. The acts could only have been done for the purposes of

fulfilling the alleged agreement - there can be no other reason why they were performed.

2. The party performing the acts must have been doing so in reliance on the alleged agreement and the other party must have permitted the acts to be done

3. The act must be done by a party to the agreement 4. There was a completed agreement 5. The acts must have been done in compliance with the

terms of th e oral agreement In this case the promise in did not give rise to a contract as alleged by Sandland and there were no acts of part performance.

Express terms: Difference between a term and a representation

Ellul and Ellul v Oakes

The Elluls purchased a house from Oakes. In doing so they relied on a statement contained in a real estate agent’s listing form that the property was sewered. This form had been signed by Oakes. The property was not sewered. Elluls claimed damages for breach of contract. The representation was made to induce a purchaser to buy the property and was successful. This provides prima facie evidence that the representation was a term. It was then for Oakes to demonstrate it was not a term. This was not done successfully.

Express terms: Difference between a term and a representation

Oscar Chess v Williams

Customer went to a car dealer to trade in his car, thinking it was a 1948 model. The dealer later realised it was a 1939 car and it was worth much less, and sued Williams for breach of contract. The statement was not a term and was an innocent misrepresentation. If a representation is made in the course of dealings for the very purpose of inducing the other party to act upon it, and actually inducing him to act upon it, by entering into the contract, that is prima facie ground for inferring that it was intended as a warranty (term). Suffice it that it was intended to be acted upon and was in fact acted upon.

Express terms: Parol evidence rule (partly oral) contract)

SRA v Heath Outdoor Ltd

The parol evidence rule has 'no operation until it is first determined' that all the terms of the contract are in writing. The parol evidence rule is persuasive and the evidentiary burden is on the party wishing to rebut the claim that the whole contract was not in writing.

Express terms: Representation or term

J J Savage and Sons v Blakney

The trial judge: the representation was neither a term of the contract nor a collateral warranty. The statement was an estimate only, not an unequivocal promise of a future speed. The Full Court: reversed the decision, holding that it was a collateral warranty. High court: The words indicated ‘an expression of opinion’ only and are only a representation.

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Express terms: Collateral contracts

Hoyt's v Spencer Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd

Hoyts argued that a collateral contract operated alongside the main contract which prohibited the Defendant from terminating the agreement, through consideration for him entering the agreement, Spencer promised Hoyts he will not terminate the agreement during the term. Collateral contracts involve the entrance into a contract as consideration for a promise.

o Argument: However, this also means that a collateral contract cannot contradict a contractual right or obligation in the original contract. It also needs to be made before or at the time of formation.

Express terms: Incorporation by notice (timing)

Thornton v Shoe Lane Parking

The carpark relied on an exclusion clause. It was not an express term as the offer was accepted before Thornton had notice of the terms. The customer would be bound by those terms as long as they are sufficiently brought to his notice beforehand. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late. The contract has already been made.

Express terms: Exception to the signature rule (document not known to be a contract)

Curtis v Chemical Cleaning and Dyeing Co

The dry cleaner misrepresented the effects of the exclusion clause on a receipt (inferring it only applied to parts of the dress). By failing to draw attention to the width of the exemption, the assistant created the false impression that the exemption only related to the beads and sequins, and that it did not extend to the material of which the dress was made...it was a sufficient misrepresentation to disentitle the cleaners from relying on the exemption, except in regards to beads and sequins.

Express terms: Incorporation by notice (reasonableness)

Parker v South Eastern Railway Co

Parker and Gabell checked their luggage on a train. They were given tickets with a number on one side, and small print on the other side, stating that the railway would not be responsible for bags lost worth more than £10. Both respondents had received the tickets before but had never read the small print. Both respondents were successful; If a plaintiff does not see writing that contains "conditions" of the contract and no reasonable effort was made to ensure he was aware of it, then he is not bound by its terms; if he does see it and either does not read it, or does not think that it contains conditions, then he will be bound by its terms so long as the defendant delivered it in a manner that gave him reasonable notice that there were conditions on the ticket. If a party actually knows that the document or sign contains contractual terms then they are bound irrespective of whether they have read it

Implied terms: Whether it exists

Codelfa Construction v State Rail

Codelfa did non-stop excavation work for the state rail authority and received nuisance complaints from local residents and asked for an injunction to stop the work at night

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Authority of New South Wales

and on Sundays. The court concluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which it was assumed to be. An injunction was imposed and thus the project took longer than initially agreed. Codelfa argued that there was an implied term that they would be paid for extra hours. The court was in favour of the state rail authority because it was not obvious that this would have been the agreement and it would have been more likely that other negotiations would have been made if it was expected to happen, resulting in an express term about the subject matter • The more detailed and comprehensive the contract, the

less ground there is for arguing the existence of an implied term

• Term must be so obvious that it ‘goes without saying’

Implied terms: Terms implied in law

Byrne v Australian Airlines Ltd

Terms implied in fact: • The test for terms implied in fact (formal contracts) is

stated in BP Refinery Pty Ltd v Hastings Shire Council • In more informal contracts, the test comes from Hawkins v

Clayton The term here was not at all so obvious that it goes without saying, or necessary for the operation of the contract. It therefore cannot be implied in fact. Terms implied in law: • Terms implied by law are implied in all contracts of a

particular class For a term to be implied in law, it must be: • Applicable to a defined category of contracts. • Suitable in a way which allows it to be implied in all

contracts in that category. • The test of necessity is often used - a term can only be

implied if its omission would entail that the rights of the parties under the contract were significantly diminished.

No necessity here, and therefore no implied term.

Implied terms: Implication by custom and usage

Con-Stan Industries of Australia P/L v Norwich Winterthur Insurance (Australia) P/L

Con-Stan argued that there was an implied term in the insurance contract that it was only required to pay the premiums to the broker, and that paying the broker discharged the debt for the insurance premiums. There was no implied term of such in the insurance industry. To establish a term implied by custom or usage we need to keep 3 things in mind 1. Whether a custom exists or not is a question of fact 2. Evidence to establish a custom requires a heavy onus of

proof – it must be so well known and acquiest in that the parties must have reasonably been able to assume it was a term

3. Not possible if an express term in a contract contradicts the

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custom

Construction of exclusion clauses: General principles

Darlington Futures v Delco

1. An exclusion clause should be constructed according to its natural and ordinary meaning, read in light of the contract as a whole, thereby giving weight to the context in which it appears including the nature and object of the contract

2. The contra preferentem principle will be applied so that in cases of ambiguity the clause will be construed against the person relying on the exclusion clause

Construction of exclusion clauses: Four corners rule

Australia Sydney City Council v West

West left his car in a car park and liability for any loss was excluded. Thief broke into the car and stole the car, going up to the ticket office and claiming he lost his ticket and they let him out. West sued. The high court ruled that the clause was incorporated but it did not exclude liability because it was outside the scope of the contract (if it was a valet and the car was damaged while being moved it would be within the four corners of the contract) but to allow a thief to take off with the car in contravention of the rule to show a ticket, it was way outside the scope and the court interpreted the clause against the interest of the carpark.

Elements of Misrepresentatio n: Statement of fact/future intention

Balfour & Clark v Hollandia

Promises or assurances as to the future are not statements of fact for the purposes of misrepresentation.

Elements of Misrepresentatio n: Statement of fact/future intention

Edgington v Fitzmaurice

Company decided to seek public investments and put out a prospectus stating that if you invest in them they will use those funds to expand the business in certain ways, but they used that money to pay off existing debts. The company collapsed, and one investor sued based on the fact that a misrepresentation was made about how the money would be used. It was a statement of future intention. On appeal, it was held that the statement was actually a statement made in fact

Elements of Misrepresentatio n: Statement of fact/opinion

Smith v Land and House Property Corp

Smith was selling his hotel and he made a statement that the hotel has a most desirable tenant. This was not true and the property corp rescinded the contract for misrepresentation. It was a misrepresentation, because the facts on which the opinion was based were known only to Smith and not the purchaser

Elements of Misrepresentatio n: Principles relating to inducement

Redgrave v Hurd

When the representee has a chance to check whether the statement was true but did not, then the purchaser may still argue that he relied on the representation

Misrepresentatio n: Deceit in Torts

Derry v Peek

An action of deceit will only stand in a court when a plaintiff can show not only misrepresentation, but also that defendants knew they would be unable to follow through with their representations.

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Misrepresentatio n: Negligent Misstatement in Torts

Esso Petroleum v Mardon

Future predictions can be warranties if they are given with the intent to induce another party to enter into a contract, and they are relied upon in the decision to enter into the contract The Hedley Byrne principle also applies, and that damages can be awarded on that basis. This is a negligent misrepresentation because Esso is in a special relationship with Mardon and they are in a position to have special knowledge. Mardon relied on this information which was made negligently, and he suffered loss. Therefore he is entitled to recover damages.

Misleading or deceptive conduct

Henjo Investments v Collins Marrickville

Silence may constitute misleading or deceptive conduct where it is a duty to reveal relevant facts. No remedy under common law as no statement was made, but there was a remedy under s 18 of the ACL

Misleading or deceptive conduct

Taco Co of Australia v Taco Bell Pty Ltd

Full court mentioned guidelines to succeed an action for misleading and deceptive conduct (conduct only needs to be A cause, not THE cause.

Misleading or deceptive conduct

Butcher v Lachlan Elder Realty Pty Ltd

The issue was whether by distributing the brochure which did not correctly identify the boundary of the property, amounted to misleading or deceptive conduct. The exclusion clause in the brochure was considered and provided: “All information contained herein is gathered from sources we believe to be reliable. However we cannot guarantee it’s [sic] accuracy and interested persons should rely on their own inquiries”. It was held that the agent did not engage in misleading or deceptive conduct. The agent’s conduct was viewed as a whole. The agent did no more than communicate what the vendor was representing, without adopting or endorsing it. Tt would be plain to a reasonable purchaser that the agent was not the source of the information which was said to be misleading. The agent did not purport to do anything more than pass on information supplied by another or others.

Common Mistake

McRae v Commonweal th Disposals Commission

In a case where both parties had equal knowledge as to the existence of the subject matter, and it turned out to be false, then it would justify the implication of a condition precedent. In that case, the contract would be void for the failure of the condition precedent, and parties would be restored to their original position. However, in a case where only one party has the knowledge, and the other simply relies on what the first party tells it, than there could be no condition precedent. The first party promises or guarantees the existence of the subject matter and will be in breach if it does not exist.

Common Mistake

Associated Japanese Bank (Int) v Credit du Nord

Japanese bank entered into a contract with Bennett for the sale of machinery to then be leased back. Credit du Nord provided a guarantee for the lease payments. The machines didn’t actually exist and then Bennett declared bankrupt. Credit du Nord argued there was a common mistake of fact

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Common Mistake Leaf v International Galleries

If there is a mistake as to an attribute of the subject matter such as quality or value, then there is no common mistake

Common Mistake: In equity

Solle v Butcher

Common mistake has to be an important matter, there has to be not fault on either of the parties, and it has to be unconscionable to not void the contract

Common Mistake: In equity

Great Peace Shipping Ltd v Tsavliris (Internationa l) Ltd

Overturned the Solle ruling, however it is still sometimes used in NSW Solle v Butcher – common mistake has to be an important matter, there has to be not fault on either of the parties, and it has to be unconscionable to not void the contract

Mutual Mistake

Raffles v Wichelhaus

If one version is more reasonable then the court will enforce that version instead of make the contract void

Unilateral Mistake: Identity of a party

Cundy v Lindsay

The contract was void if there was a mistake as to the identity of the party when they are contracting at a distance

Unilateral Mistake: Identity of a party

Lewis v Avery

The contract is only voidable. A distinction was made where there was a mistake as to the identity of the parties, but they were dealing face to face, not at a distance. Lewis advertised his care and a buyer introduced himself as a famous actor, Richard Green. He bought the car and gave Lewis a cheque on the basis that this was the famous actor. The cheque was dishonoured and then the fraudster sold the car to Averay. Lewis argued that the sale between himself and the fraudster was void for unilateral mistake. Averay argued that it was voidable, and he was an innocent third party who had received the car before the initial contract was rescinded. Where a transaction is face-to-face then it can’t be void ab initio, it is voidable only. Averay was protected. Austrlian law follows this distinction

Unilateral Mistake: The identity of the parties

Shogun Finance Ltd v Hudson

The House of Lords was split 3/2 with the majority upholding that there should be a distintion between face-to-face transactions that a voidable and distance transactions that are void.

Unilateral Mistake: About the terms of the contract

Taylor v Johnson

Mrs Johnson was selling her property. There were 10 acres and she granted an option to Taylor to purchase the land. He exercised the option and they agreed for the sale of land. Both the option and the contract for sale of land showed the purchase price as $15000, however Mrs Johnson insisted that this was a mistake and it was supposed to be $15000 per acre. She refused to carry out the contract so Taylor applied for specific performance for the land to be sold to him. There was evidence that Taylor has deliberately taken steps to prevent Mrs Johnson from realising there was the error. High Court held that it could not be void at common law, without duress, misrepresentation, subject to the signature rule. However it was voidable in equity because of the unconscionable conduct of the purchaser who took steps to hide the price from the

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vendor.

Unilateral Mistake: Non est factum – it is not my deed

Petelin v Cullen

Petelin was selling his property, but was only semi literate. He granted an option to Cullen, which ran out and Cullen requested an extension on the option. He sent him $50 and asked him to sign a document that he said was a receipt. But in reality it was confirmation to extend the option. Petelin argued that he was mistaken as to the fundamental nature of the document that he signed. The High Court rendered the signature as inoperative. However they restricted non est factum to parties with very limited capacity.

Duress: To the person

Barton v Armstrong

Barton (well known businessman) and Armstrong (member of the upper house) had a dispute over a property shares deal. Barton accused Armstrong of threatening to kill him. The court held that although Barton had other good reasons to enter into the deal, he was subject to what he perceived as death threats, it was voidable at his request.

Duress: Economic

Crescendo Management Pty Ltd v Westpac Banking Corp

A husband and wife were directors of Crescendo management and they had business loans from Westpac, however the business was troubled. The husband and wife decided to sell their personal home and purchase a new one. Westpac refused to release the money for the purchase of their personal home unless they signed papers to secure further security for their business. They then went to court seeking to have those documents set aside on the basis that they signed those documents on the basis of duress. The court held that the pressure by Westpac was illegitimate as there was no legal basis, however there was no economic duress because the facts of the case showed that the pressure had no impact on their decisions to execute those securities, they would have had to sign them anyway.

Duress: Economic

North Ocean Shipping Co v Hyundai

Price for sale was fixed in the US dollar. The dollar was devalued by 10% which meant that Hyundai would receive 10% less than what they bargained for. They then insisted that the price would be increased otherwise they would abandon the whole project. North Ocean Shipping were prepared to negotiate, however Hyundai wouldn’t accept it so they agreed to the extra payment as they had t deliver a ship to another party and didn’t want to break those contractual relations. They then sued Hyundai on the basis that the money was extracted due to duress. The court held that a threat to breach a contract could amount to economic duress. There was no legal basis for the additional money that Hyundai insisted upon. However North ocean lost the right to rescind as they had already completed the contract.

Undue influence: Class 2B

Johnson v Buttress

Undue influence is established on the facts of the case although there is no special party at law. There was no special relationship at law however the nature of Buttress proved that he relied on Johnson and Johnson could not rebut that.

Undue influence: Third parties

Yerkey v Jones

A wife guaranteed a loan for her husband that she didn’t want to. It fell through and she lost her property as a result. There was no undue influence between a husband and wife, but she was protected through a special equity for providing surety for her husbands debts without fully understanding the effects of

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his transaction

Undue influence: Third parties

Garcia v National Australia Bank Ltd

High court relied on thinking in Yerkey v Jones. Husband and wife were both business people, but the wife had little understanding of her husbands business. His business had financial trouble and he wanted the wife to sign mortgages over her share in their matrimonial home. His business collapsed and relied on the guarantee. The high court set aside her share of the matrimonial home based on Yerkey but limited it. It states that where the wife does not understand the full effect of the transactions and is a volunteer and the other party to the transaction (the husbands bank) should reasonably know that the wife relies on the husband and they take no reasonable steps to ensure the wife understands the extent of the transaction, then it can be set aside. i.e. lendors should ensure that wives (and other parties in similar relationships) seek independent advice

Unconscionability : General Law

Blomley v Ryan

Ryan was a sheep farmer and alcoholic. Blomley wated to buy Ryan’s property and they took advantage of his weakness, supplied him with alcohol and got him to sell his property for a very low price. The contract was set aside

Unconscionability : General Law

Commercial Bank of Australia v Amadio

Locked in the Blomley principle. A son took advantage of his elderly parents and they signed over their properties for their son’s business. The bank had acted unconscionably. This case established the 3 elements that are required: 1. One party is suffering a special disadvantage or

disability 2. The other party is aware of the disability 3. The other party exploited that disability

Unconscionability : General Law

Louth v Diprose

A middle-aged solicitor became infatuated with a woman. She convinced him that she was going to kill herself unless her financial situation was solved. He transferred some property of his to her. Later their relationship broke down and he argued that he was taken advantage of and wanted his property back. The court agreed – on the facts of the case, the woman has taken advantage of his emotional dependence on her and the transfer was set aside

Statutory Unconscionability

ACCC v Berbatis Holdings Pty Ltd

Just because one party has more bargaining power than the other, it doesn't mean it is acting unconscionably. Furthermore, even if it manages to use this power to procure a bargain which is much better for them than the other side, this is not unconscionable - it is merely a hard bargain. It is only when a special disability is taken advantage of that a party is said to have acted unconscionably. In this case, the Appellants had no special disadvantage or disability

Discharge by performance: Duty to cooperate on new time

Electronic Industries Ltd v David Jones Ltd

An agreement was subject to significant delays and David Jones said the contract was breached. The time for completion was uncertain but the high court held that the contract had been varied and David Jones had in fact breached the contract

Discharge by performance: Exception to strict porformance –

Cutter v Powell

A seaman agreed to serve on a ship and was to be paid when he comes back. After 7 weeks he Cutter died, and his widow sued for 7 weeks worth of payment. Powell refused to pay on the basis that the contract wasn’t completed. The court upheld

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severable and divisible contracts

this argument. It was an entire contract with payment on full only on completion of the entire agreement

Discharge by performance: Exception to strict performance - Part performance

Sumpter v Hedges

A builder did half his job and left materials behind. The owner finished building the house and used the materials that were left. Because the builder had abandoned his work, the owner had no choice but to finish, so they did not have to reimburse the builder for the work done, but had to pay for the materials used

Discharge by performance: Accord and satisfaction

Hoenig v Isaacs

Contract for the renovation of an apartment with payments for successful installments and a final payment upon completion. There was a defect in the work (book shelves the wrong size) so the client refused to pay the final instalment. The renovator sued. It was an entire contract involving work (labour) which can be distinguished from other types of entire contracts. The subject matter of the contract is physical work instead of goods. Lord Denning held that it would be wrong for the worker to receive nothing for their work, and the necessary question was whether the innocent party has been denied the essential benefit of the contract (where the work is half done or substantially different from what it was supposed to be). If they have not been deprived then damages are available. The amount that had to be paid to fix the problem could be deducted from the contract price.

Discharge by agreement: accord and satisfaction

McDermott v Black

For unilateral discharge to be effective, there needs to be accord and satisfaction

Discharge by agreement:

Commonweal th v Verwayen

The commonwealth has waived their rights as they had publicly done so for a period of time relating to a certain event

Discharge by breach (intermediate terms)

Hongkong Fir Shipping Co v Kawasaki Kisen Kaisha

Kawasaki hired a ship from Hong Kong Fir and expected it would be seaworthy (in a term). There were many problems and delays for repairs and maintenance. Kawasaki terminated the contract because of the breach and argued it was a condition. Kawasaki argued it was not a condition. Court of appeal held that it was a wrongful termination. Lord Justice Diplock stated it was not a warranty or a condition – it is somewhere in the middle. It is not immediately obvious as either a condition or warranty – it will depend on the nature of the breach.

Discharge by breach (intermediate terms)

Kompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd

Affirmed the HongKong Fir Shipping Co case in Australia. Breach of a condition gives rise to the right to terminate. The contract stands until the innocent party elects to terminate it. The innocent party may choose to continue the contract for the benefit of both parties, and may be able to enforce the contract by order of specific performance. There was a term stating that the vessel was ‘in every way fitted for cargo service’, and was breached due to incompetent and insufficient engine room crew. Resulted in significant

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delays and inconvenience to the charterers, who terminated for breach. Appeal court held that the breach did not justify termination of the contract.

Discharge by breach (anticipatory breach)

Foran v Wight

Contract for sale of land. Purchaser paid 10% deposit. Settlement was to take place after 6 months (contract stipulated that it is a condition). The vendor had problems registering his easement and gave notice to the purchaser 2 days prior to the agreed date, and asked for more time. The purchaser refused – he was also arranging his loan but had not yet finalised it and got it approved, so he called it off with the bank. Following the due date, it was terminated because of the vendor’s actual breach (essential condition). The vendor contested the termination, got the easement completed and gave a notice to complete. The purchaser refused and the vendor then purported to terminate the contract for breach. The high court found in favour of the purchaser – (1) when the vendor gave notice it was an anticipatory breach which amounted to repudiation and gave the purchaser the right to terminate immediately. (2) Any right that the purchaser had to terminated for anticipatory breach lapsed 2 days later and was replaced with a right to terminate for actual breach –the purchaser validly exercised this right. (3) The vendor was estopped from raising the point about the purchaser’s lack of readiness because the vendors conduct made it unnecessary for the purchaser to prove he was ready, willing and able, but had to show that he would have been in a position to complete the contract in the 2 days time.

Discharge by breach (restrictions on the right to terminate)

Sargent v ASL Development s Ltd

If you affirm a contract then you lose the right to terminate

Discharge by breach (relief against forfeiture)

Tanwar Enterprises Pty Ltd v Cauchi

Completion time came around and the parties were not ready to settle. A further time was agreed upon (time of the essence). The purchaser then said they needed one extra day and was then ready, however the vendor terminated and took the deposit. The high court said that was valid because they were protecting their valid right

Discharge by frustration (effect of frustration)

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour

Contract between English and polish company. Polish company paid deposit and English company worked on a machine. During the war the English company stopped work on the machine – contract was frustrated. According to common law – the English company would not have to continue work and the Polish company would not have to pay any more but would not get their deposit back. Fibrosa took action to get the deposit back and the House of Lords upheld this, saying there was a total failure of consideration (the Polish company didn’t get anything for the consideration they had given – the 1000 pounds). It didn’t overcome fully the costs incurred for the English company – this lead to worldwide statutory change o The contract is automatically discharged and obligations

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that existed prior to the frustrating event are enforced but others are discharges

o Problem: if this was the case in Krell v Henry [1903], the deposit would have been kept and the hotel would not have to give their room up – unjust outcome

o Frustrated Contracts Act 1978 (NSW)

Discharge by frustration

Taylor v Caldwell

First case that established discharge by frustration (the subject matter of the contract had been destroyed – a hall burnt down) o Where the performance of the contract relies on the

continued existence of a thing or person o There is an implied condition that performance of that

contract will be excused if that thing no longer exists

Discharge by frustration: National Carriers v Panalpina (Northern) Ltd established what the intervening events could be. This is one of them.

Codelfa Construction v State Rail Authority of New South Wales

If a court order prohibits performance of a contract it can be frustrated. Codelfa did non-stop excavation work for the state rail authority and thus received nuisance complaints from local residents and asked for an injunction to stop the work at night and on Sundays. The court concluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which it was assumed to be. An injunction was imposed and thus the project took longer than initially agreed. Codelfa argued that there was an implied term that they would be paid more for extra work (the project took longer). The court was in favour of the state rail authority because it was not obvious that this would have been the agreement and it would have been more likely that other negotiations would have been made if it was expected to happen, resulting in an express term about the subject matter

Discharge by frustration: Where there has been a failure of a condition

Krell v Henry

A coronation was the sole purpose of the contract, the coronation was called off because Edward the seventh became sick (it was for him) and the court held that the contract had been frustrated. Compare to Herne Bay Steam Boat Co v Hutton.

Discharge by frustration: Where there has been a failure of a condition

Herne Bay Steam Boat Co v Hutton

Hutton hired a boat to go out on the Thames and watch the coronation among the British fleet. The court held that it was not frustrated because there was more than one purpose and they could still sail down the Thames among the British fleet

Equitable estoppel: Alternative causes of action – Equitable Estoppel

Waltons Stores (Interstate) Ltd v Maher

If the plaintiff acts to their own detriment, in reliance on the allusions of the unconscionable party, equity law has the capability to intervene. For estoppel to found an action, the party sued must have acted unconscionably and to the detriment of the party suing. Because unconscionability is the basis of the estoppel action, it is an essential requirement that has to be established. When is conduct unconscionable? • Failure to fulfill a promise does not of itself amount to

unconscionable conduct. Nor does mere reliance on an executory promise where the promisor changes his

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position amount to unconscionable conduct. Something more is required.

• The fact that having created an assumption that a contract will come into existence or that a promise will be performed or not insisted upon and then remaining silent, while knowing that the other party was relying on the assumption to his detriment, would be sufficient to establish unconscionable conduct.

Waltons’ behaviour was unconscionable and that as a result of that behaviour Maher had suffered detriment while relying upon the assumption that Waltons had created – and, that relying upon the assumption was, in the circumstances, reasonable.

Illegality (Contracts illegal under statute): Express illegality

Re Mahmoud and Ispahani

Statute expressly banned the sale of linseed oil by unlicensed parties. The seller was licensed but the buyer wasn’t licensed and was prohibited from purchasing the oil. The buyer refused to continue buying the oil and the seller sued. The court held the contract void for illegality and did not enforce it

Illegality (Contracts illegal under statute): Implied illegality

Yango Pastoral Co v First Chicago Australia

Yango argued the contract was illegal because First Chicago had not yet obtained the required license to authorise that type of contract. The court scrutinised the banking act, and found that there was a penalty of $10,000 per day of no license, and didn’t render it illegal. The contract was not expressly prohibited, so the court had to discern whether the government intended for such contracts to be void (no, because it provided a fine and did not intend to invalidate any transactions). If it was illegal, all other depositors before the bank got the license would have been illegal transactions as well

Illegality (Contracts illegal under statute): Effect of illegality/Severin g terms

Thomas Brown and Sons v Fazal Dean

Contract for bailment. Fazal Deen could sue for the safe and the gems, and the term about the gold was severed.

Illegality (Contracts void on public policy grounds): Restraint of trade

Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd

Restrictions of this kind can be enforced as long as they are reasonable. Common law – doesn’t care about the breach, but looks at the reasonableness or unreasonableness of the restraint. Area and time was reasonable but the scope wasn’t. Reasonableness of restraint • Area • Time – 3 years is commonly held to be reasonable, but it

depends on the circumstances • Scope