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Australian Contract Law Ii Notes

Law Notes > Contract Notes

This is an extract of our Australian Contract Law Ii Notes document, which we sell as part of our Contract Notes collection written by the top tier of Griffith University students.

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DISCHARGE

BY

AGREEMENT

OR


FRUSTRATION

Content

Overview:

* Discharge


o By

Performance

(CCO1)


o By

Agreement


o By

Frustration


o By

Breach

* Consequences

of

termination

* Remedies

* Excuses

for

non--performance


Discharge

of

a

Valid

Contract:

* A

contract

may

be

discharged

by:


o Performance


SS? CCO1


o Agreement


o The

Doctrine

of

Frustration


o Breach


Discharge

by

Agreement

* If

the

parties

agree

to

discharge

the

contract,

there

is

no

reason

to

hold

them

to

the


terms

of

the

contract

* Terms

by

which

this

occurs

may

be

in

the

original

contract

or

by

subsequent


agreement/s

* Make

a

new

contract

to

discharge

the

original

contract,

(with

all

the

components

of

a


contract)


o Consideration

can

be

controversial:


SS? Deed

or

subsequent

payment

can

be

made

if

one

party

has

fulfilled

their


agreement


SS? If

neither

party

has

fulfilled

their

role

under

the

contract,

the


consideration

is

releasing

the

other

party

from

their

obligations


Discharge

by

Frustration

* Emerged

from

the

"absolute

contract

rule"


o Once

a

party

entered

into

the

contract,

they

were

bound

by

their

undertaking


even

if

external

circumstances

outside

their

control

rendered

their

performance


impossible

* Doctrine

of

frustration

developed

to

overcome

this

rule

* Occurs

where

an

unexpected

event,

which

was

not

the

fault

of

either

party,

makes


performance

of

the

contract

something

radically

different

to

what

the

parties

originally


agreed

* Question

of

construction

of

the

contract,

in

light

of

the

events

that

have

occurred

* Where

frustration

is

made

out,

the

contract

terminates

automatically


Frustration

is

rarely

successfully

pleaded

and

generally,

where

it

is

unsuccessful,

there


will

be

an

action

for

breach

of

contract.

* Davis

Contractors

Ltd

v

Fareham

Urban

District

Council:


o "Frustration

occurs

whenever

the

law

recognizes

that

without

default

of

either


party

a

contractual

obligation

has

become

incapable

of

being

performed

because

*

*

*

*

*

the

circumstances

in

which

performance

is

called

for

would

render

it

a

thing


radically

different

from

that

which

was

undertaken

by

the

contract.

It

is

not

this


that

I

promised

to

do."


SS? This

statement

was

adopted

by

the

High

Court

in

Codelfa

Construction


Pty

Ltd

v

State

Rail

Authority

of

New

South

Wales


The

doctrine

relates

to

an

event

that

happens

after

the

contract

is

made


The

frustrating

event

must

be

unexpected

and

the

parties

must

have

made

no

provision


for

it

in

the

contract


Must

have

a

significant

impact

on

the

performance

of

the

contract

by

one

or

both

of

the


parties,

such

that

performance

is

now

radically

different

to

that

thought

of

at

the

time


the

contract

was

made


Neither

party

can

have

caused

the

event


Not

every

unanticipated

event

amounts

to

frustration


o The

mere

fact

that

performance

becomes

more

onerous

for

a

party

is

not


enough

to

trigger

the

doctrine


SS? Tsakiroglou

&

Co

Ltd

v

Noblee

&

Thorl

G.m.b.H


What

is

the

basis

for

the

doctrine?

* Implied

term


o Imply

a

term

within

the

contract

which

accounts

for

the

doctrine


SS? Taylor

v

Caldwell

* Total

failure

of

consideration


o If

there

is

no

consideration,

there

is

no

contract


SS? Fibrasa

Spolka

Akcyjna

v

Fairbairn

Lawson

Combe

Barbour

Ltd

* Legal

device


o The

doctrine

of

frustration

is

really

a

device

by

which

the

rules

as

to

absolute


contracts

are

reconciled

with

a

special

exception

which

justice

demands


SS? Hirji

Mulji

v

Cheong

Yue

SS

Co

Ltd

* Construction

theory


o One

prevailing

account

of

why

it

exists


SS? Frustration

depends

not

on

adding

any

implied

term

but

on

the

true


construction

of

the

terms

which

are

read

in

the

light

of

the

nature

of

the


contract

and

of

the

relevant

surrounding

circumstances

* Davis

Contractors

Ltd

v

Fareham

Urban

District

Council


SS? It

is

legitimate

to

look

to

extrinsic

evidence

in

the

form

of

relevant


surrounding

circumstances

to

assist

us

in

the

interpretation

of

the


contract

* Codelfa

Construction

Pty

Ltd

v

State

Rail

Authority

of

NSW


Accepted

grounds

for

application

of

the

doctrine:

* Where

a

party

has

died

or

has

become

incapacitated


o Simmons

Ltd

v

Hay

* Where

the

contracts

subject

matter

has

been

destroyed

or

is

unavailable


o Taylor

v

Caldwell


o Hirji

Mulji

v

Cheong

Yue

SS

Co

Ltd

* Inability

to

use

the

contracts

subject

matter

for

a

specified

or

contemplated

purpose


o Krell

v

Henry

* Where

there

is

delay

in

performance

(not

every

delay

will

constitute

frustration)


o Jackson

v

Union

Marine

Insurance

Co

Ltd


o Metropolitan

Water

Board

v

Dick

Kerr

&

Co

* Where

war

affects

performance

of

the

contract


o Kodros

Shipping

Corporation

of

Monrovia

v

Empresa

Cuba

de

Dletes

(The

Envia)


(No

2)

* Where

a

certain

state

of

affairs

is

essential

to

performance


o Codelfa

Construction

Pty

Ltd

v

State

Rail

Authority

of

New

South

Wales

Forseeability

* Where

the

event

is

foreseen

by

the

parties

the

doctrine

will

not

apply


o Walton

Harvey

Ltd

v

Walker

and

Homfroys

Ltd

* What

degree

of

foresight

is

required?


o The

parties

must

have

foreseen

the

events

occurrence

as

a

serious

possibility

* A

plea

of

frustration

will

not

succeed:


o Where

the

contract

makes

provision

for

the

allegedly

frustrating

event


o Where

the

party

seeking

to

rely

on

frustration

should

have

foreseen

the


allegedly

frustrating

event

but

did

not


Self--Induced

Frustration

* Frustration

must

occur

without

fault

of

the

party

seeking

to

rely

on

the

contract

being


frustrated

* The

onus

of

proving

self--induced

frustration

rests

on

the

party

alleging

fault


o Maritime

National

Fish

Ltd

v

Ocean

Trawlers


SS? Plaintiff

charted

one

of

5

trawlers

owned

by

the

defendant


SS? Each

of

the

5

vessels

required

a

license

-

but

they

only

had

3

licenses


SS? Defendant

couldn't

charter

the

boat

to

the

plaintiff

because

the

boat


they

ordered

didn't

have

a

license


SS? Argued

that

the

contract

had

been

frustrated,

through

self

induction,


because

the

defendant

had

not

given

one

of

the

licenses

to

the

boat


hired

by

the

plaintiff


The

effect

of

frustration

* If

frustration

is

made

out,

the

contract

is

automatically

terminated

* Future

rights

and

obligations

are

all

discharged

but

accrued

rights

and

obligations


remain

on

foot

* The

occurrence

of

a

frustrating

event

doesn't

give

either

party

a

right

to

claim

damages

* Payment

for

any

work

performed

after

the

frustrating

event

must

be

on

a

quantum


meruit

* Payments

made

up

to

the

point

of

frustration

cant

be

recovered

unless

there

is

a

total


failure

of

consideration


o Sometimes

claims

can

be

made

in

restitution


'Force

majeure'

clauses

* Principles

of

frustration

are

default

principles

that

will

apply

absent

provision

in

the


contract

* Clauses

that

seek

to

allocate

risk

for

unexpected

events


o Natural

disasters,

(other

acts

of

God)


o War


o Failure

of

third

parties

to

perform

* A

force

majeure

clause

will

only

cover

events

that


o Are

beyond

the

control

of

the

parties


o Which

cant

be

prevented

by

the

exercise

of

due

care

* Courts

will

only

consider

clauses

WITHIN

the

actual

contract


o They

will

not

imply

one

into

it


Codelfa

Construction

Pty

Ltd

v

State

Rail

Authority

of

NSW

* Facts:


o Codelfa

entered

into

an

agreement

with

State

Rail

to

do

excavation

work

for

an


underground

railway

Contract

required

different

stages

of

the

work

to

be

completed

by

certain

times


Parties

entered

into

the

contract

on

the

understanding

that

the

work

was

to

be


carried

out

by

three

shifts

for

seven

days

a

week


o Residents

obtained

an

injunction

against

noisy

work


o Courts

deemed

it

was

frustration


What

were

the

legal

issues?


o Is

there

an

implied

term

that

SRA

would

indemnify

Codelfa

for

additional

costs


incurred

by

such

an

event?


o Is

the

contract

frustrated?


What

did

the

court

decide


o Majority

(Stephen,

Mason,

Aickin,

Wilson

JJ)


SS? An

injunction

was

not

contemplated

by

the

parties

at

the

time

the


contract

was

entered

into


SS? It

rendered

the

performance

of

the

contract

radically

different

form

the


performance

the

parties

had

contemplated


SS? It

therefore

frustrated

the

contract


o Minority

(Brennan

J)


SS? Same

decision,

but

through

different

reasoning

* The

circumstance

had

not

radically

changed

after

the


injunction

* At

the

time

the

contract

was

into,

Codelfa

was

still

under

a

legal


obligation

not

to

cause

noise/nuisance

-

IMPLIED

TERM

* Codelfa

should

have

known

or

accounted

for

that

risk

at

the


time

of

entering

into

the

contract


o o

*

*

TERMINATION

BY

BREACH

OR


REPUDIATION


Right

to

rescind


o Rescission

ab

initio


SS? Discharge

from

the

beginning


o Can

the

parties

returned,

(substantially),

to

their

original

position?


SS? Misrepresentation,

mistake,

unconscionable

conduct,

duress,

undue


influence,

and

or

misleading

or

deceptive

conduct

* Right

to

terminate


o Right

to

terminate

the

performance

of

the

contract

in

futuro


o Accrued

rights

may

still

be

enforceable

but

not

future

rights


SS? Breach

and

repudiation

* Repudiation

gives

right

to

terminate


Right

to

Terminate

* Every

breach

of

contract

gives

rise

to

a

right

to

damages

* Not

every

breach

entitles

the

promise

the

right

to

terminate

the

contract

* Right

to

terminate

can

come

from:


o Termination

clause

in

the

contract


SS? Allows

parties

to

alter

the

common

law

and

is

a

question

of


construction


SS? Statute

* Rare,

but

certain

legislation

does

give

this

right


o Sale

of

Goods,

ACL

etc.


SS? Cannot

contract

out

of

ACL


SS? Remedies

are

also

through

the

statute


SS? Common

Law

* Arises

in

3

situations:


o Breach

of

a

condition


SS? An

essential

term

in

the

contract


o A

fundamental

breach

of

an

intermediate

term


o Repudiation


SS? Words

or

conduct

amounting

to

a

refusal

to


perform

the

contract


Termination

for

Breach

of

a

Condition

* All

breaches

of

a

condition

will

give

rise

to

the

right

to

terminate,

regardless

of

the


gravity

of

the

breach


o Arcos

v

Ronaasen

* Express

or

implied

* A

term

can

be

deemed

a

condition


o By

statute


SS? ACL

s54

"guarantee

as

to

acceptable

quality"


SS? By

designation

* Need

a

clear

intention

for

term

to

have

status

as

'condition'

* Use

of

the

word

condition

is

not

decisive


o Schuler

v

Wickman

Machine

Tool

Sales


o By

construction


SS? "the

test

of

essentiality

is

whether

it

appears

from

the

general

nature

of


the

contract,

that

the

promise

is

of

such

importance

that

the

promisee


would

not

have

entered

into

the

contract

unless

he

had

been

assured

of

a


strict

or

substantial

performance

of

the

promise

and

this

ought

to

have


been

apparent

to

the

promisor"

-

Jordan

CJ

*

* Tramways

Advertising

P/L

v

Luna

Park

Ltd

* Associated

Newspapers

Ltd

v

Bancks


SS? This

is

the

main

way

to

determine

whether

something

is

a


condition

of

the

contract


Associated

Newspapers

Ltd

v

Bancks

(1951)

83

CLR

322


Facts


Issue


Held


Bancks

agreed

tor

provide

AN

Was

the

company's


The

term

was

a

condition.


a

weekly

full

page

cartoon,

to


undertaking

to

present

the


Applied

the

test

in

Tramways:


be

presented

on

the

front

page

defendant's

drawing

on

the


"if

the

innocent

party

would


of

the

comic

section.

Bancks


front

page

of

the

comic

is

a

:


not

have

entered

into

the


alleged

that

AN

had


--

condition

or

essential

term

contract

unless

assured

of

a


repeatedly,

without

his


of

the

contract

going

to

its


strict

and

literal

performance


consent

and

in

face

of

his


very

root,

the

breach

of

which

of

the

promise,

he

may

in


protest,

failed

its

to

perform


would

immediately

entitle

the

general

treat

himself

as


its

obligations.

Bancks

gave


defendant

at

his

option

to


discharged

upon

any

breach

of


notice

that

he

was

no

longer


rescind

the

contract

and

sue


the

promise,

however

slight."


bound

by

the

contract.


for

damages

for

the

loss

of

the


contract

or,


--

mere

warranty

or

non


essential

term,

the

breach

of


which

would

entitle

the


defendant

to

damages


Termination

for

Breach

of

a

Condition

* DTR

Nominees

Pty

Ltd

v

Mona

Homes

P/L


o Further

explanation

for

the

test

* Would

the

parties

have

entered

into

a

contract

on

the

understanding

that

there

would

be


strict

compliance

with

a

term?

* Characterization

in

previous

cases


o Standard

form

contract


SS? Expected

readiness

clause

=

condition

* Maredelanto

Compania

Naviera

SA

v

Bergbau--Handel

GmbH


SS? Promoting

certainty

* Bunge

Corporation

v

Tradax

Export

SA


SS? Language

used

to

describe

obligation

is

important

but

not

decisive

* Luna

Park

v

Tramways


o Advertising

boards

"guaranteed"

to

be

"on

the

tracks


at

least

eight

hours

per

day"


SS? Condition

argument

failed

in:

* Bettini

v

Gye

* Donut

King

Australia

Pty

Ltd

v

Wayne

Gardner

Racing

Pty

Ltd


SS? Probable

consequences

of

breach

* Hongkong

Fir

Shipping

Co

Ltd

v

Kawasaki

Lisen

Kaisha

Ltd


SS? Whether

damages

an

adequate

remedy

* Ankar

v

National

Westminster

Finance


For

fundamental

breach

of

an

intermediate

term:

* Less

than

an

essential

term

but

more

than

a

warranty


o Sanpine

Pty

Ltd

v

Koompahtoo

Local

Aboriginal

Land

Council

* Innominate:

assumes

the

character

of

each

in

turn,

in

accordance

with

the

seriousness


of

the

breach


o Bunge

Corporation

v

Tradax

Export

SA

* Where

a

term

is

intermediate,

the

right

to

terminate

depends

on

the

nature

of

the

breach


and

its

forseeable

consequences.

It

must

deprive

the

innocent

party

of

substantially

the


whole

benefit

which

was

intended


o Hongkong

Fir

Shipping

Co

Ltd

v

Kawasaki

Lisen

Kaisha

Ltd

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