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Law Notes Contracts 2 Notes

Termination For Breach And Repudiation Casebook Component Notes

Updated Termination For Breach And Repudiation Casebook Component Notes

Contracts 2 Notes

Contracts 2

Approximately 189 pages

Detailed notes (primarily case notes) on the topics of Incorporation of terms and construction, factors vitiating a contract and damages and included are super summaries ideal to take into an open book exam....

The following is a more accessible plain text extract of the PDF sample above, taken from our Contracts 2 Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Casebook Component – Termination for Breach

  • Whether or not a common law right to terminate for breach exists depends on the classification of the term breached:

    • If a term is a condition the aggrieved party will be entitled to terminate for any breach of that term by the other party regardless of the gravity/consequences of the breach. Damages for any loss suffered are also available

    • If a term is a warranty, the aggrieved party will not be entitled to terminate only by reason of breach by the other party but damages to compensate loss suffered will be available

    • If a term is a intermediate or innominate term the aggrieved party’s right to terminate depends on the gravity/consequences of the breach. If it is likely to have serious consequences for performance, then the aggrieved party will have the right to terminate the contract and claim damages for anay losses

  • Hence the first step in deciding whether or not the party has the right to terminate is to classify the term.

  • In general terms will only be classified as warranties where required under statute

  • The classification of the term as intermediate is like to be preferred since it gives courts greater flexibility in dealing with breach (after HK Fir Shipping)

  • Hong Kong Fir Shopping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 – in the absence of a clearly expressed intention to the contrary, a term will only be classified as a warranty if it is such that no possible breach could give rise to an event which would deprive the aggrieved party of substantially the whole of the benefit which it was intended he/she receive from the contract

Termination for Breach of a Condition

  • The accepted test for whether or not a term should be a condition was outlined in Tramways (below)

    • The question is whether or not the term is essential or inessential “depends on the intention of the parties as appearing in or from the contract”. The test is “whether it appears from the general nature of the contract, or for some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or substantial performance of the promise, as the case may be, and this ought to have been apparent to the promisor”

  • This was further clarified in DTR Nominees Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423

    • The judgement should take “close account of the importance which the parties have attached to the provision as evidenced by the contract itself as applied to the surrounding circumstances”

Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632

Relevant Facts: The plaintiff (T) was in the business of advertising for the defendant (L) by means of 53 boards displayed on the roof of trams. The plaintiff guaranteed in a letter that “these boards will be on the track at least eight hours a day throughout the season”. After this contract was in operation for two seasons L objected that the display contracted for was not being provided and therefore that it did not regard itself as bound to perform (pay) under the contract. T admitted that the service had not been provided but contended that the contract required that each board was advertised for an average of 8 hours per day. T offered to discuss alternations to the form but L refused to discuss. L protested to the boards being displayed when T did so in a third season.

Case History: T sued for the charge of the third season. L launched a cross-action for damages

Issue: What were the consequences for breach of the term

Ratio (Jordan CJ):

  • His honour considered relevant whether: the breach extended to all/some of the promises of the defaulting party, whether or not that promise was important and it’s breached substantial or trivial, when the breach occurred happened in relation to performance.

  • He discuss the second matter as a matter of essentiality outlining the test above. He then said if the innocent party would not have entered but for strict assurance of the promise, he may treat himself as being discharged on any breach however slight. If he contracted on substantial performance of the promise, then any substantial breach would justify discharge

  • The extent of performance is also relevant:

    • If nothing has been done on either side when the breach is committed, the innocent party can exercise his right of treating himself as discharged and sue for damages for loss of contract

  • Also if a party entitled to end the contract does not exercise the right when aware of the breach he loses his right to avoid and is remitted to remedy by damages when:

    • He proceeds to do some act which could only be done by virtue of the contract being treated as subsisting

    • The party in default carries on with performance at the express/tacit request of the innocent party

  • But a party does not lose his right of putting an end to the contract by insisting that a breach should be remedied, but if he does then he cannot exercise this right afterwards without giving reasonable notice of this intention

  • If a defaulting party withholds performance which is necessary to enable the innocent party to perform, the innocent party is absolved from performance as long as participation is withheld

  • He then described the implied promise of a party not to repudiate – the breach of which gives a right to avoid

  • Breaches can amount to either breach of: non-essential promises (damages), essential promises, implied repudiation

  • A breach implies repudiation if it leads to the inference that similar breaches will be committed wrt. subsequent performance (Maple Flock Co Ltd v Universal Future Products)

  • A vital breach of an essential promise is good ground for avoidance notwithstanding an intent to repudiate – hence if the essence of the contract is that at least 1 ton of something should be delivered a week – failure to do so justifies avoidance

Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 61 CLR 286

Latham...

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