#7301 - Termination For Delay Affirmation R W Election Casebook Component - Contracts 2

Louinder v Leis (1982) 149 CLR 509

Facts: By a contract dated 1/11/79 the vendor (Louinder) sold property to the purchaser (Leis). No date was fixed for completion and time was not stated to be of the essence. Cl 4 obliged the purchaser to tender a transfer to the vendor for execution within 28 days of receipt of the title. The statement was delivered the next day. The parties agreed to settle early in the following year but the vendor sought delay in settlement for three months. The purchaser agreed but was then informed that the vendor required settlement within a week.

On the 8^th of February, no tender of a transfer being made by the purchaser, the vendor issues a notice for completion within 21 days. On 4^th March the contract was terminated and an attempt on the 14^th of April to complete by the purchasers rejected. The purchaser sued for specific performance

Chief Justice Gibbs disposed of the case on the ground that Cl 4 could not be relied on for the first time on appeal. This meant that the appellant was not entitled to give notice requiring completion unless the respondent was guilty of unreasonable delay – which it was not in this case. But in obiter...

Issue: Whether, if the appellant established that the respondent was in breach of cl 4, it would have been open for him to give a notice to complete.

Obiter (Gibbs CJ):

• His honour cited Carr v J A Berriman (1953) 89 CLR 327 for the proposition that where a contract specifies a time but time is not of the essence, the promisee can rescind for non-performance only when notice specifying reasonable time has been given and that notice not complied with

• Resolving conflicting authorities, his honour came to the conclusion that a party failing to complete on the set day is guilty of delay (whether or not unreasonable) and that gives the right of the aggrieved party to terminate providing reasonable notice is given and not complied with.

• In this particular case the appellant would have had the right to give the respondent notice requiring the tender of a transfer within reasonable time but not requiring the respondent to comply with the contract

  • Notice gives the party a right to rescind but not, upon breach of a provision, to rewrite another provision

Laurinda v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623

Facts: On 31/10/85, the respondent lessor (C) and the appellant lessee (L) entered into an agreement for lease of a shop forming part of a retail centre. The lease was silent on matters such as commencement date but made provision for its ascertainment which was then 12/1985. On 3/12 L went into possession of the shop and in 1/86 paid $2317 for stamping costs as required by the lease. In 3/86 L’s accountants requested C’s solicitors to forward a copy of the lease at the earliest opportunity. On 25/3 the solicitors advised that in 10/85 the lease was sent to Melbourne for execution by C and was expected “in the near future”. By 4/86 C was aware that L wished to sell the business. On 21/8 L’s solicitors wrote to C’s solicitors pointing out that the lease should have been registered 10 months ago and L had already provided funds for its registration and explained its importance. The letter stipulated that in – ‘in view of the delay it was reasonable to require registration be completed in 14 days and if not L would reserve their rights in respect of the default.

The letter was received the following day by C’s solicitors and on 3/9 they replied that it had been sent to C for instructions. On 5/9 L terminated on the ground that C repudiated or was in breach of essential terms as a result of C’s failure to register/deliver the lease in registrable form. On 3/10 C re-entered the premises. On 31/10 L commenced an action for declaration that the lease was validly rescinded and for recovery of $2317 and damages and interest. C denied it was guilty of unreasonable delay in completing and contended that L’s purported termination was wrongful repudiation and claimed unpaid rent, damages and interest.

Case History: At trial Connolly J held that the letter of 21/8 was not effective notice to complete but that termination was valid for C’s repudiation. The Full Court on appeal held that it had not, L appealed to the High Court.

Issue: Whether or not the letter of 21/8 was valid notice

Ratio (Deane and Dawson JJ):

• The innocent party who makes time of the essence through a notice is bound by it in that it becomes of the essence for him as well as the defaulting party (Quadrangle Development and Construction Co Ltd v Jenner [1974] 1 WLR 68)

• If the innocent party himself fails to complete in time, the other party can take this and other circumstances into account whether to rescind the contract or institute proceedings for enforcement. Likewise the party who gave notice can enjoy the right to waive the right to terminate for non-compliance with the notice and bring proceedings for specific performance.

• A notice fixing time for completion does not constitute a repudiation of the contract if it unequivocally states that the party giving the notice will, upon expiry of what is held to be an unreasonable short period, act on the basis that the contract is at end.

• But this isn’t to suggest that a notice will be effective to make a time of the essence of a contract with the consequence that the party giving the notice will be entitled to rescind upon non-compliance, if it is inadequate to convey to a reasonable person in the position of the recipient that that is its purport and effect.

• A notice will be adequate to convey such a warning if, but only if, it conveys either that the time fixed for performance is made of the essence of the contracts OR that the party giving notice will, in the event of non-compliance, be entitled to rescind.

• The letter of 21/8 contained no mention of termination nor did it state that time was being made of the essence or that the lessee would in the event of non-compliance be, or regard itself as being, entitled to rescind.

Issue 2: Even if the letter of 21/8 was inadequate to make time of the essence, was the lessee entitled by 5/9 to rescind to the contract for repudiation by the lessor

Ratio (Deane and Dawson JJ):

• This is a question to be answered by determining whether or not the lessor’s conduct up to and including the letter of 3/10 was such to constitute repudiation of the contract.

• The alleged repudiation by the lessor was of its fundamental obligation to produce a lease of the premise in registrable form

• There was unreasonable delay in performance of this and it was for the lessor’s own commercial purpose

• From the standpoint of an RP in the position of the lessee, its significance was heightened by the absence of explanation in the face of the lessee’s requests and complaints and by the dishonouring of assurances given as to future conduct. The letter of 21/8 brought matters to a head and the completely unresponsive reply on 3/10 took the matter to a stage where the combined effect of dishonoured assurances, continued failure to produce a lease in registrable form and continued refusal to properly address the lessee’s legitimate requirements and complains was such that a reasonable man could hardly draw any other inference than that the lessor was not prepared to take its primary obligation under the contract lightly (Fullagar J in Carr v J A Berriman Pty Ltd)

• Their honours concluded that the lessor’s conduct constituted repudiation of the contract which entitled them to terminate

Order: Appeal allowed, orders of the Full Court of the Supreme Court set aside and the orders made by the primary judge restored