MLL111 Lecture Notes - Lecture 9: Nechacco, Tomar Clan, All England Law Reports
14 Aug 2018
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Performance and termination of a contract
Formation: What’s required for a contract to be made
Scope: Who has rights and obligations
Content: What are the terms and how are they interpreted
Avoidance: Problems with formation making contract void or voidable
Performance: Perform contract exactly how it should be not too much not too less.
Contract may not have been performed to the best, but court says that’s good enough but
will end up paying for defects and other party wont be able to terminate the contract.
For a contract to be terminate under common law needs to have a breach.
Avoidance v Termination
Avoidance
Applies to obligations of the past.
Damages only available on other grounds.
Termination
Applies to obligations of the future.
Either there is a separate idea to terminate a contract or the termination factor is present in
the contract.
Damages are recoverable.
Performance
The reason you enter unto the contract is because you want the performance.
Performance needs to be completed exactly as what the contract says. (Unless parties
expressly state exact performance is not required). If that is the case it’s a matter of
construction. What is required is a matter of construction.
Substantial is insufficient (choosing telestra when they said optus) (even if superior).
Construction
Luna Park v Tramways Advertising Pty Ltd (1938) CLR 286 HCA
*Tramways entered into a contract with D.
*Promise to display “guarantee” sign for at least 8 hours per day
*Issue: was an average of 8 hours per day a “performance” of the condition
Factors to whether a breach of a term justifies termination :
1)Extent of the breach
2)Type of promise breached
3)Seriousness of the breach
4)Timing of the breach
5)Rights and remedies the party has
*Most important is the type of promise breached if it’s a condition breach it will lead to
termination. If it’s a warranty it won’t.
*As the question about the 8 hours a day is a CONDITION, displaying the ads for an
AVERAGE of 8 hours satisfies the condition.
*Defendants claim of a MINIMUM of 8 hours is rejected.
*Condition wasn’t breach and defendant can’t terminate the contract.
The term/condition was “so essential that its non-performance may be
considered by the other party as a substantial failure to perform the contract
at all”.
Test for essentiality
*The promise is of such importance to the promisee that they wouldn’t have entered the
contract unless he had been assured of a strict or substantial performance of the promise
(other party promises they would perform very well).
*Innocent party wouldn’t have entered the contract unless assured of a strict and literal
Performance so, no matter how slight but a trivial breach will withdraw from the contract.
Entire contracts
Performed contracts as exactly as needed and contract cant be divided to parts as one part
depends on the other. Only after completion do you get payment
Cutter v Powell (1795) All ER Rep 159
*Cutter died, and his wife wanted to obtain his salaries.
*She couldn’t as he was in an entire contract and didn’t live till its completion.
Automatic Fire Sprinkles v Watson (1946) 72 CLR 435 HCA
*P entitled to sack D
*P terminated D after 6 years
*D refused to accept termination and came to work until P excluded him from the building.
Did P have to pay D for the time he came ready to perform?
*General rule is payment under employment contract not due unless and until earned.
*Can sue for damages but no payment
*Payment is periodical
*But in this scenario even there is termination according to common law D isn’t enetitled to
salaries.
*Must complete contract before claiming payment
Doctrine of substantial performance ?
*Any minor defects and if doctrine of substantial performance is applied then this contract
is considered to be completed.
*When the court implies a term that allows a partial or substantial performance which is
similar enough to stand in for the performance required by the contract.
Hoenig v Isaacs (1952) 2 All ER 176 (Court of appeal, England)
*Judge thinks think the performance has been substantially performed
*Good enough to be the performance of the contract but the other party can’t get all the
money agreed to.
*Must give up the money that will be needed to bring the current performance up to the
exact needed performance.
Apportionment legislation ?
*In certain circumstances payments increases gradually “day to day” and maybe shared out
accordingly.
*Calculated on a daily basis.
*ONLY APPLIED TO PERIODIC PAYMENTS (EG:RENT , DIVIDENDS ,INCOME)
*MAY BE EXCLUDED BY THE PARTIES
Severable contracts
*contract divides to many parts
*Parts aren’t necessarily depended on each other
*Each party must perform regardless of each other
Eg: lease contracts
Time of Performance
*Time of the “essence”: any delay allows you to terminate the contract (MAKES IT A
CONDITION).
*If time not of the essence slight duration you can’t terminate
*Time not of the essence unless parties said, or circumstances indicate so.
Tanwar Enterprises v Cauchi (2003) 217 CLR 315
*Time date present saying you need to complete before this date without saying of the
“essence” so not a condition
*Have a new contract saying time is of the essence now it’s a contract.
*Now one party wants to terminate contract as there was a delay.
*As now it says time is of an essence , but if you act in unconscionable manner
equity may come in even if time is of an essence ! , so time is of the essence and
they cannot terminate the contract.
Louinder v Leis (1982) 149 CLR 509 HCA
*Didn’t initially agree on a time to complete.
*Later one party said needs to complete by a day, but got late and one party wants to
terminate the contract.
*Judge said the other condition other than time of the essence is if you have a time
stipulation clause but no time of the essence and one party misses it you can give a notice
and make a new due date , if other party STILL late then can terminate the contract.
*Third factor is : No time stipulation clause , before terminating contract you can say
there is an unreasonable delay then you can terminate it.
*But here you cant establish an unreasonable delay so you cant terminate it.
Document Summary
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