LAWS105 Lecture Notes - Lecture 10: Judiciary Of Australia, All England Law Reports, Australian Consumer Law
LAWS105 – CONTRACT LAW
Wk. 10 – Performance and Termination & Breach and Frustration
Discharge by Breach
Breach Allowing Termination
3 types of breach allow the innocent party to terminate:
1. Contractual provision permitting discharge
Contract may provide a right to terminate, usually by election of the
innocent party (sometimes automatic)
Parties agree to the type of breach that brings the contract to an end (not
necessary for the breach to be serious – rather, it is what the parties agree)
Contract can also state the remedies for the breach
Cases: Holland v Wiltshire (1954) 90 CLR 409 and Shevill v Builders
Licensing Board (1982) 149 CLR 620
2. Repudiatory breach – ‘guilty’ party renounces the contract in some way.
Repudiatory breach = any form of conduct by a party that shows an
intention not to be bound. Examples:
Refusing to perform part/all of the contract
Requiring the other party to perform the contract in a manner that the
contract does not require/allow
Insisting on performing the contract in a manner inconsistent with the
terms of the contract; and
Continually failing to perform the contract.
TEST: would a ‘reasonable person’ in the innocent party’s position think
that he guilty party no longer intended to perform the contract. If yes – the
innocent party can terminate for repudiation.
Cases: Federal Commerce and Navigation Ltd v Molena Alpha Inc
[1979] AC 757 and Laurinda Pty Ltd v Capalaba Park Shopping Centre
Pty Ltd (1988-1989) 166 CLR 623.
If the guilty party repudiates BEFORE performance, the innocent party
may affirm or rescind. He may elect to ‘anticipate’ breach, and terminate.
Where he elects to terminate, it has to be before – because then the date
for performance has not arrived.
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Innocent party has the right to either treat the contract as repudiated and
claim damages immediately, OR,
Wait for actual breach (during which time the other party may retract
repudiation)
Why would the innocent party make or rely on anticipatory breach? – to
mitigate damages and allow the innocent party to make other agreements.
Risk of anticipatory breach for innocent party = event may occur
justifying guilty party’s non-performance (and this event makes the
innocent party guilty of a repudiatory breach of contract)
3. A serious breach of contract.
Minor breach of contract = usually the innocent party is compensated by
an award of damages
Serious breach of contract = innocent party may discharge the contract
Serious breach of contract may occur due to non-performance or detective
performance
What is the consequence of rescinding- contract bought to an end in futuro
What is the consequence of affirming? Contractual obligations continue
and guilty party may be able to remedy breach
Main test: if a condition (not a warranty) is breached, then this is a serious
breach (this was the test used in Luna Park)
If it is not possible to classify terms as a condition or a warranty then the
courts focus on the nature of the breach. Question is whether the breach
substantially deprived the innocent party of benefit under the contract.
Election to Discharge or Affirm
Usually, the innocent party needs to elect to discharge the contract (not usually
automatic)
Where a serious breach occurs, the innocent party may exercise a choice: affirm
the contract or discharge the contract.
How does the innocent party make an election to discharge the contract?
Expressly or by conduct
E.g. commencing action for damages = normally discharge
E.g. continuing to perform = normally affirmation
Discharge must be communication
Cases: Holland and Immer
Limitations on the Right of Election
Innocent party’s rights may be limited because:
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
3 types of breach allow the innocent party to terminate: contractual provision permitting discharge. Contract may provide a right to terminate, usually by election of the innocent party (sometimes automatic) Parties agree to the type of breach that brings the contract to an end (not necessary for the breach to be serious rather, it is what the parties agree) Contract can also state the remedies for the breach. Cases: holland v wiltshire (1954) 90 clr 409 and shevill v builders. Licensing board (1982) 149 clr 620: repudiatory breach guilty" party renounces the contract in some way. Repudiatory breach = any form of conduct by a party that shows an intention not to be bound. Refusing to perform part/all of the contract. Requiring the other party to perform the contract in a manner that the contract does not require/allow. Insisting on performing the contract in a manner inconsistent with the terms of the contract; and.
