LAWS104 Study Guide - Final Guide: Indian Pacific, Breach (Security Exploit), Charter-Party
25 Jun 2018
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DISCHARGE BY BREACH
Failure to perform contractual duties
-In ascertaining whether a failure to perform contractual obligations entitles the innocent party to
terminate the contract, the term must be classified as a condition, warranty, or intermediate term
-A contract can expressly stipulate what type of term is involved
-In the absence of any express stipulation, the court will construe the term
Personal Touch Financial Services v Simplysure Ltd
-‘Agreements often refer to all their terms as conditions, as in ‘conditions of sale’. However, this was
not such a case. … While [the use of the word ‘condition’] is not conclusive, it must be given due
weight when the agreement is construed’
Ankar v National Westminster Finance (Australia) (Mason ACJ, Wilson, Brennan, Dawson JJ
-‘courts are not too ready to construe a term as a condition and at least where other considerations are
finely balanced, will hold that a term is of such a kind that a breach of it does not give rise to an
automatic right to [terminate]’ and this ‘is explained by a preference for a construction that will
encourage performance rather than avoidance of contractual obligations’
Condition (aka essential term)
-Terms ‘which go so directly to the substance of the contract or, in other words, are so essential to its
very nature that their non-performance may fairly be considered by the other party as a substantial
failure to perform the contract at all’ (Wallis v Pratt, Fletcher Moulton LJ)
-If the term breached is a condition, the innocent party may choose to proceed with the contract or to
terminate it and/or claim damages
-Until the innocent party elects to terminate, the contract still stands
Tramways Advertising v Luna Park (NSW) (Test) (Jordan CJ)
-Whether a term is a condition depends on the intention of the parties
-The test of essentiality – ‘whether it appears from the general nature of the contract considered as a
whole, or from some particular term or terms, that the promise is of such importance to the promise
that he would not have entered into the contract unless he had been assured of a strict, or a substantial,
performance of the promise’
Associated Newspapers v Bancks (Jordan CJ) Bancks was contracted by a newspaper to provide a weekly
comic strip, in which the newspaper promised that the comic strip would appear on the front page of its comic
section. The newspaper breached its obligation by publishing the comic strip on page three and Bancks sought
to terminate. The High Court upheld his claim, holding that the newspaper’s obligation was a condition, on the
basis that Bancks would not have entered into the contract unless he had been assured that the comic strip would
appear on the front page of the comic section
Warranties
-If the term is a warranty, there is not right to terminate the contract for breach of the term (Bettini v
Gye)
-The remedy of the innocent party lies in damages or specific performance
Intermediate terms (neither conditions nor warranties)
-Established in Hongkong Fir Shipping by Diplock LJ
-The issue of termination is not determined merely by the existence of a breach – rather, the court
ascertains whether the extent of the beach is sufficiently serious to give rise to a right to terminate
-If it is not sufficiently serious, there is only a right to damages or specific performance
Hongkong Fir Shipping v Kawasaki Kisen Kaisha a seaworthiness term in a charterparty stipulated that the
vessel was ‘in every way fitted for ordinary cargo service’, however this was breached through an incompetent
and insufficient engine room crew and resulted in considerable inconvenience. The Court of Appeal held that it
did not and Diplock LJ regarded the term as what we now refer to as an intermediate term
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
In ascertaining whether a failure to perform contractual obligations entitles the innocent party to terminate the contract, the term must be classified as a condition, warranty, or intermediate term. A contract can expressly stipulate what type of term is involved. In the absence of any express stipulation, the court will construe the term. Agreements often refer to all their terms as conditions, as in conditions of sale". While [the use of the word condition"] is not conclusive, it must be given due weight when the agreement is construed". Ankar v national westminster finance (australia) (mason acj, wilson, brennan, dawson jj. If the term breached is a condition, the innocent party may choose to proceed with the contract or to terminate it and/or claim damages. Until the innocent party elects to terminate, the contract still stands. Tramways advertising v luna park (nsw) (test) (jordan cj) Whether a term is a condition depends on the intention of the parties.
