Please enable JavaScript.

Coggle requires JavaScript to display documents.

Week 8 Termination by Breach (Quick revision of important terms…

- - - - Associated Newspapers v Bancks (1951) 83 CLR 322
        In this case, the newspapers had contracted to print Ginger Meggs on the front of the comics section, but then they changed the newspaper’s format. As a result, there really wasn’t a comics section any more, so they couldn’t print Ginger Meggs on the front page. Bancks sued. There was no real argument about the fact that the newspaper had breached the original contract. The real argument was whether or not the breach was so significant that, with the breach having occurred, there was no value in the contract at all.
        After all, the newspapers reasoned, they were still printing the comic strip in their newspaper; in fact, they were still printing it most prominently of all the comic strips. For Bancks, this was not enough – and the court agreed.
  - - - Hong Kong Fir Shipping Coy v Kawasaki Kisen Kaisha [1962] 2 QB 26
        In this case, a vessel was chartered, and was to be in seaworthy condition (not an unreasonable requirement!). The vessel was in seaworthy condition for 80 percent of the voyage, but was unseaworthy for the other 20 percent, resulting in interruptions to the charter. The court found that seaworthiness was certainly an obligation under the contract, and that it certainly could have acted like a condition, making the contract not worth having. However in the circumstances of the case, the unseaworthy portion of the hire was relatively small, and the consequences were insufficiently significant.
        As a result, this was an intermediate term – it could have been treated like either a condition or a warranty, depending upon the precise nature of the breach.
  - - - Luna Park v Tramways Advertising (1938) 61 CLR 286.
        Luna Park contracted to have its attractions advertised on trams, and the tramways guaranteed that the advertising would be on the tram tracks for at least 8 hours every day. The tramways subsequently tried to argue that that actually meant an average of eight hours each day, but they lost. The period of time per day was considered to be such an important part of the contract that without it, there might as well have been no contract at all.
        The breach of a condition gives rise to the right to terminate the contract.
- - - - Associated Newspapers v Bancks
    - - Luna Park
- - - - where a party expressly declares that they are no longer ready, willing or able to complete their obligations under the contract.
        commonly occurs when a party finds that they will be unable to complete their obligations by the required date or time, in contracts where time is of the essence
        innocent party will have the usual options available in a repudiation situation: they might continue the contract, but seek damages for the delay; or alternatively they might terminate the contract (and also potentially seek damages).
        
        Foran v Wight (1989) 168 CLR 385
        the vendor of a property was unable to provide clear title to the property within the required timeframe (for those of you who have done property law, the property was subject to an easement which he could not remove in time). The purchaser could have decided to allow more time, perhaps with some form of damages for the delay; however the purchaser decided to treat the contract as repudiated, and terminated the contract.
    - - party may find themselves either unwilling, unready or unable to complete their obligations under a contract, and yet they may not choose to actually say as much openly (perhaps for fear that the contract might be terminated for repudiation!). In these circumstances, the innocent party may imply the repudiation from their conduct
        
        Hammer & Barrow v Coca Cola [1962] NZLR 723
        In this case, the Coca Cola company in New Zealand, placed an order with Hammer & Barrow for the manufacture of 200,000 Coca Cola yoyos. The first batch of yoyos produced, numbered somewhere in the order of 85,000. Of these, no less that 80 percent were defective, and were returned by the Coca Cola company on that basis.
        Now, let’s stop and think about this from Coca Cola’s perspective. Everyone is entitled to the occasional bad item in a batch of thousands. However when 80 percent of the batch are defective, you must start to wonder whether the manufacturer is competent to complete the contract. And at this stage, there were still another 115,000 yoyos to be manufactured! What were Coca Cola to do? Hold on and hope for the best? Rely on damages? In the end, they did the only thing they sensibly could do: they treated the contract as having been terminated for repudiation, on the basis that the inability of Hammer & Barrow to complete the contract could be inferred from the disastrous first batch.
        
        Inferring repudiation is, however, extremely tricky. In the Coca Cola situation, it was pretty clear that the failure rate was unacceptable. However what if the failure rate had been 20 percent? 10 percent? At what level does the failure rate become so high that Coca Cola was able to infer repudiation? These will be questions of fact for the court to look at; so a party must really be very clear about the basis of their view that the other party’s repudiation can be implied.
    - - In some situations, a party might effectively repudiate a contract simply because they do not understand the contract, or they have simply made a wrong interpretation of the contract’s meaning
        
        Luna Park v Tramways Advertising
        which we discussed earlier. In that case, Tramways were convinced that they were properly undertaking their obligations under the contract, because in their view the obligation was to have the advertisements “on the rails” for an average of 8 hours per day. They were therefore unwilling to have the advertisements on the rails for 8 hours every day, because in their view this was not required under the contract.
        Can you see the issue here? They were clearly unwilling, and perhaps unable, to complete their obligations under the contract. However this arose from their misunderstanding of the requirements of the contract, rather than from any more sinister or improper motive. Be that as it may, they remained unwilling to carry out their obligations under the contract, which gave Luna Park the opportunity to regard the contract as having been repudiated (and therefore enabled them to terminate the contract).
    - - occurs when a party incorrectly believes that they have obtained the right to terminate a contract, and they purport to do so. An example might be where Party A has breached a term that Party B considers is a condition of the contract. Party B purports to terminate the contract on the basis of a breach of a condition; however Party A then satisfies the court that the term was in fact just a warranty, so the breach did not justify the contract’s termination. What happens then? It is pretty clear that Party B is no longer willing, or perhaps even able, to complete their obligations under the contract. They have repudiated it, allowing Party A to terminate!
        
        Commonwealth v Amann Aviation
        Amann Aviation were unable to provide the aircraft required for Customs duties on Australia’s northern coastline, within the timeframes set out in the contract. The Commonwealth, understandably, sought to terminate the contract. However the Commonwealth, in doing so, failed to follow the process set out in the contract itself. The result was that the Commonwealth had improperly terminated the contract; in effect, the Commonwealth had repudiated the contract. Amann Aviation was therefore able to end the contract itself, and sue the Commonwealth for damages.
    - - This situation occurs when a party become unable to perform the contract; for instance, they might lose the licences required in order to perform the works required under the contract; they might fail to obtain the council approvals for a course of works; they might be imprisoned; in any number of such circumstances, a party might be held to have repudiated the contract.