Week 5: The Law of Contracts (Termination and Remedies) (Termination of…
Week 5: The Law of Contracts (Termination and Remedies)
Termination of Contracts
Both parties positively perform the legally binding promises established in a contract, therefore, the contract is terminated as there are more more promises for the law to enforce.
In order to get paid under a contract, the genera rule is that performance is required.
Can you still get paid if you not fully performed the legally binding promises? Few exceptions to the rule...
If the contracts is a
(Contract designed to be performed and paid for in stages)
Common in construction contracts
Substancial performance. Means that you've done most of what you are required to do.
Hoenig vs Isaac (Cacl 11.50)
Bolton v Mahadeva (Cacl 11.60)
The parties may agree to terminate the original contract
Might be terminated by a term in the original contract (eg. leases with time periods) or by a further agreement.
Further agreement to terminate contract must be created by another legally binding contract.
All breaches to the terms are a breach to the contracts. However, not all breaches allow a contract to be terminated.
Two broad situations:
A situation in which one side rejects the whole contract
One party indicates wether with words or with actions that it will not or can not perform the contract.
Repudiation that occurs before the time the contract was due to start being performed
Conducts amounting to repudiation
can be inferred from the conduct (actions) of a party
Laurinda v Capalaba (CACL 11.170)
Progressive Mailing House v Tabali (CACL 11.180)
Innocent party can...
Ignore the breach and insist on performance
accept repudiation and treat contract as terminated
Breach in performance
Breach in one or more particular terms
Recall from week 4, breaches can be of...
Conditions, Warranties, Inominate Terms
Remedies depend on which type of term was breached
has a specific legal meaning. It means a change of circumstances after a contract has been entered into. This change needs to change the whole nature of the agreement.
It is very unusual (common mistake to confuse between breach and frustration)
In order to contracts to be terminated by frustration it needs to meet five elements:
An event occurs after the contract was made
that event causes fundamental change to the nature of the contract and the obligations of the parties under the contract
The event was not the fault of either party
The event was not forceable by any party
It would be unfair to enforce the contract under the changed circumstances
Taylor v Caldwell (CACL 11.300)
Krell v Henry (CACL 11.320
Codelfa Construction v SRANSW (CACL 11.380)
Frustration = automatic termination
Monetary compensation for loss
Main remedy in common law
When working out if damages can be claimed theres four important steps to analyze:
What is the measure of damages?
Expectation Damages: Where a party sustains a loss by a breach of contract, damages are to bearded so that the innocent party, as far as money can do so, is in the same positions they would've been if the contracted been performed
Robinson v Harman (CACL 12.50)
In some cases it is very hard to calculate the profit that would've been received with if the contract was successful. Therefore,
are paid in order to the expenses incurred.
Commonwealth v Amman Aviation (CACL 12.60)
Was the loss caused by the breach?
Damages can only be recovered if the loss suffered is actually caused by the breach (causation)
"But for" test
Would the loss still happened if the breach hadn't occured?
Yes = coincidence = can't claim the loss
Reg Glass v Rivers Locking Systems (CACL 12.95)
Is the loss too remote from the breach?
Even if the damages are caused by a breach, they can only be recovered if they are not too remote. The loss must be reasonably forceable at the time of the contract creation
Headley v Baxendale (CACL 12.100)
Is the loss one that the innocent party should have taken steps to avoid, by the way of mitigation?
You have to take reasonable steps to limit your loss.
The idea is that you limit your loss and claim the amount that you couldn't mitigate or limit.
Failure to mitigate means that damages are reduced to the amount that could be reasonably avoided.
An order of the court requiring a party to perform their obligations under the contract.
Only for very specific items of pieces of land