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Week 5: The Law of Contract - Termination, Breach and Remedies - Coggle…
Week 5: The Law of Contract - Termination, Breach and Remedies
Termination
Simply means bringing it to an end
Part 1: By performance and agreement
Termination by performance
When a contract is fully performed, it will be considered terminated by performance
General rule: exact performance is required
Divisible contracts: Exception where a contract is to be performed and paid for in stages
Another exception is substantial performance
Did not exactly perform, but did perform (with defects)
Payment due if performance is substatial
Hoeing v Isaacs
Substantial, plaintiff entitled to recover only the contract price less teh amount required to finish it exactly
No payment is due at all if performance is not substatial
Bolton v Mahadeva
Unsubstantial die to poor quality and amount in defects proportion to the contract price
Substantial need to consider
Nature of contract
Nature of defects
Relative cost of correcting or completing the work
Termination by agreeement
Parties may agree in contract how it can be terminated
Express power
where a specific event happens (such as expiry of lease term)
Implied power
Contract without provision setting out its duration (implied right to terminate on giving reasonable notice)
Agreement satisfies requirements of a legally binding contract
Part 2: For breach
Something has gone wrong
Contracts can be terminated when one party breaches the contract (only in some circumstances)
Termination for a breach is a right but is not required
Only some breaches of terms allow for termination
Repudation - rejecting the whole contract
One party indicates that is will not or cannot perform or complete the contract (ALLOWS FOR TERMINATION)
Anticipatory breach is a particular type of repudiation that occurs before the time when the contract was due to start being performed (ALLOWS FOR TERMINATION)
Conduct amounting to repudiation can be express or implied
Laurinda v Capalabe Park Shopping Centre
Right to terminate as defendant showed intention to perform the contract in a manner that was substantially inconsistent with its obligation
Progressive Mailing House v Tabali
Cumulated effect of breaches allowed them to terminate
Breach in performance - Breaching one or more particular terms (breach of condition, serious breach of innominate term)
Breach of condition allows for termination
Breach of warranty does not allow for termination
Breach of innominate term allows for termination if it is serious
Part 3: By frustration (NOT COMMON)
Is the contract radically different as a result of the frustrating event?
Yes, contract is automatically terminated
Change of law
Destruction of subject matter
Serious injury/death
Circumstances cause radical change in contract
Common objective no longer possible
Concerned with unforeseen events that happen after the contract is formed that were not provided for in the contract
Davis Contractors v Fareham
Not frustration as it didn't satisfy the rules and just made it hard but not frustration
Examples
Changes to the law making
Covid lockdowns
Destruction of the contracts subject matter
Taylor v Caldwell
Frustration as was not the fault of either party
Common objective no longer being achievable
Krell v Henry
Frustrated as there was an unforeseeable event and the purpose within the contemplation of both parties when contract formed
General rule is that you must do what contract provides, even if it is hard and expensive, frustration is not common (not the fault of either party)
Rules
Event occurred after contract was made
Caused a fundamental change to the nature of contract
Was not the fault of either party
Was not foreseen by either party
Would be unfair in the circumstances to enforce the contract
Not covered when
Contract itself covers the event
Moore v Scenic Tours
Frustrating event could have been foreseen
Where there was fault or self induces frustration
Event simply makes the contract harder
Tsakiroglou v Noblee Thorl
Impact of the change is not sufficiently long in the context of the particular contract
National Carriers V Panalpina
Effect of frustration
Contract is automatically terminate as of the date of the event
Future obligations are discharged however liabilities that have already accrued remain
Australian Consumer Law and Fair Trading Act
means the court has discretion to fairly distribute the loss
Remedies for breach of contract
Damages
Monetary compensation
Always consider these steps
What is the measure of damages?
Damages are awarded so as to place the innocent party in the same position they would have been in had the contract been performed
Where it is not possible to demonstrate profit or the extent of profit, recover the expenses that have been reasonably incurred
Commonwealth v Amann Aviation
Reliance damages
Was the loss caused by the breach?
Reg glass v Rivers Locking systems
But for the breach the loss would not have occurred
Is the loss too remote from the breach?
Only recoverable if they were reasonably foreseeable at the time of contracting
Hadley v Baxendale
Loss must be one that arises naturally form the breach
The loss must have reasonably been within the contemplation of the parties at the time of contracting
Has the innocent party taken steps to avoid the loss by way of mitigation?
Have to take reasonable steps tp mitigate the loss, cannot passively sit by and allow losses to accumulate
Failure to mitigate means that damages are reduced by the amount that they could have been avoided
Termination
Bringing a contract to an end
Equitable remedies
Specific performance, injunctions (RARE)
Will not be granted:
Damages are an adequate remedy
Contract is for personal services
Ongoing supervision of the court is required
Damages not usually recoverable for disappointment
Except when the whole point of the contract is to create enjoyment
Jarvis v Swans Tours
Injunctions
An order of a court restraining a person from doing a wrongful act (such as breaching contract)
Not granted where its effect would be to compel someone to do something which the court would not have ordered specific performance