LLB304 - COMMERCIAL REMEDIES EXAM NOTES
Discharge by performance:was the contract discharged due to sufficient performance?
Discharge by termination:did D breach a term or repudiate the contract?
Discharge by agreement:was there a mutual release of obligations OR an intimation that the obligations were no longer required?
Discharge by frustration: have the obligations become impossible to perform?
Rescission:has there been a vitiating factor (undue influence, duress, unconscionable conduct, mistake, misrepresentation) that entitles the contract to be rescinded?
Rectification:has there been a mistake resulting in the contract not reflecting the correct agreement?
Damages:has P experienced loss of expected profit AND/OR loss of expenses spent in preparation for the contract?
Equitable remedies:is P entitled to specific performance or an injunction?
● Must something be prevented from happening prior to trial?
● Was there a benefit provided to D at the expense of P that is unjust for them to retain?
Remedies under ACL: are the parties involved in a relationship under theACL?
● Was there a relationship in trade and commerce?
● Are unfair terms, misleading conduct, or unconscionable conduct relevant?
○ Was the obligationentire?
■ In contracts for services, the courts lean against interpreting obligations as entire (Hoenig v Isaacs) [identify whether the facts suggestfull and complete performanceas a precondition to payment to reverse this].
■ Was thereurgencyrequired that reassured P to enter the contract?
● An obligation will be entire where completion by a certain time was agreed to be a condition precedent to payment (Hoenig v Isaacs).
■ Where an obligation is entire, the contract must be fully performed for payment.
○ Was the obligationnot entire?[must instead be exactorsubstantial performance for discharge]
○ Was thereexactperformance?
Was the obligation performed exactly as per the contract?
○ Was theresubstantialperformance?
Due to thede minimis non curat lexrule, insignificant failures and defects in performance may be excused (Shipton, Anderson & Co v Weil Bros &
Co). This depends ontwo factors:
■ The nature of defect in performance Should be minor.
■ The cost of remedying any defect relative to cost of contract Eg. repair ($200k) compared to contract price ($2M) = 10%.
○ Hoenig v Isaacs:defects were minor (7%), obligation discharged.
Minor Defect Serious Defect Low cost (<10%) Substantial
performance satisfied
Hard to predict. If serious nature
justifies termination of K, K price is unlikely to be recoverable High cost (>33%) Recovery of K price
may be allowed, subject to rectification cost not exceeding a reasonable amount
Obligations likely not substantially
performed
2. Was there partial performance?
Court won’t allow claim for recovery where P has only partly performed obligations, eg:
○ Work is of no value to D
○ Work is entirely different from that provided by K
○ Conduct of P constitutes repudiation or abandonment
RESCISSION
Rescission of a contract occurs when the transaction is reversed in order to restore each party to their previous position. It applies when, upon breach by the other party to a contract, a party chooses to consider the contract as no longer binding (Shevill v Builders Licensing Board).
1. Was there a vitiating factor?
Contracts are voidable at law where a vitiating factor can be proven. This allows the wronged party to rescind the contract.
○ Does misrepresentation apply (Hill v Perrott)?
■ Even if representation is false and fraudulent, there is no right to restitution unless P relied on it to enter K (Gould v Vaggelas).
■ Isnon est factumrelevant (Petelin v Cullen)?
● Must prove P’s ignorance of the nature of K at time of execution or that they did not execute K.
○ Cannot be literate and/or have full legal capacity
● Effect is to void Kab initioas title cannot pass under void K
○ Does mistake apply?
■ Common mistake: both parties share same mistake (Australia Estates)
● 5 element test:Great Peace v Tsavliris
■ Mutual mistake:both parties made different mistake
■ Unilateral mistake:only one party mistaken
○ Does undue influence apply?
■ Is there a relationship of influence?
● Does the relationship fall under a presumed category?
● Can we establish a special relationship of influence on the facts?
○ Reliance on guidance or advice; awareness of reliance;
benefit received; element of confidentiality (Lloyd's Bank v Bundy; Johnson v Buttress)
○ Can this presumption be rebutted (Johnson v Buttress)?
■ Is there an abuse or undue exercise of that influence by strong party?
● Did D take advantage of the special relationship? (Wilce v Wilce)
○ Does unconscionable dealing apply?
■ Was one party under a special disability?
● Does the condition "seriously affect the ability of the innocent party to make a judgement as to his own best interests?" (Cth Bank v Amadio)
● Commercial reliance; emotional dependence/incapacity (Louth v Diprose)
DAMAGES
Expectation Loss:the expected profit from the successful contract.
Reliance Loss:expenditure on preparing for the successful contract.
● If expenditure has been wasted in preparation for the contract, innocent party will be entitled to reliance loss in addition to expectation loss(Gates v CMLAS; Commonwealth v Amann Aviation).
1. What costs would not have occurredbut forthe breach (March v Stramare)?
Aim is to put the innocent party where they would have been if the contract had been successfully performed (Robinson v Harman).
○ What losses occurred?
○ What was the expected profit?
○ Was any money spent in preparation and reliance?
■ Reliance loss would not have occurred had the contract been performed and therefore may be recovered (Commonwealth v Amann)
○ Was the contract a "losing contract"?
■ Where a loss was expected, this amount must be factored into the final reckoning or P will be in a better position (Commonwealth v Amann).
■ There will also beno expectation loss(as they did not expect a profit).
2. Were the losses nottoo remote(and therefore recoverable)?
○ Hadley v Baxendaletwo-limb test:
(i) losses arising naturally according to the ordinary course of things
■ Was the breach 'sufficiently likely to result' in this loss? (Burns v MAN Automotive)
■ Does not capture "extraordinary" losses.
(ii) losses reasonable in the contemplation of the parties at the time they made the contract.
■ Was sufficient information provided to D to put them on notice?
■ It is not necessary for them to know the exact measure of the loss (Parsons v Uttley Ingham).
○ If the losses do not fall into either of these categories, they are too remote and therefore not recoverable.
3. Did P take steps to mitigate loss?
There is an obligation on P to take reasonable steps to minimise loss(British Dunkirk Colliery v Lever)-eg. if supplies not being bought anymore, to sell elsewhere.
○ What costs may be recovered?
○ P is entitled to recover the cost of any steps taken to mitigate their loss, even if it increases their loss (Banco de Portugal v Waterlow)
○ Any benefits from mitigation must be accounted for in assessment of damages (Lavarack v Woods of Colchester)
