TERMINATION BY BREACH
A breach occurs when a party fails to perform their obligations required under the contract.
All breaches give rise to damages but only breache of conditions or SBIMT will ensue a RTT.
Breach of Condition
If it is a condition, [X] may terminate for ANY breach, even trivial / of little consequence.
STATUTORY CLASSIFICATION
• Goods Act 1958 (Vic) s 18: Sale by description
When there is a contract for the sale of goods by description there is an implied condition that goods correspond with the description
ARCOS V RONASSEN
Buyer could terminate because the wood (goods) did not match the description which was a condition.
EXPRESS
• Parties may refer to a term as a condition however this does not automatically mean it is a condition
• Consider whether such a construction leads to an unreasonable result SCHULER V WICKMAN
Requirement to make visits to six largest manufacturers in UK once a week was referred to as a condition, however this would have the effect of make 1400 visits compulsory and missing one would give rise to termination.
Intention of the parties
TRAMWAYS ADVERTISING V LUNA PARK – IN THE ABSENCE OF AN EXPRESS STIPULATION…
• ESSENTIALITY TEST: P will argue that D’s promise was of such importance to P that he would not have entered into the contract unless he had been assured of a strict performance?
FACTORS TO CONSIDER…
General unwillingness
ANKAR V NATIONAL WESTMINSTER FINANCE
- Court said that they won’t readily construe something as a condition Language used TRAMWAYS
- The language used was “we guarantee” which demonstrated that strict performance would be ensured, preliminary correspondence demonstrated the importance of continuity of display
SCHULER
- The use of the term “condition” was used in the sense of the lay man’s terms and wasn’t a strict requirement
ANKAR
- The vagueness of the wording (no time limits) in clause 8 and 9 requiring notification point away from them being conditions (note: still held to be condition
Consequences of the breach Onerous breach =
condition
ANKAR
- A breach was dangerous for Ankar as they were trying to protect their
interests as a guarantor who had loaned money and assignment would mean they would be vulnerable to new company they don’t know
Other terms of the contract
ASSOCIATED NEWSPAPERS V BANCKS
- Term to produce a cartoon each week, and for that cartoon to be always published on the front page were concurrent and correlative promises and thus publishing on front page was a condition. MAINTAINING REPUTATION TRAMWAYS
- Contract noted that payment would not commence until all 53 boards were displayed – showed that this was the crux of the contract
Are damages difficult to
calculate?
ANKAR
- It would be too difficult to calculate and prove loss from assigning loan without notification, held to be condition. CONSIDER UNIQUE NATURE.
Whether the breach is likely
SCHULER
- Absurd result if weekly visits to six manufacturers was a condition. Out of the 1400 required, what if one fell on a public holiday? MORE LIKELY TO BREACH, LESS LIKELY TO BE A CONDITION
Fairness if breach gives rise to RTT
SCHULER
- Not fair if long contract can be terminated even if 1399 visits were made
Serious Breach Of An Intermediate Term
If it is an intermediate term, P may terminate depending on the gravity and consequences of the breach. Less than a condition but more than a warranty.
SUBSTANTIAL BREACH
P will argue that D’s breach deprived them of substantially the whole benefit of the contract HONG KONG FIR, KOOMPAHTOO)
KOOMPAHTOO
• the nature of the contract and the relationship it creates
• the nature of the term
• the kind and degree of breach
• the consequences of the breach for the other party
• the adequacy of damages
Ø Relatively high threshold
Ø Obiter support via ANKAR as even though term construed as a condition, would be SBIMT if not o HC left it open as to whether time can be an intermediate term à seems acceptable
Sanpine agreed in contract to manage land development and keep financial records. They did a terrible job, and when the agreement was insolvent, they had not kept any records. Because of nature of contract and inadequacy of damages, this deprived innocent party of substantially whole benefit.
HONG KONG FIR
There was a clause in a ship chartering agreement that it must be seaworthy. It was not seaworthy for 20 weeks. 20 wks out of a 2 year contract was not enough as the innocent party still got benefit for 19/mths
Repudiation
If [X] can establish that [Y] has repudiated the contract, this is a serious breach that will give rise to a RTT for [X].
TEST
P must prove that the circumstances, or the words or conduct of D were such as to make a reasonable person believe that D was unwilling or unable to perform obligations under the contract that…
LAURINDA; PROGRESSIVE MAILING
RELATE TO WHOLE CONTRACT ARE CONDITIONS ARE OTHERWISE FUNDAMENTAL
• All of the promisors obligation
• Tramways condition analysis
• Deprive P of substantially the whole benefit of K
UNWILLING UNABLE
• Through words or conduct (or expressly) the party must make clear that they are unwilling to perform the contract
• Intends to fulfil the contract only in a manner “substantially inconsistent” with the obligations (SHEVILL)
CARR V BERRIMAN – land owner did not have site ready, failed to deliver steel, and subcontracted the steel work. Owner “is prepared to carry out his part of the contract only if and when it suits him”
constituting unwillingness.
• Need strong evidence of a financial inability to pay
SHEVILL – ‘financial difficulties’ causing tenant to be late with rent did not mean they would be always unable to meet obligations
• This is generally seen as less important than a party being unwilling
SHEVILL – lease was consistently paid late; this didn’t show that they were unwilling to pay
IMPORTANT CONSIDERATIONS COMBINATION OF EVENTS
• A series of breaches too individually inconsequential to amount to repudiation can combine to do so
PROGRESSIVE MAILING HOUSE V TABALI – Tenant refused to pay rent for 6 months (due to failed fit out of property), also damaged the property (ruining roof support structure, down pipes broken, electrical system damaged) and refused to fix it, misused premise against local laws. ALL these factors led to R.
HIGH THRESHOLD
• “a serious matter and is not to be lightly found or inferred” - SHEVILL
• “a drastic conclusion” - WOODAR V WIMPY PREVIOUS AFFIRMATION
• If a party affirms the contract after a breach, they cannot sue on that breach alone. However, they may sue later if another breach occurs. In this case, the prior affirmed breach may be considered.
CARR V BERRIMAN – first breach of failing to clear site was affirmed, however when repudiation claim was made on the basis of the steel changes, the court still looked to the initial breach.
INSTALLMENT CONTRACTS
A contract where obligations are divided into a number of instalments GOODS ACT s 38(2)
• In contracts for the sale of goods, s38(2) Goods Act essentially says there is no rules and court should decide on its facts
RELEVANT FACTORS
1. The quantitative ratio the breach bears to the contract as a whole; AND 2. The degree of probability or improbability that such a breach will be repeated
MAPLE FLOCK – contract to supply 100 tonnes of rag flock in 67 separate deliveries. The 16th delivery was defective and contract was terminated. Court found that the defective delivery was only 1.5% of total contract, and probability of it occurring again was “practically negligible”. Therefore, no repudiation.
ERRONEOUS INTERPRETATION
• IS THE PARTY PERSISTING ON ITS INTERPRETATION WILLY NILLY IN THE FACE OF A CLEAR ENUNCIATION OF THE CORRECT INTERPRETATION?
DTR NOMINEES – DTR misread their obligations under a contract for subdivision, thinking they only had to lodge the first 9 plots’ plans of subdivision (but actually had to lodge all 35). Court held this was an honest mistake and there was no repudiation.
WOODAR V WIMPEY – provision for termination if there was compulsory acquisition by government.
Purchaser terminated on the basis of an order for acquisition made by the government. However, this was an existing order, and it was only NEW acquisition orders covered by the contract. Court held purchaser did not intend to abandon or not perform the contract, honest mistake
• CF DISSENT: (Lord Salmon) honest mistake not an excuse as it is too difficult for the court to determine when there is an honest mistake and when a party is taking advantage of a contract
• IS THE PARTY EVINCING AN INTENTION NOT TO BE BOUND BY THE CONTRACT AS CORRECTLY INTERPRETED?
o If the correct interpretation is unclear, get a court determination
EMINENCE PROPERTY DEVELOPMENTS V HEANEY – vendor mistakenly miscalculated settlement date, making it earlier than it was meant to be. Purchaser wanted to get out of contract so deliberately didn’t pay, waited for vendor to fall into their own trap and wrongfully terminate, then claim repudiation. Court held there was no repudiation. A reasonable person in position of purchaser would not have thought vendor wanted to abandon contract, just that there was a miscalculation.
• DIFFICULT TO COUNTER-SUE IN THESE SCENARIOS
DTR – initially purchaser sues for repudiation, however this is unsuccessful as there was an erroneous interpretation. Vendor then tries to sue for repudiation based on purchaser’s initial failed repudiation claim. Court held this was not repudiation as they were insisting on correct interpretation of K.
