Termination Of Contract

Formation of contract Issues Offer 1 Is offer made 2 Is the offer effectively revoked

P

D

D showed intention to make contract

Mere information or invitation to trade

Carlill v Carbolic Offer can not be revoked after acceptance

Harvey v Facey Revoke offer anytime before acceptance

Byrne & Co v Van

Routledge v Grant Offer is rejected (Counter offer)

3 Rejected

Acceptance 1 Unconditional 2 Communicated (Postal rule) Effective as soon as posted

Unconditional but requiring further information Stevenson v Mclean Postal rule

Hyde v Wrench Conditional Masters v Cameron Postal rule is not applicable if particular mean of acceptance is mentioned

Even if lost or never delivered Not applicable for instantaneous communication

Consideration Have value but need not to be adequate

Thomas v Thomas

Not previously given

Roscorla v Thomas

Promise to perform existing obligation

Stilk v Myrick Early payment of debt is consideration

No consideration for contract (By merely paying the debt owed)

Pinnel’s case

Foakes v Beer

Easily rebutted especially when the contract is essential between two businesses (Merritt v Merritt)

Presumed not legally binding

Exceptions Deed or seal Equitable promissory estoppel

Intention to create legal relationship Social and domestic Easily rebutted

Commercial

Hard to rebut

Balfour v Balfour

Rebutted by express clear words

Hard to rebut

Edwards v Skyways Ltd

Rose v Frank

Express terms of contract Issues Signed written contract

P

D

1 A party who signed contract is taken to have read, understand and agreed to be bound by all of its terms even if the party actually did not read (Exceptions: Document does not appear to be a contract/ Terms have been misrepresented)

No contract made

L’Estrange v Graucob Ltd

D J Hill and Co v Walter H Wright

2 Parole evidence (If the written term is complete, other statements can not vary those written terms) Exceptions: Not complete/ Second collateral contract

Written statement and unsigned written contract 1 Party is aware of the contract terms

2 Prior sufficient notice must be given (Nature of the document/Nature of the transaction/Nature of the clause)

3 Must not be misrepresented

D is aware of the contract term Balmain New Ferry v Robertson

D is not aware of the term and no sufficient notice is given prior to making the contract

Notice is given too late Olley v Marlborough No prior sufficient notice is given Interfoto Picture Library v Stiletto Visual Programmes

Oral statement and written contract Reasonable bystander test Time between statement and

Yes. Oral statement is the contractual term.

Negate P’s argument. Oral statement is already after contract

contract

Van Den Esschert v Chappell

made.

Nature of statement: importance, promissory, unqualified. (Whether to be intended to rely on)

Time is immediately before.

No intention to rely on.

P would not sign the contract without assurance of D

D does not have special knowledge about the statement.

Party making the contract has special knowledge.

D has special knowledge about the property

Oral statement and oral contract Reasonable bystander test

Same argument

Same argument Oscar Chess Ltd v Williams

Collateral contract Consideration is entering the main contract

Intended to be relied on and not inconsistent with main contract.

1 Statement is intended to be relied on.

De Lassalle v Guildford

Not intended to be relied on. JJ Savage and Sons v Blakeney Inconsistent with main contract Hoyts Pty Ltd v Spencer

2 Statement is not inconsistent with main contract

Exemption clause Is exemption clause a term of the contract

Exemption clause is misrepresented and thus void.

Exempt liability for breach of a fundamental term or obligation.

Does exemption clause apply to the claim

Curtis chemical cleaning v Dyeing

Photo Production v Securicor Transport

Exemption clause overruled by a statute (TPA 68)

Contra proferentem rule Any ambiguity arisen must be interpreted against the party who drafted it. Alex Kay Pl v Gen Motors Accept Corp Four corners Clause can not exempt a liability that arises outside the terms of the contract. Sydney Corporation v West

Termination of contract Ending contract Frustration Causes (P’s argument) 1 Intervening event 2 Not contemplated by both parties 3 Not fault of both parties 4 Impossible or radically different to original

Termination

Rescission

1Breach of condition (Clearly expressed as condition/Statutory implied as condition/P would have not entered without strict or substantial assurance)

1 Mistake (Each party made the same mistake about a fundamental matter)

2 Serious breach of intermediate term (Substantially deprived of P’s benefit)

2 Undue influence (Absence of a free and voluntary act of a party/Could be caused by special relationship) Exceptions: Husband and wife/ P got independent advice 3 Economic duress (Pressure exerted goes beyond legitimate)

Potential defence

Results

Negate 4 conditions above

Negate P’s argument (Not serious enough to terminate)

1All outstanding obligation discharged

L Schuler AG v Wickman Machine Tool Sales 1 Ends from time election is made

2 Benefits and Liabilities equalised between both parties

2 Relieved from performing future obligation 3 Does not affect obligations already accrued

Process

1P makes an election to treat breach as ending the

4 Unconscionable conduct (Covered in part 2) Negate P’s argument/Use exemption rule

Ends from its beginning Note : Rescission is not available in scenarios below 1 Contract has been affirmed 2 Restitution is not available 3 Third party’s legal rights are affected Same

contract 2 Must not be unequivocal and be communicated to the party in breach 3 Party terminating proves to be ready and willing to perform their part of contract

Cases

Taylor v Caldwell

4 Cant not be revoked Associated Newspaper Ltd v Bancks

Taylor v Johnson

Remedies Caused by breach of warranty or slight intermediate condition Types Damages

P

D

Damage can be awarded

Damage cant be awarded

1 Must be a type damage can be awarded (Exception: provision of entertainment or enjoyment)

P would have not suffered loss but by D

P’s loss is not caused by D

2 Loss must be caused by breach 3 Loss must not be too remote 4 Innocent party has to mitigate loss

First limb: loss is in contemplation of usual course of business Second limb: within reasonable contemplation of parties as a probable result of the breach

Recovery of the contract price

(Consequential damage only if notice is given) Performed obligation under the contract

Specific performance

Entitled to recover the agreed price Dongan v Ley

1Only when damage is not adequate 2 Never ordered for contracts involving personal service

Injunction Stop a party from doing an act

Show the contravening conduct will continue or happen again

Loss is outside the usual course of business and unreasonable P’s contributory act counts for reduction of damage

Stipulates precise completion Requires substantial performance Lumley v Wagner

Restitution Prevent unjust enrichment

Lumley v Wagner D has been enriched at the expense of P, it is unjust for D to keep the benefit Fair and just compensation to P Fibrosa v Fairbairn

Rectification Mistake common to both paties Seek order to rectify incorrect terms Third party’s legal right must not be affected

Time limitation Legal action for simple contract is within 6 yrs Legal action for formal contract is within 15 yrs Legal action for unconscionable conduct is within 6 yrs

Baltic Shipping v Dillon