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					                                     Contracts B: ISAACS

Performance
Generally, parties to a contract are required to perform their obligations under the contract exactly.
After completing the duties under the contract, parties will be discharged from any obligations.
When is performance required?
      Performance is required at or within the time specified in the contract or within a reasonable time
      (Postlewaite v Freeland; Sale of Goods Act 1896 (Qld) s 31(2)).
      A reasonable time is determined objectively by examining when the performance is alledged to
      be due (Perri v Coolangatta Investments Pty Ltd).
What order is performance required?
      Obligations can be classified as dependent or independent.
      An independent obligation is one that is not reliant on the actions of the other party. In such a
      case, a party may require the party to fulfil their obligation despite not having performed their
      own obligations under the contract.
      A dependent obligation arises under many contracts where one party is required to perform their
      obligations before the other party is required to do so. Consequently, if the party does not fulfil
      their obligations, the other party is not required to perform their obligations (usually payment).
      If the purchaser refuses to accept the good or service provided, the seller can only claim damages
      for breach, but not for the contract price (Automatic Fire Sprinklers Ltd v Watson).
1 - Is the contract divisible?
      A contract is deemed to be divisible where the consideration and payment is apportioned or
      capable of apportionment from the contract (Steele v Tardiani). When determining performance
      of a divisable contract, the courts examine each division as if it were a separate contract.
      A lump-sum contract is one where payment is due at the completion of specified work (Hoeing v
      Isaacs).
2 - What is the nature of the obligation?
      An obligation can be either entire or not entire.
      Was the obligation entire?
            An entire obligation is one where the exact performance of the contract by is a condition
            precedent to the dependent obligation (contract price) (Baltic Shipping Co v Dillon; Cutter
            v Powell). As this can result in harshness, the court will only consider the obligation entire
            where:
                  i.   Complete performance is a condition precedent
                 ii.   The benefit expected by the defendant {usually customer} will result from each
                       part of the work evenly
                iii.   The consideration is not apportioned or capable of apportionment
            (Purcell v Bacon)
            Entire Obligation

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                  If performance is exact, the contract price is the available remedy.
                  A claim for Quantum Meruit may be available if an entire contract has not been
                  performed exactly (Appleby v Myers).
                  If the plaintiff’s not in breach he may elect to sue for damages rather than for
                  restitution.
            Not Entire Obligation
                  If the obligation is not entire, performance of the contract does not have to be exact.
                  Exact Performance
                        If performance is exact, the contract price is the available remedy.
                  Substantial Performance
                        A claim for substantial performance can be made after termination of the
                        contract so long as the obligation to pay the contract price has arisen before
                        termination (GEC Marconi Systems Pty Ltd v BHP Information Technology Pty
                        Ltd).
                        Where a party substantially performs its obligations under the contract it is
                        entitled to the contract price less deductions for defects (Hoeing v Isaacs).
                        Substantial performance is considered to be the completion of an obligation
                        according to the contract apart from minor defect, collateral to the main purpose
                        of the contract (Hoeing v Isaacs per Sommervell LJ). When considering
                        whether the obligation has been substantially performed, the court will look at:
                              i.     Nature of the Defect
                          ii.        The relative cost of rectification
                        (Bolton v Mahadeva)
                        When looking at the nature of the defect, the court will consider factors such as:
                                    Useability
                                    Effect on purpose of contract
                  Partial Performance
                        Where there has been partial performance by a party, if they are not in breach
                        may claim for either damages or quantum meruit (Automatic Fire Sprinklers
                        Pty Ltd v Watson), however in breach, only have a quantum meruit action
                        available.
                        Quantum Meruit
                                    Quantum Meruit is a claim for the reasonable value of services rendered
                                    (Pavey & Matthews Pty Ltd v Paul). {Quantum Valebat for Goods
                                    provided}
                                    The plaintiff in a quantum meruit action must show that:
                                       1) They provided a benefit to the defendant
                                       2) The benefit was at the expense of the plaintiff


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                                 3) It is unjust that the defendant retains the benefit
                              When the plaintiff is in breach, the defendant may subjectively devalue
                              the work. The Plaintiff is required to show benefit and therefore that the
                              services were either:
                                  1) requested by the defendant (Pavey & Matthews v Paul);
                                  2) freely accepted by the defendant (Sumpter v Hedges); or
                                  3) the defendant has obtained an incontrovertible benefit from the
                                     services (Steele v Tardiani).
                              It will be difficult for the plaintiff to show that the services were
                              requested by the defendant as if they are in breach they are unlikely to be
                              following the request. An exception occurs when the defendant has
                              prevented performance (Planche v Colburn).
                              Where the defendant has freely accepted the services provided by the
                              plaintiff, a benefit has been conferred to the defendant. In the case of
                              improvements to land, the defendant cannot freely accept the service
                              (Sumpter v Hedges).
                              Where the defendant has gained a incontrovertible benefit {Cash} from
                              the services rendered, a benefit has been conferred by the plaintiff (Steele
                              v Tardiani).
                              It is unclear whether a quantum meruit claim is limited to the contract
                              price (Pavey & Matthews v Paul {K price ceiling}; Cf Renard
                              Constructions (ME) Pty Ltd v Minister for Public Works{not limited to K
                              price}).




Matthew Robinson - 05539234                  LWB137 Contracts B                                            3
Termination by Frustration
General Rule
      A Contract is frustrated when the law recognises that without the default of either party, the
      contract has become incapable of being performed because circumstances have rendered it
      something radically different to what was agreed to (Codelfa Constructions Pty Ltd v State Rail
      Authority).
Frustrating Event?
      A contract is not frustrated if performance becomes more time consuming or costly (The
      Eugenia).
      Destruction or unavailability of subject matter
            Where the subject matter of the contract has been destroyed or is unavailable, the contract
            is frustrated (Taylor v Caldwell {Hall Fire}; Appleby v Myers {K to erect machinery –
            frustrated but entire K so no $}).
      Death or incapacitation
            Where a person essential to the performance of the contract dies or is incapacitated (illness,
            imprisonment, internment or conscription), the contract may be frustrated (Simmons Ltd v
            Hay).
            In the case of illness, the nature and duration of the illness as well as the terms of the
            contract must be taken into account (Carmichael v Colonial Sugar Co Ltd).
            In a modern employment contract, the contract as well as any applicable legislation must be
            taken into account. This also may be helpful to determine when the contract was frustrated
            (Finch v Sayers).
      Failure on basis of contract
            Where a contract is entered into on the basis of gaining enjoyment from an event, where the
            event does not go ahead, the contract may be frustrated (Krell v Henry {coronation}).
            However, where the event in question is not the only basis for the contract, the failure of
            that event is not frustrating (Herne Bay Steam Boat Co v Hutton).
      Method of Performance Impossible
            Where the method of performance is stipulated or contemplated by both parties, that
            method of performance being impossible will frustrate the contract (Codelfa Constructions
            Pty Ltd v State Rail Authority)
      Delay
            Whether a delay will render a contract frustrated will depend on the probability of the
            length of time relative to the period of the contract (Pioneer Shipping Ltd v BTP Tioxide
            Ltd).
            Temporary delay not materially altering the contract is not frustrating (The Eugenia).
            However, where the contract is rendered radically different, a temporary delay is frustrating
            (Jackson v Union Marine Insurance Co Ltd).
            Where the delay is not temporary, the parties may be required to wait to determine the
            length of the delay (Embiricos v Sydney Reid & Co). However, the courts have taken the

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            approach that business should not have to endure long periods of uncertainty before
            determining their legal position (Pioneer Shipping Ltd v BTP Tioxide Ltd).
            The events are not judged with hindsight (Court Line v Dant & Russel).
            If a delay is reasonably contemplated, or should have been foreseen, the parties take the
            risk of delay (The Eugenia).
      Illegality
            A contract is frustrated where performance is impossible due to legal changes or executive
            action (Scanlan’s New Neon Ltd v Tooheys Ltd {neon advertising banned in war – not
            allowed to illuminate – but not frustrated as still provided advertising use}; Fibrosa v
            Fairbairn {War- total failure of consideration}).
            Dealing with the enemy in war time can be frustrating (Metropolitan Water Board v Kerr).
      Land Contracts
            Sale
                   The destruction of buildings on land is not frustrating (Fletcher v Manton).
                   Where the land is no longer available, as would be the case with government
                   acquisition, the contract is frustrated (Austin v Sheldon).
                   As soon as the contract is signed, the purchaser acquires an equitable interest in the
                   land.
            Leases
                   The issue as to frustration on a lease has not been considered by the High Court.
                   Although it has been suggested that a lease could not be frustrated (Firth v Halloran),
                   it is the better view that a lease can, but only in rare cases – such as disappearance of
                   land but not destruction of building - will be frustrated (National Carriers Ltd v
                   Panalpina (Northern) Ltd).
                   Where the government has ordered an address to be vacated, the lease will be
                   frustrated (Robertson v Wilson).
      Inflation
            Generally, inflation is not a frustrating event (British Movietnonnews Pty Ltd v London and
            District Cinemas Ltd), however in some circumstances hyper-inflation can be frustrating
            (Wales Ltd v Greater London Council).
Limits to Frustration
      The frustrating event must not be provided for in the contract (Claude Neon v Hardie).
            {Usually done with a Force Majeure Clause – states the consequences for events – read
            contra performem – despite clause, doctrine of frustration can still apply (Metropolition
            Water Board v Kerr)}
      The event must not be foreseen, or capable of being foreseen by the parties, except accept so far
      as intervening illegality (Codelfa Construction Pty Ltd v State Rail Authority of New South
      Wales). When determining whether the even was capable of being foreseen, the even will only be
      considered foreseeable if there is a high probability of occurrence (WJ Tatem Ltd v Gamboa).



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      Where the even is foreseen, where the event exceeds what is foreseen, the contract may be
      frustrated (WJ Tatem Ltd v Gamboa).
      The event must not be the fault of wither of the parties (Maritime National Fish v Ocean
      Trawlers {had 5 boats only 3 licences – chose not to use licence on boat of other party}).
      The onus of proof rests on the person alledging that the contract has been frustrated (Joseph
      Constantine v Imperial Smelting).
Effects of Frustration
      Frustration discharges obligations under the contract from the time of the frustrating event (Hirji
      Mulji v Cheong Yue Steamship Co Ltd).
      Unconditional rights accrued before frustration are still enforceable, however right not yet
      accrued are unenforceable (Baltic Shipping Co v Dilon).
      Some clauses may still bind the parties (Codelfa Construction Pty Ltd v State Rail Authority of
      New South Wales {arbitration clauses}).
      Generally, any loss from frustration lies where it falls, except where there is a total failure of
      consideration (Codelfa Construction Pty Ltd v State Rail Authority of New South Wales).
            The position of a deposit for the sale of goods is not yet cemented, however it is likely that
            their will be a total failure of consideration (McRoss Developments Pty Ltd v Caltex
            Petroleum Pty Ltd).
      Work done after frustration may be claimed on a quantum meruit basis (Codelfa Construction Pty
      Ltd v State Rail Authority of New South Wales).
      In South Australian, Victoria and NSW, there is legislation that deals with frustration.




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Termination by Agreement
      The parties to a contract may discharge obligations under a contract by forming a new contract
      where each party forgoes their rights under the original contract.
      Where one party has wholly performed their obligations under the contract, the contract must be
      under seal or the other party must provide fresh consideration – accord and satisfaction
      {comprimise or any valuable consideration – may be conditional e.g. if cause of action dropped
      original K discharged} (McDermott v Black).
      Variation
            Whether the contract has been terminated, or partially discharged or varied will depend on
            the intention of the parties (Tallerman & Co Pty Ltd v Nathan’s Merchandise).
      Requirement of Writing
            A contract required to be evidenced in writing may be discharged by an oral contract
            (Morris v Baron & Co).
            An oral contract will be effective to discharge a contract required to be evidenced in
            writing, but the new agreement will not be enforceable (Tallerman & Co Pty Ltd v
            Nathan’s Merchandise).
            A variation to an agreement required to be evidenced in writing must be evidenced in
            writing to be enforceable (Australian Provincial Association Ltd v Rogers).
            Waiver of terms does not amount to a variation of the agreement (Phillips v Ellison Bros
            Pty Ltd).
            Where an oral contract is inconsistent with the written contract so as to go to the root of it,
            it is presumed that the parties intended to discharge the original contract and replace it
            (British & Bennington’s Ltd v NW Cachar Tea Co).
      Non-contractual discharge
            A party may be estopped from insisting on their contractual rights (Walton’s Stores
            (Interstate) Ltd v Maher).
            Where both parties act in such a way as to abandon the contract or treat the contract at an
            end, the contract may be discharged (Summers v Commonwealth).




Matthew Robinson - 05539234                  LWB137 Contracts B                                               7
Termination for Breach
Termination of a contract discharges the future obligations of parties, however unconditionally accrued
rights and some clauses are unaffected (Mc Donald v Dennys Lascelles Ltd; Codelfa Construction Pty
Ltd v State Rail Authority of NSW). The right to terminate can arise pursuant to the contract (Honner v
Ashton) or under common law for a breach of a condition or serious breach of an intermediate term
(Hong Kong FIR Shipping Co v Kawasaki Kisen Kaisha Ltd).

Classification of Terms
     The classification of a term in a contract is ascertained by looking objectively at the intentions of
     the parties at the time of formation (Associated Newspapers Ltd v Bancks). However, the parties
     may choose to elevate any term to a condition (L Schuler AG v Wickman Machine Tool Sales
     Ltd).

      Conditions
          The test adopted in Associated Newspapers Ltd v Bancks for a condition is that of
          essentiality; if a party would not have entered into the contract if it were not the term, it is
          likely that the term is a condition.

            Other tests:
                The parties describing a term as a condition is only persuasive (L Schuler AG v
                   Wickman Machine Tool Sales Ltd)
                If damages are not an adequate remedy, the court may prefer to classify the term as
                   a condition (Ankar Pty Ltd v National Westminster Finance).
                The court will avoid classifying a term when it would be unreasonable to do so
                   (Associated Newspapers Ltd v Bancks).
                Where a term is borderline, the court will prefer to conclude that the term is not a
                   condition (Ankar Pty Ltd v National Westminster Finance).
                Where the contract for sales is not severable, the condition must be treated as a
                   warranty (Sale of Goods Act 1896 (Qld) s14(3))

            If a party breaches a condition, it entitles the innocent party to terminate the contract and
            claim damages (L Schuler AG v Wickman Machine Tool Sales Ltd). The breach for a term
            under the Sale of Goods Act 1896 (Qld), is the same as under the common law (Sale of
            Goods Act 1896 (Qld) s14(2)).

      Warranties
          The Sale of Goods Act 1896 (Qld) defines a warranty as “an agreement with reference to
          goods which are the subject of a contract of sale but collateral to the main purpose of such
          contract, the breach of which gives rise to a claim for damages but not a right to reject the
          goods and treat the contract as repudiated”. The common law has adopted this definition
          (Associated Newspapers Ltd v Bancks).

            A breach of warranty allows the innocent party to sue for damages, but is not grounds for
            termination (Bettini v Gye).

      Intermediate Terms


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            An Intermediate term is a term that is capable of many breaches, some of which are
            fundamental to the contract while others minor (Bunge Corporation New York v Tradax
            Export SA (Panama)). The remedy available to the innocent party depends on the
            seriousness of the breach (Hong Kong FIR Shipping Co v Kawasaki Kisen Kaisha Ltd). The
            seriousness of the breach is assessed according to a number of factors including:
                 The amount of completed performance before breach relative to that required under
                   the contract
                 The adequacy of damages
                 Whether it would be unjust to the party in breach to terminate the contract
                 The attitude and conduct of the party in breach and the likelihood of the
                   continuation of the breach
               (Hong Kong FIR Shipping Co v Kawasaki Kisen Kaisha Ltd)

Repudiation
      A party repudiates the contract where they evidence an intention, expressly or impliedly, to no
      longer be bound by the contract, or unable to perform (Progressive Mailing House v Tabali). The
      intention or inability must relate to the whole contract or an essential part of it (Foran v Wight).
      An anticipatory breach is repudiation before actual performance is required. In certain cases, the
      innocent party may elect to terminate the contract at the time of anticipatory breach (Foran v
      Wight) {See ready, Willing & Able}.
      Repudiation may occur when:
          I. Late payment in tandem with persistent breaches of terms (Progressive Mailing House v
             Tabali)
         II. Express Refusal to perform the contract, or essential parts of it (Hochester v Da La Tour)
        III. Implied refusal to perform the contract, or essential parts of it (Laurinda v Capalaba Park
             Shopping Centre)
        IV. The party in breach adopts an unjustifiable interpretation of the contract (Luna Park
             (NSW) Ltd v Tramways Advertising Limited). However, the innocent must have attempted
             to persuade the party in breach of the correct interpretation and allowed an opportunity to
             rectify the breach (DTR Nominees Pty Ltd v Mona Homes Pty Ltd).
         V. The wrongful termination of the contract (Braidotti v Qld City Properties Ltd) {although
             there is conflict as to whether a bona fide, good faith termination is a repudiation}
        VI. The commencement of proceedings upon the contract, where the party instigating
             proceedings intends not to be bound regardless of the outcome (Lombok Pty Ltd v
             Supentina Pty Ltd).
       VII. Inability to perform the contract


Termination for Delay in Performance
      A contract may only be terminated for delay in performance where time is of the essence, or
      where a notice to complete is served.
      Was Time of the Essence?
            A time provision in the contract will be essential where:
                I. The contract expressly stipulates essentiallity (Harold Wood Brick Co v Ferris).


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               II. The surrounding circumstances or the subject matter make it the time provision so
                   important that it should be adhered to precisely (Bundge Corp v Tradax SA).
              III. The terms of the contract indicate that essentiality should be inferred
            Commercial Contracts
                  In commercial contracts, time of the essences is generally implied (Bunge Corp v
                  Traddax SA).
            Land Contracts
                  An earnest of performance such as a deposit on time is prima facie essential (Brien v
                  Dwyer).
                  In equity, unlike the common law, a time provision is only of the essence if expressly
                  stipulated. If a party wished to make time of the essence, a notice to complete would
                  need to be served to make time of the essence (Canning v Temby). This position has
                  been cemented by the Property Law Act 1974 (Qld) s 62.
            If time is not of the essence, a valid notice to complete must be served in order to make
            time of the essence.
      Notice to Complete
            A party may make a time provision of the essence by serving a notice to complete.
            When can a notice to complete be served?
                  Where a time for completion is stipulated in the contract, after that date a notice may
                  be immediately served.
                  Where the time for performance is not stipulated, a party must wait a reasonable time
                  before serving a notice to complete (Canning v Temby).
            Date for Completion
                  The Notice to complete must affix a {further} reasonable time for completion
                  (Louinder v Leis) {reasonable time most likely over 14 days – depends on what is
                  required}. This makes time of the essence and binding on both parties.
            Requirements of the Notice
                  In order to be effective, the notice to complete must:
                      I. Advise of the obligation to be performed;
                     II. Fix a reasonable time for performance; and
                     III. Inform that a failure to comply with the notice will give rise to a right to
                          terminate {this may be implicit in correspondence between solicitors}.
                          (Luarinda v Capalaba Park Shopping Centre)
            Exception
                  Where the time delay is unreasonable, the delay may amount to a repudiation, making
                  a notice to complete unnecessary (Luarinda v Capalaba Park Shopping Centre).

Restrictions on Termination
Election
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      The innocent party has the choice as to whether to affirm or terminate the contract (Sargeant v
      ASL Developments Ltd). These rights are inconsistent, so that a party cannot purport to terminate
      the contract after affirming it.
      The innocent party must have knowledge of the breach (Bennett v L & W Whitehead Ltd).
      Has the party affirmed/terminated the Contract?
            The election to affirm or terminate must be unequivocal, through either word or action
            (Peter Turnbull Pty Ltd v Mundas Trading Pty Ltd).
            Whether the innocent party has affirmed the contract is determined objectively, by gauging
            whether they have acted in a way that is consistent with the contract (Champtalour v
            Thomas).
            The question may be left open until an unequivocal decision is made, as long as it does not
            harm the other party (Champtalour v Thomas).
      Exceptions
            The reliance on a untenable ground for termination does not prevent the reliance on a then
            existing valid ground (Shepard v Felt and Textiiles of Australia Ltd).
            Where the contract requires co-operation between the parties, an affirmation cannot be
            made independently of the other party (Automatic Fire Sprinklers v Watson). {see bellow}

Further performance Impossible
      Where further performance of the contract requires co-operation between the parties, the innocent
      party may have no choice but to terminate, or must affirm with the co-operation of the other party
      (Automatic Fire Sprinklers v Watson).
Terminating Party Ready Willing and Able
      Where an obligation is dependent and concurrent, the innocent party must show that they were
      ready willing and able to perform their obligations in order to terminate (Foran v Wight).
      An obligation that is not dependent and concurrent does not require the innocent party to be ready
      willing and able (Kelly v Desnoe).
      Anticipatory Breach
            Where a party is in anticipatory breach, the reliance on the repudiation by the terminating
            party will result in that party only needing to show that they were not wholly and finally
            prevented from being ready, willing and able (Foran v Wight).
            Where the terminating party does not rely on an anticipatory breach, they must still show
            that they were ready, willing and able at the time of actual performance (Foran v Wight).
      The terminating party cannot take advantage of their own breach or default to terminate, or
      acquire a benefit under the contract {preventing performance} (Alghussein Establishment v Eaton
      College).
Right to terminate lost or excluded
      Once the innocent party affirms the contract, the party can not terminate the contract for that
      breach (Tropical Traders Ltd v Goonan).
      A party may be estopped from terminating the contract (Legione v Hateley).


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      Equity may grant relief against forfeiture (Legione v Hateley) {Particularly in relation to
      instalment payments; covered on page 714-15 of text}.
      The contract may restrict rights to terminate {such as requiring reasons to be given in writing and
      time to rectify or excluding the operation of the doctrine of repudiation} (Amann Aviation Pty Ltd
      v The Commonwealth).




Matthew Robinson - 05539234                  LWB137 Contracts B                                       12
Remedies
The breach or repudiation of a contract entitles the innocent party to sue for damages. The purpose of
damages is to return position of the innocent party to what it would have been if performance had been
completed according to the contract, not to penalise the party in breach (Robinson v Harman).
In order to claim damages three elements must be shown:
    I. Causation
   II. Remoteness
  III. Mitigation

Causation
      General Test
            Generally, the method used to determine whether the loss was caused by the defendant is
            the ‘but for’ test: Would the loss have occurred but for the breach of the defendant?.
      Multiple Causes
            Where there are multiple causes for the loss of the plaintiff, there has been a shift towards a
            common sense, policy based test. It is generally enough that the defendant’s breach was one
            of he causes, but not necessarily a dominant cause (Alexander v Cambridge Credit Corp).
      Intervening Causes
            The chain of causation may be broken by an intervening event, however the event must not
            be foreseeable by the parties (Monarch SS Co Ltd v A/B Karlshamns Oljefabriker).
Remoteness
      Damages will not be available if the loss suffered by the plaintiff is too remote from the breach of
      the defendant.
      Damage will not be too remote if:
          I. It is considered as arising naturally according to the usual course of things from the
             breach; or
         II. Is was reasonably considered to have been in the contemplation of the parties at the time
             of formation that the loss would be the probable result.
             (Hadley v Baxendale)
      First Limb
            Although the appropriate test to determine whether the first limb of Haley v Baxendale is
            satisfied is unclear, the better view is whether the loss is sufficiently likely to be the result
            of the breach (Burns v MAN Automotive (Aust) Pty Ltd).
            It is only neccisary to foresee the type of damage, not the magnitude of damage suffered (H
            Parsons Livestock Ltd v Uttley Ingham & Co).
      Second Limb
            Where the loss suffered by the plaintiff would not arise naturally from the breach, actual
            knowledge is required as to the likely result of the breach (Koufos v Czarnikow). Therefore,

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             the defendant must have acquired this knowledge prior to formation or the plaintiff must
             have know the plaintiff possessed the knowledge.

Mitigation
      The plaintiff may not claim for damages that it could have mitigated and is therefore required to
      take reasonable steps to mitigate their loss (Nukirk Colliery Co v Lever).
      The onus of proof rests on the defendant to show unreasonableness.
      Reasonable Steps
             Whether the actions of the plaintiff were reasonable is a matter of fact and determined
             objectively. The plaintiff is not required to take steps to mitigate their loss which is costly
             or extravagant (British Westinghouse Electric and Manurfacturing Co Ltd v Underground
             Electric Railways Co of London Ltd).
             Where the plaintiff has refused to enter into a new contract, it must be determined whether
             they acted reasonably in not entering the contract to mitigate their loss (Shindler v Norther
             Raincoat Co Ltd).
             The refusal to negotiate with the defendant as a result of an ulterior motive may be seen as
             unreasonable, where entering into a new contract with the defendant would be reasonable
             (Payzu Ltd v Saunders). {This is covered in more detail in relation to employment contracts
             on p 783 of the text book}
      Other
             Any further loss as a result of reasonable attempts at mitigation of the breach will be
             recoverable (Banco de Portugal v Waterlow & Sons Ltd).
             Any benefit obtained by the plaintiff as a result of the breach of the Defendant will be taken
             into account when assessing damages (Lavarack v Woods of Colchester Ltd).
      Limitations to Mitigation
             Mitigation does not have to be undertaken until the time of breach, or in the case of an
             anticipatory breach, when the innocent party elects to terminate the contract (White and
             Carter (Councils) Ltd v McGregor).
             Mitigation does not apply to debt or a liquidated sum (White and Carter (Councils) Ltd v
             McGregor).

Heads of Damages
      Damage may be recovered for:
          I. Physical injury caused by the breach (Cullen v Trappell).
         II. Disappointment or mental distress, only where the contract is for the provision of freedom
             from distress, disappointment or molestation (Baltic Shipping v Dillon).
        III. Delay in performance or payment (Hungerfords v Walker).
        IV. The loss of an opportunity (The Commonwealth v Amann Aviation).
         V. Interest or the cost of borrowing (Common Law Pratice Act 1867 s72).



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Assessment of Damages
      The court will, as far as money can do so, place the innocent party in the position that they would
      have been if the contract had been performed (Robinson v Harman). This compensation can be
      assessed as either expectation loss or reliance loss.
      Difficulty in the calculation of the damages will not be a bar to assessment (Howe v Teefy).
      Generally, the time of assessment is at the time of breach (Sale of Goods Act s 52(3)). Exceptions
      include debt denominated in a foreign currency, the sale of goods that do not have an immediate
      market and anticipatory breach. In the case of anticipatory breach, the time of assessment is when
      performance was due (Hoffman v Cali).
      Expectation Loss
            Expectation loss compensates the innocent party for the benefit, which they expected to
            obtain from the contract, usually their profit.
      Reliance Loss
            The method of reliance loss is used where there is no way to quantify the loss suffered or
            the contract was not profitable (McRae v Commonwealth Disposals Commission). It will
            place the innocent party in the position that it would have been if they had not entered into
            the contract.
      Recovery using both methods
            In certain circumstances, damages may be awarded on the basis of both expectations and
            reliance loss (Banks v Williams). However, double compensation will not be awarded as it
            would put the plaintiff in a better position than if the contract was performed (Angelia
            Television Ltd v Reed).
      Loosing Contracts
            In the situation of a loosing contract, the loss suffered will be offset by the expected loss
            under the contract.
      Net Loss
            As the courts avoid double compensation …
                 I. Any assets in the possession of the plaintiff will be considered in the award of
                    damages (The Commonwealth v Amann Aviation).
                 II. When calculating the loss in relation to the purchase of defective machinery for the
                     purpose of making profit, the cost and residual value of the equipment will be taken
                     into account (Cullinane v British ‘Rema’ Manufacturing Co Ltd).
              III. Any future saved costs must be accounted for
Agreed/Liquidated Damages
      Where the parties to a contract have fixed a genuine pre-estimate of the loss that would result
      from breach, the court will award that amount as a liquidated damages (debt).
      The court will not however strike down the agreed damages if they bear little relationship to the
      actual loss suffered, so as to amount to a penalty (Dunlop Tyre Co v New Garage Ltd). When
      considering whether the court will strike down the clause the following are considered:

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          I. Bargaining power of the parties
         II. Intention of the parties
        III. Whether the stipulated sum is clearly in excess of the greatest loss that could be suffered
             as a result of the breach
        IV. Whether the sum is acting as a penalty in that the amount is payable for minor as well as
            major breaches
      If the clause is struck down, the party claiming damages is entitled to sue for damages in the
      usual way, although the amount may be capped at the level of the penalty (W & J Investments Ltd
      v Bunting).
Remedies under Restitution
      There is consensus that restitution is based on the doctrine of unjust enrichment (Pavey &
      Matthews Pty Ltd v Paul), so that the following must be shown:
          I. The defendant has been enriched by a benefit;
         II. The defendant has been enriched at the expense of the plaintiff; and
        III. It would be unjust to allow the defendant to retain the benefit.
      Recovery by innocent party
            Money
                  The innocent party may elect to claim damages or claim under restitution.
                  Any money paid may be recovered if there has been a total failure of consideration
                  (Fibrosa v Fairbairn).
                  If seeking damages, the damages will be adjusted to reflect any sums that have not
                  been recovered.
            Services
                  After the innocent party has elected to terminate for the breach of the other party, the
                  may make a quantum meruit claim for the reasonable value of the work performed
                  (Planche Colburn).
                  A claim for quantum meruit may be used to recover, where a contract is
                  unenforceable as it is required to be in writing (Pavey & Matthews Pty Ltd v Paul).
      Recovery by party in breach
            Money
                  The party in breach may recover any moneys paid under the contract where there ha
                  been a total failure of consideration, except where the payment was an earnest of
                  performance (McDonald v Dennys Lascells).
                  Equity will also intervene to prevent forfeiture, where it would be unconscionable for
                  the other party to retain the benefit (McDonald v Dennys Lascells).
            Services and Goods
                  If the party in breach wishes to recover for service performed or goods delivered, it
                  must show that the innocent party has obtained a benefit. This can be shown in the
                  following ways:
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                      I.   requested by the defendant (Pavey & Matthews v Paul);
                     II.   freely accepted by the defendant (Sumpter v Hedges); or
                    III.   the defendant has obtained an incontrovertible benefit from the services
                           (Steele v Tardiani).
                    IV.    The defendant has prevented performance (Steele v Tardiani).
Equitable Remedies
      The court may use its discretionary power to enforce promises where common law damages are
      not am adequate remedy.
      Specific Performance
            The court may make an order for specific performance of contractual obligations. The
            primary application of the doctrine of specific performance is for the dale or other
            disposition of land or in the sale of an unique Chattel (Sale of Goods Act 1896 (Qld) s53).
      Injunctions
            An injunction can be sought to prevent breach, especially in relation to a negative promises
            (Lumley v Wagner). The court is reluctant to order specific performance when cooperation
            id required, however is more inclined to grant an injunction in relation to a negative
            promise such as a restraint of trade clause (Warner Bros v Nelson).
Limitations of Actions
      For actions based on contract within the jurisdiction of Queensland, the plaintiff has 6 years from
      the date the claim arose to bring the action (Limitations of Actions Act 1974 s 10(1)(a)).
      The cause of action accrues at the time of breach (Ward v Lewis).
      Exceptions
            Where the action is one to relieve from fraud or mistake, the cause of action accrues when
            the party discovers the fraud or mistake (Limitations of Actions Act 1974 s 38).
            Where the person founding the action is under a disability {under age or not of sound
            mind} at the time the action accrues, the period of six years starts from the date at which
            the person ceases to be disabled (Limitations of Actions Act 1974 ss 10 (2) & 10 (3)).
      The equitable doctrine of Laches will operate to bar an action if the plaintiff has been guilty of an
      unreasonable delay that amounts to acquiescence of the defendant’s breach (Limitations of
      Actions Act 1974 s 41).


Rescission
      A rescission of the contract returns the parties to substantially the same position had they not
      entered the contract.
      The representee must elect to rescind the contract (Car Finance Ltd v Caldwell). The election to
      rescind or affirm must be clear and unequivocal and is final (Coastal Estates v Melevende).
      However it is unclear whether the representee must know of his right to rescind in order to be
      unequivocal.



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      The right to rescind may be lost if the election in not made promptly (Leaf v International
      Galleries).
      Rescission will only be available if the parties can be returned to their pre-contractual state
      (Brown v Smit). However, in the case of fraudulent misrepresentations, the court will be satisfied
      to substantially return the parties to their pre-contractual position.
      Where an innocent 3rd party has acquired an interest in the subject matter, rescission will not be
      allowed and the third party may continue to hold that interest (McKenzie v McDonald).
      In the case of an innocent misrepresentation, if the contract has been executed, rescission will not
      be available. However, this may be limited to the sale of land or shares.




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Misrepresentation
~ Trade Practices Act 1974 (Cth)
The TPA states that “A corporation shall not, in trade and commerce, engage in conduct that is
misleading or deceptive or is likely to mislead or deceive …” (TPA s 52).
Is the representor within the scope of s 52?
      Section 4 of the TPA states that:
      “corporation means a body corporate that:
          (a) is a foreign corporation;
          (b) is a trading corporation formed within the limits of Australia or is a financial corporation
              so formed;
          (c) is incorporated in a Territory; or
          (d) is the holding company of a body corporate of a kind referred to in paragraph (a), (b) or
              (c). “
      Actions of agents of a corporation, where there is sufficient authority to act, are considered the
      actions of the corporation.
      Remedies can be sought against natural persons engaging in the conduct, or involved in the
      contravention where the person had knowledge of the essential facts of the contravention or
      intention (TPA s75B; Yorke v Lucas).
      Section 6 of the TPA extends the ambit of s52 to include persons where the conduct is in relation
      to trade between states or territories, or outside of Australia; and also where the conduct involves
      the use of telephonic or postal telegraphic services or radio or television broadcasts.
Did the Representor engage in conduct as defined by the TPA?
      Engage in conduct is defined as doing or refusing to do any act (TPA s 4(2)).
      When a person deliberately refrains (e.g. silence), this will be considered conduct (Demagogue
      Pty Ltd v Ramensky).
Did the representee engage in trade or commerce?
      “Trade and Commerce” is given a wide interpretation and will generally apply to most
      commercial transactions (O’Brien v Smolonogov).
      Activities that are incidental to engaging in trade and commerce (such as employment) are not
      within the scope of s 52 (Concrete Constructions (NSW) Pty Ltd v Nelson).
      The sale of a business will be considered engaging in trade and commerce (Beranere Pty Ltd v
      Lubidineuse).
      The sale of a private dwelling is not in trade and commerce, even if a real estate agent is
      involved, however the real estate agent may still be liable (O’Brien v Smolonogov).
Was the Representor’s conduct “Misleading or deceptive”?
      Whether the conduct of the representor was “misleading or deceptive” is a matter of fact and
      determined objectively considering the class of persons to whom the conduct was exposed (Taco


Matthew Robinson - 05539234                  LWB137 Contracts B                                            19
      Co of Australia v Taco Bell Pty Ltd). An intention need only be shown in relation to silence, a
      natural person or where the statement is in relation to an opinion, intention or the future.
      Silence can be misleading in certain circumstances. Where there is a reasonable expectation that
      the fact would be disclosed considering all relevant circumstances, failure to disclose will be
      “misleading or deceptive” (Demagogue Pty Ltd v Ramensky).
      An opinion phased clearly as an opinion will not be misleading or deceptive.
      When a representation is made as to the future, the onus of proof is reversed, requiring the
      representor to show that they had reasonable grounds to make the statement (TPA s 51A). If this
      is not satisfied, the conduct is misleading or deceptive under s 52.
      Puffery may constitute misleading or deceptive conduct where it would be reasonable for the
      representee to rely on such a statement.
Remedies Available
      The court has the power to grant a number of remedies to the representee.
      The court may order and injunction to prevent further conduct (TPA s 80).
      The court has the power to award damages (TPA s 82). In order to obtain damages, a loss must
      have been suffered that is not too remote from the conduct of the representee {reliance or flowed
      from conduct}. Although there is not clear authority, the measure of damages used in tort is
      adopted (Gates v City Mutual Life Assurance Society Ltd). {Heads of damage include economic
      loss, loss of opportunity, mental distress and interest}
      Where loss or damage has been or is likely to be suffered, the court may make other orders that
      include: Recision, variation, orders to refund or return, or orders to pay loss (TPA s 87).
      Although the courts are not bound by equitable doctrines, it is often used as guidance when
      exercising its discretionary powers under this section (Henjo Investments v Collins Marrickville).
Time Limmit
      The representee has 6 years from the time of the action accruing {usually the time the loss was
      suffered} in which to bring the action.


~ Fair Trading Act 1989 (Qld)
The FTA states that “A person shall not, in trade and commerce, engage in conduct that is misleading
or deceptive or is likely to mislead or deceive …” (FTA s 38).
Is the representor within the scope of s 38?
      The representor must be a person.
Is the representee a consumer?
      The representee must be a consumer, defined as an individual acquiring goods, services or
      interest under the value of $40,000 for otherwise than for business (FTA s 6).
Did the Representor engage in conduct as defined by the FTA?
      Engage in conduct is defined as doing or refusing to do any act (FTA s 5A).
      When a person deliberately refrains (e.g. silence), this will be considered conduct (Demagogue
      Pty Ltd v Ramensky).

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Did the representee engage in trade or commerce?
      The FTA s 5 defines trade or commerce as including “any business or professional activity”. A
      business includes a business not carried on for profit or any trade or profession (FTA s 5).
Was the Representor’s conduct “Misleading or deceptive”?
      Misleading or Deceptive has the same meaning as under the TPA.
      Whether the conduct of the representor was “misleading or deceptive” is a matter of fact and
      determined objectively considering the class of persons to whom the conduct was exposed (Taco
      Co of Australia v Taco Bell Pty Ltd). An intention need only be shown in relation to silence, a
      natural person or where the statement is in relation to an opinion, intention or the future.
      Silence can be misleading in certain circumstances. Where there is a reasonable expectation that
      the fact would be disclosed considering all relevant circumstances, failure to disclose will be
      “misleading or deceptive” (Demagogue Pty Ltd v Ramensky).
      An opinion phased clearly as an opinion will not be misleading or deceptive.
      When a representation is made as to the future, the onus of proof is reversed, requiring the
      representor to show that they had reasonable grounds to make the statement (TPA s 37). If this is
      not satisfied, the conduct is misleading or deceptive under s 38.
      Puffery may constitute misleading or deceptive conduct where it would be reasonable for the
      representee to rely on such a statement.
Remedies Available
      The court has the power to grant a number of remedies to the representee.
      The court may order and injunction to prevent further conduct (TPA s 98).
      The court has the power to award damages (TPA s 99). In order to obtain damages, a loss must
      have been suffered that is not too remote from the conduct of the representee {reliance or flowed
      from conduct}. Although there is not clear authority, the measure of damages used in tort is
      adopted (Gates v City Mutual Life Assurance Society Ltd). {Heads of damage include economic
      loss, loss of opportunity, mental distress and interest}
      Where loss or damage has been or is likely to be suffered, the court may make other orders that
      include: Recision, variation, orders to refund or return, or orders to pay loss (TPA s 100).
      Although the courts are not bound by equitable doctrines, it is often used as guidance when
      exercising its discretionary powers under this section (Henjo Investments v Collins Marrickville).
Other
      Contravention of the act may attract criminal sanctions (FTA s 92). Defences are set out at s 97.


~ Common Law
A number of elements must be proved to show a misrepresentation at common law.
Elements of Misrepresentation
      Was the representation a false statement of existing or past fact?




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            A statement may be made in writing, orally or by conduct and must relate to past or present
            fact {although this might be slightly different under a negligent misrepresentation}. The
            following must however be distinguished:
            a) As to law: A person can only ever express an opinion as to the law unless the court has
               ruled on it. However, exceptions may be present in relation to fraud or where a special
               duty exist such as that of a legal advisor.
            b) As to Future intention: A statement as to future intention will not amount to a
               misrepresentation unless it forms part of the contract or collateral contract, or the
               intention was never held (Edgington v Fitzmaurice).
            c) Statements of Opinion: An opinion will not amount to a misrepresentation unless:
                 a. A fraud can be established
                 b. The opinion was unreasonably held (Bisset v Wilkinson).
                 c. The representor had no facts to support such an opinion (Fitzpatrick v Michael).
                 d. The representor is in the sole position to know all the facts on which the opinion is
                    based (Smith v Land & House Property Corporation).
            d) Silence: Generally, mere silence will not constitute a misrepresentation. However,
               there are a number of exceptions:
                 a. Half-Truth: Where the representor uses non-disclosure to distort a positive
                    representation, this may amount to a misrepresentation (Dimmock v Hallet).
                 b. Where a false statement is made, a duty arises as to correct the falsity when they
                    later discover the truth (Davies v London Marine Insurance Company).
                 c. Where there is a fiduciary relationship between the parties, in which case a
                    requirement to disclose arises (Tate v Williamson).
                 d. Where the contract requires upmost good faith {umberrimae fidei} {e.g. contracts
                    of insurance} (Insurance Contracts Act 1984 (Cth) s 21).
      Was the representation addressed to the representee?
            The statement must be addressed to the representee.
      Was the representation made at or before the time of formation?
            The statement must be made at, or prior to formation.
      Was the representation intended to and did induce the representee to enter the contract?
            The representation need not be the sole or major inducement to enter the contract
            (Edgington v Fitzmaurice).
            The representee must rely on the inducement (Gould v Vaggelas).
            If the representation was intended to induce the representee to enter the contract, that will
            generally be enough to show that the representee relied on the statement (Gould v
            Vaggelas).
            The representee’s knowledge of the true facts may be a bar to an action (Gould v
            Vaggelas).
            The onus lies on the representee (Gould v Vaggelas).

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            The fact that the representee could have discovered the falsity of the statement will not be a
            bar to recovery (Redgrave v Hurd).


Innocent Misrepresentation
      A misrepresentation will be classified as innocent where it is neither fraudulent or negligent
      (Redgrave v Hurd).
      Remedies
            The only remedy for an innocent misrepresentation is rescission.
Negligent Misrepresentation
      To be a negligent misrepresentation, the following elements must be shown:
          I. That a duty of care was owed for one person to the other
         II. A breach of that duty
        III. Loss or damage that is not too remote
      (Hedley Byrne v Heller & Partners)
      Where there is not a special duty between the parties the court has broadened the application of
      the general rule under tort in relation to misrepresentation. Where a representor knows or ought
      to have known that the representee was relying the information given to be correct, a duty is
      created (Shaddock and Associates Pty Ltd v Parramatta City Council).
      A negligent misrepresentation does not require a statement of past or present fact - it may be
      information or advice.
      Remedies
            The innocent party may obtain rescission and/or damages when induced by a negligent
            misrepresentation.
Fraudulent Misrepresentation
      In order to prove a fraudulent misrepresentation, an additional element must be proved.
      A subjective test is applied to determine if the representor had a bona fide belief in the truth of
      the statement, by examining their state of mind at the time of the representation (Derry v Peek).
      To be fraudulent the false representations must have been made:
          I. Konwingly; or
         II. Without belief in its truth; or
        III. Reckless, careless as to whether the statement was true or false, with the intention that the
             statement be relied upon
      (Derry v Peek)
      Remedies
            The innocent party may obtain rescission and/or damages when induced by a negligent
            misrepresentation.
Remedies


Matthew Robinson - 05539234                    LWB137 Contracts B                                       23
      Damages
            The relevant measure of damages is that in tort which is aimed at compensating the plaintiff
            for the loss suffered, given the loss is not too remote (Esso Petroleum v Mardon).




Matthew Robinson - 05539234                 LWB137 Contracts B                                       24
Mistake
Where a party or parties made an operative mistake in entering the contract, the law will sometimes
release the parties from their obligation. There are three types of mistake: Common, mutual and
unilateral.
Common mistake
      A common mistake is one in which both parties make the same mistake. A mistake as to the
      qualities or attributes of the subject matter will not void the contract (Bell v Lever Bros. Ltd).
      Res Extincta
            The contact may be void where the subject matter of the agreement is non-existent,
            depending on the construction of the contract (Couturier v Hastie). {A party can take on the
            risk of any loss (McRae v Commonwealth Disposals Commission)}
            Where a party warrants the existence of the subject matter, the non-existence of the subject
            matter cannot be relied on to void the contract (McRae v Commonwealth Disposals
            Commission).
            “Where there is a contract for the sale of specific goods, and the goods without the
            knowledge of the seller have perished at the time when the contract is made, the contract is
            void” (Sale of Goods Act 1989 (Qld) s 9).
      Res Sua
            The contract is void where the purchaser enters into a contract for the purchase of his or her
            own property (Bell v Lever Bros. Ltd).
      Equity
            Equity will follow the common law except in two situations.
            Fundamental nature or quality
                  Although no longer good law in the UK, the case of Solle v Butcher has not been
                  overruled in Australia (Taylor v Johnson). Solle v Butcher is authority for the
                  proposition that where a common mistake is of a fundamental nature, the contract
                  may be voidable. The following elements must be shown:
                      I. The common mistake must be as to facts or rights; and
                     II. The mistake must be of a fundamental nature as to change the nature or
                         quality of the subject matter; and
                     III. The mistake was not the fault of the party seeking to void the contract.
                  The court is however reluctant to void a contract for the sale of land unless it amounts
                  to a total failure of consideration (Lukacs v Wood).
                  The rights to rescission are limited as with misrepresentations.
            Rectification
                  Where the written agreement does not accurately record the agreement between the
                  parties, the court may rectify the contract.
                  Rectification will be possible if:


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                      I. There was a prior complete agreement before the reduction to writing
                     II. There is evidence that the reduction to writing did not accurately reflect the
                         common intention of the parties
                     III. The bona fide rights of a 3rd party are not effected
                  (Maralinga Pty Ltd v Major Enterprises Pty Ltd)
                  The rectification will apply from the date of formation (Maralinga Pty Ltd v Major
                  Enterprises Pty Ltd).
                  The onus lies on the person seeking rectification to show that the mistake was
                  common to both parties and they must show precisely what recification is needed
                  (Pukallus v Cameron).
                  A document may be rectified if by honest mistake, incorrect material is inserted
                  (Warburton v National Westminster Finance Aust.).
      Remedies
            Where a contract is void ab initio, tittle is not passed, money passed under the contract will
            be returned; accordingly a 3rd party acquiring a bona fide interest will be defeated.
            However, in some circumstances it is the better view that a total failure of consideration
            will be the basis for avoiding the contract (McRae v Commonwealth Disposals
            Commission).
            Remedies under Equity are more flexible with rescission, specific performance and the
            contract being voidable available remedies.
Mutual Mistake
      A mutual mistake occurs where the parties are at cross-purposes. The court will objectively
      attempt to ascertain the essence of the promise {by how a reasonable person would understand
      the contract} (Smith v Hughes). If no meaning can be given to the contract, the contract will be
      void (Raffles v Wichelhaus).
      Equity will generally follow the common law, however may withhold specific performance if it
      would be just.
Unilateral Mistake
      General Rule
            A unilateral mistake occurs where one party is mistaken and the other party knows, or
            ought to know about the mistake (Smith v Hughes).
            The court undertakes an objective test when considering unilateral mistakes (Taylor v
            Johnson; Cf. Ashley v Cook). Consequently, a contract will not be void at common law.
            Equity however will intervene where the conduct of the party who is not mistaken is
            tantamount to sharp practice {unconscionability} (Taylor v Johnson).
      Mistake as to Identity
            Where the mistake is in relation to the identity of the other party, the contract will be void
            where:
                I. At the time of formation the identity of the contracting party was material; and


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               II. There was an intention to contact with a separate entity, rather than with the other
                   party; and
              III. The intention was, or ought to be known by the other party.
            (Taylor v Johnson)
            A rebuttable presumption arises that where the parties contracted face-to-face, the parties
            intended to contract with each other (Lewis v Averay).
            Trying to ascertain the identity of the contracting party will not automatically rebut the
            presumption (Philips v Brooks).
            A distinction on the grounds of an attribute of the other party, such as wealth, credit
            worthiness or social status will not rebut the assumption (Phillips v Brooks).
            Remedies
                  Where the contract is void for unilateral mistake, valid title will not pass to an
                  innocent 3rd party (Lundy v Lindsay).
                  A contract will only be voidable if there is a fraudulent misrepresentation inducing
                  the mistake. The contract will then only be set aside if a third party has not acquired
                  bona fide rights under it.
      Non est factum
            A written contract may be void in certain circumstances if the mistaken party signed a
            document of a vastly different nature to which he intended to sign.
            The following elements must be satisfied:
                I. The mistaken party is of the class of persons able to claim non est factum. This class
                   includes:
                       a. Persons, who through no fault of their own, are permanently or temporarily
                          incapable of of understanding the document without help (Saunders v Anglia
                          Building Society)
                                 i. This includes people with a defective education, illness or innate
                                    incapacity
                               ii. People with poor English (Lee v Ah Gee).
               II. The document was radically different from what was being signed {subjective test –
                   essentially different in substance or kind (Petelin Cullen)} {onus on claimant}.
              III. If the other party is innocent {e.g. innocent 3rd party must not be aware of the }, the
                   claimant must show that their failure to take reasonable steps to ascertain the
                   character of the document was not due to carelessness (Petelin v Cullen).
            The mistake must be as to it the character of the document, not as to its legal events




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Duress
Generally, if one party pressures the other party into entering the contract, so that it does not amount to
free consent, the contract will be voidable (Seear v Cohen; TPA s52A; FTA s39).
Situations:
      Actual or threatened violence
              Where a party has been induced into the contract as a result of actual or threatened violence
              to themselves or friends and family, the court will recognise duress (Seear v Cohen).
              The threat of imprisonment or confinement will be considered as duress (McLarnan v
              McLarnan). However, duress will not be found where the threat concerns prosecution based
              on sufficient grounds (Scolio Pty Ltd v Cote).
      Economic Duress
              Although there is conflicting authorities as to whether a contract entered under economic
              duress will be voidable, it appears although in certain circumstances the contract will be
              voidable, as set out in Crescendo Management v Westpac Banking Corp:
                  I. The pressure induced the victim to enter into the contract; and
                 II. The pressure went beyond what was legitimate.
              Generally, commercial pressure or threats of legal action will be legitimate, however
              unlawful threats or unconscionable conduct will not be legitimate.
Remedies
      The contract may be recisinded subject to the limits on recission.
      A restitutionary claim may be bruonght for unjust enrichment.
      The Law is unclear as to damages, however if damages are available, they will likely be based in
      tort.


TPA / FTA
      The TPA s60 (FTA s50) prohibit the use of physical force, harassment or coercion in the supply
      of goods or services to a consumer. Statute also gives a wider range of remedies including
      damages and variation.




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Undue Influence
Where one party induces another to enter into a contract through undue influence, the contract will be
voidable in equity (Allcard v Skinner). The Law separates undue influence into two classes, with the
first class having a presumption of undue influence brought about by a special relationship; the second
class where there is actual undue influence.
Class 1
      Where there is a special relationship between the parties, a presumption is raised that undue
      influence was exerted (Allcard v Skinner).
      The presumption is raised in these relationships:
              Parent and child
              Guardian and ward
              Trustee and ward
              Solicitor and client
              Doctor and patient
              Religious advisor and disciple
              Any other Fiduciary relationship
      Exclude husband and wife; accountant and client; child and parent.


      Once the presumption has been raised, the onus is on the defendant to show that no undue
      influence was exerted by showing that:
           I. The claimant knew and understood what they were signing; and
          II. The claimant was acting independently of any undue influence (West v Public Trustee)
      Relevant considerations might be whether independent advice was sought, the offer came from
      the claimant (spong v spong), or the defendant took no active steps (Allcard v Skinner).
Class 2
      If no special relationship exists between the parties, actual undue influence must be shown
      (Johnson v Buttress).
      Bank of Credit and commerce International SA v Aboody, set out the elements required to prove
      actual undue influence:
           I. One party had the capacity to influence the claimant; and
          II. That influence was exercised; and
          III. The use of the influence was undue; and
          IV. The influence brought about the transaction.
      Factors that may be relevant are:
                  Intelligence and education of the claimant


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                  Age, health and blood relationship
                  Business experience of the claimant
                  Length of the relationship
                  Strength of character and personality of the dominant person
                  Opportunity afforded to influence
      (Nattrass v Nattrass)


3rd Party Surety
      A third party may not take advantage of a special relationship between two other parties (Yerkey
      v Jones).




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Unconscionable Conduct
Under equity, the court may set aside a contract that is harsh and unconscionable (Commercial bank of
Australia v Amadio). Three elements must be shown, with the onus on the Plaintiff initially
(Commonwealth Bank of Austraila v Amadio).
    I. One party is at a special disadvantage to the other, creating an unfair advantage;
                  A special disadvantage is one which seriously affects their ability to make judgments
                  to act in their own best interest (Commonwealth Bank of Austraila v Amadio).
                  Blomley v Ryan set out cases of Special disadvantage: Poverty, Sickness, Age, sex,
                  infirmity of body or mind, drunkenness, illiteracy, lack of education or a lack of
                  explanation where an explanation was required.
                  In certain cases love has been considered a special disadvantage (Louth v Diprose).
                  The special disadvantage is generally considered only to include constitutional
                  disadvantages. As such the common law will not recognise situation disadvantage
                  such as inequality of bargaining power (ACCC v Berbatis).
   II. The disadvantage has been exploited in a morally culpable manner; and
  III. The resulting transaction is oppressive.
If the above elements are shown, the onus rests on the defendant to show reasonableness
(Commonwealth Bank of Austraila v Amadio).
Remedy
      If unconscionable conduct is found, the innocent party may rescind the contract. However, as it is
      an equitable doctrine the power is discretionary; as such the court will not allow a remedy if the
      claimant has unclean hands or in the case of Laches.
Statute
Section 51AA of the TPA (FTA s39) acts to extend the remedies under the “unwritten law” to include
remedies under TPA s 87 (FTA s100).
Section 51AB of the TPA (FTA s 39) extends the scope of unconscionability to include situational
advantages in certain circumstances. The section requires that the sale of goods or services be to a
consumer for ordinary household use. The section outlines the considerations for determining
unconscionable conduct (TPA s51AB (2)):
   a) Strength of bargaining positions
   b) As a result of the conduct of the defendant, did the consumer comply with conditions not
      reasonably necessary to protect the legitimate interests of the defendant.
   c) Was the consumer able to understand the document
   d) Were undue influence or unfair tactics used
   e) The market value of goods or services
S51AC of the TPA, extends s51AB to protect unlisted businesses in sale or acquisition for amounts
under $3 million. The section includes the additional considerations of: industry codes, the
unreasonable failure to disclose conduct that prejudices the interests of consumers or small business,
the extent of negotiation and the extent to which the parties acted in good faith.

Matthew Robinson - 05539234                 LWB137 Contracts B                                           31
Void Contracts
Statute
      A statute may declare a type or class of contract is void {ie. A contract to perform x will be
      void/unenforceable}.
      For example, the TPA s 45 renders contracts that restrict competition void.
      PAGE 118 of SG – Fill in !!!
Common Law
      Contracts to oust the jurisdiction of the court
            A contract that purports to evade the jurisdiction of the court to hear questions of law will
            be void on the ground of public policy (Baker v Jones).
            A clause that provides for dispute resolution/arbitration as a first resort will not be void
            (Scott v Avery).
      Contracts prejudicial to the institution of marriage
            The laws as to contracts prejudicial to the institution of marriage evolve with community
            values, however a total restraint of marriage will be void (Lowe v Peers).
      Restraints of Trade
            Generally, an agreement to restrict ones liberty to trade with others in the future is void at
            common law (Nordenfelt v Maxim Nordenfelt Guns Ltd).
            However, where the restrain is reasonable in the interests of both parties and the public, the
            restraint may be valid (Nordenfelt).
            The validity is judged at the time of formation (Bridge v Deacons).
            Was there a Legitimate Interest?  what was the legitimate interest
                  The restrain must go no further than necessary to protect the legitimate trade interests
                  of the covenantee. Relevant considerations include the scope of the restraint, the
                  activities covered, the relative bargaining power of the parties, the consideration and
                  the context of the contract.
            Was the restraint reasonable to both parties?  why did they benefit from restraint
                  Reasonableness is a question of law for the judge.
                  The onus lies on the covenantee to show that the agreement is reasonable between the
                  parties (Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd).
            Was the restraint reasonable to the public?
                  Although a restraint reasonable to both parties is reasonable to the public, they are
                  separate issues (Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty
                  Ltd).
                  The onus lies on the covenantor to show that the restraint is not reasonable in the
                  public interest (Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty
                  Ltd).
            Situations

Matthew Robinson - 05539234                   LWB137 Contracts B                                           32
                  Master and service agreements
                        Employers are entitled to protect proprietary trade secrets that the employee has
                        knowledge (Foster Ltd v Suggett).
                        A restraint for life will not necessarily be void (Fitch v Dewes).
                        Application: First look at reasonableness (particularly time and area), then:
                        “The employer benefits from the restraint as he can protect his trade secrets
                        and the employee benefits from the trade as he acquires knowledge and skills
                        that they otherwise would not have attained if the employer did not enter into
                        the contract for the fear of losing their competitive advantage.”
                  Contracts for exclusive service
                        A contract for exclusive service is not necessarily void (Warner Bros. Pictures
                        Inc. v Nelson).
                        Relief may be granted against an employer or association of employers
                        (Buckley v Tutty).
                        A restraint between employers to restrict the employment of each other’s
                        employees may be void (Kores Co Ltd v Kolok Co Ltd).
                  Solus agreements
                        An agreement to be tied to one supplier may be in restraint of trade
                        {reasonableness} (Esso Petroleum Co Ltd v Harpers Garage Stourport Ltd).
                  Sale of Business
                        Courts are more willing to uphold restraints of trade in an agreement for the
                        sale of a business.
                        There must be a genuine sale (Vancouver Malt Ltd v Vancouver Breweries Ltd).
                        The restrain may only protect the business sold (Nordenfelt).
                        Application: “A restraint of trade for the sale of a business is in the interests of
                        both parties as the purchaser will acquire the full goodwill of the company,
                        while the seller will receive the full value of the business.”




Matthew Robinson - 05539234                  LWB137 Contracts B                                           33
Illegal Contracts
An illegal contract is one to which the ex turpi causa principle applies – the court will not lend its help
to a person entering into a contract for an illegal or immoral purpose.
Statute
      Express prohibition
            An expressly prohibited contract may be illegal as formed or performed (Re Mahmoud and
            Ispahani). Generally, if the contract could have been performed legally, the contract will be
            illegal as performed. Alternatively, if the illegality was essential to performance, the
            contract is probably illegal (Fitzgerald v Leonhardt).
      Implied Prohibition
            Whether the a statue impliedly prohibits a contract is a question of construction (St John
            Shipping Corporation v Joseph Rank Ltd). The contract may be illegal as formed or
            performed.
            Factors relevant when constructing the statute are:
                I. Is the object of the penalty imposed merely to collect revenue {contract probably
                   legal} (Cope v Rowlands).
               II. Where te object of the penalty is to protect the public, the contract is probably
                   illegal (Pretorius Pty Ltd v Muir & Neil Pty Ltd  {licence required for sale of
                   particular goods was considered to protect the public}).
              III. Are the penalties imposed by statutes sufficiently served by the penalties imposed
                   by the statue, considering commercial realities (First Chicago Australia Ltd v
                   Yango Pastrol Co Pty Ltd).
              IV. The commercial and public implications to those not parties to the contract if the
                  contract was rendered void (First Chicago Australia Ltd v Yango Pastrol Co Pty
                  Ltd).
Contravention of Public Policy
      The traditional approach to illegality at common law was the use of heads of public policy as the
      only grounds of illegality. However, recently the high court has adopted a more flexible approach
      as to whether the contract would be enforced (Fitzgerald v Leonhardt).
      Flexible approach
                I. Is the unenforceability of the contract proportionate to the illegality
               II. Is sanctuary neccisary given the terms of the statute and its objectives
              III. The statute does not disclose that the sanctions are the only legal consequences
      A contract that appears on its face to be legal, but is illegal will be considered to be illegal as
      performed, whereas a contract that is ex facie illegal will be considered to be illegal as formed.
      The heads of damage used in the traditional approach do however still provide useful examples of
      when the Ex turpi Causa principle will be applied.




Matthew Robinson - 05539234                  LWB137 Contracts B                                             34
          I. A contract to commit a crime, tort or fraud to a 3rd party {must be at core of agreement;
             may extend to defamation} (North v Marra Developments Ltd). This extends to statutory
             offences (Farrow Mortgage v Edgar).
         II. A contract which is exually immoral or tends to sexual immorality (Pearse v Brooks).
        III. A contract predjudicial to the public safety, such as with an alien enemy (Porter v
             Freudenberg). This also applies to the commission of a crime under the law of a friendly
             foreign state (Foster v Driscoll).
        IV. A contract prejudicial to the administration of justice {stifle public offence} (Keir v
            Leeman). However, in the case of private offences such as common assult, the court may
            compromise (Fisher & Co v Appollinaris Co).
         V. A contract that promotes corruption in public life {actual corruption need not be shown}
            (Horne v Barber).
        VI. A contract to defraud revenue (Miller v Karlinski).
Consequences of illegality
Where the contract is illegal, the Ex turpi causa principle applies, so that the court will not assist a
claim that is based on an illegal or immoral act (Holman v Johnson). Consequentially, the loss will lie
where it falls, and where both parties are at fault good title will pass (Taylor v Chester).
      Exceptions
                I. The claimant was ignorant of the factual circumstances that rendered the contract
                   illegal (Nelson v Nelson). However, where the contract was illegal as formed, the
                   court assumes that the both partied intended to break the law. Thus where the
                   contract was illegal as performed, the innocent party will be able to claim damages
                   as usual. {mistake as to illegality may also be included}
               II. Where the statue was for the protection of a class of persons to which the claimant
                   belongs (Kiriri Cotton Co v Dewani).
              III. Where the illegal agreement was induced by fraud, oppression or undue influence.
                   In any case the TPA may provide a remedy in these cases.
              IV. Where the claimant has repented to the illegality at common law (George v Greater
                  Adelaide Land Development Co). However, this must not be due to inability to
                  complete the contract or for grossly immoral acts.
            Under the flexible approach however, the court may be more lenient in relation to
            restitution claims (quantum meruit or Total failure of consideration) or claims based on
            possession rather than contract.
Severance
The illegal or void component of a contract may be severed leaving the remainder on foot. The forms:
   a) The severance of a transaction from associated transaction in a larger enterprise: An
      associated transaction will also be invalid if they amount to one contract (Amoco v Rocca).
   b) The court will sever a promise so long as it only changes the extent not the kind of contract,
      and the term does not comprise a majority of the consideration (Bennett v Bennett).
   c) The court may sever a part of the promise if the promise is divisible, however the court will
      not make the agreement for the parties (Attwood v Lamont).

Matthew Robinson - 05539234                  LWB137 Contracts B                                        35

				
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