Cutter v Powell [1795] 101 ER 573 [28.06C]
Facts The claimant's husband agreed by contract to act as a second mate on the ship the 'Governor Parry' on a return voyage to Jamaica. The voyage was to take eight weeks and he was to be paid on completion. A term in the contract stated:
"Ten days after the ship 'Governor Parry,' myself master, arrives at Liverpool, I promise to pay to Mr. T. Cutter the sum of thirty guineas, provided he
proceeds, continues and does his duty as second mate in the said ship from hence to the port of Liverpool. Kingston, July 31st, 1793."
Six weeks into the voyage the claimant's husband died. The claimant sought to claim a sum to represent the six weeks work undertaken.
Outcome Court found in favour of D. Therefore, P got nothing for the work which Cutter ad done.
Judgment for D
Government of Newfoundland v Newfoundland Railway Co [1883] 13 App Cas 199 [28.16C]
Facts D (Government of Newfoundland) agreed to grant 25000 acres of lad to P every 5 miles of railway constructed. P only completed 25%.
Outcome Appeal dismissed. Therefore, P were entitled to subsidies and land grants in respect of the completed parts.
Koompahtoo Local Aboriginal Land Council v Sanpine (2007) 233 CLR 115
Facts Koompahtoo entered a joint venture with Sanpine for development of Koompahtoo’s land. Liabilities were incurred against the land in preparing proposals for development, but development consent could not be achieved.
An admistrator was appointed to Koompahtoo and terminated the agreement.
Issue Was the agreement validly terminated?
Analysis/Decision Agreement was validly terminated because of Sanpine’s failure to adhere to its accounting obligations, to keep proper records and books was sufficiently serious to give Koopahtoo the right to terminate the contract, either because it was an essential term, or even if it were non-essential, the breach was sufficiently serious as to justify termination.
Ration The right for repudiation for breach of contract may aris even if the breach was not of an ‘essential term’ of the contract, where there has been a sufficiently serious breach of non-essential term as to justify termination.
Obiter There may be times when it is impossible to say when the contract is entered into whether breach of a particular term will entitle the other party to terminate, but still breached of the term may be serious enough to have that consequence.
Order Appeal allowed with costs.
McDermott v Black (1940) 63 CLR 161 [6.94]
Facts There was an agreement that the plaintiff purchase certain shares from the defendant. The plaintiff had difficulty paying the purchase price and obtained a three week extension. Toward the end of this period the plaintiff complained that he had been misled about the shares by the defendant's
misrepresentations. The plaintiff offered to withdraw these allegations on condition that the defendant granted a further extension. This was agreed, but the plaintiff was still unable to pay. The defendant rescinded the contract of sale, and the plaintiff commenced the present action alleging fraud. The defendant claimed that the plaintiff was contractually bound not to bring such an action.
Issue Issue of discharge by agreement
Whether or not a subsequent agreement discharged any cause of action for breach of contract in the initial agreement.
Outcome Held that this was allowed as there was no consideration given for the agreement.
Maynard v Goode (1926) 37 CLR 529 [13.14C]
Facts Goode (P, R1 for HC) agreed to buy land know as the ‘Cairnton’ from one Crosby (R2). The land comprised about 1455 acres of soldier settlement land.
Agreement was subject to a proviso tat the transfer of land owned by Good went through in a ‘reasonable time’. This was necessary because of the statutory restriction on amount of land he could own.
Shortly afterwards, Crosby purported to sell the land to Maynard (A). Crosby also refused to join with Good in applying for the consent of the Ministered of Public Lands to the transfer. Goode managed to sell his land to one Angel, which transfers being registered in June.
Good sought damages and specific performance of the contract with Crosby in the Supreme Court. Maynard and Crosby were restrained from proceeding with their transfer.
Outcome Appeal dismissed. There the order for specific performance would remain in force and Crosby was obliged to complete the transaction.
Lewes Nominees Pty Ltd v Strang (1983) 49 ALR 328 [13.21C]
Facts Strang (R) granted A an option to purchase property. Cl 3 dealt with the exercise of this option. The option was due to expire on 11.11.1980. On that day a written notice of exercise, together with a bank cheque for the amount payable under cl13 were placed in an envelope addressed to R and forward to him by registered mail. This was received on 12.11.1980. In addition, a
photocopy of the notice and bank cheque was delivered to R at his home on 11.11.1980.
SC held that the option had been exercised in accordance with cl.13. That decision was reversed by FC.
Outcome Appeal dismissed. On the basis that the option had not been exercised at the time. That was not because the appellant breached the contract. It was simply that a condition precedent had failed.
Kingston v Preston (1773) 2 Doug 689 [28.12]
Facts The Defendant was a silk mercer and the Plaintiff was his apprentice.
Their agreement provided that after a year and a quarter, the Defendant would retire from the business. The Plaintiff and a partner were to carry on the business. The Plaintiff would buy out the Defendant’s share of the business in monthly installments and to assure these payments, the Plaintiff agreed to provide security to the Defendant at and before the sealing and delivery of the deeds conveying the business. The Plaintiff subsequently sued, averring that the Defendant had not surrendered the business at the appointed time, and the Defendant claimed that the Plaintiff had not provided sufficient security.
Issue Did the Defendant breach the agreement?
Outcome Held. No. There are three types of covenants: (1) mutual and
independent – each party can sue the other for breach, but one party cannot cite a breach of the other party’s covenant as an excuse for his own breach; (2) conditions and dependent – the performance of one depends on the performance of another and the duty to perform does not arise until the prior condition is performed; (3) mutual conditions – the conditions must be performed at the same time and the failure of one
party to perform is a ground for alleging breach. The dependence and independence of these covenants must be determined from the “evident sense and meaning” of the parties. The important factor to consider is when in the order of time the covenants should be performed. Here, the agreement essentially dictates that the Defendant would not entrust his business to the Plaintiff without sufficient security.
Therefore, the giving of security is a condition precedent. Thus, the Defendant did not breach the agreement
since the Plaintiff had not yet performed his obligation
Discussion The timing of the performance of covenants is extremely important, as it dictates if and when a breach has occurred.
Hoenig v Isaacs [1952] 2 All ER 176 [28.22C]
Facts Demonstrates how a court may rule that even in a Breach of contract the injured party may still have obligations
Heonig agreed to decorate Isaacs's flat for £750. Isaacs was not satisfied with the work, and offered only £400, so Hoenig sued for the balance. Isaacs claimed that the contract was for the whole job, and Hoenig had not finished it
properly. At most, it was argued, he was entitled to an award of Quantum meruit for the work done. However, the court ruled that the contract was substantially complete, and the Hoenig should be paid the full price less the amount it would cost to finish the job (estimate at £55).
Outcome Considered the doctrine of substantial performance and whether or not a contract had been substantially completed or if full completion was a condition of the contract.
This case is significant because it applied the principle of substantial performance.
Held:
The claimant had substantially performed the contract and was therefore entitled to the contractually agreed price minus the cost of the defects.
Bolton v Mahadeva [1972] 1 WLR 1009 [ 28.29C]
Facts The claimant installed central heating in the defendant's home. The agreed contract price was £560. The defendant was not happy with the work and refused to pay. Defects in the work amounted to £174. The action by the claimant to enforce the payment failed since the court held there was no substantial performance.
Outcome Sachs LJ held that Bolton was entitled to nothing because there had been no
substantial performance at all. At 1015 he said, ‘It is not merely that so very much of the work was shoddy, but it is the general ineffectiveness of it for its primary purpose that leads me to that conclusion.’
Jacob & Youngs Inc v Kent 230 NY 239 (1921) [28.35C]
Facts Plaintiff built a house for Defendant for the price of $77,000 and sued to recover the balance due of $3,483.46. One of the specifications for construction was that all wrought iron pipe used must be Reading pipe. By the inadvertence of Plaintiff, not all pipe installed in the house was Reading pipe. When
Defendant realized this, he had already begun to occupy the house.
Nevertheless, he demanded that Plaintiff replace the pipe with Reading pipe.
Doing so would have required Plaintiff to demolish substantial parts of the house and reconstruct it, which would have been a great expense to Plaintiff.
He therefore refused and billed Defendant for the remaining amount due for the construction. Defendant refused to pay, and Plaintiff initiated this action.
Issue Is Defendant entitled to the cost of replacement of the pipe for Plaintiff’s breach of contract?
Outcome Holding: Yes
Rational: The court reasoned about what is important and trivial, when it comes to not following the exact terms of the contract. The court held in this case that the measure of the allowance is not the cost of replacement, which would be great, but the difference in value, which would be either nominal or nothing. The court also made an analogy by stating “Specifications call, let us say, for a foundation built of granite quarried in Vermont. On the completion of the building, the owner learns that though the blunder of a subcontractor part of the foundation has been built of granite of the same quality quarried in New Hampshire. The measure of allowances is not the cost of reconstruction”.
Furthermore, when the defect is insignificant, the court will find that there was substantial performance and excuse the breach of using the same type and quality of pipe which parties had agreed were the same except for the brand name. The measure of damages is not the cost to rip out the old pipe and install a new one, but the difference in value, which in this case is zero.
Dissent: Disagreed with majority’s decision by stating that the defendant specified in the contract exactly what he wanted and that he was entitled to that. The failure to perform was either intentional or due to gross negligence.
A right to terminate the contract for repudiation may arise if one of the parties is not willing or able to perform their contractual obligations. If one party repudiates the contract then the other party (the aggrieved party) will be entitled to terminate the contract.
Where a party repudiates their contractual obligations before they fall due this is known as an anticipatory breach. Where there is an anticipatory breach the party affected by the repudiation has the option of terminating the contract and claiming damages or they can refuse to accept the repudiation and wait until there is an actual breach of the contract. If a party refuses to accept the repudiation then the contract continues along with all the obligations to be performed under it:
Bowes v Chaleyer (1923) 32 CLR 159.
Actual Breach
If there is an actual breach of contract then the party seeking to terminate the contract must prove that they were ready and willing to perform their contractual obligations at the time the breach occurred: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 and Foran v Wight (1989) 168 CLR 385.
Anticipatory breach
Where the repudiation is accepted
Where there is an anticipatory breach and the repudiation is accepted by the other party then if that party seeks to terminate the contract they must prove that they were ready and willing to perform their contractual obligations at the time the contract was repudiated: Foran v Wight.
However, it will usually be sufficient if the party seeking to terminate the contract can show that they were not substantially ‘disabled or incapacitated from such performance’ at the time set for performance: Foran v Wight (1989) 168 CLR 385 at 408-409
Where the repudiation is not accepted and the contract is not terminated
Where there is an anticipatory breach and the repudiation is not accepted by the other party then the contract will remain operative.
However, in some situations the conduct of the repudiating party may indicate that the other party is no longer required to perform the contract. In such a case the repudiating party may be estopped from arguing that there was lack of readiness or willingness on the part of the other party if that party seeks termination. This issue was also discussed in Foran v Wight.
The absence of willingness or ability
Repudiation may relate to the performance of the whole contract or it may relate to specific contractual obligations. Repudiation is likely to give rise to a right of termination where the repudiation goes ‘to the root of the contract’ and it effectively deprives one party of
‘substantially the whole benefit of the contract’: Universal Cargo Carriers Corp v Citati [1957]
2 QB 401 at 426 and 430; Federal Commerce and Navigation Co Ltd v Molena Alpha Inc [1979] AC 757 at 779.
Conduct amounting to repudiation
If one party’s conduct indicates that they are not willing or able to perform the contract then the other party is entitled to treat this as a repudiation of the contract: Freeth v Burr (1874) LR 9 CP 208 at 213; Universal Cargo Carriers Corp v Citati [1957] 2 QB 401 at 436.
There are several ways in which a party’s conduct may amount to repudiation:
An express statement of unwillingness or inability
A party may expressly state that they are unwilling or unable to perform the contract. This is the simplest way that repudiation occurs.
Repudiation based on words or conduct
A party’s words or conduct may imply that they are unwilling or unable to perform the contract. When determining whether words or conduct amount to repudiation the courts apply an objective test: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; Satellite Estate Pty Ltd v Jaquet (1968) 71 SR(NSW) 126 at 150; Universal Cargo Carriers Corp v Citati [1957] 2 QB 401 at 436.
Repudiation based on words or conduct
The Court examines whether a reasonable person would consider the words or conduct to amount to a repudiation of the contract. In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd Brennan J suggested that the subjective intentions of the repudiating party are not relevant. He stated (at 647):
‘Repudiation is not ascertained by an inquiry into the subjective state of mind of the party in default; it is to be found in the conduct, whether verbal or other, of the party in default which conveys to the other party the defaulting party’s inability to perform the contract or promise or his *or her+ intention not to perform it’
Repudiation and erroneous interpretation of the contract
Repudiation may be the consequence of one party being mistaken in their interpretation of the contract. This will occur if a party refuses to perform their contractual obligations or refuses to accept the other party’s performance because they adhere to an incorrect
interpretation of the contract. Repudiation may also occur if a party attempts to terminate a contract based on an incorrect interpretation. In these situations one factor that the court assesses is whether the terminating party was honestly mistaken in their incorrect
interpretation: Green v Somerville (1979) 141 CLR 594; DTR Nominees v Mona Homes Pty Ltd (1978) 138 CLR 423.
Repudiation and erroneous interpretation of the contract
If a party is honestly mistaken in their interpretation and acts in good faith then their actions may not be viewed as repudiation of the contract: Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277.
Inability in fact
A party may be unable to perform their contractual obligations. In such cases the party desiring to terminate the contract for repudiation must be able to prove inability in fact:
Universal Cargo Carriers Corp v Citati [1957] 2 QB 401. The court will consider whether the repudiating party was ‘wholly and finally disabled’ from performing their contractual obligations. (at 446)
Rationale for the doctrine of repudiation
One practical reason justifying the principles relating to repudiation is that they allow parties to make alternative arrangements as soon as possible so that they can minimise any loss they might suffer as a result of the breach. In Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Justice Brennan explained (at 46):
‘The principles relating to anticipatory breach are intended to avoid the necessity for useless performance and to mitigate the damages for which the repudiating party is liable by permitting the innocent party to dispose of any property, services, or other benefits to which the repudiating party would have been entitled under the contract.’
In the Progressive Mailing House case the court considered that the contract for lease was repudiated based on a range of factors. These involved several breaches of the contract which included ‘inflicting physical damage to the premises, failing to rectify that damage, subletting the premises without the consent of the lessor and failing to pay rent’. (Jeannie Paterson, Andrew Robertson and Peter Heffey, Principles of Contract Law (2nd ed, Lawbook Co., 2005) 370).
Note that there are some situations which would give a right of termination both in relation to breach of a term classified as a condition and also a right of termination for repudiation: Associated Newspapers Ltd v Bancks (1951) 83 CLR 322; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286.
Bowes v Chaleyer (1923) 32 CLR 159 [30.52C]
Facts R agreed to sell 89 pieces of tie silk containing 1780 yards to A by contract.
It provided for shipment by ‘sailer/steamer. Half as soon as possible. Half two moths later’. In June the buyer purported to cancel the contract.
Nevertheless, the seller shopped the gods in three lots between Otc to Dec.
Nineteen pieces were tendered on 19/01 and 30 on 25/01. The buyer
rejected these. An offer to tender the balance of the goods on the
expiration of two months was declined and the seller claimed for damages for non-acceptance of the goods.
In the Supreme court: Macfarlan J gave judgement for the seller.
Issue Construction of the contract to determine whether the term quoted above was a condition?
The consequences of A’s attempt to cancel the contract in June.
Outcome Appeal allowed. Macfarlan J’s award for damages in favour of R was set aside.
Universal Cargo v Citati [1957] 2 QB 401 [30.59C]
Facts Vessel chartered to load cargo of scrap iron at Basrah and to go to Buenos
Facts Vessel chartered to load cargo of scrap iron at Basrah and to go to Buenos