Case-Study- Final PDF

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TOPIC 5: Contents of Contracts (Exclusion Clause and Implied Terms) 1. Causer v Browne – Exclusion on liability Facts: Causer took his wife's dress to Browne for dry cleaning. When he gave the dress to Browne, he hands Causer a docket saying no responsibility accepted for loss or injury to articles. Causer did not read what was written on the document and the statement was not specifically drawn to hi attention. During dry cleaning, the dress was stained. Causer claimed damages from Browne to compensate for the ruined dress. Browne defended the claim relying on the docket Issue: Had the statement on the docket that excluded Browne's liability become a term of the contract? Decision:  The statement had not become a term of the contract.  Terms will not become part of the contract when they appear on a document that does not appear to be a contractual document and attention is not brought to the other party of these terms.  This document was a docket and thus it was reasonable in the circumstances for Causer to assume that the document was only an identifying docket, which he would have to produce to collect the goods after cleaning.  It could not be inferred, therefore, that Causer was agreeing to exempt Browne from liability for negligence.

2. Olley v Marlborough Court Ltd – Brought attention before entering the agreement Facts: Couple booked into hotel room. Furs and jewellery were stolen from the room during their stay. Couple wanted compensation from the hotel. Hotel denied liability, directing the couple attention to an exclusion clause detailed on a sign on the back of the couple’s room door – “The hotel would not be responsible for articles lost or stolen.” Issue: Had the exclusion clause behind the door incorporated into the contract between the couple and the hotel? Decision:  No, it was only brought to the attention of the couple AFTER they had checked in.  For the clause to be effective, it needed to be brought to their attention at the time when the contract was formed.

3. Sydney City Council v West

Facts: West parked car in Sydney council car park, obtaining a ticket from machine at entrance. Car was gone when he returned. Third party had approached parking attendant claiming to have lost ticket. Attendant provided duplicate ticket to third party without doing any checks. Third party then proceeded to take car. West sued Council for damages. Council denied liability on the basis of express statement on ticket – ‘The Council does not accept any responsibility for the loss or damage to any vehicle…however such loss damage or injury may arise or be caused’. Issue: Did the statement on the ticket effectively exclude liability in these circumstances? Decision: • No. The exclusion clause had become a term of the contract, but properly interpreted it did not apply to this situation where the parking attendant had allowed for an unauthorised delivery of the car.

4. Codelfa Construction Pty Ltd v State Retail Authority of NSW – Terms implied ad hoc Facts: Codelfa construction agreed to build two tunnels in Sydney for the State Retail Authority for an agreed price. When contracting, both parties believed that nothing could prevent construction from continuing 24 hours a day. The high level of noise disturbed the local residents who obtained an injunction placing limits on hours during which Codelfa could work. Having to do the work more slowly cost Codelfa extra money. Codelfa therefore claimed extra payment from the SRA. Issue: Was a term implied into the contract ad hoc obliging the SRA to pay Codelfa for extra costs associated with the limited construction? Decision:  No such term was implied.  In order to determine there are terms implied ad hoc into the contract, the court applies the officious bystander test.  That is, they must test if it was sufficiently obvious that a particular term was agreed to without being expressly stated.  In this case, since neither party had believed when contracting that anything could prevent the construction from happening 24 hours a day, it could not be inferred that they intended to include a term in the contract regarding extra costs caused by limited work hours. Note also: It was not clear what particular provision parties might have agreed on in the changed circumstances. Also implied terms must be inferred from the expressly agreed terms and not from any extrinsic evidence.

5. Breen v Williams – Terms put law into specific kinds of contracts Facts: • Ms Breen had an operation to insert silicone breast implants. • Some problems later developed and she consulted with Dr Williams about the complications. • Another doctor conducted the surgery to remove Ms Breen’s implants. • Ms Breen wanted to join a lawsuit against the implant manufacturers in the US. • She sought access to her medical records from Dr Williams but he refused. Issue: • Was there implied terms of the contract between patient and doctor that the patient has a right of access to their medical records, and that the doctor must act in the best interests of the patient by providing them with these records? Decision: • No. Certain terms are implied by fact to reflect what the parties intended e.g. doctor would advise and treat the patient with reasonable skill and care; the patient will render payment to the doctor etc., but this did not extend to the provision of medical records to the patient.

TOPIC 6: Performance and Breach of Contract (Discharge of Contractual Obligations) 6. Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 7. Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99

8. Maritime National Fish Ltd v Ocean Trawlers Ltd Facts: MNF chartered the St Cuthbert, a trawler, from OT. To use the trawler for fishing, as was intended, it has to be licensed, but the government issued only 3 licences to MNF, and the company had five boats needing licences. MN allocated licences to there of their other boats and asked OT to take back the St Cuthbert, claiming the contract had been frustrated by the lack of a license. Issue: Did the unavailability of a license for the St Cuthbert frustrate the contract? Decision: The plaintiff was not entitled to rely on frustration in there circumstances. Reason: It was MN’s own decision not to allocate one of their available licences to the St Cuthbert. In seeking to avoid the contract, MN was not entitled to rely on a situation they had deliberately brought about. For frustration to discharge the contract, the changes situation must arise without any fault or deliberate act by the party who is seeking relief.

9. Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 (pg165, 6.17) 10. Associated Newspapers Ltd v Bancks Facts: Bancks, a cartoonist, agreed to produce a weekly full-page drawing for AN. AN agreed to pay B a salary and to publish the drawing on the front page of the newspaper’s comic section. However, for 3 weeks, because of paper shortages and consequent production problems, B’s drawings appeared on page 3 of the comic section. B protested but AN ignored him. B then decided to terminate further performance of the contract.

Issue: Was the promise to publish B’s drawings on the front page of the comic section an essential term, breach of which would justify terminating further performance of the contract? Decision: The term was an essential one (a condition) and Bancks was therefore justified in terminating further performance. Reasons: 

The test was succinctly stated by Jordan C.J. in Tramways Advertising Pty. Ltd. V Luna Park (NSW) Ltd.

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The decision was reversed on appeal, but his Honour’s statement of the law is not affected.

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He said: “The test of essentiality is whether it appears from the genera nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promise that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor.”

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The world “warranty” describe terms of lesser importance than conditions.

11. Bettini v Gye – Condition and Warranties Facts: Bettini, a singer, contracted to sing for Gye, a promoter, at various eents over a 15 week period, It was a term of the contract that Bettini arrive six days before the first engagement and attend rehearsals. Being ill, Bettini arrived late and missed four days of rehearsals. Because of this breach, Gye wanted to terminate the future performance od the contract Issue: Was the term requiring attendance at rehearsals for six days a condition, breach of which would justify terminating performance of the contract, or a mere warranty?

Decision:  The term was a warranty therefore Gye was not entitled to terminate further performance of the contract in order to Bettini's breach.  In order to determine whether a term is a condition we apply a test of essentiality. The test of essentiality determines whether it appears from the general nature of the contract considered as a whole, that the promise goes to the root of the contract.  In this case it was found that the requirement of attending rehearsals did go to the root of the contract because in the view of the court, a number of

performances over a long period of time, attendance at initial performance would not vitally affect the whole contract.

12. Varley v Whipp Facts: V and W met in the town on Huddersfield. V offered to sell a 2nd hand-reaping machine to W for $21. V said the machine was in the town of Upjohn. He said the machine was a year old and had only been used to cut 50 or so acres of crops. W had not seen the machine, but agreed to buy it. When delivered, the machine proved to be a very old one which had obviously been broken and mended. W returned it and refused to pay the price. Issue: Had the seller delivered what was promised, so that he was entitled to be paid the agreed price? Decision: The seller had not delivered what had been promised. Reasons: 

The thing sold was a specific machine, but it was bought unseen and it was identified by description.

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The description was “a nearly new reaping machine then in Upjohn”. The machine delivered is not the same class of goods as had been described. The seller had therefore failed to deliver the particular goods as identified in the contract.

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This was a breach of the condition, implied into sale contracts by law, that the seller must deliver the goods as identified by description in the contract.

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Whipp therefore entitled to reject the machine and was not obliged to pay.

13. Hoenig v Isaacs Facts: Hoeing contracted to paint Isaac’s apartment and supply some furniture for $750. After painting the apartment and supplying the furniture, Hoenig claimed payment in full. Isaacs complained that the work had been badly done. If cost $55 to have another workman rectify the defects. In view of the imperfect work, Isaacs paid only $400 to Hoenig. Hoenig sued Isaacs for the balance of the agreed price. Issue: Was Isaacs obliged to pay the agreed price in full? Decision: Isaacs was not obliged to pay the full price, but was only entitled to deduct the actual cost of the necessary repairs ($55). Reasons:

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Payment of the agreed price by Isaacs was due in exchange for the performance by Heonig of his obligations under the contract.

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Although H had not performed perfectly, the faults in his work were easily fixed at modest cost.

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In this circumstance, he had performed substantially.

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Where substantial performance has taken place, the failure to render complete performance while still a breach of contract, will be treated as a breach of a warranty rather than a breach of condition (unless the parties have expressly agreed otherwise).

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The substantial performance must be accepted and paid for proportionately.

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Isaacs was therefore required to pay the agreed price, less the amount needed to rectify the defects.

14. Steele v Tardiani Facts: Tardiani and others were employed by Steele to cut firewood. The agreement provided that payment would be made at the rate of 6 shillings per ton of wood cut in 6 foot lengths and split 6 inches in diameter. T and the others cut 1,500 tons of timber but split it into ranging from 6 to 15 inches in diameter. Issue: Was Tardiani entitled to payment for the work done? Decisions: Although performance was incomplete, Steele did not choose to reject the work done. Having accepted it, he had to pay for the value of the work. Reasons: 

The contract was not substantially completed: it was only partly performed. However, Steele was obliged to pay for the value of the work done by the woodcutters.

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This was because, knowing that the woodcutters were splitting some of the woods to a diameter of more than 6 inches, Steele had nevertheless said he would pay the woodcutters when the wood was eventually sold to customers.

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He had also allowed T to finish working without requiring him to split the thicker logs properly.

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Accordingly, the court decided that Steele had chosen to dispense with his right to insist on complete performance.

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Furthermore, because Steele had accepted the benefit of the partial performance, he was bound to pay the woodcutters for the actual value of the work they had done (as distinct form the agreed price).

15. Holland v Wiltshire Facts: Wiltshire sold some land to Holland for $3,750. The written agreement provided for payment to be made “on the day fixed for settlement namely January 14th 1952”. At Holland’s request, W agreed to an extended deadline, but H failed to proceed with the sales at all. W did not immediately terminate the contract but said that if H did not settle by 28 March, W would commence legal action for breach of contract. Issue: Was W entitled, failing payment by 28 March, to terminate further performance of the sale, resell the sell to a 3rd party and claim any loss from H? Decision: W was entitled to the remedies. Reasons: 

There were 2 breaches of contract by H.

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1st occurred when H failed to perform at the agreed time.

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On the facts of this case, the court held that the time of performance was agreed to be of essential importance.

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This meant that H’s failure to perform on time amounted to a breach of condition and entitled W to terminate the contract immediately.

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W chose not to end performance of the contract immediately.

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It was only after a 2nd breach occurred, when H said he would not proceed with the sale at all, that W gave him a deadline for performance and then terminated the contract when that deadline passed.

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W then resold the property to a 3rd party, but at a lower price.

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He was entitled to claim as damages the difference between the lower price on resale and the original contract price.

16. Mahoney v Lindsey (1980) 33 ALR 601

TOPIC 7: Remedies for Breach of Contract 17. McDonald v Denny Lascelles Facts: This case involved a purchase of land, the price of which was payable in instalments. A third party guaranteed the payment of an instalment. The buyer failed to pay an instalment on time. The seller treated this failure as a serious breach of contract and decided to terminate performance. The buyer did not dispute this decision. The seller then wanted to enforce the guarantee given by the third party. It was argued that, performance of the sale having been terminated, the contract was at an end and that accordingly the guarantee was not enforceable. Issue: What was the legal effect of the seller's decision to terminate performance of the contract? Did it mean that there was no longer any contract? Decision and Reason:  The common law remedy of terminating performance of a contract on grounds of breach of a condition does not make the entire contract void ab initio.  It only puts an end to the further performance of outstanding obligations.  But those obligations remain in existence and can be enforced in other ways, such as by a claim for damages.  In the present case, the third party who had guaranteed the payment of the instalment remained liable on the guarantee.

18. Associated Newspapers Ltd v Bancks Facts: Bancks, a cartoonist, agreed to produce a weekly full-page drawing for Associated Newspapers. Associated Newspapers agreed to pay Bancks a salary and to publish the drawing on the front page of the newspaper's comic section. Bancks's drawings appeared on page 3 of the comic section.Bancks then decided to terminate further performance of the contract. Issue: Was the promise to publish Bancks's drawings on the front page of the comic section an essential term, breach of which would justify terminating further performance of the contract? Decisions:  Yes, the test of essentiality is whether it appears from the general nature of the contract considered as a whole, that the promise is of such importance to the promise that he would not have entered the contract unless he had been assured of a strict performance of the promise.  In this case, it was clear that Bancks would not have agreed to the contract without the promise that his cartoons would be published on the front page of the comic section.  That promise was therefore an essential term (condition) of the contract.  Breaches of a conditions justify termination of contract.

19. Holland v Wiltshire Regarding: termination of contract for late performance Facts: Wiltshire sold land to Holland for £3,750. The written agreement provided for payment to be made 'on the day fixed for settlement namely January 14th 1952'. At Holland's request Wiltshire agreed to an extended deadline, but Holland failed to meet the extension. Holland then informed Wiltshire that he did not intend to proceed with the sale at all. Wiltshire did not immediately terminate performance of the contract but said that, if Holland did not settle by March 28, he (Wiltshire) would take action for breach of contract. Issue 1: Was Wiltshire entitled, failing payment by March 28, to terminate further performance of the sale, resell the land to a third party, and claim any loss from Holland? Decision 1: • Yes. On the facts of the case, the court decided that late performance was breach of a condition, entitling Wiltshire to terminate performance.  Wiltshire continued performance by extending the deadline after the first breach.  However, he also said that if another breach occurred, he would terminate performance.  Therefore he did not waive his right to terminate and when the 2nd breach occurred, Wiltshire was entitled to terminate performance and claim as damages the difference between the lower price on resale and the original contract price. Issue 2: Had Wiltshire done what was required to terminate further performance of the contract? Decision 2:  Yes, when faced with a breach which justifies termination, the non-defaulting party has a choice: to continue with the contract, or to terminate further performance.  The decision does not have to be made immediately, but once made and communicated to the other party, the choice is binding.  In this case, Wiltshire had kept the contract alive for a short time after Holland's repudiation, but made it clear that any further failure would result in an action for breach.  The eventual decision to treat the contract as terminated was communicated sufficiently by re-advertising and reselling the land.

20. Radford v Froberville Facts: Radford owned two adjacent blocks of land. He sold ...