Codelfa Construction Pty Ltd v State Rail Authority of New South Wales PDF

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Summary

Implied terms, discharge by frustration - important aspect of contract law...

Description

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales 1. Terms Implied on the Facts of the Case 2. Discharge by Frustration – Court orders leading to frustration Name of Case

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales

Citation and Court

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 High Court of Australia

Material Facts

The SRA accepted Codelfa’s tender in relation to excavation work required for the construction of the Eastern Suburbs Railway. Construction of the railway was authorized by statute, which included a provision granting the SRA immunity from prosecution by nuisance. The parties agreed that Codelfa was to complete its work within 130 weeks form commencement. It was expressly agreed that Codelfa would bear all necessary costs for the work at an agreed price regardless of the difficulties it might encounter. In order to complete the work on time, Codelfa calculated it would need to three 8-hour shifts per day for six days per week, with certain work on Sundays as well. However, local residents obtained an injunction against Codelfa, which mistakenly assumed it was protected by the SRA’s statutory immunity. This meant that work could not proceed between 10pm and 6am on the six days or at all on Sundays. The SRA refused Codelfa’s claim for additional costs and the dispute proceeded to arbitration. Whether there were grounds upon which to imply a term into the contract granting Codelfa further time to complete and requiring SRA to indemnify Codelfa against additional costs incurred. Parol evidence rule and; The criteria to for a court to imply a term come from precedent of BP Refinery (Westernport) v Hastings Shire Council: ‘(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.’ Parol evidence rule exception of prior dealings: extrinsic evidence is admissible in order to solve the ambiguity of a terms. Court looked at discussions about how many shifts Codelfa would have to work. They were not negotiations but instead concern matter of common contemplation. Did not give rise to a contractual provision because it was a common assumption. According to the above criteria, the terms needs to be not only reasonable but so obvious that it goes without saying – ‘To say that the maintenance of three eight hour shifts the certain amount of work being common assumptions is not enough - it must be one that is necessary to give the contract business efficacy - and the term must be so obvious, it goes without saying.’

Legal Issue 1 Implied Terms Relevant Law 1

Application of Law to the Facts 1

Conclusion 1

Therefore, the court did not imply the term arising from the grant of the injunction

Legal Issue 2 Frustration

Whether the injunction issued by the Supreme Court frustrated the contract between Codelfa and the SRA.

Relevant Law 2

Davis Contractors Ltd v Fareham Urban District Council Lord Reid: ‘on the true construction of the terms which are in the contract read in light of the nature of the contract and of the relevant surrounding circumstances… [and] whether the contract which they did make…wide enough to apply to the new situation: if it is not, then it is at an end’ Lord Radcliffe: ‘… frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract… It was not this that I promised to do.’ The statements intend to mean that a contract is frustrated if an event occurs, that is nether parties’ fault and that event completely changes the intention/contents of the contract. The event that occurs in this case is the granting of the injunction. There was enough evidence to support that view that the parties did not have this in contemplation as they thought they were protected from the injunctions.

Application 2

Conclusion 2

It was held that the injunctions fundamentally or radically changed the circumstances of the contract, such that the contract was frustrated....