Contract Law 2 - Lecture notes - Exam notes PDF

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LA1106 – Exam Note Lecture 1.......................................................................................................................4 Discharge by Performance.....................................................................................................4 Time of performance............................................................................................................4 Order of performance...........................................................................................................4 Nature of obligations............................................................................................................4 Standard of performance......................................................................................................4 Divisible obligations............................................................................................................4 De minimis non curat lex.....................................................................................................5 Substantial performance.......................................................................................................5 Acceptance of partial performance.......................................................................................5 Quantum meruit...................................................................................................................5 Prior Agreement...................................................................................................................5 Contingent conditions..........................................................................................................6 Condition precedents............................................................................................................6 Condition subsequent...........................................................................................................6 Consequences of non-fulfillment of contingent condition....................................................6 Duty to co-operate................................................................................................................6 Subsequent Agreement.........................................................................................................6 Consideration required.........................................................................................................6 Formal Requirements...........................................................................................................7 Abandonment.......................................................................................................................7 Assignment and Novation....................................................................................................7 Discharge by operation of law..............................................................................................7

Lecture 2.......................................................................................................................8 Classification of terms of a contract.....................................................................................8 Promises or undertakings.......................................................................................................8 Termination for breach.........................................................................................................8 Conditions............................................................................................................................8 Warranties............................................................................................................................9 Determining if a term is a condition or warranty..................................................................9 Innominate (or intermediate) terms......................................................................................9 Determining the outcome of an innominate term...............................................................10 Repudiation...........................................................................................................................10 Effect of repudiation...........................................................................................................10 Anticipatory breach............................................................................................................10 Conduct amounting to repudiation.....................................................................................11

Lecture 3.....................................................................................................................12 Termination for delay...........................................................................................................12 Terms – time of performance..............................................................................................12 No term as to time..............................................................................................................12 Time is of the essence.........................................................................................................12 Time is not of the essence...................................................................................................13 When will delay constitute repudiation?............................................................................13 Making time of the essence................................................................................................13 Notices...............................................................................................................................13 Extension of time...............................................................................................................14 Termination and affirmation...............................................................................................14 Procedures and consequences.............................................................................................14 Election to terminate the contract.......................................................................................14 Ready, wiling and able.......................................................................................................14

Restrictions on termination.................................................................................................15 Consequences of termination for the parties.......................................................................15 Election to affirm the contract............................................................................................15 Termination........................................................................................................................15 Consequences for innocent party........................................................................................16 Consequences for defaulting party.....................................................................................16

Lecture 4.....................................................................................................................17 Frustration............................................................................................................................17 A contract has been frustrated if:........................................................................................17 Substantial Impact..............................................................................................................17 Categories of frustrating events..........................................................................................17 Illegality.............................................................................................................................17

Lecture 5.....................................................................................................................18 Remedies...............................................................................................................................18 Right to terminate...............................................................................................................18 Right to damages................................................................................................................18 Damages as compensation..................................................................................................18 Expectation Damages.........................................................................................................18 Loss of profit/Loss of bargain............................................................................................18 Damages for loss of profit on basis of termination clause..................................................18 Loss of chance/opportunity................................................................................................19 Disappointment..................................................................................................................19 Loss of reputation...............................................................................................................19 Loss of use of money.........................................................................................................19 Payment of Interest.............................................................................................................19 Reliance Damages..............................................................................................................19 Damages under statute........................................................................................................20 Pre-estimated damages clauses...........................................................................................20

Lecture 6.....................................................................................................................21 Limitations on the award of damages.................................................................................21 ‘But for’ test.......................................................................................................................21 Remoteness........................................................................................................................21 The two limbs of breach.....................................................................................................21 Extent of loss contemplated................................................................................................22 Mitigation...........................................................................................................................22

Lecture 7.....................................................................................................................24 Equitable Remedies..............................................................................................................24 Main equitable remedies....................................................................................................24 Specific performance..........................................................................................................24 Injunctions..........................................................................................................................26 Restraint of trade clause.....................................................................................................26 Equitable damages..............................................................................................................27

Lecture 8.....................................................................................................................28 Vitiating Factors...................................................................................................................28 Mistake...............................................................................................................................28 Common mistake...............................................................................................................29 Mutual mistake...................................................................................................................30 Unilateral............................................................................................................................31

Lecture 9.....................................................................................................................33 Misrepresentation...............................................................................................................33

Lecture 10...................................................................................................................39

Abuse of power.....................................................................................................................39 Duress................................................................................................................................39 Undue Influence.................................................................................................................41

Lecture 11....................................................................................................................44 Impropriety by third parties................................................................................................44 Unconscionability...............................................................................................................44

Lecture 12...................................................................................................................47 Illegality.................................................................................................................................47 Consequence......................................................................................................................47 Pleading illegality...............................................................................................................47 Express statutory illegality.................................................................................................48 Implied statutory illegality.................................................................................................48 Incidental illegality.............................................................................................................49 Illegality at common law....................................................................................................49 Consequences of illegality..................................................................................................50

Lecture 1 Discharge by Performance Contract has been performed completely to the satisfaction of the parties Consider: Time of performance Order of performance Standard of performance Time of performance  Contracts may stipulate a time for performance  Time may be of the essence  Where there is no stipulated time, the court may impose one  What is reasonable depends on the nature of the obligations Order of performance  Some contracts may stipulate an order of performance of obligations  If not, order will be determined by nature of obligations Nature of obligations  Independent obligations – parties must perform irrespective of other parties obligations  Dependent and concurrent – obligations must be performed at the same time  Dependent obligations – one party must perform their obligation before the other Standard of performance  Exact performance  General rule: In order to discharge the contract, performance of the contract must be exact o Cutter v Powell  Many exceptions: o Divisible contract o De minimis rule o Substantial performance o Acceptance of partial performance Divisible obligations  Entire obligations: Where complete and exact performance is required before the contract price is to be paid o Cutter v Powell  Divisible obligations: Contract split into separate obligations each one capable of being paid for after completion o Steele v Tardiani o Property Law Act 1974, ss 231, 232 o Nemeth v Bayswater Road Pty Ltd  Contracts may be divisible even if it is a lump sum or paid in installments

De minimis non curat lex  “the law does not concern itself with trifles” o Shipton Anderson & Co v Weil Bros & Co  If the performance is close enough to exact, it will be considered exact Substantial performance  A promisor who substantially performs a contract will be entitled to claim the contract price subject to a deduction for defects in the performance.  Doctrine does not apply to: o Expressly stated entire contracts (condition precedent) o Dependent and concurrent obligations  Hoenig v Isaacs o Substantial performance has occurred o Nature of defect is minor  Bolton v Mahadeva o Nature of defect is major o Remedy costs a fair percentage of original price o Substantial performance has not occurred  Factors to consider: o Nature of defects o Cost of rectifying the defect compared to contract price  Therefore a question of substantial performance is a question of degree to be determined by the court taking into account all relevant facts Acceptance of partial performance  A free and willing acceptance of partial performance of the contract implies a promise to pay for the part performance  If there is no choice (as in the case of a house or another permanent fixture), then it cannot be inferred that you will pay Quantum meruit  Restitutionary claim based on principle of unjust enrichment  Available only where there is no subsisting contract between the parties, i.e. o No contract o Void or unenforceable contract o Contract with no price stipulated  Elements o Plaintiff must have provided a benefit to the defendant o Benefit must be provided at the expense of the plaintiff o Unjust for defendant to retain that benefit o Defendant must have a choice o Plaintiff must not be in breach  Sumpter v Hedges  Steele v Tardiani Prior Agreement  Express terms – may refer to o Period of notice/termination at will o Procedure to be followed

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Implied terms o Crawford Fitting Co v Sydney Valve & Fitting Co

Contingent conditions  Term stipulating that the formation or performance of the contract is conditional on occurrence of event  Contingencies affect the existence or operation of the whole or part of the contract. Condition precedents  Term stipulating that a specific event must occur before contract comes into existence (formation) or before obligation arises under the contract (execution)  Parties are not bound to perform until the condition is fulfilled o Pym v Campbell o Masters v Cameron Condition subsequent • Term stipulating that a right to end further performance of the contract may arise upon the occurrence or non occurrence or a specific event. • Parties are bound to perform until the condition is fulfilled. o Meehan v Jones Consequences of non-fulfillment of contingent condition • Two possibilities: o the contract is automatically terminated. o parties can elect to terminate. o Party who benefits from the condition has the right to terminate or to waive the condition. • Perri v Coolangatta Investments Pty Ltd Duty to co-operate • Parties have a duty to ensure that the condition can occur. • Party cannot elect to terminate a contract for non-fulfilment of a contingent condition if s/he hindered the fulfilment of the condition. Subsequent Agreement In order to be binding the subsequent agreement must have all the elements of a binding contract, including consideration and formalities Consideration required  Bilateral discharge o Both parties have outstanding obligations o Agreement to discharge the other amounts to consideration  Unilateral discharge o Only one party has ourstanding obligations o Need deed (of release) or fresh consideration – accord and satisfaction  Promise not to sue may be considered fresh consideration o McDermott v Black  British Russian Gazett...