October 2016 ADVANCED CONTRACTS. FULL SUBJECT NOTES p2 EXAM SUMMARY NOTES.p153

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1 ADVANCED CONTRACTS UNIVERSITY OF TECHNO LOGY, SYDNEY SPRING SEMESTER, FULL SUBJECT NOTES p2 EXAM SUMMARY NOTES.p153 1

2 76047 ADVANCED CONTRACTS SUBJECT NOTES CONTENTS COURSE ADMIN...4 Description...4 Subject Topics...4 ASSESSMENTS...6 Assessment task 1: Submit a contract portfolio...6 Assessment task 2: Team Presentation...7 Assessment task 3: Restricted Open Book Examination...7 SEMINAR 1 DEFECTIVE PERFORMANCE; IMPLIED TERMS; STATUTORY WARRANTIES...9 PORTFOLIO QUESTIONS: WEEK 1 FOR WEEK 2 DEFECTIVE PERFORMANCE...16 SEMINAR 2 ENTIRE PERFORMANCE; SUBSTANTIAL PERFORMANCE; SEVERABLE CONTRACTS...20 PORTFOLIO QUESTIONS: WEEK 2 FOR WEEK 3 Entire Performance, substantial performance and severable contracts...31 SEMINAR 3 TERMINATION FOR BREACH...37 PORTFOLIO QUESTIONS Week 3 for Week 4 Termination for breach...46 SEMINAR 4 REPUDIATION OF CONTRACT...49 WEEK 4 (FOR WEEK 5) REPUDIATION OF CONTRACT...57 SEMINAR 5 QUANTUM MERUIT...63 WEEK 5 FOR WEEK 6 QUANTUM MERUIT...78 SEMINAR 6 QUANTUM MERUIT: ACCEPTANCE OF THE BENEFIT...80 WEEK 6 FOR WEEK 7 QUANTUM MERUIT 2: ACCEPTANCE OF THE BENEFIT...90 SEMINAR 7 ESTOPPEL...92 WEEK 7 FOR WEEK 8 ESTOPPEL IN CONTRACT SEMINAR WEEK 8 FOR WEEK 9 RECOVERY OF THE LIQUIDATED SUM (THE CONTRACT PRICE) SEMINAR

3 WEEK 9 FOR WEEK 10 CONTRACT DAMAGES (GENERAL PRINCIPLES) SEMINAR SEMINAR STUDENT S PRESENTATIONS Grant v Australian Knitting Mills Ltd [1936] AC Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR Gloucestershire County Council v Richardson [1969] 1 AC Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR DTR Nominees v Mona Homes (1978) 138 CLR Quantum Meruit: Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR Field v Dettman [2011] NSW DC Gamerco SA v ICM/Fair Warning (Agency) Ltd [1995] 1 WLR Brenner v First Artists Management Pty Ltd [1993] 2 VR D & C Builders Ltd v Rees [1965] EWCA Civ Arfaras v Vosnakis [2016] NSWCA LAST CLASS CLASS OVERVIEW

4 COURSE ADMIN Description This subject focuses on how contract law assists in the enforcement of agreements and defences to contractbased claims. It deals with selected areas of practical relevance in the application of principles of contract law to solve contractual disputes. The subject utilises a 'life-cycle' approach to a contractual dispute, moving through issues of formation, written requirements, express terms, implied terms, good faith, interpretation, repudiation, breach, termination, defences and applications in law and equity, questions of enforcement, legislative intervention, remedies, and the use of evidence. Subject Objectives Upon successful completion of this subject students should be able to: 1. Demonstrate in-depth understanding of selected areas of contract law 2. Identify, comprehend and relate relevance and importance of legal and factual issues and to develop arguments in response to a problem in the context of contract law 3. Articulate concise, coherent and persuasive written and oral arguments - PG at an advanced level 4. Research, critically evaluate and creatively articulate a legal proposition - PG at an advanced level 5. Demonstrate and reflect upon the skills and techniques necessary to work effectively in a team environment 6. Accurately record various statements and documents used in conducting a contractual dispute Subject Topics Formation Theory Uncertainty / Agreements To Negotiate Contract Law Theories Electronic Commerce Express terms Implied Terms Duty Of Good Faith Unconscionability and other vitiating factors Repudiation/Breach/Discharge Contractual and Restitutional Remedies Resources Any recent Contracts textbook or casebook o Carter, JW, Cases and Materials on Contract Law in Australia, Sydney, (6th ed. 2016), LexisNexis Butterworths 4

5 o Carter JW, Contract Law in Australia (6th ed, 2013) LexisNexis Butterworths, Australia Other resources Reports and Journals: Australian Contract Law Reporter, CCH Australia, (2 volume loose leaf service) Journal of Contract Law published by Butterworths. UTS Library Digital Resources Register Some articles are also available relevant to this subject from the UTS Digital Resources Register. Useful Web Sites

6 ASSESSMENTS Assessment Length Due Weighting Contract Portfolio 1-2 pages Week 11 (18 Oct) 30% Team Presentation minutes; 1400 Week 3 (16 Aug) 20% words (1 page) Final exam restricted open book In class exam 50% ASSESSMENT TASK 1: SUBMIT A CONTRACT PORTFOLIO Weight: 30% Task: Students will submit a portfolio of tasks and exercises related to the subject and based on the contractual disputes considered in class, including a summation of facts from plaintiff and defendant, a statement or affidavit of plaintiff and defendant, points of claim, case analysis in brief form and relevant summaries of academic works, approaches to evidence, commentary on aspects of the case/scenario, appraisals of points raised in discussion by presenters. The portfolio will consist of both individual and group work. Each week a task will be done in class or in preparation for a class. Print on ONE SIDE ONLY. Each section/week of work to be clearly labelled and separated by page dividers when handed up. Length: Each task will vary in length but will generally fall into the range of one to two pages. Due: Week 11 Further information: Contracts Portfolio Each week students will be given written tasks to complete either individually or as a group/team. Some tasks will be performed during class, others are to be done prior to class - in preparation. Each page of each task must be numbered with a heading clearly printed at the top of the page and dated. Each task is to be placed into a folder - the first task at the front (NOT into plastic sheets). Marks will be allocated according to the structure of responses, clarity of writing, practicality and usefulness of responses, correctness, viability of argument and other relevant criteria particular to each task. Above all, each task must be fully completed. Students should note that work may be examined prior to or during class for purposes of assessment. The portfolio will be handed in at the last class of the semester. Attendance: Given that the assessment involves a class presentation, participation and the production of a portfolio, which in turn requires an audience to listen, participate and encourage by their presence, the minimum attendance required of individual students will be set at 80% of all classes. Any student who falls below this figure will be ineligible to be awarded a mark higher than 50% for the subject irrespective of their actual performance subject to medically certificated illness or misadventure. Of course, class members should attend all, not merely 80% of sessions, to enhance their learning and to support their fellow students. A similar observation can be made regarding the lectures. 6

7 ASSESSMENT TASK 2: TEAM PRESENTATION Weight: 20% Task: Students will do a class presentation individually or in pairs (or team) based on an article, case, or other document. The task will look to the capacity of students to summarise a point of law and fact succinctly. A strict time limit for presentation will apply. Students will send their written report on the case or article to the lecturer who will then place it on UTSonline. Students will use the case or article to explore a point of law raised in the factual materials. Students will be expected to demonstrate how the law applies, why it may not apply and any counter arguments or to respond to questions raised by the case, article or document. This assessment will also include marks awarded for the capacity of students to engage with, be involved in and contribute to general class discussions throughout the course. Students will be encouraged to be creative in their presentation of material and may use, where appropriate, multimedia tools to assist. This segment is very much about the art of communication. Students will be allocated individual marks for their presentation. Students must do approximately equal work. Marks will be allocated according to the overall quality of the presentation, including voice, presence, projection and any other criteria relevant to a good presentation. This will include accuracy, precision, brevity, explanation of points of law and the capacity to answer the question correctly and succinctly and the ability of the presenter to relate the article, case or document to the contract materials dealt with in class. At the beginning of the class the students must hand up a written summary of the main points of the presentation - this is to be less than one page and will have an influence over the mark for this assessment. Students are expected to stick to the time limit. Marks may be deducted for exceeding the time allocation. Length: Each team will present for approximately 12 minutes. Marks may be deducted if the time limit is exceeded. A notional word limit of around 1,000 words UG and 1,400 words PG is expected. Again, you must stick to the word limit. Font limit 11 Due: Marks allocated on the day of the presentation. ASSESSMENT TASK 3: RESTRICTED OPEN BOOK EXAMINATION Weight: 50% Task: The exam will be a restricted open book exam. No books or photocopies of books permitted. Your own notes are permitted. The exam may include problem questions, short answer questions, multiple choice questions or materials dealt with in class, seminar, the student portfolio or class presentations. Your portfolio answers will be useful to answer exam questions and may be used in the exam. As your portfolio will be handed up prior to the exam it is suggested you make a copy for use during the exam. Due: As allocated: See timetable Further information: 7

8 The exam will assist in encouraging students and measuring the demonstrated capacity of students to critically evaluate legal problems; to demonstrate writing skills pertinent to the subject; to identify, comprehend and relate the relevance of legal and factual issues and respond to these issues in a written form. The exam is an opportunity for students to apply what they have learned in group work, lectures, presentations and team work. The exam provides as incentive for all students to work towards a goal that encourages them to seriously engage with the other forms of assessment. 8

9 SEMINAR 1 DEFECTIVE PERFORMANCE; IMPLIED TERMS; STATUTORY WARRANTIES 2 August 2016 Topics: o Breach by Defective Performance o Implied terms o Statutory warranties Provision and reading of base materials Preparation of portfolio materials Work on provided materials and insertion into portfolio Group and class discussion DEFECTIVE PERFORMANCE CASES Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 [HC] Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 [ECA] Chin Keow v Govt of Malaysia [1967] 1 WLR 813 at 816: Reg Glass Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 Bolam v Friern Hospital management Committee [1957] 1 All ER 118 Carew Counsel Pty Ltd v French [2002] VSCA 1 Erwin v Iveco Trucks Australia [2010] NSWCA 113 Defective Performance (as breach of contract) Late performance A breach of contract can occur in three ways Non-performance Defective Performance What is defective performance? Defective performance is a breach of contract and will entitle the promisee (the victim to use an inaccurate descriptor) to damages in compensation. 9

10 Breach through defective performance occurs: (1) where the performance is deficient in quality or quantity as per the terms of the contract (usually associated with a failure to use reasonable skill and care) or (2) where the performance is not fit for the purpose for which the goods or services were intended. In contrast, where the promisee rejects performance (say, does not take possession of the goods and services in question) due to non-conformity to the contract, the breach is one of non-performance. Where performance does not meet the requirements of the contract and the promisee retains the goods or service the breach is one of defective performance. This question is: by what standard is the performance of the promisor to be tested. When is quality deficient? When is quantity deficient? When are goods not fit for their purpose? Determining the Standard of Contractual Duty Whenever we agree to perform a contact there is, to a lesser or greater degree, an intended standard of performance. The promisor, to win a suit at law claiming breach of the standard of care, must be able to show what the required standard of performance was intended to be, and that this standard was breached. 1. Express standard within the contract. In this circumstance, the contract expressly states what the intended standard of performance. The meaning and scope of the standard of performance is a matter of construction to be gleaned from the surrounding circumstances (factual matrix) in which the contract was formed. The express standard could require perfect performance or it may be reasonable performance or the exercise of reasonable skill or care. 2. Implied standard (two subsets) A standard of performance will often be an implied standard. In such circumstances a court will have to decide what standard of performance the parties impliedly agreed to. a matter of implication. Two Categories of Implied Standard: A. The fit for purpose standard (a strict liability standard). The product produced or service provided must actually do the job it was designed to do. B. The reasonable diligence, skill and care standard (the professional standard). The result is not guaranteed, merely that in delivering performance the promisor will do so with care and skill. The connection to broader questions of performance: 10

11 Where there is a claim for defective performance, particularly where the breach concerns the quantity or quality of performance, debate may ensue as to whether the promisor is entitled to payment under the doctrine of substantial performance or whether the contract is expressed in severable form. In other words performance may be defective but may nonetheless be substantial or severed into what is, in effect, a number of separate contracts. Where the promisor believes that performance has been substantial, although defective, a claim may be made for payment minus the amount required to remedy the defect. Where, however, the performance is truly defective there is no value and the victim may sue for damages in breach. Acceptance by promisee needed to claim defective performance: By and large, if performance is accepted (goods retained) the breach will be treated as defective. If rejected, the breach will be treated as non-performance. The breach can be either of express or implied terms. To classify a breach as non-performance or defective performance much depends on the capacity of the promisee to reject goods or services. For example, if you order a bespoke suit and it arrives at the shop in the wrong colour, you are able to reject it non-performance. If you wear the suit and the seam splits, that is defective performance. What of damages: Where performance is defective, the promisee will generally be entitled to the reasonable cost of rectifying the defect. See Bellgrove v Eldridge (1954) 90CLR 613. We will consider this case later in the course. [Q. Why is there a difference in standard? What is the base reason for this? Can we extend the application of the professional standard to non-professional jobs, such as some within the building industry? We will come back to this.] [Q. Can you make a case that rock-coting is skill and care or strict liability fit for purpose? Is it not more an art than a science? What factors could you argue to apply to the question?] A. Defective Performance: Not Fit for Purpose Implied warranty that goods are fit for use Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 [HC] Dixon J: It became one of the terms of the agreement about the plaintiff's fencing that he should have the use of the electric saw during the week-end. In other words, they might reasonably find that it became part of the agreement that he should do the fencing... [So a term, but how do we know if that term has been breached?] 11

12 What if he was a gratuitous bailee? The expert and non-expert standard Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 [ECA] Forklifts in warehouse. Terms implied in fact and in law. The expert and non-expert standard. Note again there are two ways to approach failure to meet the requisite standard of care; one, the general obligation, which is implied in law, for the engineer to use reasonable skill and care; and two, the obligation, implied as fact, that it was the intention of the parties that the engineer would produce a design reasonably fit for purpose. This case discusses both. Court Referred to Chin Keow v Govt of Malaysia [1967] 1 WLR 813 at 816:... where you get a situation which involves the use of special skill of competence, then the test as to whether there has been negligence or not is not the test of the man on the top of the Clapham omnibus, because he has not got this special skill. The test is the standard of the ordinary skilled many exercising and professing to have that special skill, A man need not possess the highest expert skill; it is well established law that it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art. The role of circumstances: In applying that test, it must be remembered that the measures to be taken by a professional man depend on the circumstances of the case. Although the judge talked about a higher duty, I feel sure that what he means was that in the circumstances of this case special steps were necessary in order to fulfil the duty of care. [I agree with the judge in Keow who said]: I do, however, find that he knew or ought to have known, that the purpose of the floor was safely to carry heavily laden trucks and that he was warned about the dangers of vibration and did not take these matters sufficiently into account, the design was inadequate for the purpose. Reg Glass Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 This case is also about causation in contract loss. Is the opinion of Owen J, dissenting, preferable?: The only warranty that could possibly be implied would be one to the effect that the door as fitted and hung would offer some substantial impediment to unlawful entry and cause a significant period of delay to a would-be intruder who might for that reason desist from trying to force an entry through it. 12

13 It is, I think, impossible in these circumstances to say the plaintiff established that the door did not impede or delay the thief to a significant or substantial extent and, if that be so, no breach of warranty was proved. But what of causation and damages: Is it the cost of repair to the door, or the loss of goods from the shop. Rivers were liable for the loss of stock from the shop. Why? B. Performance as Reasonable Care and Skill Note that the breach of contract by failing to use reasonable skill and care may also constitute negligence at common law. Ordinary standard versus expert standard. Bolam v Friern Hospital management Committee [1957] 1 All ER 118 [case only deals with instructions to jury] The ordinary standard: In an ordinary case it is generally said, that you judge that by the action of the man in the street. He is the ordinary man. In one case it has been said that you judge it by the conduct of the man on the top of a Clapham omnibus. He is the ordinary man. But where you get a situation which involves the use of some special skill or competence, then the test whether there has been negligence or not is not the test of the man on the top of a Clapham omnibus, because he has not got this special skill. The expert standard : The test is the standard of the ordinary skilled man exercising and professing to have that special skill.... in the case of a medical man negligence means failure to act in accordance with the standards of reasonably competent medical men at the time. That is a perfectly accurate statement, as long as it is remembered that there may be one or more perfectly proper standards; and if a medical man conforms with one of those proper standards then he is not negligent. [Q. In contractual terms did the doctor the contract by failing to exercise proper skill and competence.] [Q. Can a case be made that the workmanship, say of the renderer, was of acceptable standard because it is virtually impossible to do a perfect job?] Carew Counsel Pty Ltd v French [2002] VSCA 1 Breach of obligation of care by solicitor [Q. So what were the circumstances?] 13

14 Industry Standard Does the industry standard apply in determining if there was a breach by defective performance? Erwin v Iveco Trucks Australia [2010] NSWCA 113 [110] In addition to these matters, any assessment of the design precautions required of a reasonable manufacturer in 1989 must take into account the fact that the design was the industry norm at that time. While this is not decisive, in the absence of evidence that the industry practice itself was deficient or that potential safety issues had been identified at the time but not acted upon, the respondent's adherence to the industry norm is a strong indication that a reasonable person in the respondent's position would not have adopted additional precautions to guard against the risk. Furthermore, on the primary Judge's findings, the respondent had no reason in 1989 to believe that the risk would or might eventuate. Indeed there was no such indication until the crash occurred in Conclusion: Q. Is the home owner contracting to do fit for purpose or care and skill? Does it matter? Is it possible to produce a perfect rockcote job? What of other jobs? My notes: There are two avenues 1. Express terms (in contract), or 2. Implied (at common law) Implied in - Fact skills and care / fit for purpose; or - Law (skill and care) 14

15 If you take delivery Breach (by defective performance) by what standard? If you have not taken delivery non-performance difficult as a homeowner to show nonperformance so the claim here would be defective performance, not non-performance Condition allows you to terminate - but for essence of the contract; you don t get essentially what you bargained for Warranty allows for damages there is a problem but you still got what you bargained for Diminimas rule the court does not concern itself with trifles Workmanlike reasonable skill and care professional performance and Fit for purpose must be able to do the thing - are these two things different? Yes 15

16 PORTFOLIO QUESTIONS: WEEK 1 FOR WEEK 2 DEFECTIVE PERFORMANCE (a) Claims of breaches of contract by defective performance / statements that go to establish that the builder contractually agrees not to produce defective work: 4 Mr Steve represented himself to the Applicants as an experienced builder 11 Two weeks into the works the Respondent had not made significant progress 13 Work progressed at a slow and delayed rate 22 Mr Steve represented that he would supervise the subcontractor and ensure that all rendering and rockcoting works would be done in a proper and workmanlike manner and take care of those works 30 The Respondent failed to properly supervise its subcontractor and its employees 31 The Respondent by its subcontractor failed to render and rockcote the front and side fences of the Property 32 The Respondent failed to complete the first floor extension to the property 34 The render and rockcoting were not completed in a proper and workmanlike manner 55 Respondent performed defective work (b) Do the breaches go to fit for purpose or failure to exercise skill and care at common law? A breach may be implied at common law. This breach may be implied: In fact skill and care / fit for purpose; or In law skill and care For there to be a breach of the fit for purpose standard, the produce produced / service provided must not do the job it was designed to do. For there to be a breach for failure to exercise skill and care, the performance of the Respondent must be found to breach the professional standard, ie there was skill and care taken in delivering the performance. In this case, there is not enough detail provided in the Home Owners Statement in the particulars to characterise an implied breach at common law. We would need to know: Fit for purpose: o Was the first floor renovation completed to a level that it would be fit for purpose as a living area? o Was the rockcoting and rendering fit for purpose as an exterior coating, either to provide protection from elements, or to provide a pleasing aesthetic? Skill and care: o Was the standard of performance of the renovations and rockcoting / rendering completed to a professional standard? 16

17 Here we have a little more detail to work with according to the Home Owners Statement, the Respondent and the subcontractors abandoned the property, admitted to defects in the work, and failed to remedy these defects. This would indicate that the standard of performance breached the professional standard, therefore breaching the implied standard of skill and care in fact and in law, at common law. (c) Breaches for fit for purpose may pertain to: The purpose of the first floor extension: will result to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling that is, it is to be a liveable area for the purpose of that particular room, be it a living room / kitchen / bedroom this is not clear in the particulars and would need to be made clear in the Home Owners Statement to characterise a breach for fit for purpose The purpose of the rockcoting / rendering may be to provide additional weather protection and to improve the aesthetic appearance of a home. Render finish may vary between tradespeople and so the definition of a perfect render / rockcote finish is flexible (d) Defective performance breach express / statutory requirements: Express requirements: Clause 3 General conditions of contract o (a) The contractor will diligently proceed and complete all work to be done under this contract in a proper and workmanlike manner Clause 6 Time for completion o The contractor must diligently proceed and complete the work within six calendar weeks from the date the work is due to commence Clause 8 Completion of work o The work will be complete when the contractor has finished the work in accordance with the contract documents and any variations, it is free of apparent defects Clause 9 Statutory Warranties o a) The work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract o d) the work will be done with due diligence and within the time stipulated in the contract o e) the work will result to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling Clause 23 Defects rectification o The contractor must rectify omissions and defects in the work which become apparent within the period of 13 weeks from the date the work has been completed. 17

18 Statutory requirements Home Building Act 1989 (NSW) 18B Warranties as to residential building work (1) The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work: (a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder s or person s skill and judgment. (2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the "principal contractor" ) who has contracted to do residential building work contracts with another person (a "subcontractor" to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor. (e) From the Home Owner s Statement only as we have not yet seen the particulars of the defects / breaches, or the expert s report, or the Respondent s statement this case has a number of elements regarding breach of contract and defective performance. Overall the case involves uninformed Home Owners and builders / subcontractors who appear to have taken advantage of this in a number of ways including non-completion of works and defective performance as well as contractual issues such as writing, insurance, variations, suspension of work. Variations not in writing 18

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20 SEMINAR 2 ENTIRE PERFORMANCE; SUBSTANTIAL PERFORMANCE; SEVERABLE CONTRACTS 9 August 2016 Topics: o Breach by defective performance (continued) o Implied terms o The written contract o Contract performance o Termination for breach o Repudiation of contract o Provision and reading of base materials Work on provided materials and insertion into portfolio Group and class discussion Class presentations Entire Performance, substantial performance and severable contracts CASES Cutter v Powell (1795) 101 ER 573 Sumpter v Hedges [1898] 1 QB 673 William Thomas & Sons v Harrowing SS Co [1915] AC 58 Shipton, Anderson & Co v Weil Bros & Co [1912] 1 KB 574. Boone v Eyre (1777) 126 ER 169 Luna park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 Hoenig v Issacs [1952] 2 All ER 176 Bolton v Mahadeva [1972] 1 WLR Government of Newfoundland v The Newfoundland Railway (1888) 13 App Cas 199 Steele v Tardiani (1946 CLR) Jacob & Yong Inc v Kent (1921) 230 NY

21 Entire Performance, substantial performance and severable contracts Introduction The builder dispute: For the parties in our dispute, substantiating, or not substantiating, a claim of defective performance to the point where there is no value delivered to the home owner, is a prime concern in respect to the purported breach. (Leaving aside the issue that variations were not recorded in writing or insurance was inadequate per the Act.) The owners are claiming the builder s performance was so inadequate that he is not entitled to any payment whatsoever. In fact, to rehabilitate the site requires all the builder s render/rockcote work to be removed and replaced. What do the facts so far indicate? Refer to the Report and to the Photos put your response in your portfolio. Some ancillary issues: If the builder is willing to go on site to complete defects known prior to the job being finished is there a breach by the owners? Is a job concluded if the builder has not left the site but there are defects in the work that the builder is willing to fix? What the contract says: As the written contract may override common law doctrine, it is essential to always make first reference to its provisions. Look at: Clause 8: Completion of work The work will be complete when the contractor has finished the work in accordance with the contract documents and any variations, it is free of apparent defects, any damage of the kind referred to in Clause 19 has been repaired, and all rubbish and surplus material has been removed from the site. Clause 15: Final payment When the work is complete in accordance with Clause 8 the owner must pay the amount remaining unpaid under the contract. Payment must be made in the manner specified in Clause 14. If the amount is not paid, interest in accordance with Clause 14 applies. 21

22 Clause 23: Defects rectification The contractor must rectify omissions and defects in the work which become apparent within the period of 13 weeks from the date the work has been completed. The date of completion shall be determined in accordance with Clause 8. [HOME BUILDING ACT SECT 18B Warranties as to residential building work 18B Warranties as to residential building work The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work: (a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,... (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder s or person s skill and judgment. Note that warranty period is 6 years] The general right to entire performance The common law does not recognise a right to payment for doing a proportion of the contract under which payment is to be made. In particular instances performance less than entire will elicit payment from the promisee. Jacob & Yong Inc v Kent 230 NY 239 per Cardozo J: The court will never say that one who makes a contract may fill the measure of his duty by less than full performance. They do say, however, that an omission, both trivial and innocent, will sometimes be atoned for by allowance of the resulting damage, and will not always be the breach of condition to be followed by forfeiture. An entire performance contract is one where the parties have agreed that the contract must be complete before the promisor is entitled to payment. That is, entire performance is a condition precedent to payment. 22

23 How do we know if a contract is entire performance? This is a matter of construction looking to express or implied terms and the factual matrix of the contract. Contract Construction When can you be paid when you don t entirely perform? The answer to this question is very important because many cases are brought where a promisee believes the quantum of work performed or the quality of work performed is less than that required by the terms of the contract. Alternatively it is not uncommon, particularly in building contracts, for an owner to claim work is not up to scratch to avoid payment. Within this sphere is also the claim that work done off-contract, where a written contract is required, need not be paid for because the contract is not in the correct form. It is an objective test: the reasonable bystander what would they think, knowing the written expression and the facts surrounding. Meaning: Construction (construing) a contract is the interpretation of the terms of the contract. This involves giving meaning to the words (or terms) in their context and determining the legal effects of those words of terms or terms. For example, is delivery of toys by 20 December to be construed as a condition or a warranty. The object of construction is to give effect to the intention of the parties. Intention is the objectively determined express intention of the parties: The question to be answered always is: what is the meaning of what the parties have said not, What did the parties mean to say? it being a presumption [of law] that the parties intended to say that which they have said. L Schuler AG v Wickman Machine Tool Sales Ltd (1947) AC 235 at 263. Therefore, courts in construing a contract will give meaning to the intention of the parties as that intention is expressed, not as subjectively held. The old and new law: independent and dependent promises Under the old law of contract, each parties promise was independent of the other. This meant that it did not matter if the other party did not perform their side of the bargain, they could still sue, and vice versa. In Nichols v Raynbred a farmer was able to recover the price of a cow even though he had not delivered it to the purchaser. This was pure contract the supremacy of the obligation. Modern contract law concentrates on the order of performance. Where a promise, say to pay, is dependent on the performance of the other party, no payment will be made until that 23