LAW 1503: Contract Law Exam Notes 2017

Transcription

1 LAW 1503: Cntract Law Exam Ntes 2017 Cmmn mistakes t watch ut fr Generally, when discussing breach f cntract, repudiatin shuld be addressed if necessary. Repudiatin - party wuld seek a lss f bargain damages. Even if a term des appear t be essential, still discuss the pssibility that it is an intermediate term and that there has been a fundamental/serius breach. If P is trying t seek damages fr the cst f hiring smene t cmplete the wrk, nt whether r nt they had actually paid D yet r nt. Example: P was t pay D $17,000 t cmplete their bligatin. If P has already paid ver this mney then they will be able t seek damages fr the cst f hiring smene t cmplete the wrk. If P had nt yet paid ver the mney and D had nt yet cmpleted the wrk, then P has nt suffered a direct lss and s damages wuld be nminal. Generally, when discussing incrpratin, interpretatin may als need t be addressed. D nt frget t address the sale f gd act if necessary E.g. s 14: implies a term in every cntract fr the sale f gds that thse gds must be f merchantable quality and/r fit fr their purpse. With regards t cnduct being in trade r cmmerce, if a persn is buying and selling a prduct fr prfit, then generally they will be acting in trade r cmmerce. Sectin 21 prevents cmpanies that are publicly listed frm bringing an actin (that is, if MB was the Plaintiff), thus it desn t matter if the defendant is a publicly listed cmpany fr s 21 t apply. Remedies Self Help (D nt have t g t curt) Withhld perfrmance f a cntract Terminatin Depsits and advance payments A depsit indicates that a party is serius abut entering a cntract. If a depsit is made and a party decides t 'back ut' f the cntract, then the recipient f that depsit may keep that sum f mney. Enfrcement (frce the party t d as they prmised) Specific perfrmance Order that the cntract be perfrmed. Discretinary remedy - usually nly granted fr the sale f land. Cmmn reasns fr refusal f specific perfrmance: Damages wuld be an adequate remedy (Dugan v Ley) Cntinuing bligatins invlved which wuld require the curts supervisin (JC Williams Ltd v Lukey and Mulhlland) Obligatin is ne f persnal service - e.g. emplyment (Byrne v Australian Airlines) Unreasnable delay in seeking relief; Plaintiff is unwilling and unable t perfrm their wn bligatins; Plaintiff has 'unclean hands'; It may cause hardship t the Defendant. Injunctin Used t enfrce negative stipulatins and t restrain a breach f cntract. Negative stipulatins: an rder that yu shuld nt d within a cntract (and if yu did d it then it wuld be in breach f the cntract). This is a discretinary remedy but it is mre cmmnly granted than specific perfrmance.

2 Actin fr debt r mney due Used t recver sums f mney due under a cntract. N need t prve lss, nly that mney is wed and has nt been paid. This is nt an equitable remedy but rather, a cmmn law remedy. Thus, it is much mre cmmnly granted. If a party nly seeks t be paid the sum f mney that they are wed under a cntract then this is the suitable remedy, NOT DAMAGES. Tw requirements: a. The debt has accrued - that is, A has dne their part but B has nt yet paid up. Fr the payment t have accrued, the plaintiff must have earned the payments by at least substantially perfrming their cntractual bligatins: McDnald v Dennys Lascelles b. The amunt f mney must be stipulated. Cmpensatin (Damages) The rules Any time there is a breach f cntract, a party will be entitled t seek damages. These damages will be nminal unless the Plaintiff can prve that they have suffered a lss. If it can be established that there has been a breach f cntract, then damages must be awarded. Damages must return the Plaintiff t the same situatin that they wuld have been in had the cntract been perfrmed: Rbinsn v Harman Types Expectatin damages: putting the party in the psitin that they wuld have been in had the cntract been perfrmed. Reliance damages: putting the party in the psitin that they were in befre the cntract was frmed. Expectatin damages Where a party sustains a lss by reasn f a breach f cntract, he is, s far as mney can d it, t be placed in the same situatin had the cntract been perfrmed - Rbinsn v Harman The decisin in Rbinsn was endrsed by the High Curt in Tabcrp Hldings Lss is ften hard t quantify Fr uncmpleted wrk: the cst f having smene else t cmplete r rectify it, unless that cst wuld be unreasnable. Fr undelivered gds: additinal cst (if any) f having t buy replacement gds: Sale f Gds Act 1895 (SA) s 50 If gds cst mre, the difference between the tw prices; if the gds cst less, then the damages will be nminal. Fr defective gds: cmpare the value f the gds prmised cmpared t the gds supplied: Sale f Gds Act 1895 (SA) s 52 Calculating damages is the difference between what happened and what ught t have happened: Clark v Macurt Examples f quantifying lss A is t sell a car t B fr $10,000; the market value f the car is $12,000; therefre the damages wuld be $2,000 (here the mney has nt actually been spend but the party had an expectatin f receiving the car). A is t sell a car t B fr $10,000; the market value f the car is $10,000; nminal damages fr disappinted expectatins. If the market value is less than that f the agreed price then n damages will be awarded because the Plaintiff has actually saved mney. Bellgrve v Eldridge If yu cntract t have wrk dne, then yu are entitled t have it dne. The damages in this case were awarded fr bth the demlitin and the rebuilding f a huse.

3 Ruxley v Frsyth Pl was built 6ft deep instead f 7.6ft deep. Hwever, the pl was still deep enugh t dive int. P wanted damages fr the remval and rebuilding f the pl (a cst that was significantly greater than the riginal cntract price). The cntract was fr a pl that P culd dive int and the curt held that the pl culd still be used fr this purpse. N damages were awarded (unreasnable amunt). Tabcrp Hldings v Bwen Investments Clause in the agreement stated that the tenant culd nt alter the building withut the permissin f the landlrd. D remdelled the lbby withut permissin. P wanted damages fr the remdelling and fr the lss f rent that P wuld suffer whilst the building was being restred. The curt granted $1.3 millin in damages and held that D was clearly and knwingly in breach f the cntract and that P had an abslute right t damages given that they had made is clear that there was t be n altering f the building by tenants. Lss f bargain damages (fr terminated cntracts) If a cntract is terminated, lss f bargaining damages may be awarded t remedy n lnger having the cntract. They are based n the price that the plaintiff wuld have received if the cntract had been perfrmed as prmised minus the price that the plaintiff wuld receive by entering int a substitute cntract. Example: the different between rent due in the cntract and rent that culd be btained n the market. This kind f lss is subject t mitigatin. Damages fr lss f chance Frms part f expectatin damages. Damages must be assessed n matter hw difficult they are t quantify: Chaplin v Hicks In rare cases, where expectatin damages cannt be ascertained, reliance lss may be awarded. Damages fr lss f chance must equate t the lss f chance, nt the benefit that the party wuld receive had they been granted the chance. Chaplin v Hicks P entered int a beauty cntest; her applicatin was mixed up was verlked by D. D, in accrdance with the rules f the cmpetitin, had agreed t assess her (and every ther applicant's) submissin. P argued that there had been a lss f chance given that she was denied the pprtunity t participate in the cmpetitin. Reliance damages The lss (e.g. expenditure) incurred in preparatin fr a cntract. Where expectatin damages are t difficult t calculate, reliance damages may be awarded (but very rarely this is the case): McRae v Cmmnwealth Dispsals Cmmissin McRae v Cmmnwealth Dispsals Cmmissin Cntract fr M t salvage a ship wreck. A mistake had been made and the tanker was nn-existent. M sued fr breach f cntract. CDC argued tat the cntract was vid fr cmmn mistake and that P culd nt prve that he had suffered any lss due t the uncertainty f the marine salvage industry. Marine salvage is a risky business. M culd have travelled t the lcatin and even if there were a tanker, nt been able t salvage anything. Therefre, he wuld have lst mney anyway.

4 M culd nt prve that he was as a lss. McRae was awarded with reliance damages fr the lss f mney he had spent n trying t embark n the vyage. Nte: this case shuld nly be qutes if it is mre r less impssible t calculate damages fr lss f chance. Cnsequential lss Additinal lss that results frm the breach f cntract, such as physical injury, lss f prfits etc. Limitatins: causal link must be established ('but fr' test) and damages must nt be t remte. Remteness f damages Established test fr remteness - Hadley v Baxendale - crank shaft brke; Baxendale was meant t deliver it t the repairer in tw days but did nt; Hadley missed ut n five days f wrk and prfits. In Hadley, the lss is nt t remte if: i. The lss arises naturally, accrding t the usual curse f things (this cncerns the type f lss reasnably expected and is an bjective test); r ii. The lss was reasnably cntemplated by the parties at the time f the cntract as a 'prbable result' f this kind f breach (this cncerns the actual knwledge f the parties). Bth limbs shuld be discussed but nly ne needs t be satisfied. The test was applied in Victria Laundry v Newman Industries Ltd N delivered a biler 5 mnths late, despite knwing the urgency; VL miss ut n everyday lss (damages allwed) and a lucrative gvernment cntract (i.e. cnsequential lss). Under limb ne, the Plaintiff succeeded as it was reasnably freseen that a bigger briler wuld lead t mre prfits, BUT, the claim failed in the sense that, under limb tw, the defendant wuld nt have been expected t knw f the lucrative business deal that DL was entering in t. The High Curt endrsed Hadley in Eurpean Bank Ltd v Rbb Evan Nn Pecuniary Lss Generally, damages are nt available fr mental distress, unless: a. They are the result f physical injury; r b. If the purpse f the cntract was t prvide happiness/relaxatin/freedm frm stress - Baltic Shipping - Cruise ship sunk part way thrugh a 14 day cruise; P sught t recver fr disappintment/distress. Cntributry Negligence Damages may be reduced under the Cntributry Negligence and Apprtinment f Liability Act 2003 (SA) t the extent that the Plaintiff has cntributed t their wn lss. Mitigatin N recvery fr lss actually avided r fr lss that the Defendant prves culd reasnably have been avided by the Plaintiff taking apprpriate steps: British Westinghuse v Undergrund Electric Railways Reductin f damages where lss was either: avided r avidable (bjective test - nus f prf is n the Defendant) N reductin f damages where additinal lss is incurred in an attempt t mitigate lss. Date f Assessment Lss usually assessed frm date f breach - Ng v Film lck Otherwise, lss is calculated frm when it becmes apparent. Interest n judgement sum: Supreme Curt Act 1935 (SA) s 30c As a general rule: dn't take int accunt later events. Unless it has taken a lng time t becme aware f the damages, then the lss will be assessed frm the date at which it

5 became apparent, nt the date f the riginal breach - strng burden f prf n the Plaintiff here. Punitive damages r gains based damages Exemplary r punitive damages are NOT awarded fr breach f cntract: Hspitality Grup Pty Ltd v Australian Rugby Unin Ltd Agreed damages (liquidated damages) and penalty clauses Parties may stipulate an agreed sum (liquidated damages) t be paid in the event f a particular breach. This will be enfrceable as liquidated damages if it is a genuine pre-estimate f likely lss. A penalty is an extravagant sum that des nt reflect the estimated lss fr a breach. But, under the rule against penalties, such a prvisin will be unenfrceable if it is 'extravagant and uncnscinable' cmpared t the maximum lss likely t be suffered frm the breach: Pacicc The rule against penalties may als apply where a 'sanctin' is applied fr smething ther than a breach. Andrews v ANZ Class actin by ANZ accunt hlders ver the fees charger fr verdrawing accunts and late repayments etc. These fees were nt presented as penalties, rather, fees fr additinal services. But it was argued that they did nt reflect the lss f the bank; the bank argued that they were nt penalties as they did nt apply fr a breach. It was held that the penalties rule can apply t any penalty intended t secure perfrmance. Hwever, it will nt be a penalty if the fee is fr further services. Query hw widely accepted the rule against penalties applies - because f this uncertainty, n detailed knwledge f this rule is expected. Limitatins f actins Limitatins f Actins Act 1936 (SA) s 35 Actins must be cmmenced within six years f the cause f actin accruing. Hadley v Baxendale Held t be t remte because D did nt have the knwledge t be reasnable aware that P wuld suffer a detrimental lss if they failed t perfrm their cntractual bligatins n time. That is, at n pint did P make D aware that they needed the piece f machinery ASAP because they did nt have spare parts t use in the meantime. Victria Laundry v Newman P rdered a briler frm D, wh was late in delivering it. P sued D fr damages fr the lss f the prfits that they expected t make with a larger briler. Fr the mst part the argument succeeded It was reasnable fr D t have freseen that P wuld lse prfits if a larger briler was nt delivered n time. One part f the claim failed P had a cntract with a gvernment agency that wuld prvide significant prfits. P culd nt fulfil their cntract with this gvernment agency given the lateness f the briler. Failed in receiving damages fr this particular lss because D did nt knw f this particular cntract and nr was it reasnable fr them t knw unless they were explicitly tld by P. Baltic Shipping Ship set sail and sunk midway thrugh the cruise. P sued fr damages fr the disappintment f having a hliday ruined. Their claim succeeded and all f the passengers were able t

6 claim damages fr the disappintment in nt getting the hliday they had been prmised when they bked the cruise. Restitutinary remedies Used when a cntract is made vid r is terminated. Restitutinary remedies prevent the defendant frm being unjustly enriched by retaining a benefit gained at the Plaintiff's expense: Pavey & Mathews v Paul Nte: the remedy cannt be used t rewrite the cntract: Lumbers v W Ck Actin fr mney had and received Where there is a fee paid t the defendant fr the perfrmance f an bligatin and that bligatin is never perfrmed s that defendant is unjustly enriched, the plaintiff may seek t have that mney returned. There must be an established basis fr the actin a. If the mney was paid by mistake; b. If there has been ttal failure f cnsideratin (cnsideratin refers t failure f perfrmance f bligatins in this case) frm ne party. c. If the benefits are cnferred under cmpulsin r duress d. Or If there is an inability t recver due t statute law. Quantum Meruit See later ntes Quantum valebat See later ntes Estppel Types f Estppel Equitable estppel Prprietary estppel Prmissry estppel Equitable Estppel Riches v Hgben Sn agreed t emigrate after his mther assured him that she wuld buy a hme in his name. The sn bught an actin t enfrce this prmise. The sn had relied n the prmise by incurring expenses and mving t Australia. The curt had made an rder fr specific perfrmance as that the prperty went t the sn's name. There will be n equity unless the prmisee has relied n that prmise and subsequently incurred sme detriment. The prmise can be verbal. Remember: granted at the curts discretin Elements Assumptin - it must be clear that A is encuraging B t adpt sme frm f assumptin: Legine This can be due t an explicit prmise (verbal r in writing); r manner f cnduct. Detrimental reliance - B has t act n that assumptin in such a way that they wuld be wrse f if A departed frm that assumptin: Je Maintreindrai; Ashtn v Pratt Uncnscinability - Must be uncnscinable fr A t have departed frm the assumptin: Austtel v Franklins Remember, it is nt whether B will be wrse ff if A fails t fulfil the prmise. The questin is whether B has dne smething t change their psitin in such a way that they will be wrse

7 ff (i.e. have they acted n the assumptin) - have they actually dne smething t their detriment? Je Maintreindrai Estppel was used t estp the landlrd frm suing fr the full rent that was wed under the riginal lease. This case was befre the idea f practical benefit was established. Hairdressers requested a rent reductin and the landlrd agreed. The landlrd later requested the lump sum f mney back and was estpped. Where there has been detrimental reliance, B cannt seek t turn back a prmise t A. Legine v Hateley Cntract fr the sale f land; purchaser wuld nt get the mney t cmplete the sale n time; the purchaser's slicitr cntacted the vendr's slicitr (but instead spke with anther persn at the firm) and asked t pstpne the settlement. The persn wh tk the call said that it "might be k, but it wuld have t be discussed with the vendr". On faith f this prmise, the purchaser did nt aim t cmplete the payment n the settlement date. When that date arrived and the purchaser had nt yet paid, under the terms f the cntract, the vendr had a right t terminate and retain the purchaser's depsit. There was an argument that the vendr shuld be estpped frm terminating the cntract because the vendr's agent (the persn wrking fr the vendr's slicitr wh had taken the phne call) had lead them t believe that they had agreed n mre time. The High Curt agreed that estppel is available in a case like this but the majrity decided that based n the facts f the case, it was nt a clear enugh assumptin t be relied upn ("I think it might be k"). A reasnable persn wuld nt have acted/relied n this unclear indicatin. Waltns v Maher W were negtiating with M wh wned sme land and had a building n that land. The deal was that M wuld demlish that building and cnstruct a new ne which wuld be suitable fr W t use. The building wuld then be lease by W. Dcuments were drawn up by the parties' slicitrs' and the parties eventually settled n the terms f the lease. But, it was clear that the cntract was ging t be made WHEN cpies f the lease were exchanged and signed. Befre this time arse, W had secnd thughts and decided t slw negtiatins dwn. Remember: at this pint in time there was n fficial cntract and neither party were legally bliged t g ahead with the lease. M believed that the deal was ging ahead smthly and were under the impressin that the lease was abut t be signed. They started demlishing the building. Nte: W's slicitr's new that M thught that the deal was ging ahead but did nt disclse this t them). W decide nt t g ahead with the deal. M sues fr breach f cntract, but there was n cntract at this pint. M argued that W shuld be estpped frm denying the cntract because they had lead M t believe that the cntract wuld be signed and new that M thught this and let them prceed with the demlitin. Thus, it was uncnscinable fr W nt t g ahead with the agreement. The High Curt held that a dctrine f prmissry estppel states that if ne party prmises the ther party that they are ging t act in a certain way, if the ther party relies n that prmise t their detriment r it wuld be incnslable fr the ther party nt t fulfil their prmise, then they may be estpped. This case shws that estppel can be used t enfrce a gratuitus prmise where it is relied n and where it wuld be uncnscinable nt t fulfil the prmise. Ashtn v Pratt Case in which P was alleged t have prmised his mistress a huse in return fr giving up her jb as a sex wrked. Her claim in estppel failed because there was n detrimental reliance.