Topic 6 Performance and breach of contract: Discharge of contractual obligations

REVISION

What to do this week

Attend seminar/ Listen to recording Read chapter 8 of First Principles of Business Law Do the tutorial Performance and breach of contract. NOTE: The principles relating to Divisible contracts and breach of innominate terms are not examinable in this course.

Learning Outcomes
After completing this topic you should be able to:

explain what degree of performance is required to discharge a contract explain when and how a breach of contract may occur distinguish actual and anticipatory breach.

1. Performance in context
It must be understood that duties of performance arise from the creation of a contract containing particular terms.
These terms give rise to legally enforceable obligations (rights and duties). Performance is then required of the contractual duties owed, so as to discharge them.

2. Determining the required performance

The performance required depends on the particular terms of the contract. In the event of a dispute this means that the terms of the contract must be interpreted by the courts. The courts apply an objective approach:
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd ( 1990) 20 NSWLR 310 Australian Broadcasting Commission v Australasian Performing Right Association Ltd ( 1973) 129 CLR 99

2. Determining the required performance

Compare the following examples and discuss exactly what performance is required by the seller in each case. A agrees to sell B 100 tons of wheat. A agrees to sell B 100 tons of grade 1 wheat. A agrees to sell 100 tons of the wheat in his warehouse.

3. The effect of performance

Voluntary performance discharges the obligations. When all the obligations are discharged, the contract is at an end. Performance of contractual promises is required unless excused by unusual circumstances.
For example, if a contract can be said to be frustrated due to a supervening event.

3. The effect of performance

Failure to perform voluntarily is a breach of contract. Breach of contract does not discharge the contract: the obligations in existence and can be enforced by means of a legal action. Sometimes a court may order that specific performance actually be carried out. But the ordinary remedy for breach is payment of damages instead of performance. This discharges the outstanding obligations.

4. Excusing performance: Frustration

Performance of contractual promises may be excused if the performance is impossible. If a promise is impossible from the outset it does not create enforceable obligations (Initial impossibility).

4. Excusing performance: Frustration

When performance is initially possible but changed circumstances then make it impossible (or fundamentally different from what was originally envisaged) the situation is described as supervening impossibility. If it can be inferred from the circumstances that the contracting parties have assumed the risk of changed circumstances, they remain bound by the contract and must pay damages for non-performance, even if circumstances change to make performance impossible.

4. Excusing performance: Frustration

A contract can be said to be frustrated where:
It cannot be inferred from the circumstances that the parties have assumed the risk of changed circumstances; and The party seeking relief is not responsible for the changed circumstances; and It would be unjust in the new circumstances to enforce the agreement.
Maritime National Fish Ltd v Ocean Trawlers [1935] AC 524 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337

5. Breach of contract
If performance is not excused, a failure by a contracting party to do what was promised constitutes a breach of contract. Looked at this initially in Topic 6. Focus was on whether term was a condition or warranty. Important to review this for this topic. Now more detail regarding breach.

5. Breach of contract
Depending on the importance of the term that is breached, a breach of contract can described either as: a breach of condition a breach of warranty
Associated News v Bancks- newspaper/ginger megs comic strip Bettini v Guy- opera singer

5. Breach of contract
A breach can occur in different ways. These are described separately in the following slides.

6. Non-performance
Non-performance describes a complete failure to perform, e.g. The time for performance arrives and nothing at all is done; OR Something is done but it bears no relation to what was undertaken.
Varley v Whipp [1900] 1 QB 513

7. Partial performance
Generally, complete performance is required to discharge the contract. Anything less is called partial performance and amounts to a breach of contract.

7. Partial performance
A breach of a condition (even a small breach) may justify rejection of the performance and termination of further performance. The plaintiff can also claim for damages to compensate for any loss caused by the breach.

7. Partial performance
A breach of a warranty does not justify rejecting the performance and terminating further performance: the plaintiff is only entitled to claim damages to compensate for any loss caused by the breach of warranty.

8. Substantial performance
If a breach of a condition is relatively minor, so that the plaintiff still gets the expected benefit of the contract, the performance is called substantial performance.
Although this is still a breach of condition, substantial performance cannot be rejected and further performance terminated: only damages can be claimed.

8. Substantial performance
In other words, if performance is substantial, a breach of condition is treated as a breach of warranty.
Hoenig v Isaacs [1952] 2 All ER 176 Steele v Tardiani (1946) 72 CLR 386

9. Late performance
Performance must be made when agreed. Otherwise performance is due within a reasonable time. A complete failure to perform or tender performance within the required time amounts to a repudiation of the contract and may justify termination.
Holland v Wiltshire (1954) 90 CLR 409

9. Late performance
If performance is made or tendered late, termination might not be justified. This is because, although the common law treats time clauses as conditions, equity treats them only as warranties unless the parties have expressed a contrary intention. Legislation now gives preference to the equitable approach: e.g. see s 41 of the Property Law Act (Vic).

10. Breach before performance is due (anticipatory breach)

Breach normally occurs when or after performance is due. But sometimes it is obvious in advance that a breach is likely. The law recognises anticipatory breach when: Performance can no longer be achieved; OR By words or conduct the promissor has indicated an intention not to perform, i.e. has repudiated or disavowed the contract.

10. Breach before performance is due (anticipatory breach)

Repudiation:

Repudiate - to refuse to acceptto denyto refuse to acknowledge or payto disown

10. Breach before performance is due (anticipatory breach)

May refer either to the entire contract, or to a condition: either way, the repudiation allows the plaintiff to treat performance as terminated and sue for breach.

Repudiation of a warranty cannot have this effect.

10. Breach before performance is due (anticipatory breach)

If the whole contract (or a condition) is repudiated, the non-defaulting party may accept the repudiation, terminate further performance of the contract and sue for damages.

10. Breach before performance is due (anticipatory breach)

NB: Terminating is risky if the facts do not really amount to a repudiation, because then terminating is itself an act of repudiation.

Documents about Tuqiri sacking reveal nothing

10th August 2009, 15:30 WST

The public is no closer to learning the reasons for Lote Tuqiris sacking by the Australian Rugby Union (ARU), with newly released court documents revealing no details. The former Wallabies and NSW Waratahs winger had his $1 million a year contract torn up by the ARU on July 1, but the circumstances leading to his sacking were not made public.
The ARU said only that Tuqiri had breached the player code of conduct, but not the law

Consequently, the full statement of claim on behalf of Lote Tuqiri and LT Promotions was revealed, with the exception of paragraph E. The claim says Tuqiris employment with the ARU and the NSW Rugby Union (NSWRU) was fixed for five years from January 2008 to December 2012.

It is the plaintiffs contention that the terminations were contrary to the provisions of the player contract and amounted to a repudiation of that contract which the plaintiffs have accepted, a statement of claim released on Monday said.

The plaintiffs claim damages for loss of bargain and (damages) flowing from the wrongful termination.
The circumstances leading to the termination were not outlined. The parties are due to appear in the NSW Supreme Court on August 11. SYDNEY

http://au.news.yahoo.com/thewest/sport/a/-/union/

Tuqiri, ARU settle out of court

AAP August 24, 2009, 5:28 pm Send

The drawn-out sacking of Tuqiri ceased on Monday when the parties announced a negotiated settlement.

The former NSW Waratahs winger had his contract torn up by the ARU on July 1, but the circumstances leading to his sacking were not made public.
The ARU said only that Tuqiri had breached the player code of conduct, but not the law.

Tuqiri took action against the ARU alleging unfair dismissal and both sides argued against details being released.
"Following mediation discussions between the parties, an agreed settlement has been reached and Mr Tuqiri has agreed to discontinue his proceedings against the ARU and NSWRU," the ARU said in a statement released late on Monday.
http://au.news.yahoo.com/thewest/sport/a/-/union/5854331/tuqiri-aru-settle-out-of-court/

10. Breach before performance is due (anticipatory breach)

Hochester v De la Tour (1853) 1 CLR 846; 118 ER 922
Employment Cont 3 weeks 22/5 1/6

10. Breach before performance is due (anticipatory breach)

Mahoney v Lindsey (1980) 33 ALR 601
Contract sale of land M wants out L intended to complete L missed meeting 29/6

Topic 7 seminar topic

Performance of a contract

Case study: The building supplies

Andre Paginni, a builder, has a contract to renovate a house for a client. He needs supplies to carry out various different repairs. On Tuesday morning, he telephones Bunnings Warehouse, a retailer of building materials and hardware. He orders:
30 x 50 kg bags of cement mix for $200, which he needs to build a brick wall in the garden; 100 sheets of 2.4 metre x 1.8 meter plasterboard for $2,000, which he wants to repair various different walls in the house; and 1000 meters of tongue-and-grooved pine floorboards for $2,400, to replace the floor in the kitchen;

Case study: The building supplies

Andre says he needs the materials immediately and the assistant assures him that everything will be delivered to Andre before the weekend.

Case study: The building supplies

On Wednesday the following goods are delivered by Bunnings Warehouse to Andre.
30 x 50 kg bags of Victory cement mix 90 sheets of 2.4 metre x 1.8 metre plasterboard No pine floorboards.

Case study: The building supplies

Andre telephones Bunnings Warehouse to ask about the floorboards and is told that they were mistakenly left off the truck and will be delivered the following week on Wednesday. Andre is upset at what he thinks is inadequate performance of the contract. He tells the assistant that he wants to reject delivery of all the goods, and stop any further deliveries from Bunnings Warehouse. Bunnings says that Andre is not entitled to do this. They say that he must keep and pay for what he has received and accept the floorboards when they are delivered.

Question
Using the four step process, advise Bunnings Warehouse of their legal position in these circumstances. You will need to determine what were the terms of the contract, whether there was discharge by performance or a breach of contract. If there was a breach, you will need to explain the type of breach.

PLANNING STAGE
( or identifying the important facts for issue spotting)

Identify the agreed terms. Has there been discharge by performance or a breach? This will mean you need to determine whether the term is a condition or warranty.

Step 1

Identify the legal issue The principle (or issue) of law is

Step 3

Apply the law to the facts of the question in a detailed and logical manner, to each rule of law explained in step 2

Step 4

Draw possible conclusions (logical and consistent with what you have argued above)