Contract Law

Contract law II

Contract law II course introduces students to issues concerning the performance, discharge and termination of contracts; the remedies which are available for breaches of contract; and to the vitiating factors. In addition, it introduces students to the way contract law interacts with related areas of law, especially legislation, and unjust enrichment. This course has an emphasis on learning and applying the legal skills involved in mooting (the presentation of a legal argument to a court), in particular, co-writing an outline of argument, and making an oral submission.


*Following content was extracted from the final assessment. Received 6/7 for Contract law I and Contract law II.

 

Summary of the facts

The complainant was planning to start a business with a 2015 New Year’s Eve Masquerade Party. To do so, the complainant required a boat license, so she attended the course, where she met Jeff Elder, who owned a construction business called Elder Constructions, and they became acquainted with each other. The complainant told the defendant about her dream business, and the defendant was keen to renovate the boat. The complainant visited the defendant’s website and was impressed by the statements that referenced to the quality of the work provided.  The complainant signed a contract on 11 May, 2014. However, the defendant failed to complete the renovation on the stipulated date, which was 31 December, 2014.

 

Issue for court's determination

  1. Can the complainant terminate the contract due to the defendant's breach of clause 19?
  1. If the complainant can terminate the contract, is she entitled to recover the contract damages in relation to the breach of clauses 19 and 20?
  1. In the alternative, is the complainant entitled to rescind the contract for misrepresentation?
  1. Is the complainant engaged in unconscionable conduct?

 

Plaintiff's submission

  1. The complainant is entitled to terminate the contract due to the defendant's breach of clause 19.
  1. The complainant can cover all damages by the defendant's breach of clauses 19 and 20.
  1. The complainant relied on the statements on the website, therefore the complainant can rescind the contract for misrepresentation.
  1. The complainant did not engage in unconscionable conduct.

 


 

1.Termination of the contract

 

1.1.  Clause 19 is an essential term

1.1.1 The complainant can terminate the contract if clause 19 is either an essential term: Associated Newspapers v Banks,[1]or an inessential term capable of a variety of breaches, which is an intermediate term that has been breached in a serious way: Koompathoo Local Aboriginal Land Council v Sanpine Pty Ltd.[2]

1.1.2 The test of essentiality is stated by Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd [3] as follows:

 

'The test for essentiality is that the promisee would not have entered into the contract unless assured of strict or substantial performance of the promise and that   ought to have been apparent to the promisor.'

 

1.1.3  The court applied the test of essentiality in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd [4] to the Associated Newspapers v Banks.[5]

'The High Court held that it was a condition and stated that the innocent party would    not have entered into the contract unless assured of a strict and literal performance   of the promise.'

1.1.4 In the first week of March, 2014, the complainant told Elder Constructions that the restoration of the boat had to be completed in time for the New Year's Eve Masquerade Party. It would appear that Sarah Vega would not have entered into the contract with Elder Constructions unless she was assured that he would complete the renovation of the boat by 30 December, 2014. Accordingly, clause 19 was an essential term.

 

1.1.5 In Caprice Property Holdings Pty Ltd v McLeay,[6]  Fraser JA, Boddice J and Jackson J stated that the buyer was in breach of contract by failing to settle and that the breach was a breach of an essential term because time was of the essence under clause 6.1. The sellers were ready and willing to complete the contract in accordance with its terms.

 

2.1.  Clause 19 is an intermediate term that has been breached in a serious way

2.1.1 Even if clause 19 is not an essential term, the contract can be still terminated. If that were the correct interpretation, then clause 19 is more properly construed as an intermediate term rather than a warranty. It is an inessential term capable of a variety of breaches, which is an intermediate term that has been breached in a serious way: Koompathoo Local Aboriginal Land Council v Sanpine Pty Ltd.[7]

2.1.2  In this case, there may be circumstances in which completion of renovation of the boat by 31 December, 2014, was very important. It might be therefore that the completion of renovation of the boat on time was  more in the nature of an inessential term which is capable of being breached in a variety of ways, some trifling, some serious.

 

2.1.3 Also, whether Elder Construction's breach, by failing to complete the restoration of the boat by the stipulated date would, prima facie, give the complainant a right to terminate the contract would depend upon the effect of that breach on the facts, and whether it was such as to substantially deprive the innocent party of the whole benefit of the contract: Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd.[8]

 

2.1.4 It is clear that the restoration of the P.S. Marion was not completed on the stipulated date, which is mentioned in clause 19 of the contract. As a result the party was ruined and important guests, the Tongs, left in the middle of the party and left a negative impression of the complainant’s new business. Therefore, the complainant is entitled to terminate the contract with Elder Constructions.

 

[1]  [1951] 83 CLR 322.

[2]  (2007) 233 CLR 115.

[3]  (1938) 38 SR (NSW) 632, 641-2.

[4]  (1938) 38 SR (NSW) 632, 641-2.

[5]  [1951] 83 CLR 322.

[6]  [2015] 1 Qd R 206 .

[7]  (2007) 233 CLR 115.

[8]  [1962] 2 QB 26.

 


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