In-Class Exercise

on Lecture Topics 1 and 2

TABL 1710
Business and the Law

PLEASE SPEAK TO YOUR TUTOR IF YOU

MISSED THE IN-CLASS EXERCISE
Worth 10% of your mark
You must do this exercise before week 9
After week 9 students who have not done this
exercise will automatically receive 0/10 for
this assessment

Week 6
Contract Law (Contd)
Breach of contract/Termination of
contract/Remedies for breach of contract
Lecturer: Paul Tuohy
2015 The University of New South Wales
Sydney 2052 Australia
The original material prepared for this guide is copyright. Apart from fair dealing for the purposes of private study, research, criticism or review, as
permitted under the Copyright Act, no part may be reproduced by any process without written permission.
Enquiries should be addressed to the Head of School, Taxation and Business Law, UNSW, Sydney

MAJOR ASSIGNMENT

MAJOR ASSIGNMENT

On Moodle now
DUE WEEK 9: Monday 4 May 2015
Contract law, problem question
See Guidelines to Students (attached to the
Assignment)
See suggested readings and research guidance
notes
Note: Students should show evidence of research
beyond the suggested readings and beyond the
textbook

ONLINE SUBMISSION ONLY

Check your plagiarism score and re-submit on
Turnitin as many times as you wish UNTIL the
deadline of 5pm on 4 May
Word limit is 2000 words please observe the word
limit

Lecture 3: Summary

Discussion Forum

Essential elements of a contract:

Intention to enter into a legally binding contract

Agreement
Offer
Acceptance

Consideration

Now available on Moodle

Separate Discussion Forum for EACH TUTORIAL
CLASS
Tutors will provide details about how to use the
Discussion Forum for your tutorial class
Access problems? Please email Margaret Connor
m.connor@unsw.edu.au

Something of value (price)

Exception: Promissory Estoppel

Lecture 4: Summary

Lecture 3: Summary

Intention to create legal relations

Other elements for a valid contract:
Legal capacity
Genuine consent
Legality of purpose
Any formal/procedural requirements must be satisfied
(See Latimer at 5-510 to 5-570)

Social/family/domestic/voluntary
Commercial/business
Historically the rebuttable presumptions
Now change in approach

Terms of a contract
Representation:
- Pre-contractual negotiations
Terms
- Express/Implied
- Condition/Warranty
- Uncertain/Meaningless/Ambiguous terms

Week 5: Summary

Week 5: Summary

Exclusion Clauses

Requirements for a valid contract (contd)

Notice to be given before contract made or at time of making of contract

(Thompson V London, Midland & Scottish Railway Co; eBay case; Olley v
Marlborough Court; Balmain Ferry case)
Exclusion clause must be properly incorporated into the contract (Curtis v
Chemical Dry Cleaning)
You are bound by what you sign (LEstrange v Graucob)
Rules of interpretation:
Ambiguity (or Contra Proferentum) Rule;
Negligence Rule;
Four Corners Rule (Sydney County Council v West; Thomas National
Transport case)

Capacity
Consent
Proper form

Privity of contract

Agency: the exception to Privity

Vitiating elements

Mistake
Misrepresentation
Illegality
Inequality between the parties
Duress (threats of violence to person/property etc)
Undue influence (improper use of position of authority)
Unconscionable conduct (abuse of superior bargaining position when you
know other party in situation of special disadvantage/special disability:
Commercial Bank v Amadio)

Week 5: Summary

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Week 5: Summary

Unconscionable or Unfair Contracts

Contract will be set aside as unconscionable (unfair) where the
defendant has abused their superior bargaining position in
their dealings with the plaintiff

Unconscionable or Unfair Contracts

The plaintiff has to establish:
They were in a position of special disability or special
disadvantage
That substantially affected their ability to protect
themselves
The defendant knew, or ought to have known, of the
plaintiffs disability/disadvantage and should not have taken
advantage of it
AND

Case: Commercial Bank of Australia v Amadio

See Latimer at 5-730

The actions of defendant were unconscionable

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Todays lecture

Week 5: Summary
Unconscionable or Unfair Contracts
Examples of special disability/special disadvantage
include:
age
financial needs
illness
ignorance
inexperience
inability to understand the language
inability to read

Restraint of trade clauses

Breach of contract
Termination for breach of contract
Loss of the right to sue (the limitation period)
Time of the essence
Remedies available for breach of contract, under the
common law

See Latimer at 5-730

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Overview - Week 6

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Restraint of trade clauses

Breach of Contract/Termination for breach of

contract/Remedies

Clauses in restraint of trade are found in:

Contracts for employment
Contracts for sale of business
Contracts between manufacturers and traders

On completion of this week you should be

able to:
9 Explain when a contract may be terminated or
discharged
9 Identify the remedies for breach of contract
9 Explain what is a statutory limitation period
9 Explain what time of the essence means

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Restraint of trade clauses

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Restraint of trade clauses

Restraint of Trade clauses in contracts will generally

be unenforceable (ie: void as being contrary to public
policy) unless the restraint is reasonable

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What is reasonable is determined by:

The geographic extent
The time period involved
The nature of the business and the activity being
restrained
Whether the restraint is reasonable, both in the
interests of the parties and the public

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Enforceability

Enforceability

Contracts classified by enforceability:

Contracts classified by enforceability:

Valid - a contract which the law will enforce

Voidable - the contract remains valid and binding
unless and until it is repudiated (ie cancelled) by
the injured party
Void - no legal rights or obligations from the outset
(void ab initio)

Unenforceable - valid on its face but no legal

action can be brought on the contract, often
because of a procedural defect
Illegal - the purpose of the contract contravenes a
statute or the common law, and generally treated
as void

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At Common Law:
Termination of contract

Breach of contract
Remedies
(1) Common Law

Termination of contract

Damages

When one party:

completely fails to perform their obligations (actual
breach)
or
indicates that they do not intend to perform their
obligations (anticipatory breach), the other party is
entitled to terminate the contract

(2) Equity

Rescission

Restitution

Rectification

Specific Performance

Injunctions
(Also: Remedies under the Australian Consumer Law - to be
discussed in Consumer Law lecture)
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At Common Law:
Termination of contract

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At Common Law:
Termination of contract
A contract may be terminated or discharged:
by performance
by agreement
by operation of law (eg bankruptcy)
by lapse of time
by frustration

Breach of contract may be either:

Total breach: where one of the parties does not
perform the contract at all
OR
Partial breach: where one of the parties does not
perform the full requirements of the contract

See Latimer at 6-280 to 6-350

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At Common Law:
Termination of contract

At Common Law:
Termination of contract

By performance: contract usually ends when each

party has performed its contractual obligations

By performance:
Entire or divisible contracts

Obligations under a contract must be performed

exactly
Near enough is not good enough

- If a contract does not provide for pro rata recovery expressly or

by implication then this equals an entire/lump sum contract
- If the contract is to be delivered by instalments which are to be
separately paid for, then the terms of the contract will show
whether the breach is a repudiation of the whole contract OR
whether the breach is severable (ie referable to the particular
instalment only)

Cases: In re Moore & Co Ltd and Landauer & Co

Sumpter v Hedges

See Latimer at 6-300

See Latimer at 6-290

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At Common Law:
Termination of contract

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At Common Law:
Termination of contract
By lapse of time: when contract stipulates a time
period after which it will expire and parties allow this
time to lapse or expire

By agreement: contractual obligations can be

discharged by agreement between the parties
By operation of law: bankruptcy, death, material
alteration of a written document without consent,
merger of contract terms into one document

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Loss of the right to sue:

Statutes of Limitation

Time of the essence

Performance of the contract must take place in the time
specified

Statutes of Limitation protect a person from being forced to

defend a case after a certain number of years (when the case
becomes statute barred)

Or, within a reasonable time if no time is specified

If performance at certain time is essential, contract may contain

a time of the essence clause

Period of limitation begins to run as soon as a cause of action

arises (so when the breach of contract first occurs)

If time not of the essence, serving a notice to complete will fix

the time for performance/completion of the contract

Statutory limitation period: 6 years (or 12 years for formal

contracts)

Non-compliance will become a breach

See Latimer at 6-500

See Latimer at 6-290

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At Common Law:
Termination of contract

At Common Law:
Termination of contract
Cases:

By frustration:
After formation of the contract, performance may
become impossible if something unexpected
happens over which neither party has any control

Codelfa Constructions Pty Ltd v State Rail Authority (NSW)

Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd

See Latimer at 6-350

See Latimer at 6-350

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At Common Law:
Termination of contract

At Common Law: Damages

Frustration can arise if:

There is some significant or radical change to
nature of contractual rights and obligations by an
unexpected event
Neither party caused the unexpected event
Neither party contemplated the unexpected event
when the contract was entered into
In the new circumstances, it would be unjust to hold
the parties to the originally agreed contract
See Latimer at 6-350, footnote 51: National Carriers Ltd v
Panalpina (Northern) Ltd case

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Every breach of contract gives the innocent party a

right to claim damages
Main purpose of damages is to enable the innocent
party to receive (monetary) compensation for injury or
loss suffered because of the breach

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At Common Law: Damages

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At Common Law: Damages

Key issues:
Causation
Remoteness

Damages are calculated on the basis of looking at

what the position of the plaintiff would have been if
the contract had been properly performed

Case: Hadley v Baxendale

See Latimer at 6-430

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At Common Law: Damages

At Common Law: Damages

Causation and Remoteness:

Causation and Remoteness:

The plaintiff must show that the breach of contract by the

defendant was the cause of the loss

ASK:

Must be a connection between the breach and the loss

suffered

Is the loss suffered by the injured party a usual

and reasonably direct consequence of the breach of
contract?

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At Common Law: Damages

At Common Law: Damages

Causation and Remoteness

Compensation will NOT be awarded for damages that are too remote

The plaintiff may not be able to recover if an additional factor

unconnected with the defendants breach breaks the causal chain
between the defendants action and the plaintiffs loss or damage

Losses which can be claimed are those that:

flow naturally from the breach of contract
are special losses made known to the defendant when
the contract was made

Case: Victoria Laundry (Windsor) Ltd v Newman

Industries Ltd
See Latimer at 6-430

This is a question of fact

See Latimer at 6-420

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At Common Law: Damages

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Amount of damages

Damages for special losses cannot be awarded unless:

the plaintiff made known the special circumstances to the
defendant at the time the contract was made
if so, the defendant will be taken to have accepted the risk
by default

The aim of damages is to put the injured party back as

close to the position they would have been in had the
breach never occurred

Case: Victoria Laundry (Windsor) Ltd v Newman

Industries Ltd
See Latimer at 6-430

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Amount of damages

Mitigation of damages
The innocent party has a duty to take reasonable steps to
minimise or mitigate their loss. Failure to do so can result in a
reduction of damages

Damages are recoverable for economic loss as well

as for:
Distress and disappointment

Mitigation is a question of fact

Upset/anxiety

Onus of proof is on the defendant to show that the innocent

party (plaintiff) did nothing to mitigate the loss

Discomfort
Mental distress

Case: Payzu v Saunders

See Latimer at 6-480

See Latimer at 6-460

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Types of damages

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Types of damages
General damages: compensation for loss suffered
by the plaintiff as a result of the breach

The type of damages that will be awarded will be

determined by the seriousness of the breach and
whether the contract has specified the amount of
damages to be paid in the event of breach

Nominal damages: defendant breached contract but

plaintiff has not suffered any actual loss
Exemplary damages: punitive and may be awarded
for non-economic loss
See Latimer at 6-450

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Types of damages

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Types of damages
Penalties
Only enforceable if amount is a genuine preestimate of the loss from the breach of contract
Must not be extravagant or unconscionable
Must not be designed to apply pressure or
intimidate the other party
Must be transparent: based on reasonable criteria
and clear evidence/information as to how the
amount is calculated

Liquidated damages: awarded where a plaintiff is

able to sue for a specified sum, which must be a
genuine or bona fide pre-estimate of the actual loss
that will flow from the breach
Unliquidated damages: awarded where an injured
party has no fixed sum in mind and leaves the court
to decide the amount
See Latimer at 6-471

See Latimer at 6-471

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Equitable remedies

Equitable remedies

Restitution
Rescission
Rectification
Specific Performance
Injunction

Restitution: The court orders the return of property

or the payment of money
Rescission: Setting aside an agreement and
restoring parties to their pre-contractual positions
Rectification: The court corrects a written document

These are discretionary remedies at equity and

only granted where damages are not an adequate
remedy
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Restitution

Restitution

The plaintiff must establish:

Based on the concept of some UNJUST

ENRICHMENT
Can be used where there has been:
a mistake of fact or of law
duress
some element of compulsion

Defendant obtained a benefit or enrichment;

Benefit was at plaintiffs expense
It would be unjust to allow defendant
to keep benefit or enrichment
and
Defendant has no defences (such as estoppel,
incapacity, illegality) to rely on

See Latimer at 6-510

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Rescission

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Rectification

Termination by right
Court order setting aside contract, to restore parties
to pre-contractual position
May be granted because of:
mistake
misrepresentation
undue influence
duress
unconscionability

Court order requiring correction of mistake/error, to

bring document in line with correct agreement
between parties
See Latimer at 5-695

See Latimer at 6-280

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Specific Performance

Injunctions
Court order prohibiting a party from doing something
Court order requiring or compelling a party to do
something

Court order requiring a party to specifically perform

their contractual obligations
See Latimer at 6-400

See Latimer at 6-410

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Injunctions

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Contract Law LECTURE queries

Your tutor is your primary point of contact but.
if you have any contract law LECTURE queries, you
may contact Paul Tuohy at: p.tuohy@unsw.edu.au
All contract law TUTORIAL and ASSIGNMENT
queries should be directed to your individual tutor

Cases:
Lumley v Wagner
Curro v Beyond Productions Pty Ltd
Network Ten Pty Ltd v Rowe
See Latimer at 6-410

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Next week
Introduction to Tort Law
Topic for weeks 7 & 8 (Lecturer: Dr Leela Cejnar)
Read Latimer Chapter 4: 4-010-4-120

IMPORTANT TOPIC
Problem question in the exam

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