BLAW10001 Lecture Notes - Lecture 6: Land Council, State Rail Authority, Divisor
15 May 2018
School
Department
Course
Professor
Principles of Business Law
• Lecture 1
• Week 6
• Contractual Performance, Breach and Discharge
• Performance in context
• 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 of the contractual duties owed discharges them
• Determining the required performance
• Performance required depends on the particular terms of the contract
o Consider additional implied descriptions as well
o If all parties agree, then that is enough to satisfy the express terms of the
contract, unless there are additional or implied terms
• When interpreting contractual language, the starting point is that words should be
given their ordinary and natural meaning
• Role of the ourt is to deterie, o a ojetie asis, the eaig the parties
intended the words to have
o Where meaning of the words are ambiguous
▪ Extrinsic evidence can be led to aid interpretation
▪ courts will prefer an interpretation that is not commercially
inconvenient
▪ courts should not take account of post-formation conduct
• parties are acting in accordance with their subjective
understanding of the contract, not its objective interpretation
• The effect of performance
• Voluntary performance discharges the obligations
o When all the obligations are discharged, the contract is at an end
• Failure to perform voluntarily is a breach of contract
• breach of contract does not discharge the contract
o remedies include a payment of damages instead of performance
o right to terminate the contract
• any failure to perform a contract, no matter how significant or insignificant, allows
for a payment of damages for loss as a result of the breach
• Excusing performance
• Parties may be excused from performing their contract if
o The contract is set aside because of the presence of a vitiating factor
• Supervening impossibility/ frustration
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o When performance is initially possible but changed circumstances then make
it impossible (or fundamentally different from what was originally envisaged)
the situatio is desried as supereig ipossiilit
▪ Inferred from the circumstances that the contracting parties have
assumed the risk of changed conditions
• Remain bound by the contract and must pay damages for non-
performance even if circumstances change to make
performance impossible
o However:
▪ Changed circumstances render the situation radically different from
that at the time of formation
▪ It cannot be inferred from the circumstances that the parties have
assumed the risk of changed circumstances
▪ Party seeking relief is not responsible for the changed circumstances
▪ Would be unjust in the new circumstances to enforce the agreement
• Frustration
o The contract is disharged frustratio ad oth parties are eused fro
further performance
▪ Each must carry their own loss
• Case Studies
• Codella Construction v State Rail Authority
• Held
o Both parties believed that continuous, 24/7 work would be possible
o The injunction was unforeseen as the parties had received (bad) legal advice
that such an injunction could not be issued
o The circumstances were fundamentally different as a result of the granting of
the injunction – it would be much more expensive to complete the work
o Thus, the contract had been frustrated
• Maritime National Fish Ltd v Ocean Trawlers
• Facts
o MNF chartered a trawler from OT
o MNF was allocated three licences but it had hoped to operate five boats
o MNF argued that the lack of licence frustrated the contract
• Held
o MNF decided how to allocate the three licences it received. The situation it
found itself in was the result of its own decision
o MNF could not rely on a situation it had brought about to claim frustration
• Cotrat is disharged frustratio ad oth parties are excused from further
performance
o Each must carry their own loss, if any
• Different kinds of breach of contract
• If performance is not excused, a failure by a contracting party to do what was
promised constitutes a breach of contract
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• Depending on the importance of the term that is breached, a breach of contract can
be described as:
o A breach of condition
o A breach of warranty
o A breach of an innominate term
• Conditions v Warranties
• Conditions
o Are terms that are of fundamental importance in the agreement
• Warranties
o Terms that are of lesser importance than conditions
• Whether a term is a condition or a warranty
o The promise was so important that the person to whom it was made (the
promise) would not have entered the contract without it, and this was
apparent to the person making the promise (the promisor)
• Parties proale itetios aout the sigifiae of particular terms are
determined objectively having regard to the terms of the contract and surrounding
circumstances
o Factors relevant in assessing whether or not a term is a condition include
▪ Previous decisions
▪ Language in which the obligation is described
▪ Other terms of the contract
▪ Likely character of the breach
• Associated Newspaper v Bancks
• Held
o (applying the Tramways test), the promise was an essential term. Why?
o It was held that publicity associated with prominent placement is very
important for artists, such as B – thus, he would not have entered into this
otrat uless the frot page proise had ee ade
• Test of essentiality
o Whether or not it appears from the general nature of the contract considered
as a whole, or from particular term of terms
▪ Promise is of such importance to the promise that he would not have
entered into the contract unless he had been assured of a strict or
substantial performance of the promise
• Bettini v Gaye
• the fact that she was sick has no legal relevance
o only an explanation of the circumstances
• the ter of rehearsals as a arrat, ot a oditio
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