Example Contract Attack Plan

Discharge by Agreement

Express Powers

Parties to an original contract may include an express term for termination The parties may agree that one or both of them will have the right to terminate the contract: at will after specified period or after an event is triggered:

E.g. bank having right to terminate consequent to a number of loan defaults Pan Foods Company

Contingent Conditions

Parties may make the performance of some or all of obligations contingent or dependent upon the happening of some events which neither of them can promise will occur.

Conditions Precedent to formation and to performance.

Courts prefer construing these conditions as contingent to the contract performance and not existence. If there is no contract in existence then there are no existing obligations Perri v Coolangatta

Subsequent agreements

Parties may make a subsequent agreement expressly terminating their original contract is of itself contractual and must be embodied in a deed and supported by agreement Williams v Roffey Bros.

Bilateral Discharge Where both parties still have obligations under the contract to perform and they mutually agree to relinquish any demand for further performance agreement to terminate the contract will be enforceable by either part as both parties have given consideration by foregoing a chance to benefit under the contract.

Rescission: a complete discharge of the existing contract which terminates the relationship between the parties.

Rescission and Substitution: a complete discharge of the existing contract and replacement with a new contract.

Variation: Partial discharge of existing contract, varying/modifying existing contract without discharging completely

Unilateral Discharge - one party still has obligations under the contract to perform and the other party decides not to require further performance.

Waiver

A term may be waived: Both parties may reach an agreement to waive the term and no longer be bound by it. In this case the parties will be bound by that agreement and may not terminate the contract for non fulfilment of that condition. Alternatively, where the term is for the sole benefit of one party, that party may waive the term party indicates that, although they could still demand strict performance of the contract, they will not do so.

The party who waives strict performance is required to honour that agreement Levey Co v Goldberg (KB 1922).

Like a promissory estoppel, waiver may be withdrawn provided reasonable notice is given Charles Rickards Ltd v Oppenheim (KB 1950).

Non fulfilment of the contingent term

When time has elapsed for performance of contingent condition, either party may elect to terminate provided he or she is not in default, provided it has not been waived: Perri v Coolangatta

However each party may be under an obligation to do all that was reasonably necessary to fulfil the condition

In a subjective contract a party must act honestly (and perhaps reasonably) to satisfy the condition or they will be in breach of the contract Meehan v Jones (HCA 1982).

Where a contingent term does not set a date by which the event is to have occurred, the condition must be completed within a reasonable time Perri v Coolangatta

Perri the lapse of 3 months was held to be reasonable time in the circumstances

Once time has elapsed for the performance of a contingent condition then it is not necessary to first give notice calling on the party in default to complete the contract or fulfil the condition Perri

Consequences of the non fulfilment of a contingent term

Relates to a particular obligation: generally parties will be excused from performance of that obligation,.

Whole contract is not fulfilled, the contract will generally be voidable. If contract is terminated, neither party will be liable in damages for the fact the condition has not been fulfilled. Void: Means that upon non-fulfillment of the condition, the contract will come to an end without an election on the part of either party

Is fulfilment an objective or subjective test?

Fulfilment of a contingent condition is judged by an objective or subjective test depends on the language of the condition.

Whether a duty of reasonableness should apply to a condition of satisfaction has not been resolved in Australian contract law Meehan v Jones

Discharge by Performance

General Rule: If performance is not exact, that party is in breach and cannot demand performance by other: Cutter v Powell.

Order and time of performance

Older view: Contractual obligations are independent. Each party could call on each other to perform without actually performing themselves. E.g. Had a sale of goods contract, where the buyer is obligated to pay the price on a certain date. This obligation was independent of the seller delivering the goods. Buyer still had an obligation to pay even if the goods were not delivered on time.

Modern view: contractual obligations are dependant and in some cases, even concurrent - A s non performance excuses B from having to perform their obligations are tied together: Automatic Fire Sprinklers v Watson

If there is an intention, express or implied that performance will be subject to time pressure court will uphold that intention. Where no time for performance is fixed performance must occur within a reasonable time.

Watson wrongful dismissal, P continued to appear at work Not entitled to action in debt for wages as dependant.

Cutter v Powell the plaintiff s husband entered into a contract to act as second mate on the defendant s ship for its journey from Jamaica to Liverpool. Before the end of the journey, the husband died. Was the defendant liable to pay any part of the contract price? No. The fact that the contract provided that payment was due following the end of the journey and the fact that the payment was much larger than the value of the work suggested that the husband s completion of the journey was a condition precedent to payment and the contract was entire.

Discharge for Breach (1) Was the Termination Valid (2) Can Mitzy Terminate? WRONGFUL T IS REPUDIATION

State what terms have been breached and classify them

Implied as a matter of law that [insert] will render his services with reasonable care: Samuels v Davies.

Implied warranty that services rendered to a consumer would be rendered with due care and skill: TPA S. 74 (1)

Conditions/Essential Terms Any actual breach of a condition will allow termination.

Tramways Advertising v Luna Park: the promise is of such importance to the promisee that he would not have entered the contract unless he had been assured of its strict or substantial performance,

{the words we guarantee meant strong obligation- emphasised the importance of the term}

Bettini v Gye: Whether it goes to the root of the contract such that a failure to perform it would render performance of the rest of the contract a thing different in substance from what was contemplated.

{Opera singer contract for shows with rehearsals sick and didn t get to London darling- until day before first show - failure to attend would at most affect 2 weeks of a 15 week contract, not radically altered}

Wording is not conclusive Schuler v Wickman

{breach of condition requiring W to visit customers once a week for duration of contract- breach could be so trivial could never have intended to be condition}.

Termination clause: Parties may include in their contract a clause which confers a right to terminate in circumstances where such a right would usually not arise: Shevill v Builders Licensing Board

lessor entitled to terminate due to term of a contract of lease provided that the lessor could terminate the lease where the lessee failed to pay rent for 14 days. Such a breach would not usually give rise to a right to terminate. The failure to pay the rent did not go to the root of the contract as further commercial performance was still possible. However because the lessor could only rely on a contractual right to terminate and not a common law right, the lessor was only entitled to receive arrears in rent and not loss of bargain damages.

Intermediate terms A serious breach will allow termination.

A term that can be breached in a variety of degrees both serious and trivial: Hong Kong Fir Koompahtoo

For Termination: Breach must be serious enough to deprive of substantially the whole of the benefit which it was intended that they should obtain from the contract: Hong Kong Fir Koompahtoo

seaworthiness cl. referred to every part of the ship, could be breached in number of ways, trivial and serious.

Warranties A breach will give rise to damages but not right to termination. Bettini. Look to intention of parties.

Time stipulations Time is not presumed to be essential in a contract: Property Law Act 1969 (WA) s21.

Term time is of the essence expressly makes time condition. Citati

Commercial preferred to give certainty to the parties: Bunge Corp

{soya beans to be shipped term required P to nominate delivery date in June and 15 days notice. Notice on 17 June date would fall outside. condition since the contract arose in a commercial context and time was of the essence. Lord Wilberforce: problematic to construe time stipulation as intermediate as only one kind of breach possible, namely to be late . Hong Kong fir test would be undesirable as certainty was required here

Laurinda Notice not effective only 14 days for registration process that took longer and didn t expressly mention right to terminate.

Notice can be given by innocent after fixed time or unreasonable delay to make time of essence: Louinder v Leis

Sale of property. Clause requiring purchaser to do something in 28 days from delivery. No time fixed for delivery, time not of essence. Vendor served notice (after 28 days) requiring completion in 21 days. Held no unreasonable delay, termination not justified.

RT If not of essence will be implied must be completed in reasonable time Reid v Moreland Timber Co Pty Ltd

Determined by circumstances the case, including the contract and surrounding context Canning v Temby

Terminate: delay amounts to repudiation sufficient to frustrate the commercial purpose of the contract Citati

Ie. evidences an intention of the delaying party no longer to be bound by the contract Carr v J A Berriman

Termination for Repudiation

Where a party is not, or will not be ready willing and able to perform contractual obligations when they fall due.

Express refusal - Refused to perform all obligations: Frost v Knight {intention not to marry}

Election to terminate: innocent party can claim damages from the time of the repudiation: Hochster {eurocourier}

Implied Refusal may be implied from words or conduct (Laurinda) if a reasonable person

1. would clearly infer that the other party would not be bound by the contract

2. or would fulfill it only in a manner substantially inconsistent with their obligation

Clear intention to carry out obligations only if and when it suits them is sufficient. Laurinda

Where party intends to be bound, only when it suits them. Will depends on circumstances/intention. Laurinda

Nine months elapsed. The long delay was a relevant factor in decided the lessor had repudiated its obligation.

More than one: must be evidence breach would be followed by many more look at proportion in relation to whole contract. Maple Flock

Agreement to deliver 3 loads of flock per week. 16th load delivered was contaminated. Not a repudiation as. breach was a small proportion of the contract as a whole. Second, likelihood of a similar breach occurring was practically negligible on the evidence. D s business was carefully conducted. Breach isolated 1/20.

Wrong interpretation where intends not to perform except in accordance with the erroneous interpretation, may be repudiation if requirement of seriousness is satisfied: Tramways

Even for mistake rights or by accident: Lord Salmon dissenting in Woodar

Contract for sale. Before settlement D (purch) purported to terminate. However the term didn t actually give D the right. D had not repudiated the contract as had been acting in good faith

Except in DTR Nominees v Mona Homes where party honestly believed they were acting on an interpretation the purchaser shared, and the purchaser made not attempt to correct. The bona fides will be relevant.

Vendor agreed to sell the purchaser nine subdivisions which were set out on a plan annexed to the contract. In accordance with a term, a copy of the plan annexed was to be lodged with the council, however, a plan different to that annexed was lodged. Court held lodgment of a different plan did not repudiate. Purchaser had not advised the vendor of the error, nor given the vendor opportunity to rectify, there was no basis upon which the vendor was persisting with its interpretation in the face of enunciation to the contrary.

Wrongful termination of a contract constitutes repudiation of the contract: Braidotti

Consecutive Breaches While minor breaches viewed in isolation may not be considered to amount to repudiation of the contract, several consecutive minor breaches may amount to repudiation: Progressive Mailing House v Tabali.

refusing to pay rent for extended period of time and breaching covenants of repair, consent to sublet etcl

Repudiation based on inability to perform

Express declaration by words or acts

Will be repudiated if there is an express declaration by words or conduct of an inability to perform Foran v Wight

Vendor informed purchases he was unable to settle on the date for completion couldn t remove easement.

Implied inability

May be inferred by words or conduct must be wholly and financially disabled from performing: Citati.

Charterparty, charterers were obliged to load in specified time. Owner terminated before expiry as the charters could not have completed loading in the remaining time. Termination was valid. At the time of termination it was reasonable for them to infer the charterers would not have loaded within a reasonable time after the expiry of the specified time repudiation. Frustrated the commercial purpose of the contract.

Anticipatory Breach where party, prior to the time for performance evinces an intention to no longer be bound to the contract according to its terms.

Innocent party: may terminate for an anticipatory breach providing it is sufficiently serious.

Once the due date for performance has arrived, all rights for the anticipatory breach are lost and any termination must be based on the actual breach: Foran v Wight.

2 days before settlement vendor s solicitor told purchasers that they couldn t settle then. P had a right to terminate for anticipatory breach because the V indicated they could not comply with an essential term

Election and Affirmation and Consequences

Innocent party must elect whether to affirm or terminate the contract AFS v Watson

For actual breach: innocent party must be ready and willing to perform at the time of breach: Foran v Wight

For anticipatory breach: innocent party must be ready and willing to reform at time of receiving __ not substantially disabled from perform on date: Foran

Where a party intimates it will be useless for the other to perform on the stipulated date, and that party abstains from performing in reliance on the intimation, they are dispensed from an obligation to perform, provided they were ready and willing to perform at time of intimation. Foran v Wight

2 days before told vendor could not settle. Vendors argued purchaser could not terminate because they were not RWA to perform on date as no money. substantially disabled from acquiring funds

Election Generally has to be communicated, but can be manifested by clear conduct (Holland)

purchaser repudiated a contract for sale of land. Term in contract gave vendor option of terminating and selling. Vendor gave notice requiring payment. After this notice there was no further communication and the property was sold to a third party. Notice was not sufficiently equivocal to amount to affirmation it only said that the contract was alive on the conditional basis that payment was made. Subsequent repudiation allowed termination. Election to terminate manifest in advertising the property and selling it. Unequivocal

May be lost if P (with knowledge of breach) unequivocal act which confirms the existence of contract. Holland

May be found to have affirmed a contract where continues to perform obligations: Sergeant v ASL Developments

Delay: an aggrieved is not required to elect immediately. If a reasonable time elapses, then the aggrieved party may be taken to have affirmed the agreement: Champtaloup v Thomas.

Affirmation both parties continue to be subject to rights and obligations under the contract. (Bowes v Chaleyer)

Sale of goods buyer repudiates but seller affirms but goods in breach Because the had not accepted the buyers repudiation he remained liable to perform contract. The buyer was therefore entitled to take advantage of any subsequent default by the seller. Thus the breach gave the buyer a right to terminate.

Lose the right to terminate. Would need a new breach to terminate. (Ogle v Comboyuro Investments Pty Ltd)

Because the time had been of the essence, the defendant had breached a condition on 23 October. In light of this breach, the plaintiff affirmed the contract. The defendant s failure to respond to the second notice constituted a further repudiation for which the plaintiff was awarded a second right to terminate.

The contract can be frustrated (Avery v Bowden)

charterer of a vessel in Odessa informed the owner during the period allotted for loading that he did not have the goods for transport. Repudiation. Then Affirmation. Then Crimean War broke out. It thus became illegal to load goods for trading. Therefore frustration and without liability of either party. Owner got nothing.

Damages for anticipatory breach cannot be recovered if affirmed: Progressive Mailing House

May have affirmed a contract where, following the event giving rise to a right to terminate, the aggrieved party accepts or insists upon receiving performance from the other party to the contract: Berriman

If they purport to terminate on invalid ground may rely upon another even if not known Rawson v Hobbs

Termination discharges future rights and ogations but accrued rights/obligations remain (Dennys Lascelles)

WHAT CLAIMS ARE AVAILABLE TO THE INNOCENT PARTY?

Liquidated damages Easier, no principle of mitigation.

P may stipulate through a liquidated damages to be paid in the event of breach AMEV-UDC Finance Ltd v Austin

However it will be struck down if it is considered to be a penalty and not a genuine pre-estimate of the loss likely to be caused by the breach of contract Lord Dunedin in Dunlop Pneumatic Tyre affirmed by HCA in Ringrow

Question is whether the amount stipulated is extravagant or unconscionable in comparison with the greatest loss that could conceivably be proved to have followed from the breach: Lord Dunedin in Dunlop Pneumatic Tyre

Matter of construction judged at the time of entering the contract. Wording is not conclusive.

Difficulty in calculation is not a bar. Can still be a genuine pre-estimate even where precise estimate is impossible.

Dunlop: Factors to consider in determining whether a penalty:

1. Non payment of money: penalty if the sum specified is greater than the sum which should have been paid

2. Presumption: it will be a penalty if a single sum is payable a number of breaches, even trivial

3. Degree of disproportion between stipulated sum and the loss likely to be suffered AMEV-UDC

4. The term must be out of all proportion not merely lacking in proportion. Ringrow Pty Ltd v BP

5. Nature of the relationship between the contracting parties relevant to unconscionability AMEV-UDC

6. Where there is an acceleration clause which requires return of the item on default, a discount should be given otherwise a penalty because it overcompensates (O Dea v Allstates Leasing)

If it is a penalty or there is no liquidated damages clause Damages: [Damages]

Tie contract with resale price maintenance. Clause for 5 pounds for each tyre sold in breach. D sold for less. This was not a penalty clause. The damage from any one sale contrary to the agreement was impossible to forecast. Thus in this case it was reasonable for parties to the contract to estimate the damage at a certain figure. It was not considered extravagant and thus it could be seen as a true bargain to assess damages.

lease of equipment. Lessee defaulted - penalty because it required the lessee to pay the balance of the instalments without any rebate for the accelerated payment of future instalments and without the lessor having to account to the lessee for the proceeds form the sale of the equipment. The loss which can be recovered is limited to that flowing from the fundamental breach. It does not include loss which the lessor sustains as a result of his termination. This loss is attributable to his act and not the conduct of the lessee

Action in debt: no mitigation. Where entire contract performed (or substantial) = contract price recoverable

If it can be shown that a person has no legitimate interest financial or otherwise in performing the contract rather than claiming damages he ought not to be allowed to settle the other party with an additional burden with no benefit to himself: (White and Carter (Councils) Ltd v McGregor)

(nb no requirement of reasonableness, burden of proving no legitimate interest is on the defendant)

bins advertising plaintiff performed its obligations under the contract and sued for the full contract price. The court found in favour the plaintiffs.

Quantum Meruit: Innocent party can have a choice between QM and action in debt, possible QM greater. Renard

The work had to be completed by a certain date. Ultimately things went wrong and the minister terminated the contract. In the end there was no justification for the termination, it was repudiation. R then terminated the contract in response to the repudiation. R could choose to sue for damages or under QM. It is possible that the QM claim could give a greater amount of money than the contract price (eg if sold themselves short). Controversial but has been affirmed.

Recovery of money paid: [TFC and deposits]

WHAT CLAIMS ARE AVAILABLE TO THE PARTY IN BREACH?

No damages

Sums fixed by the contract? can bring an action in debt to recover payments that have been unconditionally accrued: Dennys Lascelles

Recovery of Money Paid: available where there is a TFC: Shaw v Ball [see deposits and TFC]

Quantum Meruit [see QM] Part in breach can recover: Sumpter Steele

Action in debt

Generally contract must be exactly performed: Cutter v Powell

A party can bring an action in debt to recover payments that have unconditionally accrued: Dennys Lascelles

If prevented from performing not sufficient party RWA to if dependent obligations: Watson. action for damages.

De Minimus May disregard trifling departures from contractual obligation (Shipton: 99 not 100k of bananas delived)

Can the party recover a severable portion?

On each instalment party is able to recover fixed sum provided it has bee n unconditionally accrued (MacDonald)

Matter of construction: Cutter v Powell Newfoundland

railway construction over 5ys. Paid twice per year when certain parts completed. Also granted 5000 acres of land per mile. D didn t complete Entitled to payment The terms of the contract suggested that the defendant was to be paid and granted segments of land for every section of the railway completed. The payment was also severable thus the completion of the railway was not a condition precedent to the receipt of the subsidy.

If a contract provides for progress payments does not necessarily make it severable: Gilbert-Ash

Steele v Tardiani is cited as authority for the position that SP applies to severable components of divisible contract. While the law is unclear there is no reason in principle to deny such relief unless such strong intention that complete performance of each severable component is condition precedent to recovery.

D contracted Ps to cut firewood according to certain dimensions (severable contract infinitely divisible). The ptf cut 1500 tonnes of varying diameters. Contract was infinitely divisible. Could recover for portions SP

Lump sum cannot recover severable portion however doctrine of substantial performance applies: Hoenig v Isaacs

Entire contracts - Where a contract is entire and has not been entirely performed no recovery. Hoenig

For a contract to be entire there must be a very clear intention. In construing the contract the intention must be manifested in and from the contract Hoenig v Isaacs per Lord Denning

Payment of a lump sum is evidence that the contract is entire but is not conclusive Hoenig v Isaacs

Courts are reluctant to construe contracts as entire due to the harsh effects: Hoenig v Isaacs per Lord Denning

Substantial performance appears to apply to entire contracts after the judgment of Lord Cairns in Bolton: the rule in Cutter v Powell must be read in light of Hoenig

Can the party claim substantial performance deduction for costs of rectification Hoenig v Isaacs

Hoenig v Isaacs: Contract substantially performed unless the defects go to the root of the contract. There will not be substantial performance if the failure by the defendant to perform was so serious that it actually amounted to a breach of a condition.

P engaged to decorate and provide furniture for a flat for 750 pounds. Paid instalments as the work progressed, and was to be paid a balance of 350 pounds on completion. The plaintiff completed the work but with minor defects. 55 pounds was needed to rectify these errors. The plaintiff sued to recover the balance.

P had substantially performed the defects did not go to the root of the matter. It was simply a term of the contract that the work be completed and thus the breaches of the contract were not serious enough to deny the contract price. Therefore, the plaintiff was entitled to the balance minus the cost of fixing the defects.

Bolton v Mahadeva look to (1) nature of the defects and (2) proportion of costs spent fixing the defects relative to the overall contract price. (this has to be slight a quarter of the contract price is not slight)

the plaintiff was contracted by the defendant to install a heating system for an apartment complex for a lump sum of 560 pounds. The plaintiff did a poor job. The system released undesired fumes and did not provide adequate heating. The cost of repairing the defects amounted to 174 pounds. No substantial performance

First, the nature of the defect was serious: the purpose of the contract was to install a working heating system, and this had not occurred.

Second, the cost of remedying the defect (£174) was significant in relation to contract price (£560).

Quantum Meruit Reasonable Remuneration for Non Monetary Services

Restitutionary remedy to recover a reasonable sum for (non monetary) work done at the request of the other party

Contract ineffective not available where a contract governs the rights of the parties: Pavey v Matthews

Work freely accepted there must be a choice for the innocent party to accept the benefit: Sumpter v Hedges

P contracted to construct some buildings on the D s land. Did some of the work before abandoning the contract. D completed the work and for this purpose, used the materials which had been left behind by P. Was the plaintiff owed reasonable remuneration? P was owed reasonable remuneration for the materials used by the defendant but not for the work done.

There must be free acceptance and implicitly, therefore, the defendant must have a choice to reject or accept the benefit of the plaintiff s work no such choice existed in relation to the work done he couldn t leave them incomplete. By contrast, there was such a choice in respect of the materials, and D freely accepted.

Can be done by allowing them to leave without correcting. Steele v Tardiani

D contracted Ps to cut firewood according to certain dimensions (severable contract infinitely divisible). The ptf cut 1500 tonnes of varying diameters. Plaintiffs could recover reasonable remuneration because the defendant had freely accepted the benefit of the miscut firewood. He told them that he would be selling the wood before letting them off from his employ and acquiesced in their failure of complete performance. D supervised and observed the incorrect wood cutting but had made no objection and he allowed them to depart his property without requiring that they attempt to meet the specifications.

Difficult with fixtures. Sumpter

However Gummow, Hayne, Crennan and Kiefel in Lumber suggest where the services have been requested by the other party this will be sufficient.

W Cook and Sons (sons) agreed to build a house for Lumber and contracted the project out to W Cook builders. From then on, work was undertaken and paid for by builders. Lumber paid sons, who passed it on to builders. When builders went bankrupt they claimed that they had been underpaid and the liquidators sued to recover the difference from lumber.

Majority: builders had no rights against Lumber because Lumbers did not request (expressly or impliedly by conduct) that builders complete the work, and in fact was not aware that builders were completing the work and were being underpaid.

BUT the builders would have an action for work and labour done or money paid for and at the request of Lumber.

Amount recoverable

The contract is a guide to what is a reasonable sum but if it exceeds what is fair it is not a relevant measure: Pavey

The owners of the house refused to pay builders could not sue on the contract because it was unenforceable (not complied with form). They claimed a reasonable value for the work done (Quantum Meruit). The court found that the price that was provided for in the contract was a guide as to what was a reasonable sum, however, that sum would not be the measure of a QM if it exceeded what would be fair in the circumstances.

If what is fair is greater than the contract price, then the fair (greater) price may be awarded under QM: Renard

The work had to be completed by a certain date. Ultimately things went wrong and the minister terminated the contract. In the end there was no justification for the termination, it was repudiation. R then terminated the contract in response to the repudiation. R could choose to sue for damages or under QM. It is possible that the QM claim could give a greater amount of money than the contract price (eg if sold themselves short). Controversial but has been affirmed.

Recovery of Money Paid

Deposits

Deposit: part of the overall purchase price paid in as earnest payment for vendors performance

Where the vendor is in default, the purchaser is entitled to the return of the deposit. McDonalds

The vendor will be entitled to keep the deposit. McDonalds

P sued D as guarantor of the performance of Ryde Ltd under a contract for the sale of land. R had contracted to buy land from another party by way of a deposit, installments, and the balance. They failed to pay the 2nd installment and balance. where a contract for the sale of land is terminated prior to complete performance, the money which has been paid is to be returned to the purchaser, regardless of which party is in default. The exception to this is in relation to deposits. Where the vendor is in default, the purchaser is entitled to the return of the deposit. Where the purchaser is in default, the vendor will be entitled to keep the deposit.

Any instalments paid can be recovered on the basis that consideration for the conveyance has failed: McDonald

A deposit of more than 10% of the contract price will generally be a installement unless it is justified by the circumstances of the case Yardley v Saunders.

Not a universal rule: Coates v Serich

25% of price was deposit to buy a farm. Rst of the money was to be paid by installments over 16 years. Vendor terminated the contract. Could the vendor claim the deposit? Given the circumstances here it was considered a deposit. Because the contract was going to be performed over so many years and so many things could happen over that time, the initial payment was almost like insurance for the vendor that if something went wrong they would be able to claim it. Purchaser had neglected the farm.

Total Failure of Consideration restitutionary remedy to recover money paid

Total failure of the bargained for performance.

What has the party actually bargained for? (Rowland v Divall)

P purchased a car from the defendant, the car was bought and the plaintiff drove around in it for a couple of months. Discovered that the seller had no title to the car, and could not therefore pass title to the buyer. The buyer had bargained for title to the car, not use, therefore considered a TFC, and got his money back.

If part of the benefit of a contact is enjoyed, this is not total failure of consideration (Baltic Shipping Co)

Bargained for the enjoyment of being on a cruise, she had enjoyed part it no total failure of C

Shaw v Ball Sale of business paid in installments. Ultimately the contract was terminated no TFC-even though he had to leave the business, received good will, lease, stock etc part of which the consideration had been paid for.

Contract must be effective. Compare Roxborough and Kirby Dissent

If there is a discrete part of the contract that totally fails, recovery is allowed (Roxborough)

Rothmans supplied cigarettes to Roxborough. Price included component for excise tax. Tax was declared unconstitutional and Rox wanted to recover excise it had paid. if amount being claimed was attributable to a distinct and severable part of the consideration then that part failed. Clear from the invoices, there was a part that related to the excise. Even though in relation to the whole contract there had been no TFC, in relation to that distinct part there had been. (This is quite a radical decision)

Unliquidated DAMAGES

Where there is a breach of contract, the innocent party will automatically be entitled to damages: Tramways

General principle

To put Plaintiff in the position he or she would have been in had the contract been performed: Robinson v Harman approved by the HCA Amman Aviation

Damages are compensatory and not punitive: Addis v Gramophone Co Ltd

wrongful dismissal amount awarded by jury was punitive as he couldn t have earned it.

Onus on P to prove on BoP they have suffered loss as a result of the breach of contract: Amman

If the innocent party can prove breach but not loss then nominal damages are awarded: Tramways

appellant could not establish causation only entitled to nominal damages.

Expectation Losses compensate the plaintiff for the value of the benefit innocent party hoped to gain from contract

Where a contract is not terminated, expectation damages will commonly represent the

difference in value between what D has done and should have done under the contract. fixing repairing

Where the contract is terminated, expectation damages will commonly represent either

the price promised under the contract (sometimes termed loss of bargain damages) or

the cost of obtaining performance to replace that promised under the contract. Difference between price agreed and payable in market

Costs in reliance may have to be deducted from an award of expectation damages based on contract price where contract was terminated before performance and party saved from those costs Amman

In cases where a defendant has breached an obligation to build or repair property one simple measure of damages would be the difference between the market value of the property without the building or repairs as per the contract and the value of the property had the building or repairs been carried out under the contract, BUT Bellgrove v Eldridge (HCA 1954).

House was built substantially different to the contractual specifications. HCA Rejected the builder s argument that plaintiff s damages should be measured by the difference between the value of the house built and the value which it would have been had it met contractual requirements. An award of damages for the cost of demolishing the house and erecting one which did comply with the contract was the only measure of damages which would genuinely compensate the owner. This was reasonable because due to the breach of contract the foundations of the house were defective and the building was unstable.

Damages for the cost of rectification will NOT however be awarded when rectification would be unreasonable where the cost of rectification would be wholly disproportionate to the benefit obtained.

RELIANCE LOSS

Compensate the plaintiff for expenditure incurred in reasonable reliance on the contract being performed: McRae

Appropriate when there is serious uncertainty of making a profit (Amman)

It is the court not the plaintiff that chooses when should be awarded (Amman)

Burden on the defendant to prove even if the contract had been performed, the plaintiff would not have been able to recover/recoup his or her expenditure in reliance of the contract being performed: McRae Amman.

McRae Plaintiff was entitled to recover damages for a breach which promised that there was a oil tanker at the locality given. Included agreed purchase price (expectation losses) together with the expenditure wasted in reliance on the promise that there was an oil tanker at the locality given (reliance losses).

The court in McRae also established another principle that expenses incurred must be reasonable.

In McRae the plaintiffs had grossly exaggerated their claim. However, the court was able to arrive at a reasonable figure on the basis of the evidence provided by the plaintiffs

In this case the ptf will be entitled to damages only to the extent of the expected benefit under the contract

For example in McRae: it was impossible to calculate the loss however in Amann it was only very difficult

Cannot recover both expectation and reliance damages over-compensate the plaintiff. (see section on rule against double recovery

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 (CB1)

Facts: The plaintiffs (McRae) were employed by the defendants to search for an oil barge wrecked on a reef surrounding the Jorrnard Islands. The plaintiffs spent a substantial amount of money and equipment attempting to search for the tanker. However, it could not be found and it transpired that no tanker ever existed at the location advertised by the defendants. The plaintiffs sued in the original jurisdiction of the High Court for damages for breach of contract and misrepresentation. No damages were awarded because there had been no contract as the tanker never existed. The plaintiff appealed.

Held: The plaintiff was entitled to recover from the Commonwealth, damages for a breach of contract which promised that there was a oil tanker at the locality given. The contract was not nullified by mistake.

The plaintiff was entitled to recover damages for the agreed purchase price (expectation losses) together with the expenditure wasted in reliance on the promise that there was an oil tanker at the locality given (reliance losses).

The court in McRae also established another principle that expenses incurred must be reasonable. In McRae the plaintiffs had grossly exaggerated their claim. However, the court was able to arrive at a reasonable figure on the basis of the evidence provided by the plaintiffs

Australia v Amman Aviation Pty Ltd (1991) 174 CLR 164

Facts: Contract between Amman and the Cth for A to provide aerial surveillance of Australia s northern coastline for 3 years, with prospect for renewal. The Cth purported to terminate the contract, but were not entitled to terminate in the way they did did not follow the procedures that the contract set out, thus they were in breach. Amman s response to the breach was to terminate and sue for damages.

Prior to this Amman had spent a lot of money modifying and equipping the planes to fulfill the contract, and their ability to perform was looking shakey.

Amman wanted reliance losses for the sum of money they had spent. (They did not sue for expectation losses because they couldn t prove they would profit from the three year contract, only if it was renewed which was not certain, thus definite reliance losses was more certain).

Held: Clth was unable to discharge their onus of showing that the money A had spent would have been wasted.

It is for the court to choose whether reliance or expectation is more appropriate.

Mason, Dawson, Deane, Toohey Gaudron: award of reliance damages is appropriate where no profit or an uncertain amount of profit would have been made from performance

Mason, Dawson Brennan, Toohey Gaudron McHugh: P cannot expect to claim reliance damages, they are awarded when the court determines that the expectation measure is not appropriate

Mason, Dawson, Brennan and Deane: D bore the onus of establishing that the plaintiff s expenditure would not have been recouped (ie that the contract was not profitable)

Damages for Consequential Loss and Loss of a Chance

Consequential loss might include the loss of profit on a subsequent transaction or loss of chance to obtain something of value

Loss of Chance plaintiff may be able to recover damages for a loss of a chance to obtain something of value.

Where the breach deprived the P of a chance to:

Succeed in a contest or game: Howe v Teefy, Chaplin v Hicks

Chaplin v Hicks the defendant placed an advertisement in a newspaper for prospective actors. The advertisement detailed the complex procedure by which applicants were selected. The plaintiff applied and was selected for the final 50. However, because of the defendants breach this information failed to be passed on to the plaintiff. The plaintiff sued to recover damages for loss of a chance of being engaged as an actress. Although the assessment was difficult , the court nonetheless awarded the plaintiff damages even though she paid nothing to be part of the acting competition.

Howe v Teefy Here a breach of contract deprived the ptf of the use of a racehorse. Thus he lost the chance of winning prize money. In this case the ptf was entitled to damages.

Pursue a potentially successful commercial opportunity: Amann {potential to renew contract}

Engage in an alternative opportunity in place of entering into the contract that was breached: Sellars v AP

the directors of Adelaide Petroleum enter into two parallel negotiations with two companies, Pegini and Poseidon, in order to convince them to acquire shareholdings in the company, which was struggling financially. Adelaide Petroleum entered an agreement with Poseidon. Poseidon then repudiated the contract and Adelaide Petroleum accepted the repudiation. Adelaide Petroleum then entered an agreement with Pegini on terms less favourable than those originally negotiated. Adelaide Petroleum sued Sellars, Poseidon s agent. They alleged that the new contract did not come to the same conclusion as was in the original draft between AP and Pagini as a result of their misleading or deceptive conduct. However there was only a chance that this second agreement with Pagini would have proceeded to completion. It was held that Adelaide Petroleum could recover damages for loss of opportunity to enter a more profitable bargain

Uncertainty or mere difficulty in calculating damages is not a barrier: Howe v Teefy

However if simply too difficult to calculate, may be more efficient to award reliance losses: Amann

Majority of the court took into account the prospect of renewal of the aircraft surveillance contract in calculating the damages available to the plaintiff as this prospect had real commercial value.

The prospect of renewal was contemplated by both parties. It was offered as an incentive and therefore should be taken into account in the damages calculation (Mason and Dawson JJ)

Applying the test from Sellars v AP: P must show on the balance of probabilities that the wrongful act has caused the loss of a chance of some value.

Must be more likely than not that a chance has been lost not whether it would have been fulfilled.

Adelaide Petroleum was able to show on the balance of probabilities that it would have entered into a more profitable bargain but for Sellars misleading or deceptive conduct.

The lost opportunity is valued/quantified according to the probability of its fulfilment (i.e. value x % chance of occurrence)

In Adelaide Petroleum the court gave a 40% deduction to allow for the probability that the original agreement would not have gone through less other discounts for particular items plus interest.

Discounting D may show that had there been no breach the benefit was likely to have been reduced anyway by other events:

See Minority of Deane, Toohey, McHugh JJ in Amann found should be reduced by 20% to account for the chance that the Cth would have validly terminated the contract before renewal. (cf. the Majority: no discount should be made)

LIMITATIONS ON RECOVERY

The losses must be caused by the breach and not too remote.

Causation

Courts generally apply the torts test set out in March v Stramare.

Applying the but for test and whether D s breach was so connected with the plaintiffs loss or damage that as a matter of ordinary common sense and experience it should have been regarded as the cause of it.

It need not be the dominant cause of the loss and is generally satisfied if no evidence to the contrary. Ref Glass

More direct cause/Supervening event

The but for test is unsatisfactory. Lexmead Alexander

Courts will favour more direct cause: Alexander

Reg Glass v River Locking System

Facts: Defendants agreed to install burglar proof door, burglars broke through the door and stole stock from the premises. The plaintiff sought to recover for losses suffered as a result of burglary on the basis that those loses were caused by the defendant breach of contract in failing to install a reasonably fit door for protection purposes. Was the loss caused by the breach? Maybe they would have got in anyway. Maybe they would have but there was no evidence supplied to this effect this may have put a question on the causation question.

HC Held: beach of contract, as door (when locked) was not reasonably fit to keep burglars out. But for test satisfied. Therefore the loss was caused by the breach. P entitled to recover damages through the application of the but for test .

Alexander v Cambridge Credit Corp (1987) 9 NSWLR 516 (CB1)

Facts: CC engaged A to audit its business for a year ending June 1971, it was found that the audit had been performed negligently. This is a breach of contract (implied term that services by supplied with care and skill). There was a breach because the court found the auditors had failed to require that the valuations of certain assets should be reduced (some of its assets were given an overinflated value). If this had occurred then the capacity of Cambridge credit to borrow money would have been substantially reduced and may have gone into receivership. They kept going with business, and collapsed three years later. It was argued that the collapse was caused by the auditor s breach of contract. In the three years following, there was an economic downturn and property prices fell (adverse economic conditions)

Held: Although in the broadest sense (but for) the result was a result of the defendant s breach, however legal causation doesn t accept everything that is a cause in the broadest sense eg what if the company s buildings had been destroyed by an earthquake would the auditor be responsible for that? Allowing the company to continue did not cause the loss, look at the most proximate cause

Minority: Said that the fact the company continued in business caused it to run down its assets like an unseaworthy vessel which puts to sea after being negligently certified.

The court selected an event other than the defendant s breach as a cause of the loss can t be any more precise than to say it will not always be the defendant s breach that is regarded as the cause when there is other possible causes.

Lexmead (Basingstoke) Ltd v Lewis [1982] AC 225

Facts: Lewis purchased a tow bar for his landrover for his farming, in the course of use of the tow bar a spindle and handle became detached from it when he was driving his car with the trailer attached the tow bar failed, the trailer veered across the road and a horrific accident occurred. Lewis was sued in negligence, he cross claimed against the retailer who sold the tow bar to him argued breach of contract with faulty tow bar (goods have to be fit for their purpose).

Held: by the court that Lewis s loss was caused by Lewis s own negligence: he knew or ought to have known that a spindle and handle were missing for some time prior to the accident, and failed to do anything about it.

But for test unsatisfactory where supervening event

Lewis s negligence amounted to a intervening even between breach and the loss.

Remoteness

Onus on plaintiff to prove loss is not too remote: Contract test is different to the torts test for remoteness.

Unlike Torts this is not a test of reasonable foreseeability. Koufus

Because the two parties have sat down and are assumed to have reasonably had each-other s contemplations in mind:

First and second limbs of Hadley remoteness rule (Hadley v Baxendale)

Where a contract has been breached the injured party may only recover

i. Losses which can be fairly and reasonably considered to have arisen in the usual course of events following the breach.

Deals with presumed knowledge of the defendant as a reasonable person.

First limb concerns general damages which are presumed to flow from a breach. It has been the subject of a variety of interpretations.

not unlikely to result or sufficiently likely to result : Burns v MAN Automotive (Aust) Pty Ltd

ii. Losses reasonably supposed to be in contemplation of parties at the time of entering the contract as a probable result of the breach

Whether the losses were or ought to have been in the contemplation of the parties at time of making the contract. (Koufos v C Czarnikow Ltd)

Concerns special damages only recoverable where there the parties are assumed to have had specific knowledge of a particular risk when the contract was entered into: Victoria Laundries

Can you can party has assumed the risk? Transfield Hoffman in Minority

Communication

Where special losses are foreseeable by the injured party communication to the guilty party is necessary in order to claim special damages: Victoria Laundry

Not foreseeable by the injured party communication not necessary, rather must prove that the special losses are a continuation of reasonable losses that were in the contemplation of the parties. Parsons

Hadley v Baxendale Lost profits due to shut down of a mill after D failed to deliver crank shaft were too remote as

1st: they were not a usual happening (usual course of events) from the breach.

2nd: D didn t know mill was inoperative, Not in contemplation when formed, for all D knew, P could have had a spare.

Koufos v Czarnikow Ltd Lost profits due to delay in delivery of sugar and thefore lower market prices were recoverable under 1st as the loss occurred in the usual course of things. D knew that the P were sugar merchants in a market. D should have contemplated that a delay could result in a decrease in value of the goods, and lost profit.

Victoria Laundry Lost normal profits due to installation of faulty boiler were recoverable as D could be presumed to know the boiler would be used for profit making purposes.

However it could not be presumed, that in ordinary events, D would know that loss of profits would flow from special Govt. contracts. D had no knowledge of this, they were not liable for the loss of special profits.

Must be communicated prior to entering the contract.

H Parsons (Livestock) Ltd v Uttley Ingham Co Ltd PBig farmer purchased silo to hold feed. D failed to open ventilator. Feed became moldy and bigs died. P sued for breach and claimed damages for dead pigs, expenses and costs in dealing with infection, loss of sale and turnover.

Held: In ordinary course of things it was likely that if there was a breach of this nature, the pigs would have become ill, but not dead. As long a type of damage is likely the extent of it is irrelevant. It was likely that some physical damage to pigs would have occurred, the D should therefore be liable for all physical injury including death.

Where special losses are not foreseeable by the injured party, communication to the guilty party is not needed to give the injured party the right to claim special damages (provided that they are a continuation of reasonable losses that were in contemplation of the parties.)

Transfield Shipping v Mercator Shipping Lost profits due to a late returning charter ship were not recoverable as the other contract was a Much higher rate and not known to other party or in ordinary course of things.

Hoffman: can you say the guilty party has assumed the risk?

Mitigation

A court will assume that a plaintiff has taken reasonable steps to mitigate their loss.

The plaintiff cannot recover for avoided or avoidable loss: Lavarack v Woods of Colchester British Westinghouse

Plaintiff need only act reasonably, onus on D to prove otherwise: Schindler v Northern Raincoat

Wrongful dismissal of plaintiff, plaintiff refused a job offer from a company closely related to the defendant. that in these circumstances it was unreasonable to expect the plaintiff to mitigate their loss by accepting a job at a closely related company. Therefore damages were awarded without the deduction of the assumption that the plaintiff could have earned wages in another job after the breach.

Further losses If P has taken all reasonable steps in mitigation can recover for further losses except where a reasonable person would close down a loss making business. Burns v MAN

Lease arrangement for truck, defendant promised truck had a reconditioned motor, after acquisition plaintiff found out that motor wasn t reconditioned and therefore the truck could not be used for interstate carriage of goods (profitable) and could only be used for unprofitable journeys in Queensland. Claim was damages for loss of profits Held: damages could be recovered up to a certain point in time, the point where the plaintiff should have acted to terminate the contract and stop accumulation of losses. The courts assume that a reasonable person would at some point in time have closed down a loss making business/endeavor (therefore they cannot continue to rack up losses and expect to be reimbursed,)

Further benefit If mitigation leads to more benefit, D only liable for remaining loss. Westinghouse

Plaintiff purchased turbine machines from the defendant which didn t comply with the contractual standard (breach) plaintiff lost profits from under-performing turbines. Plaintiff purchased and installed new turbine machines with a greater capacity than those purchased from the defendant. Held: benefits/profits of new machines had to be deducted from the award for damages.

Except where the benefits are collateral. Lavarack

Plaintiffs employment contract wrongfully terminated by defendant, plaintiff obtained job with new employer including benefits which flowed from her investing in it. Claim was for damages for breach of contract. Plaintiff was required to account for wages and benefits obtained in new job after the breach of contract. Damages for expectation loss and loss of chance to earn wages were awarded minus the wages she earned in the new job. However the investment in the other company was collateral to the breach of the contract and therefore did not need to be accounted for in the award of damages (collateral benefit doctrine.)

Contributory Negligence In Craig v Troy the court held that the Law Reform Act provisions regarding contributory negligence apply to breach of contract. overturned Austley

Non Pecuniary Loss Not generally recoverable as damages in contract. Baltic Shipping Three exceptions: (Mason in Baltic)

1. pain and suffering arising from physical injury caused by breach. where disappointment and distress flows from physical inconvenience caused by breach.

2. Third, where the object of the contract was to provide enjoyment, relaxation or freedom from distress Baltic Shipping Jarvis v Swan Tours

P was a passenger on a cruise which sank halfway through the cruise. The ptf successfully obtained damages for personal injuries suffered and loss of property. P could recover damages for emotional distress and disappointment caused by sinking as D had impliedly promised to provide a pleasurable holiday.

3.

P booked a holiday to Switzerland. promised house parties, afternoon tea, good skiing facilities and other English speakers. In fact, there were no other guests at the lodge. Further, the skiing facilities were below par. Could claim damages for disappointment because the purpose of contract was to provide enjoyment.

Double Recovery damages cannot be inconsistent thereby double compensating the P: Robinson v Harman.

Cullinane: ptf could not claim for expenditure and loss of gross profits

clay-processing machine which was faulty. Sued for cost of machine and profits he would have gained if it had worked. (Capital expended in installing plant + interest) minus ( unpaid balance of price + residual value of plant and ancillary equipment) Loss of profits for 3yrs = estimated gross profits at warranted output minus (running costs + interest + depreciation + maintenance) He could not recover under both heads.

TC industrial: ptf could claim for expenditure and net profits

faulty stone crushing machine and had intended to let it to a third party. It allowed the plaintiff to recover lost profits without having incurred any expenditure in the process. Not purchase price of the machine (expenditures and liabilities in course of and for purpose of carrying out the contract)

Discharge by Frustration

Where obligations are incapable of being performed as performance would render it something radically different to what was agreed to by the parties: Codelfa approving Davis Contractors

Mere hardship, or a contract being more expensive to perform or more onerous is not enough: Davis Contractors

Nor will a bad bargain or results that one party hoped for or had expected didn t eventuate: Scanlan s

1. Subject matter been destroyed Taylor v Caldwell

a. Sale of Goods where the goods are destroyed before risk passes to the buyer, the agreement is avoided.

2. Has performance become illegal?

a. Where performance has become illegal subsequent to formation Avery Fibrosa

b. Where law changes to prohibit performance: Metropolitan Water Board v Dick Kerr

3. Future event which is the basis of the contract does not occur

a. Where its entire purpose/basis (regarded by both) is destroyed: Krell v Henry

b. Where one party s purpose in performing as been destroyed Brisbane CC v Group

4. Death or incapacity of a party who is essential to the contract may constitute a frustrating event Simmons v Hay

a. Sickness: depends on nature/probable duration and the nature/terms of the contract: Carmichael

b. Frustration can also occur where one party is called up for military service Morgan v Manswer

5. Alteration of a state of affairs

a. Alteration of a state of affairs necessary to perform contt in the way contemplated by the parties: Codelfa

6. Has performance been delayed?

a. Such a nature as to radically affect the performance of the contract: Jackson v un ion Marine Insurance Co

b. Long term contracts are less easily frustrated than short term contracts National Carriers v Panalpina

c. A contract may be frustrated by prospective delay: Embiricos v Sydney Reid Co

d. Parties should not have to wait and see how long the delay proves to be Bank Line v Arthur Capel and

e. In relation to strikes a wait and see attitude is normally taken as they are often over quickly Embiricos

Taylor v Caldwell burning down of Surrey Gardens/Music Hall frustrated a contract to hire for 4 concerts as existence of the Hall was essential to the performance as envisioned by the parties at the time of entering into the contt.

Avery v Bowden Charterparty was frustrated when the Crimean War broke out and it became illegal to load cargo

Fibrosa a contract for the sale of goods to Poland was held to be frustrated after the Germans invaded.

Krell v Henry P hired rooms to watch coronation of King Edward VII along Pall Mall. It was postponed. the rooms had been let out for the lone purpose of viewing the coronation procession. What had been regarded by both parties as the foundation of the contract was destroyed and the contract was frustrated.

Brisbane CC v Group Projects Deal that is Group Projects carried out works on land, future urban would be rezoned. However land was resumed by the crown for the development of a school. Frustrated: basis of the contract did not occur. Acquisition had destroyed GPs purpose in undertaking any obligations under the contract

Simmons v Hay H employed for 3 years an engineer. He became permanently incapacitated by illness and was therefore unable to discharge his duties under a contract of employment. Contract provided workers would be paid if prevented from working due to illness. permanent incapacitation had frustrated contract and was outside clause

Codelfa injunction had frustrated the contract. The common understanding was that, in order to complete the work in time A would undertake construction work 24 hours per day. Parties had specifically addressed this issue and had directed their minds towards it. Injunction made performance fundamentally different from what was contemplated

Davis Contractors A agreed to build 78 houses in 8 months. Took 22 months due to lack of skilled labour. A sought payment for their increased costs on the basis that the contract had been frustrated. No frustration. As disappointed expectations or increase burdens not sufficient and increased costs could were RF.

Tsakiroglou Contract to ship goods via Suez not frustrated as the alternate route around Cape Horn could be taken. Greater cost was not grounds for frustration. merely make performance more onerous not radically different

National Carriers v Panalpina Not sufficient that lessee was denied access for 20 months of 10year term.

Bank Line charterparty for 12m frustrated as ship requisitioned by Govt for War for 8months. At the time the ship was requisitioned the parties could not have known when, if ever the ship would have been returned.

Embiricos Chaterparty frustrated as D learnt Greek vessels were being seized at the Dardanelles by Turks and would be ship would be loaded on time. The fact that the period was extended was irrelevant: prospective delays can frustrate.

Limits on Frustration

Contracts for Sale of Land- Doctrine of frustration applies to contracts for the sale of land, but difficult due to value.

Common law rule is that risk of loss passes to the purchaser at the moment of formation Fletcher v Manton.

Generally, requires a very serious event such as landslip or the resumption of the land by the govt Austin v Sheldon

Contracts for lease could be frustrated by very serious events. National Carriers (cf. Firth v Halloran)

Austin v Sheldon resumption of land that was subject of contract was sufficient to frustrate.

National Carriers v Panalpina HOL: no reason why frustration could not apply where events affect the land itself. However difficulties arise because leases are long term. Needs to be extreme. Lord Simon: ie: where erosion of the land results in complete inability to use building or if demolished.

Foresight

If the event claimed to have caused frustration was foreseen, (expressly or otherwise) it will not frustrate the contract.

An event subjectively foreseen by the parties then no frustration Metropolitan Water Board v Dick Kerr

An event the parties could reasonably be thought to have foreseen will not frustrate: Davis Contractors Ltd

If RF then the presumption is that the parties allocated the risk of the event occurring to the party affected

May still be frustrated where the parties foresaw the cause of the frustrating event but not the event itself.

Will frustrate if actual extent of interference was much greater than contemplated Simmons v Hay

Did the contract exclude frustration? (Express provision)

Where the parties expressly allocate the risk of the event in their contract: Claude Neon Ltd v Hardie

D hired neon sign from P. Term provided that the hirer was deemed to have defaulted if interest in premises as extinguished or transferred . Premises were resumed by the State Government. The clause included involuntary acts. Therefore it was within the scope of the clause and therefore, the contract had not been frustrated.

Clause covering a broad class of disruptive events

A clause covering a broad class of events does not necessarily prevent the contract from being frustrated by an event which apparently falls into that class: Metropolitan Water Board v Dick Kerr

a clause giving an engineer (working on construction of a reservoir in WWI) the power to extend the time of completion whenever any difficulties or impediments whatsoever and howsoever occasioned delayed the work was not enough to prevent frustration (when Minister ordered stoppage) as the cessation of the work extended beyond anything contemplated by the term. In all likelihood the interruption to the work would render the contractual obligations of the parties radically different from those originally contemplated. Cl for mundane things.

Self Induced Frustration - frustration Must arise without blame or fault by party seeking to rely Bank Line v Capel

Frustrating event cannot have arisen from fault of one or both parties: Maritime National Super Servant Two

It is enough that the party in fault was negligent: Super Servant Two

Maritime National Fish Charterparty had not been frustrated by a decision of D not to apply licences (had 3) to the vessel under the charterparty and consequently fault lay with them. Thus the charter fee still had to be paid.

The Super Servant Two Contract for the carriage of a large and heavy drilling rig was not frustrated by one sinking as the contract contemplated the SS1 could be used, D wasn t obliged to use SS1 and the inability to use the other vessel was the defendants fault and therefore could not be relied upon to invoke the doctrine of frustration.

If the contract had stated that transportation was to be done by SS2 and this sunk without fault - frustration

CONSEQUENCES OF FRUSTRATION

The contract is automatically brought to an end and no election is necessary Scanlan s New Neon v Tooheys

Parties are discharged of any further obligation to perform the contract. Hirsch

No right to damages.

Recovery of money paid

Party will be entitled to restitution of money they paid under frustrated contract where consideration for the payment has totally failed: Fibrosa

[insert TFC]

Fibrosa Contract with Poles frustrated by the Germans. The purchaser could recover the £1,000 which they had earlier paid the seller as there had been a total failure of consideration. Although the seller had incurred expenses in preparing to perform the contract, the consideration was the delivery of the machinery, which had not taken place.

Action in debt The loss lies where it falls but unconditionally accrued rights and liabilities remain unaffected: Fibrosa

QM claim

There is no scope for a QM claim for work done prior to frustration.

However work done after the frustrating event may be subject to such a claim Codelfa

[insert QM]

Codelfa unable to receive the contract price but were able to claim a reasonable amount for the work done after the injunction was granted.

Misleading and Deceptive Conduct

A corporation (s52 TPA) (person: s10 FTA WA) shall not in trade or commerce engage in conduct that is misleading or deceptive or is likely to be misleading or deceptive.

CL distinction between fraudulent/negligence and innocent misrepresentation is irrelevant. Hornsby

Anyone can use s52 (not just consumers) Hornsby

Is the defendant a corporation/person?

Constitutional limits exist on s52 must be a corporation however s10 FTA covers natural persons

Is the conduct in trade or commerce?

Must have trading or commercial character: Concrete Constructions v Nelson

Includes:

Sale of a business: (Bevanere)

Negotiations for employment contract: (Stoelwinder)

One-off sales of capital assets: (Bevanere)

Not:

Private sale by individual (O Brien v Smolonogov)

Internal communication in a business: (Concrete)

O Brien v Smolongov: Sale of home, advertisement in newspaper. Not in business context.

Concrete Constructions internal communications re work methods in trade or commerce but incidental to.

Classify the conduct

Includes acts and omissions: TPA s 4(2)

Intention or fault: not necessary: Parkdale Hornbsy.

Focus is whether it leads into error, or capable of: Henjo

The focus is on how the conduct was perceived, not how it was intended: Yorke v Lucas

Conduct is not confined to misrepresentations: Franich

Puffery

Will be misleading conduct if the statement is capable of leading into error in circumstances where the purchaser may attach importance to the words: Mr Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd Collier Homes

Silence

Not mere silence, must be considered in the context in which it occurs: Henjo Demagogue v Ramensky

Silence will breach s 52 when the circumstances give rise to an obligation to disclose relevant facts: Henjo

Must be deliberate if there are no other misleading circumstances: s4(2)TPA Johnson Tiles

Opinion:

Whether in the circumstances it may reasonably relied on by the recipient (where knowledge or expertise)

Whether what appears to be an opinion is a statement of fact

Intention or future:

Covered where representation is made about a future matter without reasonable grounds: s51 TPA, s9FTA

Henjo v Collins Marrickville Failure to disclose restaurant only licenced for less than it could seat was MD. D argued P could have made inquiries as to the truth of statement. no duty on the representee to take reasonable care

Franich: v Swannell Non-disclosure the potential purchaser that there was some subsidence was MD.

Collier Homes: the best deal a vague and subjective claim. No criteria for what was best deal. Clearly puffery

Demagogue v Ramensky Estate agents statement that an access way could be organised was MD as in reality it was very difficult and would require constant agreement with surrounding properties. Difficulty should have been disclosed.

Hornsby: Two businesses with same name. Conduct under s52 need not be fraudulent or intended.

MDC: Affect on Audience

Affect on audience: Class of people ie in advertisement

Likely to deceive reasonable/ordinary members of class Gibbs CJ/Mason J in Parkdale

Cf Murphy J in Parkdale and Franki J in Annand: hold test should extend to those who are uneducated, not unwell informed.

Tendency has been to use the former test.

Affect on audience: Individual

Butcher: consider:

Bargaining power difference between parties

Character of the transaction contemplated

Knowledge of each party about the other party as a result of dealings

Butcher v Lachlan Realty

Facts: Purchaser claimed Estate Agent was MDC by including an inaccurate survey diagram that read: we cannot guarantee it s accuracy and interest parties should rely on their own enquiries

Majority: in order to determine whether the conduct was misleading you must consider the nature of the parties, the character of the transaction and what each party knew about the other as a result of the dealing to determine what effect the conduct would have.

The purchasers were shrewd, intelligent and self-reliant business people who could be assumed to respond to the representation in question in a reasonable manner.

The estate agent: business will small staff that did not hold itself out as possessing the means of independently verifying the title details. Such matters are complex and need to be dealt with by specialists.

Nature of the transaction: very expensive property and purchaser was assisted throughout the transaction by professional advisers.

Disclaimer: mad it clear the estate agent was not representing that the diagram in question was accurate.

Given the nature of the transaction, the parties and the presence of a disclaimer the conduct was not MDC.

McHugh J (diss.): whether conduct was likely to mislead persons in the class identified as a reasonable potential purchaser of waterfront properties in the price range of over 1m.

Imputed a number of details including professional advice and that it was not part of EA job to obtain or verify a survey.

During an inspection Butcher made it clear he was relying on the accuracy of the survey diagram. Everything the EA said was premised on the pool being within the freehold land. In order to be effective the disclaimer had to modify the effect of all the contract engaged by EA. Held the disclaimer did not overcome this.

Kirby J (diss.): Accepted that Butcher s personal characteristics were relevant to determining whether the conduct was MD. Further he was an intelligent, shrewd and self0reliant business person Hwever these would not have made him alert to the nuances of land law.

By including he inaccurate diagram the EA and failing to verbally reinforce the disclaimer EA was MD.

Disclaimer was ineffective because of its size and he thought giving effect to it would subvert the goals of the act.

Parkdale two shops selling almost exact furniture.

Gibbs CJ: held that s 52 contemplates the effect of the conduct on reasonable members of the class.

Mason J: referred to the ordinary purchaser.

Murphy J: took the most expansive view and said that s 52 protects both the prudent and imprudent.

Anand Not misleading to advertise a never driven car as new, despite not latest model, but never driven.

Whether conduct is misleading tested by effect on one of less than average intelligence but not abnormally stupid.

Remedies for Misleading and Deceptive Conduct

Damages under s82 TPA/s79 FTA

TPA provides no method of assessment, however P must establish

Breach of s 52 Actual loss/damage caused by breach that is not too remote: Henville

Merely passing on information not actionable, recipient should be aware they didn t know if it was true or not (Yorke)

Is there reliance on the conduct Henjo Investments

Actual reliance upon the M or D conduct

No duty to check

Representation does not have to be sole inducing factor

Tort Damages to put in position had MDC not occurred

How much worse off is the P due to reliance? Gates

Not always appropriate, ie nothing given in ie (Marks v GIO)

Damages at common law (eg loss of opportunity Sellars)

Expectation loss may be recoverable, unclear, seems to contradict GIO, and take Kirby s position: Murphy v Overton

Exclusion clauses

Exclusion clauses: exclusion clauses cannot breach the nexus between s 52 conduct and the making of the agreement It is contrary to public policy to allow exclusion clauses to deny a statutory remedy for the offending conduct: Henjo

Term of contract of representations: exclusion may have relevance to reliance: Keen Mar

Keen Mar: a landlord required lessors to sign an exclusion clause providing that they had not been induced to enter the lease by misrepresentation. The exclusion clause was held to be effective because actual notice had been given of it.

Gates Misrepresentation that the insurance would cover if P was disable from working as a builder. Damages were therefore sought under s 82, for misleading conduct in contravention of s 52.

HC Held: not entitled to recover damages, other than a refund of premiums paid, on the basis that the cover provided was worth the consideration paid. In addition, evidence was not adduced that an alternative policy could have been retained by the appellant providing him with the benefits sought and misrepresented.

Marks v GIO: Loan agreement. Misrepresentation that interest was fixed. Later GIO notified Marks that the margin would, in fact, be increased from 1.25% to 2.25% and allowed M to refinance without penalty. M elected not to and sued.

HC Held: Marks failed to prove actual loss or damage had been suffered as a result of the GIO s misleading conduct.

McHugh, Hayne and Callinan JJ: similar stance to that enunciated in Gates, by considering the position that Marks would have been in had the MDC not occurred: the GIO loan at the increased margin was more beneficial to the borrowers than any other loan that was available .

Gummow and Gaudron JJ: although the misleading conduct occurred before entry into contract, injury did not arise until GIO was going to increase loss was avoided when GIO provided the option to refinance without penalty. The imposition of the higher rate resulted from a failure to accept. Therefore Marks were unable to prove damage.

Kirby J (diss.): Restrictive approach used in Gates should not be applied to claims brought under s 87. Broad adoption of the terms loss and damage , should extend to the loss of expectation of profits.

Expectation damages would be appropriate: it would be an extremely odd result for such proceedings to have been brought successfully and an unchallenged serious misrepresentation found, yet contraveners walk away scot-free .

Sellars: Negotiations with two companies, Pegini and Poseidon. AP entered an agreement with Poseidon. Poseidon then repudiated. Adelaide Petroleum then entered an agreement with Pegini on terms less favourable than those originally negotiated. AP sued Sellars, Poseidon s agent, for having engaged in MDC, which induced it to enter 1st contt..

Held: AP could recover damages for loss of opportunity to enter a more profitable bargain. They were able to show on the BoP that it would have entered into a more profitable bargain but for Sellars MDC.

Murphy v Overton: Overton owned a retirement village. Leased to Murphys. Claimed prior to entering lease misleading statements were made on behalf of O concerning the extent of their liability under the Lease to contribute to expenses.

Held: Murphys suffered loss merely by undertaking a contractual obligation that was more onerous than the misrepresentation led to them to believe. Expectation loss. Contradicts much of GIO.

Remedies for Misleading and Deceptive Conduct

A range of remedies are available under the statute.

Injunction under s80 TPA/s74 FTA

Useful where there is misleading advertising, ongoing (not for pre-contractual dealings)

Rescission under s87 TPA/s77 FTA

Discretionary remedies, not as of right. Only damages if innocent party seeks to affirm

Don t need actual loss just likely , at discretion of the court (Creative Landscape)

Common Law Bars to Recission are merely a guide to s86

Impossibility of Restitution - If the parties cannot be returned to pre-contractual position.

Equity will allow rescission where subject matter has only undergone minor alteration: Alati v Kruger

Affirmation - Election (w. knowledge of falsity/right to rescind) or imputation adverse acts - knowledge not required

To affirm: party must know both facts and the right to rescind: Coastal Estates Pty Ltd v Melevende

If contract gives right to rescind: deemed to know of that right, and no further proof is required: Sargent

Lapse of time only evidence of affirmation in Australia: (Cf: UK approach in Leaf- will be a bar)

Innocent third party has acquired an interest in the subject matter

Rescission will not be granted: Huddersfield Banking Co unless Caldwell

P will have to take action for damages: Phillip Lewis v Averay

Innocent and the contract has been executed- rule in Seddon s Case: applied in Svanosio

Cannot rescind for an innocent misrepresentation once the contract has been performed/executed by both sides.

Highly criticised: may leave victims of innocent misrepresentation with no remedy- no damages for innocent.

Senanayake v Cheng illustrates a court may work around rule descb. continuing agreement and not executed.

Generally accepted that it does not apply to sale of goods: Leaf v International Galleries Leason

SOGA s59 (2): CL rules including those relating to fraud/misrepresentation should continue to apply. Legislature intended to exclude the rules of the equity courts including rescission: Watt v Westhoven crit.

Misrepresentation has become a term of the contract

Doctrine of Merger: cannot rescind. Becomes a contractual right. Unless merely a warranty. Academy of Health

Alati v Kruger: D arg restoration was impossible as a lease had been cancelled on the property Equity requires substantial, not precise, restoration to original position. P had not acted unconscientiously, abandonment was no bar

Sargent v ASL: Contract for sale of land. Term allowing either party to terminate if land became subject town planning controls even though the vendor had no knowledge of right to rescind, their acts were only consistent with affirm.

In Re Hoffman: Bankrupt tried to sell interest in business. Purchaser didn t know vendor was bankrupt and assets were vested in A. Became aware of this and agreed to A using money in administration of estate. Piccus J: obiter: not necessary for the innocent party to have knowledge of the right to terminate in order to render an effective election.

Leaf v International Galleries: A gallery sold a painting representing it as being done by a famous painter. 5 years later, while trying to resell the painting, the purchaser found out that it was not. Sued for rescission P lost right to rescind after such a period of time. His only remedy after that length of time was for damages only.

Coastal Estates v Melevende: R was induced to buy land by fraudulent misrep by A. Although aware of the falsity of some of the representations, he kept trying to perform the contract by making payments and negotiating with A. Later R purported to rescind. not affirmed since R not aware of the right to rescind.

Svanosio after conveyance discovered that only a portion of hotel stool on land. Applying SR couldn t rescind

Car and Universal Finance v Caldwell: Car sold for dud check. C immed. informed Police Automobile Association and asked for their help in finding it. It had been resold by fraudster to 3rd party C did enough to rescind- kept title of car

Senanyake Cheng: P agreed to purchase some of D interest and became a partner of firm. Subsequently, P learnt that the D s claims about the firm during negotiation were false. Purported to rescind. D relied on Seddon s Rule and argued that rescission was barred. agreement was a continuing one, that is, it was executory, Seddon s Rule did not apply.

Long v Lloyd sale of a truck. Long relied on an innocent misrep as to the trucks quality. Realises the day after the sale and informs Lloyd. He accepts Lloyds offer to pay for half the repairs. Day after the truck breaks down and Long purports to rescind acceptance of the offer to pay half the repair costs led to the loss of the rights to rescission. Later act of dispatching the truck amounted to a final acceptance and conclusively extinguished any rights of rescission.

Misrepresentation

Types at CL: fraudulent (tort of deceit) negligent (remedy rescission, damages) innocent (no damages, indemnity)

Statement of pre-existing fact - not law, intention or opinion and separate to contract

Statement of fact can be implied from prediction/promise/statement of future intention:

- if not accurate in present circumstances (Balfour v Hollandia Ravesthorpe)

- misrepresentation of a state of mind (intention) is a misstatement of fact (Edgington v Fitzmaurice)

Statement of opinion:

- May be sufficient if unreasonable held: (Bisset v Wilkinson)

- Statement of opinion may involve statement of fact (Bisset v Wilkinson, Smith v Land House)

- Where the speaker implies special knowledge (Bisset v Wilkinson, Smith v Land House Property)

Fraudulent misstatement of law is actionable: Public Trustee v Taylor

Disclosure - no general duty of disclosure unless:

1. Half truth: when a statement is literally true but gives rise to a false impression: (Awaroa Holdings)

2. True but later rendered false by a change in circumstances (With v O`Flanagan, Jones v Dumbrell)

3. Certain special classes of contract eg uberrimaw fidei, insurance contracts

4. that distorts a positive statement may amount to a half truth false statement of fact: Dimmock v Hallet

Addressed by one to another before or when the contract was made

Intended to induce and in fact inducing, the contract

Must be reliance on the representation: Holmes v Jones

Does not have to be the sole inducement: Edgington

P has ultimate onus of proof of reliance, however, the representor may have evidentiary onus: Gould v Vaggelas

No obligation to check the truth: Redgrave v Hurd

Not necessary RP would induce RP for fraudulent misrepresentation: Nicholas v Thompson

Probably necessary for innocent negligent: Gould

Balfour: MisRep that if P opened a/c with building society they could borrow 90% was actually statement of fact.

Edginton: State of mind (intention) was fact that investments would be used to complete alterations (not pay debt) ardless of other factors of inducement, the D was still liable as its misrepresentation had had an inducing effect.

Bisset: Opinion that property could hold 2000 sheep was fact- it could be assumed vendor genuinely believed it to be true.

Smith v Land: Opinion that a tenant was most desirable was fact implied basis and in greater position of information

Dimmock: Tenants had already given notice to leave the property before sale.

Awaroa: contract for sale of lease. D overstated the rental received from tenants. half truth, able to rescind.

With: Sale of medical practice, before formation revenue dropped due to illness D had a duty to disclose this to P.

Holmes v Jones: No reliance on false report of stock on farm as the buyers relied on their own report.

Redgrave v Herd: D agreed to buy business. P stated it earned £300 per annum but showed statement that said £200. P said remaining revenue came from related businesses. Had D checked further papers he would have known this to be false. D refused to settle and the plaintiff sued for specific performance misled irrelevant he had opportunity to check

Nicholas v Thompson: Representees were induced to purchase representor s interest in a speculative venture by the representor s fraudulent misrepresentation that he had been offered a very large sum of money for his interest but had refused to sell it. The representor argued that a reasonable person would not have been induced to contract on the back of that statement. necessary to prove that the statement was material in that particular sense.

Gould P purchased a tourist resort that subsequently under preformed. Ultimately the mortgagees resumed the property and sold it, but failed to recover all the debt. P s alleged the vendor s made misrepresentations during the negotiations onus on both parties is an evidentiary burden and it is for the finder of fact to conclude if the statement made was relied upon by the defendant.

RESCISSION for Misrepresentation

Restitutio in integrum: contract is set aside and the parties are restored to their pre-contractual positions.

Contract is voidable , until the innocent party elects to rescind the contract remains on foot.

Election - Generally, an election to rescind will only be valid where it is communicated to the other party.

The rescission may be communicated to the other party in a writ claiming relief based on the rescission.

Where the guilty party, by absconding, deliberately puts it beyond the power of the innocent party to communica

te, the innocent party may evince an election to terminate by some means without communication: Caldwell

If the victim elects to rescind then the contract is rendered void ab initio.

The right to rescind is lost where:

Impossibility of Restitution - If the parties cannot be returned to pre-contractual position.

Equity will allow rescission where subject matter has only undergone minor alteration: Alati v Kruger

Affirmation - Election (w. knowledge of falsity/right to rescind) or imputation adverse acts - knowledge not required

To affirm: party must know both facts and the right to rescind: Coastal Estates Pty Ltd v Melevende

If contract gives right to rescind: deemed to know of that right, and no further proof is required: Sargent

Lapse of time only evidence of affirmation in Australia: (Cf: UK approach in Leaf- will be a bar)

Innocent third party has acquired an interest in the subject matter

Rescission will not be granted: Huddersfield Banking Co unless Caldwell

P will have to take action for damages: Phillip Lewis v Averay

Innocent and the contract has been executed- rule in Seddon s Case: applied in Svanosio

Cannot rescind for an innocent misrepresentation once the contract has been performed/executed by both sides.

Highly criticised: may leave victims of innocent misrepresentation with no remedy- no damages for innocent.

Senanayake v Cheng illustrates a court may work around rule descb. continuing agreement and not executed.

Generally accepted that it does not apply to sale of goods: Leaf v International Galleries Leason

SOGA s59 (2): CL rules including those relating to fraud/misrepresentation should continue to apply. Legislature intended to exclude the rules of the equity courts including rescission: Watt v Westhoven crit.

Misrepresentation has become a term of the contract

Doctrine of Merger: cannot rescind. Becomes a contractual right. Unless merely a warranty. Academy of Health

Alati v Kruger: D arg restoration was impossible as a lease had been cancelled on the property Equity requires substantial, not precise, restoration to original position. P had not acted unconscientiously, abandonment was no bar

Sargent v ASL: Contract for sale of land. Term allowing either party to terminate if land became subject town planning controls even though the vendor had no knowledge of right to rescind, their acts were only consistent with affirm.

In Re Hoffman: Bankrupt tried to sell interest in business. Purchaser didn t know vendor was bankrupt and assets were vested in A. Became aware of this and agreed to A using money in administration of estate. Piccus J: obiter: not necessary for the innocent party to have knowledge of the right to terminate in order to render an effective election.

Leaf v International Galleries: A gallery sold a painting representing it as being done by a famous painter. 5 years later, while trying to resell the painting, the purchaser found out that it was not. Sued for rescission P lost right to rescind after such a period of time. His only remedy after that length of time was for damages only.

Coastal Estates v Melevende: R was induced to buy land by fraudulent misrep by A. Although aware of the falsity of some of the representations, he kept trying to perform the contract by making payments and negotiating with A. Later R purported to rescind. not affirmed since R not aware of the right to rescind.

Svanosio after conveyance discovered that only a portion of hotel stool on land. Applying SR couldn t rescind

Car and Universal Finance v Caldwell: Car sold for dud check. C immed. informed Police Automobile Association and asked for their help in finding it. It had been resold by fraudster to 3rd party C did enough to rescind- kept title of car

Senanyake Cheng: P agreed to purchase some of D interest and became a partner of firm. Subsequently, P learnt that the D s claims about the firm during negotiation were false. Purported to rescind. D relied on Seddon s Rule and argued that rescission was barred. agreement was a continuing one, that is, it was executory, Seddon s Rule did not apply.

Long v Lloyd sale of a truck. Long relied on an innocent misrep as to the trucks quality. Realises the day after the sale and informs Lloyd. He accepts Lloyds offer to pay for half the repairs. Day after the truck breaks down and Long purports to rescind acceptance of the offer to pay half the repair costs led to the loss of the rights to rescission. Later act of dispatching the truck amounted to a final acceptance and conclusively extinguished any rights of rescission.

Remedies for Common Law Misrepresentation

Damages for Negligence or Fraudulent Misrepresentation

To put plaintiff in position they were in before reliance on representation: Gould v Vaggelas

Representee must prove

Causation (involving reliance and loss suffered caused by the representor)

Remoteness reasonable foreseeability (may not be necessary for fraudulent misrepresentation)

Application of Damages Principles:

RESCISSION:

Property handed back

Purchase price handed back (plaintiff can recover stamp duty, conveyancing costs)

Trading losses (not loss of profits)

Lost opportunity (loss of a chance): Sellars v Adelaide Petroleum

o (Last two are consequential losses)

AFFIRMATION:

Difference between price paid and value of property at time of purchase

Trading losses (not loss of profits)

Lost opportunity (loss of a chance): Sellars v AP

o (Last two are consequential losses)

Indemnification for Innocent Misrepresentation

Reimbursement for expenses incurred pursuant to obligations concurrent with the contract damages

Equity has jurisdiction to award an indemnity.

Therefore, a representor (even if innocent) may be required to indemnify a representee against obligations created by the contract: Whittington v Seale-Hayne

Must be created directly by contract: Whittington v Seale

Derry v Peek: D tram company issued a prospectus stating that the company used steam power rather than horses. Relying on this statement, the P bought shares in the company. As it happens, the D was not allowed to use steam power. P sued for deceit.

Held: deceit may be committed intentionally or recklessly. In the latter circumstance, it is enough that the defendant did not care whether the statement was true or false. In this case, the defendant had an honest belief that it would be able to use steam power and therefore, was not liable for deceit.

Whittington v Seale-Hayne: Ps leased property from D to breed poultry. Innocently represented premises were in a sanitary condition. However, contaminated water on the property caused poultry to die. Further, P were required by the local council to repair the property. P claimed rescission and indemnification against exp.

Held: P owed indemnification in respect of all losses except those relating to poultry breeding. Why? The plaintiffs had not been obliged to breed poultry under the lease.