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NOTES:

Contracts can be terminated in the following circumstances:


By agreement or contractual right
By abandonment or waiver
By election
By consent of the parties (accord and satisfaction, substituted agreement)
By performance on both sides
For non-fulfilment of a contingent condition of formation or performance
By the exercise of an express contractual right to terminate.
By operation of law (eg, frustration or bankruptcy)
For breach of an essential term, for repudiation and arguably for a serious breach of a so-called intermediate or
innominate term

Termination by Agreement
a. Express Contractual Right to Discharge/Terminate
b. Termination for non-fulfilment of contingent conditions
Distinguishing preliminary agreements and contingent conditions
1. What are preliminary agreements?
Examples:
Possession shall be given and taken on settlement upon signing and execution of a formal contract of sale within 28 days of
acceptance of this offer. (cl 3) Godecke v Kirwan
This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on
the above terms and conditions. Masters v Cameron
Jaylor hereby offers Helmos the opportunity to purchase its 50% interest in Kingsleys Crab House for $$1,100,000 by notice
in writing no later than 15 April 2002Upon receipt of the exercise of offer, contracts for the purchase of Jaylors 50%
interest shall be sent to your office no later than five days from the exercise date. Helmos Enterprises Pty Ltd v Jaylor Pty Ltd
[2005] NSWCA 235
2: Main legal issues
When do the parties intend to be legally bound?
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Are the parties obligations postponed, or is the agreement immediately binding.
3. Classification of preliminary agreements
A. Immediately bound, formal agreement to follow
B. Immediately bound, performance dependent on formal contract
C. No contract
D. Immediately bound, substituted contract to follow
Masters v Cameron (1954) 91 CLR 353 the court distinguished between three possible interpretations where a contract is
said to be conditional:
(1) The parties have reached a final agreement on the terms and intend to be bound to the contract at that point and
want those terms to be made precise, but not in a materially different form concluded contract;
(2) The parties have reached finality and dont intend to change the agreement, but want to put off performance of the
contract until it has been made more formal concluded contract;
(3) The parties do not intend to make a concluded bargain unless and until they have signed a formal contract no
contract unless the contract is reduced to writing.
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) ANZ ConvR 681.
The parties will be bound immediately, but they will make a further contract in substitution of the first, which may
contain further terms.
Which of these four alternatives will be chosen depends upon what the parties intended. This will be determined by their
language and their conduct.
Language
Detail
Nature and magnitude of the transaction
Circumstances surrounding the execution of the contract
A contingent condition on performance is an event which parties agree must occur before performance is due. There is a
contract, but the parties dont have to perform until the event occurs. If the event doesnt occur the contract will either
Come to an end automatically, or End when one party terminates Depending on what the contract says.
The High Court tends to prefer finding a contingent condition on performance rather than a contingent condition on
formation

1.What are contingent conditions?
This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on
the above terms and conditions. See Masters v Cameron (1954) 91 CLR 353.
Possession shall be given and taken on settlement upon signing and execution of a formal contract of sale within 28 days of
acceptance of this offer. See Godecke v Kirwan (1973) 129 CLR 629.
In the event of the consent of the Treasurer not being obtained within two months from the its date the contract shall be
deemed cancelled. See Suttor v Gundowda (1950) 81 CLR 418.
2: Types of contingent conditions
Contingent conditions may fall into one of two categories:
conditions of formation:
Conditions of formation
If a contract contains a condition of formation and the condition doesnt eventuate there is no contract at all.
Thus, it is a condition precedent to the existence of the contract.
No obligation to co-operate.

conditions of performance.
If a contract contains a contingent condition of performance and the condition does not eventuate then the contract
does exist, but the parties need not perform until the condition is fulfilled.
The court can imply (in law) an obligation on the party or parties to take all reasonable steps to bring about the
fulfilment of the condition.
3. The right to terminate for non-fulfilment of a contingent condition
If a contingent condition has not been fulfilled, then either party can terminate the contract.
4. Procedure for termination
The contract may specify the manner of exercise of the right to terminate for non-fulfilment of a contingent condition.
If it doesnt, it is sufficient if the party terminating simply communicates the decision to the other party.
(a) Conditions for termination
Party cannot normally terminate unless:
The time designated has elapsed; when no designated time, reasonable time implied
Condition still unfulfilled
(b) Party must elect to terminate
The contract remains on foot until a party entitled to bring the contract to an end elects to terminate
Unless the condition is self-executing
(c.)Election to terminate or affirm irreversible
(E) Loss of right to terminate
Affirmation/waiver
An election to affirm the contract in this way requires both conduct and knowledge on the part of the party alleged to have
affirmed.
Conduct:
To be affirmation conduct may be:
Deliberate (conscious waiver) or
By default (by conduct inconsistent with the right to terminate)
Knowledge At the least, the affirming party must have knowledge of the facts that give rise to the right to terminate and,
with that knowledge, they must engage in conduct which is referable only to the continued existence of the contract.
Breach of the duty of co-operation
The universal duty to cooperate imposes an obligation on each party to do all that is reasonably necessary to secure
performance of the contract
Estoppel
Where there is a contingent condition as to formation, estoppel may occasionally be invoked to prevent an attempt to
eschew legal liability altogether.
Where there is a condition of performance which is not fulfilled it may still be possible to argue that the party seeking to
terminate, by their conduct, led the other party to believe that the contract would not be terminated or would not be
terminated without notice.
5. Effect of election to terminate
Termination is effective de futuro
ii. Unjust enrichment
A breach of contract by one party may entitle the other party to terminate the contract.
Whether or not the wronged party is entitled to terminate for breach may be:
Set out in the contract itself
A right conferred by law.
The right to terminate is regulated: the method is prescribed, and the right may be lost because of the wronged partys own
conduct.
The right to terminate, if it exists, is in addition to the right to damages for breach.
Performance and breach
Standard of performance
Performance means exact or precise compliance. However, sometimes the standard of performance might be open-ended,
so the question of breach is problematic. This is also a problem in the case of some implied terms.
Order of performance
There cannot be a failure of performance unless the obligation has become due.
This is a problem when one persons performance depends on the others they are dependent obligations.
Where obligations are independent one parties obligations arise regardless of the others performance.
Types of Breach
The law recognizes two forms of conduct as constituting breach:
a. failure to perform;
Actual failure to perform the contract as and when agreed can be:
Complete non-performance,
Defective performance
Delayed performance
b. unwillingness or inability to perform (repudiation or renunciation).
Unwillingness or inability to perform
A party indicates an unwillingness or inability to perform repudiation or renunciation.
This may occur before the time for performance is due, and may lead to termination by the other party.
3. Right to termination
Express Contractual Rights to Terminate
If Contractor (R) misses deadlines, then Principal (MfPW) can demand Contractor show cause (please explain) as to why
contract should not be terminated (Renard)
Occurrence of following events shall constitute good cause for BKCto terminate this agreement: (d) HJ fails to comply with
any terms, conditions or provisions of this agreement (Burger King)
Either party may terminate this arrangement by giving to the other notice in writingeffective 32 days after posting. (Garry
Rogers)
a.Problems of construction
Express terms which confer a right to terminate need to be interpreted just like any other term of the contract.
However, clauses conferring a right to terminate for breach are in general construed strictly, and may also be interpreted
contra proferentem.
Burger King:
clause 15.1: the occurrence of any of the following gave BK good cause to terminate the contract
(d) HJ fails to comply with any terms, provisions or conditions of this agreement or any other obligation owed to BK.
HJ was obliged to open 4 new restaurants a year. If they didnt, they were charged extra franchise fees for each restaurant
they fell short
but the extra fees werent levied immediately, and were waived if they if the failure was made good in the following year
(clause 8.1).
Needed to be read in the context of the contract as a whole Burger King couldnt terminate until the end of a years leeway.
B Constraints arising from implied terms
The implied duty of good faith, and perhaps the implied duty to co-operate, might constrain the express contractual right to
terminate.
This may imply a requirement
that the terminating party substantiate the grounds for termination (Renard)
or use power for legitimate or proper purpose (Burger King and Garry Rogers)
C: Damages for loss of bargain
Normally the terminating party can claim compensation for loss of bargain. However, where the right to terminate only
arises in contract (ie it does not also arise in law) damages for loss of bargain are not available Shevill.
Make sure that the contract specifically provides damages for loss of bargain after exercise of the right to terminate by
contract.
Termination without express contractual right (common law)
Arises where there is a serious breach, ie:
(a) Breach of an important term. (that is, a breach of a condition as opposed to a warranty)
Breach of an important term
Condition = a contractual duty, the breach of which gives rise to the right to terminate
How do we work out if a term is a condition?
Parties may designate a term to be a condition
Where no express designation it is a matter of construction on the basis of the following factors:
Promise so important to promisee that s/he would not have entered into the contract unless assured of strict
or substantial performance of the promise (Jordan CJ in Tramways)
Language
Nature of contract
Other terms of contract

(b) breach causing substantial loss of benefit (consequences)
(c) repudiation or repudiatory conduct (including repudiation prior to moment of performance)
What is repudiation?
termination is justified when one party by his or her words or conduct manifests an unwillingness or inability to be bound by
the contract.
ii. What conduct amounts to repudiation?
indicates he/she will not perform
indicates he/she could not perform
maintained an erroneous interpretation of the contract
multiple minor breaches the cumulative effect of which was serious
unjustified termination
Repudiation or renunciation is clear when someone expressly asserts their unwillingness or inability to perform.
Where there is no express indication, The question becomes whether the persons conduct would lead a reasonable person to
conclude that they no longer intend to perform their contractual obligations
Repudiation is indicated by
words,
conduct, or
actual position: are they in a position that makes it impossible or unable for them to perform.
Repudiation can relate to:
All contractual obligations
Some contractual obligations in which case the court will have to determine whether the partial renunciation is sufficiently serious
to allow termination by reference to:
whether he has refused to perform a condition or essential term,
or whether his refusal to perform a particular term go to the root of the contract.
When should you argue repudiation?
Often repudiatory conduct and breach will overlap, and both can be argued, although different evidence will be required.
The distinction between breach and repudiation is important in two cases:
Combination or series of breaches
Anticipatory breach
CASE: Laurinda Pty Ltd v Capalaba Park Shopping Pty Ltd (1989) 166 CLR 623
A time was not specified for registration;
Time was not of the essence;
It was an implied obligation to effect registration within a reasonable time.
Thus, there was a breach.
Did it amount to a repudiation?
The notice was not effective to make time of the essence, but there was nevertheless repudiatory conduct
The difference between a contract which contains a stipulated day for performance of an essential term and a contract which,
expressly or impliedly, requires performance within a reasonable time is important when the question is whether, on failure to
perform within the time limited by the contract, the innocent party is entitled to rescind. In the former case, a right to rescind arises
at law when the stipulated day passes; in the latter, that right does not necessarily arise when the reasonable time expires but only
when repudiation is clearly to be inferred from the circumstances in which the delay occurs. Delay will amount to repudiation if the
defaulting party "evinces an intention no longer to be bound by the contract ... or shows that he intends to fulfil the contract only in
a manner substantially inconsistent with his obligations and not in any other way" (Brennan J, quoting Shevill)
The absence of an effective notice means that the other evidence must be examined to determine whether a clear inference of
repudiation should be drawn, but it does not preclude the drawing of that inference.
Anticipatory Breach
Anticipatory breach may arise in two ways:
either because a contractor indicated by words or conduct that he or she will not perform on the day; or
because the contractor has put it out of his or her power to perform on the day.
This indicates three difficulties about deciding to terminate before actual failure to perform:
How certain must it be that the promisor will breach?
How serious must the breach be?
If seriousness depends on consequences, how are the consequences established?
Certainty
Seriousness
Delay Section 41 of the Property Law Act now governs the approach to termination for delay in Victoria in relation to
contracts for the sale of land:
Stipulations in a contract as to time or otherwise which according to rules of equity are not deemed to be or to have
become of the essence of the contract shall be construed and have effect in law in accordance with the same rules.
Time Essential
Breach confers right to termination and damages
Time inessential
but a date for performance set in contract
no date for performance set in contract
Notice required which sets out:
A time for performance
A reasonable time for performance
The consequences of not performing
A: When is time of the essence?
Contract states that time is of the essence
The time provision is an essential term: indications?
Specific dates for performance in commercial contracts
Requirement to pay deposit in land contracts
Tests relevant to determining essential terms generally?
B Notice Procedure
The notice procedure will be useful where:
a date for performance is stated in the contract, but the date is inessential; or
no date is stated in the contract.
Notice must:
State a definite time for performance;
Set a time which gives a reasonable time for performance
Convey the consequences of any failure to perform: that is,
that the new deadline is an essential condition,
or that the innocent party is entitled to terminate if the new deadline is not met.
The effect of the notice is to make the new time fixed by the notice essential
4: Restrictions on the right to terminate
(a) Election and waiver/affirmation
Has the party elected by unequivocal words or conduct?
Did the party have the knowledge of necessary facts which gave rise to the right to terminate?
Ready, able and willing to perform
(B) In order to terminate the innocent party must be able to show that he or she was ready, able and willing
to perform his or her obligations This presents particular problems in the case of anticipatory breach.
Put termination for breach in the context of other ways of ending a contract
Understand the tests used for determining whether the innocent party can terminate a contract for breach
Revisit the notion of election and affirmation in the particular context of termination for breach
Be aware of when the right to terminate can be lost
CONSEQUENCES OF TERMINATION:
When a contract is terminated it is terminated prospectively (into the future, or de futuro).
The parties are released from any future obligations, but rights and obligations which have already accrued under the contract
remain intact.
What about the loose ends:
What about money which has been paid (deposits, instalments, etc)?
What about money due but not yet paid?
Because the termination only applies to the unperformed part of the contract, accrued rights are not divested. If an entitlement
under a contract accrued prior to termination, that entitlement may still be enforced.
There are two types of accrued right:
the right to damages
the right to recover sums due under the contract.
1 Recovery of Sums Fixed by Contract
Liquidated damages clauses
Recovery of a debt
Money sums fixed by contract may be recoverable in action for debt
Benefits of recovering a Debt as opposed to Damages
(a) Summary judgment procedure
(b) Different onus of proof
(c) No duty to mitigate
Prerequisites for a debt recovery action
2.2.2.1 The contract is for payment of a fixed or ascertainable sum
2.2.2.2 The debt has accrued
Question of construction
Depends upon one of the following factors:
Whether one partys obligations are dependent or independent of the other partys obligations
Whether a partys obligations can be classified as entire or divisible/severable.
Dependent/independent obligations
i. Independent obligations: right to payment arises independent of performance
Terms contracts - the purchasers obligation to pay the purchase price is independent of the vendors obligation to transfer
title
Dependent obligations: right to payment arises out of exact performance
Contracts for the Sale of Land Obligations usually dependent
Contracts for the Sale of Goods Obligations usually dependent (payment for transfer of title: s.55 (1) Goods Act 1958
(Vic)).
Entire/divisible contracts
Whether a contract is divisible or not depends upon the proper construction of the contract.
judicial preference not to construe a contract as entire
Entire Contracts
An entire contract is one in which the parties have expressly or impliedly agreed that precise or exact performance by
one party is a condition precedent to the other partys obligation to pay.
. Severable or Divisible Contracts
The parties have agreed that contract payments are to be made for specified instalments of the goods or services - a party
can still be paid for each severable part of the work completed or for each part of the goods delivered, even if the whole of
the contract is not performed.
Parties (including those in breach) can recover sums for parts completed prior to termination even though another part not
complete
iii. Exceptions to the requirement of exact performance
a:The de minimus rule
de minimis non curat lex the law does not concern itself with trifles the court will disregard trifling departures from the
contractual obligations.
B Substantial performance
In the case of substantial performance, the court may allow recovery of the contract sum (as a debt), with the possibility of
counter-claim and set off to deal with any defects.
Substantial performance is still a breach entitling other party to damages for cost of rectifying any defects
Innocent party must pay price, but entitled to deduct amount of any set off or cross claim for cost of rectification
C Acceptance of part performance
Partial performance is not the same as substantial performance; partial performance is a breach, and entitles the other party
to terminate and sue for damages
UNLESS the innocent party has accepted part performance, which basically creates a new contract.
D Obstruction of performance
Contract terminated by repudiation, and one party has therefore been prevented from performing recovery through an
action in unjust enrichment:
Quantum meruit
Quantum valebat
2.3 Right to retain money
Generally, someone who has paid money under a contract wont be able to get it back as a liquidated or fixed sum they will
have to
sue for damages for breach,
or bring a restitutionary action for monies had and received, provided that there has been a total failure of consideration.
. Contract has no forfeiture clause
Where the contract does not have a forfeiture clause and the contract has been terminated for breach
the vendor must return the instalments whether or not the purchaser is at fault.
Contract contains a forfeiture clause
Where a contract contains a forfeiture clause, and the contract has been terminated for breach, Then the common law will
not allow relief against forfeiture. BUT equity may give relief against forfeiture.
Right to retain deposit
If the purchaser is in default , The deposit is normally retained by the vendor even in the absence of an express contractual
right to do so
Purchaser not in default:
Deposit must normally be returned in a restitutionary action for monies had and received
Can X terminate the contract?

Sub-issue Index Sub-index Definitional
principle
[main]
Ancillary principles Alternative
arguments
Can X
terminate
the
contract
for failure
of a
contingent
condition?
Termination Contingent
Conditions
of
performance
(including
category 2
Preliminary
agreements)
Eg subject to
contract,
subject to
council
approval,
etc.
A condition
of
performance
is a
condition,
the effect of
which is to
defer
performance
unless and
until the
condition is
fulfilled. In
such cases, a
contract
does come
into
existence;
but one or
both parties
are exempt
from the
obligation to
perform
pending the
outcome of
the
condition. If
The classification of contingent conditions (as a
condition of performance or formation) is dependent of
the intentions of the parties having regard to:
o Language
o Level of detail
o Nature and magnitude of the transaction
o Circumstances surrounding the execution of the
contract
If a contingent condition if performance has not been
fulfilled, then typically either party can terminate the
contract but whether both parties can terminate is
ultimately a question of construction
The contract may specify the manner of exercise of the
right to terminate for non-fulfilment of a contingent
condition. If it doesnt, it is sufficient if the party
terminating communicates the decision to the other
party.
The right to terminate has arisen because:
o The time designated has elapsed; or when no
designated time, reasonable time implied
o Condition still unfulfilled
The contract self-executes (Gange) or there is an
election to terminate. An election is irrevocable
(Tropical Traders)
Intention (is
there an
intention to
create legal
relations at
this point?
condition on
formation
see
flowchart
Certainty


the
condition is
not
satisfied, the
contract can
normally be
terminated
[flow chart]
Can X
terminate
the
contract
for
breach?
Breach

a breach of
the contract
may entitle
the innocent
party to
terminate
the contract
A breach occurs:
When youve shown that the promise is in the contract
(incorporated and promissory), including express and
implied terms
There has been an actual failure to perform an
obligation exactly as and when promised (consider
order of performance and dependent/independent
obligations)
Or the party has demonstrated unwillingness or inability
to perform (repudiation/renunciation)
A right to terminate arises:
According to the express terms of the contract
(regardless of how trivial the breach) (construed strictly
in the context of the contract as a whole, and subject to
the implied term of reasonableness and good faith)
At common law
o For breach of a condition (labelled as such in
the contract or otherwise its a matter of
construction)
o Breach causing substantial loss of benefit
(consequences test)
o Repudiation or repudiatory conduct

Damages for
breach

Can X resist termination of the contract?

Delay A breach of
a time
stipulation
will allow
termination
if the
provision is
essential.
If time is of the essence then any delay is a breach of
a condition (above)
If time is not specified to be of the essence notice
procedure with specific requirements:
It states a definite time for performance;
That time is a reasonable time for performance
It must convey the consequences of any failure
to perform: that is, that the new deadline is an
essential condition (ie. new time is of the
essence) or that the innocent party is entitled to
terminate if the new deadline is not met.



Can X recover their deposit/instalments/money paid/services rendered under the contract?
Can X keep money already paid under the contract?

Constraints
on
Termination
Termination The right to terminate for breach can be lost if the innocent
party is not themselves ready and willing to perform or, in
the case of anticipatory breach, they hadnt put it out of their
power to perform as at the time of the anticipatory breach
(grey area see Foran)
The right to terminate can be lost by an election to affirm the
contract
with unequivocal words or conduct which is
referable only to the continued existence of
the contract
conscious waiver
affirmation
and knowledge of the facts that give rise to
the right to terminate
if it is an express contractual right
knowledge is deemed
a solicitors right is deemed to be the
knowledge of the client
The right to terminate can be lost for breach of a an implied
obligation on the parties to make reasonable efforts to fulfil
that condition
The right to terminate may be lost by an estoppel if it can be
established that a party has relied to his or her detriment on
conduct that led the other party to believe that the contract
would not be terminated or would not be terminated
without notice
?unconscionable exercise of duty
?duty to exercise in good faith
Wrongful
termination
other
party in
breach
Consequences
of Termination
Valid
termination
Termination is
de futoro -
Parties are
released from
future
obligations, but
obligations which
have already
accrued remain.

Recovery of
deposit

A reasonable
deposit will be
forfeited in the
event of a
wrongful
termination.
Whether or not a
sum is a deposit
or a penalty is
determined by
reference to
the
proportio
n of the
payment
in issue to
the
purchase
price and
the terms
of the
contract.
Has the deposit been forfeited?
When the contract is terminated for breach,
o And the purchaser is in default a reasonable
deposit is normally retained by the vendor, even
if there is no express contractual right to do so.
o and the purchaser is not in default, the deposit
must normally be returned and, if not, can be
recovered in an action for monies had and
received for a total failure of consideration
o If a contract is terminated for a failure to pay
the deposit, the innocent party may be able to
sue to enforce the recovery of the deposit as a
debt, even if the innocent party has not suffered
any loss.
when the contract fails for failure of a contingent
contingent - restitutionary action for moneys had and
received on or for a total failure of consideration.


If excessive, it
may be subject
to relief against
forfeiture.
Recovery of
instalments paid
Where the contract has been terminated for breach
and
does not have a forfeiture clause the vendor
must return the instalments whether or not the
purchaser is at fault.
does have a forfeiture clause which specifies
that the deposit is forfeited, then common law
follows the contract but equity may provide
relief against forfeiture; usually if it is a penalty
ie not a genuine pre-estimate of loss.

Payment for
services
performed
Action for unjust enrichment - a restitutionary claim, on
a quantum meruit, for reasonable remuneration
the defendant has received a benefit,
at the expense of the plaintiff,
in circumstances which the law recognises as
unjust
and that there are no available defences.

Recovery of
money sums
Debts which
have
unconditionally
accrued prior to
termination as
payment for the
other partys
performance are
recoverable,
regardless of
liquidated damages clause in contract which is a
genuine pre-estimate of loss (not a penalty)
recovery of unconditional debts which have accrued
prior to termination (including an unpaid deposit)
through a liquidated demand where:
o the contract is for payment of a fixed or
ascertainable sum
o the debt has accrued

fault
Damages Justifiable
termination will
give rise to a
right to damages
If termination is justified at common law, then loss
of bargain damages are available - equivalent to the
full value of the lost performance, including
expected income and other benefits that would
have been gained.
If termination is justified by the contract, loss of
bargain damages are not available but accrued
damages are available.

Questions and Answers
Question:
Liquidated damages clauses and penalties... the differences between these two seems simple enough where a penalty is a simply
number which has to be paid for a breach? Whereas liquidated damages calculates the amount suffered?
Although, liquidated damages will not always be enforced by courts I have read.. this I am unclear about.
Answer:
Re liquidated damages liquidated damages clauses will not be enforced if they are penalties. The distinction is that a liquidated
damages clause is a genuine pre-estimate of damage (even if the damage ends up being less) whereas a penalty may be excessive or
is unrelated to the likely damage.
Question:
I have just been reanalysing my answers on the tutorial questions, and Foran V Wright has got me a bit confused.
- From my understanding, if a party repudiates then the other party does not have to fully prove they are willing and ready to enter
into the contract, as the repudiating party has effectively estopped them from doing so.
- If that is the case, unless it is a trick question, number 9 asks
If the majority had found that the purchasers were not ready, able and willing to perform, would that have affected their ability
to recover the deposit?
What I am not sure of is, even if the majority had found the innocent party was not ready and willing, the fact that the vendor
repudiated would make this irrelevant? Or would it then determine that on a technicality the purchaser had also repudiated?
Answer:
The vendors have repudiated (in an anticipatory breach). The purchaser did not elect to terminate at that stage, thus waiting for the
settlement date. Neither attended settlement, and the purchaser terminated for actual breach (time was of the essence).
The purchaser sought return of the deposit (action for money had and received on a total failure of consideration), and was
successful.
The purchaser did not have the funds to settle on the date, because he took the view that because of the repudiation there
wouldnt be any point attending settlement.
Normally he would have had to show he was ready and willing to settle, but the vendor would have been estopped from claiming
that because the vendor was the one to lead him to believe that there was no point in attending settlement.
The main issue was whether the vendors conduct in repudiating the contract before settlement date estopped him from later
arguing that the purchaser was not ready, able and willing to perform. The conduct was there, and was relied upon and the
purchaser had sustained detriment in the form of a loss of chance to tender money (the elements of estoppel).
So the purchaser got his money back.
So normally they would have had to show that they were ready and willing to perform, because this was a termination for actual
breach, but the repudiation had come first and that was the thing that led them to believe that there was no point in tendering the
money.
Question:
in Masters v Cameron :
-Masters brought the action against Cameron wanting the deposit back. Masters lost because there was found to be a contract so he
didn't get his deposit back.
-Masters appealed to the HCA and won because it was found there was no contract and he got his deposit back ?
Answer:
The reason it is relevant to termination is that it draws the distinction between a contingent condition on formation (condition
precedent) (if the condition doesn't eventuate the contract has not been formed at all) and a condition on performance (condition
subsequent) - if the condition doesn't eventuate the contract can be terminated.
If there's no contract because the condition on formation didn't eventuate, then the deposit would be returned. The action
(although it doesn't say so in the case) is a restitutionary action for moneys had and received on a total failure of consideration.
Question:
in Sargent v ASL Developments from what I understood:
-Mrs Sargent sold her land to ASL Developments and in their contract either party was allowed to terminate if the land was affected
by town planning schemes in a certain period of time. But she didn't know about this clause? And so 2 and a half years later she
terminated because the land was in fact involved in a town planning scheme. But before this time she has received payment and
assisted the purchaser brining the land under the Real property Act.
-Im not sure what happened in the courts prior to the HCA but in the HCA it was held her termination was ineffective because by her
taking payments she had 'waived' her right to terminate.
Answer:
In Sargent by acting inconsistently with termination (by accepting the payments) she waived her right to terminate. This is a form of
affirmation - she lost her right to terminate by affirming the contract. Even though she didn't personally know of the right to
terminate, her solicitor did and his knowledge was imputed to her, so the affirmation occurred with the relevant knowledge.
Question:
in Godeke v Kirwin
-kirwin sold his land to Godecke there was a clause to say if either party wanted to change the agreement or make additions they
could so in 28 days. Godecke made some changes and Kirwan refused to proceed.
-it was first help there was no binding agreement, then in the HCA it was help there was.
-so does that mean the main issue of the case was whether there was a binding contract or was it just a preliminary agreement?
-I don't understand what sort of condition was the requirement to exercise the formal contract and what were the indications they
intended to be immediately bound?
Answer:
In Godecke there was a preliminary agreement (which also gave rise to a certainty argument) by which the parties agreed that they
would 'execute a further more formal contract.' There are a number of questions arising out of Godecke, including whether they
intended to be bound at that point or not (they were) and whether the uncertainty could be cured (it could). The types of things
that led the court to say that they intended to be bound at that point included the amount of detail in the preliminary agreement.
CASES:
Case analyses
Masters v Cameron (1954) 91 CLR 353 (E)
1. In the case above, who were the parties to the contract and what type of contract was in dispute?
Violet Christina Cameron and Norman James Masters were the parites to the contract. The type of contract that was in
dispute was a sale of land contract, between a vendor and a purchaser.
2. What was the main issue in this case?

3. What sort of condition was the requirement to exercise the formal contract of sale?
An agreement was reached to sell a farming property on certain terms. It was stated that, "this agreement is made
subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and
conditions." On the same day a deposit of 1750 was paid to the vendor's agent. When the purchaser refused to proceed
with the sale, both parties claimed the deposit - the purchaser on the basis that there was no contract, therefore money
paid should be returned - the vendor claiming that there was a contract and in the event of a failure to proceed, the
money was forfeited. The judge held that there was a contract. The purchaser appealed.
4. What were the three possible classes of into which this case could fall? Into which class did it fall? Why?
The parties have finalised their agreement and intend to be bound straight away, but intend to put it into more precise
form. Lord Blackburn in Rossiter (1878) - said that the mere fact that you have indicated a desire to have a more formal
expression of the terms does not mean that negotiations are still continuing. An assent without power to vary the terms
indicates a completed contract.
2. They have agreed all the terms, but have made performance of one or more terms conditional upon the execution of a
formal document.
3. The parties do not want to be bound until they have completed the formal document. Here, the parties may wish to
retain the right to withdraw, if agreement cannot be reached on outstanding matters.
In the first two cases we have a binding contract. In the third case we merely have a record of the terms which are
intended to form the basis of a contract to be finalised.
The question is to be determined by the parties intention as disclosed by their language. If "subject to contract" means
there are terms to be agreed, or conditions to be fulfilled, then there is no contract until those things have been done. Sir
George Jessell in Winn v Bull (1877) said that where a proposal or agreement is "subject to contract", it means what it
says, that it is subject to a formal contract being prepared. When not expressly stated to be so, then it is a matter of
construction. Similar views have been expressed in Spottiswoode [1942] and Keppel [1927]. No reason why those
principles should not apply here, and thus we conclude that no contract has been formed.
This leaves the question of the status of the deposit. Was the payment anticipatory, to become a deposit under the
contract, or was it intended to be an interim guarantee that the purchaser would enter a reasonable contract. As noted in
Chillingworth v Esche (1924), prima facie, the latter is not common sense. We conclude that the payment was merely
anticipatory.
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 (E)
Laurinda and Capalaba Park had entered an agreement by which Laurinda was to receive a lease over premises in the Capalaba Park
Centre. There was an obligation on Capalaba Park to supply a lease in registrable form to Laurinda. Laurinda took possession of the
premises in December 1985. Laurinda fulfilled all of its obligations, and forwarded the lease to Capalaba to complete. Time was not
of the essence (as a consequence of clause 15.7). Capalaba was considering changing its financial structure, and delayed completing
the formalities that would make the lease registrable for a total of 9/10 months. In that time, Laurinda had decided it wanted to sell
its business, and needed the lease to complete the sale. It sent letters to Capalaba asking them to return the lease. Capalaba gave
the impression that they would comply with their obligations in the near future, but took no action. In August 1986, Laurinda sent a
letter giving Capalaba 14 days notice to complete, with which Capalaba did not comply. Laurinda terminated the agreement.
What is the nature of repudiatory breach and the nature of a notice to complete?
Mason CJ, Brennan, Deane, Dawson, Gaudron JJ
One party may rescind a contract if the other party (a) repudiates it generally, or (b) repudiates an important term in the contract
(Brennan, 642). Repudiation may be inferred where "one party renounces his liabilities under it - if he evinces an intention no longer
to be bound by the contract ... or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his
obligations and not in any other way" (Shevill, cited by Mason and Brennan). This inference is to be drawn objectively - i.e. it is
determined by whether a reasonable person in the shoes of the innocent party would infer that the other party's actions fulfilled the
Shevill test (Brennan). Where time is not of the essence, mere delay does not necessarily satisfy this test (Mason and Brennan).
The rights and obligations of parties upon the giving of a valid notice to complete are mutual. The notifier and the notified both have
a right to rescind if the notice is not complied with by the other party on the given date. If a notice to complete needs to threaten
termination for non-compliance, that would remove the mutuality (as the notified party would have a right to elect to leave the
contract on foot after non-compliance that the notifier would not have) (Deane and Dawson). The notice must still convey the fact
that the notifier wishes to have time regarded as being of the essence. This can be done by implication, especially if it is
correspondence between solicitors. The time set out in a notice to complete must be sufficient for a reasonable person to complete
the actions mentioned. The onus is on the notifying party to show that the time specified is sufficient.
HELD Deane and Dawson JJ
Breach of a fundamental obligation by unreasonable delay will justify recision at law, but not at equity. A valid notice to complete
effectively makes time of the essence in equity, non-compliance thereby removing the right to equitable relief.
HELD Gaudron
The special relationship between creditor (the directors of Laurinda, who were acting as guarantors for the company) and surety
may ground the inference that time is of the essence, even in the face of a contractual clause seemingly to the contrary.
As a question of fact, 14 days was an unreasonable time in which to expect someone to procure a lease in registrable form - the
notice to complete was not valid. However, the unjustified delay by Capalaba, coupled with its incorrect statements and unfilled
assurances permitted the inference that it intended to perform the contract only in a manner substantially inconsistent with its
obligations. Laurinda was within its rights to rescind for this reason.
Godecke v Kirwan (1973) 129 CLR 629
Background facts:
Agreement made with principal terms set out
Clause 6 specifies that if the vendor requires, the parties will sign a further agreement prepared by the vendors solicitors.
Legal issues
Illusory promises Exemptions, matters to be determined by a third party
Judgement
Clause 6 did not require a further agreement, only allowed vendors solicitor to add terms unilaterally.
Solicitors can only add terms which are consistent with the original offer and are reasonable in an objective sense (court determines
what is reasonable objectively).
The TJ held the agreement was not binding.
On Appeal shown to be binding.
1. In the case above, who were the parties to the contract and what type of contract was in dispute?
Godecke (purchaser) and Kirwan (vendor) entered into a written agreement for the sale of land
2. What was the main issue in this case?
Illusory promises Exemptions, matters to be determined by a third party
Kirwan subsequently refused to proceed with the sale

3. What sort of condition was the requirement to exercise the formal contract of sale?
in cl 6, that, if Kirwan required it, Godecke would execute a further agreement containing the terms of that agreement
and any other as determined by Kirwan's solicitors (within reason).
4. What indications were there that the parties intended to be immediately bound?
Walsh J: A binding agreement may be made leaving some important matter to be settled by a third party or even, in most
cases, by one of the parties. The parties set out all the principal terms governing the sale of land, including an obligation
to execute a formal contract and a promise by Godecke to execute, if required , a further agreement. Walsh
considered that requirement should be limited to permitting the insertion of covenants and conditions not inconsistent
with those contained in the offer and such additional conditions needed to be reasonable in an objective sense. This
was not an agreement to agree on additional provisions but an agreement by Godecke to accept additional provisions
if reasonably required.
This was, therefore, not a case in which all the terms of the contract had not been settled. A binding
agreement had been made. Appeal allowed.
Tropical Traders v Goonan (1964) 111 CLR 41
D agreed to purchase land in Perth in Jan 58. Price to be paid by deposit, four instalments due in 59, 60, 61 and 62 with final
payment in 63. Cl 12 made time the essence of the contract in all respects. Cl 11 said that if D failed to make payments at the proper
times, all the money paid by them would be absolutely forfeited. This clause also allowed them to "rescind" the contract without
notice and to retake possession of the property. Title was to be transferred on payment of the full purchase price.
D took possession and paid deposit. The first 3 instalments were each a few days late, and the 4th a few days early. Final payment
due on 6 Jan 63. Interest was paid on the following day and an extension of time requested. On 8 Jan P informed of right to rescind
for breach but said the right would not be exercised before 11 Jan. On 15 Jan P wrote to say money forfeit and agreement rescinded.
31 Jan P issued writ for declaration that rescission lawful and claiming possession.
HELD Kitto J
Each acceptance of a late payment operated as an election not to rescind for non-payment by the due date, but to read into it
anything of a promissory nature with regard to future payments and non-reliance on Cl 12 would be unwarranted. Repeated
acquiescence in non-observance by the other of, say, a time provision may make it no longer 'of the essence', and it may not matter
if it is described as a promissory estoppel, a waiver or a variation by mutual consent. The extension granted in relation to the final
payment goes against the argument concerning a waiver. What the extension may do, is indicate that time is no longer of the
essence. Barclay (1874) the effect of the extension is only to substitute the new deadline for the old, and does not destroy the
essential character of time. The extension is a qualified and conditional waiver of the original stipulation. The acceptance of the
interest did not affect the right to rescind - it was money due and was not an election to affirm for the future. Contract validly
rescinded, but remit to Supreme Ct to consider the question of relief against forfeiture.
Foran v Wight (1989) 168 CLR 385
HELD Mason CJ, Brennan, Deane, Dawson, Gaudron JJ
Contract for sale of land. Time was of the essence. Some days prior to the completion date, the vendors represented that they
would not be able to complete on time. At that time the purchasers did not have enough finance to purchase the house. Neither
party acted on completion date. Two days later purchasers purported to rescind the contract, and seek their deposit back.
Did the purchasers need to show they were ready and willing to perform? (no) If so, at what time? Was an estoppel created by the
vendor's representations? (yes)
When one party, A, purports to repudiate the contract, the other party, B, may either (i) accept the repudiation, and rescind the
contract or (ii) allow the contract to remain on foot. There is no third option (Fercometal Case (1989, UK)). If the contract remains on
foot, it does so for the benefit of both parties. For one party to sue for the other's breach under contract they must show that, under
ordinary contract principles, they were ready and willing to perform their obligations under the contract as at the time of the other's
breach. Where A represents to B that B needn't perform B's obligations under an executory contract (i.e. one to be performed in the
future), or that it would be pointless for B so to do, B is released from the performance of those obligations until such time as A
withdraws that representation [Peter Turnbull, (1954, Aust). If B wishes to sue under the contract for A's failure, B must be able to
show that they were ready and willing to perform their obligations as at the receipt of A's representation. The onus of this is
discharged if they can show they were "not incapacitated from [performing their obligations] and were not decided against doing
so".
In this case, the repudiation was not accepted (i.e. it was an action for actual breach), but (per Brennan, Deane, Dawson) the
vendor's representation estopped them from arguing that the purchasers needed to be ready and willing to complete on time. To
rely on the estoppel, the purchasers had to show that they were ready and willing to complete as at receipt of the repudiation. They
discharged this onus. The vendor's consideration totally failed, so the purchasers were entitled to the return of the entirety of the
deposit (Fibrosa).
HELD Gaudron
Not based on estoppel. The vendor's representation waived their benefits under the "essentiality of time" clause, thereby removed
the need for the purchasers to complete on time.
HELD Deane
Readiness and willingness is only relevant where the plaintiff is attempting to recover damages for breach. It is not necessary to
rescind a contract.
HELD Mason CJ dissenting
There was no relevant detriment to the purchaser on which to ground an estoppel. The purchaser was therefore required to show
that they were ready and willing to perform as at the completion date. This onus had not been discharged.
Sargent v ASL Developments Ltd (1974) 131 CLR 634 (E)
This case considered the right of rescission of a contract and whether or not the conduct of a party amounted to a waiver of their
right to rescind a contract where they had knowledge of this right to rescission and did not act on it immediately. An issue was
whether the party had satisfied the doctrine of election in relation to their right of rescission.
In Sargent by acting inconsistently with termination (by accepting the payments) she waived her right to terminate. This is a form of
affirmation - she lost her right to terminate by affirming the contract. Even though she didn't personally know of the right to
terminate, her solicitor did and his knowledge was imputed to her, so the affirmation occurred with the relevant knowledge.