CONTRACT LAW IN AUSTRALIA
Issue:
The issues in this case are whether under the circumstances, Max can rescind, terminate, or otherwise avoid the contract, and whether he can confirm the contract but sue Maggie for breach of contract and/or for one-half of $35m in damages or some other appropriate sum.
Rule
The laws governing contract rescission, termination, and breach, and whether in either circumstances, one can sue for damages, are contained in a number of instruments, including, common law, statutory law provisions, and case law[1]. The common law is contained in the doctrines of ancient English law of the commonwealth nations, Australia inclusive. Statutory law on the other hand, is derived from Acts[2] of the Legislature and Statutes. Case law constitutes decisions emanating from the courts of law which touch on the relevant matters and as applicable to the given fact pattern. At the moment, Australia does not have a unified code of contract of law. As such, the laws regulating contract formation, discharge, or termination derive greatly from common law and case law. There are other various pieces of legislation that have an impact on contract law such as National Consumer Credit Protection Act of 2009 and The Personal Property Securities Act of 2009.
Under common law, a contract can only be terminated if there is a material breach of a condition or warranty as was held in the case of Hill as Trustee for the Ashmore Superannuation Benefit Fund v Halo Architectural Design Services Pty Ltd[3].
The breach must be so fundamental that it defeats the purpose of proceeding with the contract. Termination may also be due to frustration. Frustration occurs if an external supervening circumstance sets in and renders the contract performance impossible[4]. In other cases, parties may simply choose to abdicate their responsibilities under the contract. In such a case, the contract is terminated by breach. In rare circumstances, parties may, by mutual consent, bring an end to their contractual relationship and resolve that no responsibilities may owe to each other by virtue of the contractual agreement.
Various duties and responsibilities may flow upon the breach of a contract, depending on which party is at fault. The defaulting party must compensate the other party the resources expended in meeting their part of their obligations. If there are any benefits derived under the contract, the receiving party must pay for such benefits. The law seeks to restore the parties to their initial positions upon the termination of a contract, in a principle referred to as restitution integram[5]. Restitution integram is usually quantifiable and awarded in monetary terms. An aggrieved party under the contract can also sue for general and special damages upon the breach of the contract[6]. The damages are meant to cater for the expenses incurred by the innocent party.
Analysis
The scenario presents a situation where one party, Max, wants to terminate the previous contractual relationship with Maggie. This move is informed by the change in circumstances and the failure by Maggie to fulfill her part of the obligations under the contract. Besides, Max wants to know whether it is possible under the law to confirm the contract but sue for breach of the contract by Maggie and subsequently sue for one half of the suit property in its increased value.
To effectively analyze this issue, it is important first to determine whether there was actually a valid and enforceable contract between the parties. Max and Maggie are assumed to be adults of sound mind, capable of entering into contractual relations. Therefore, they had capacity and with intention to create legal relations, as a result of which they entered into a contract[7]. There is no prove of undue influence or coercion from either party, thus, the contract entered into on the 1st day of March, 2015 was valid and enforceable.
The details of breach are that Maggie failed to perform her duties under the contract. First, she failed take up residence by 14 May 2015 as agreed, pay up the initial deposit of $1 m by 1st May 2015, pay up any financial outlays on the property of $45,000 owed to Point Lonsdale Regional Council (PLRC) by 7 May 2015, and clear the outstanding balance of $9 m by 31 May 2015. Instead, she took residence on 30 May 2015, paid the initial deposit on 1 June 2015, failed to pay the $45,000 owing to the Point Lonsdale Regional Council and has not cleared the outstanding balance as agreed.
All the above factors negate the provisions of the contractual agreement. However, it is also clear that Max has encouraged the habit by receiving the payment overdue and paying the outstanding credit to PLRC. The delayed payments and occupation of the premises are a clear breach of the terms of the contract. However, they constitute only a breach of conditions and not warranties. The fact that Max agreed to receive payments later than the stipulated time implies that he acquiesced the conduct. He is therefore estopped from bringing the issue up as contributing to the breach of the contract[8]. We are not told whether the outstanding payment of $9 m has been made or it is outstanding. Due to the time lapse, we can safely assume that Maggie has not honored her part of the bargain. The failure by Maggie to pay the outstanding dues and to remit the balance contributes to a breach of warranties. Max can effectively and under law terminate the contract.
If Max desires to confirm the contract and wait for Maggie to pay the outstanding balance, he will be entitled to a refund of the $45,000 paid the PLRC and can sue for other damages. However, he cannot sue for the one half of the value property in its inflated value. To act as such amounts to a claim that the consideration for the contract was not adequate. Even if he had agreed to sell his portion of the property to Maggie at $1, that value would be deemed to be adequate. The law is clear that consideration need not be sufficient, but be adequate.
Conclusion
According to the fact pattern and analysis of the law, Max has two options. One, he can terminate the contract for breach of a warranty. Two, he can confirm the contract and sue for the extra amount incurred in settling the debt to PLRC and any other damages.
Bibliography
Corden Investments Pty Ltd v. Lesder Properties Pty Ltd [2012] NSWCA 184.
Equuscorp Pty Ltd v Wilmoth Field Warne [2007] VSCA 280.
Hill as Trustee for the Ashmore Superannuation Benefit Fund v Halo Architectural Design Services Pty Ltd [2013] NSWSC 842.
Legione v Hateley (1983) 152 CLR 406.
Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61CLR286.
National Consumer Credit Protection Act of 2009.
The Corporations Act 2001.
The Personal Property Securities Act of 2009.
Trans Petroleum Pty Ltd v White Gum Petroleum Pty Ltd [2011] WASC 150.
[1] Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61CLR286. The case outlines various circumstances under which a contract can be terminated, including, parties’ resolve.
[2] See s. 10X of The Corporations Act for example.
[3] [2013] NSWSC 842.
[4] See Legione v Hateley (1983) 152 CLR 406.
[5] See the decision in Trans Petroleum Pty Ltd v White Gum Petroleum Pty Ltd [2011] WASC 150.
[6] Ibid
[7] See the decision in Trans Petroleum Pty Ltd v White Gum Petroleum Pty Ltd [2011] WASC 150.
[8] Equuscorp Pty Ltd v Wilmoth Field Warne [2007] VSCA 280. The case developed the law of estoppels to bar a litigant from going back on his promise or deviating from his previous conduct. See also the case of Legione v Hateley (1983) 152 CLR 406.