IMAG0001

24
DISCHARGE BY BREACH
INTRODUCTION
24.1 Contractual obligations may be discharged for several reasons. It will be recalled that such
obligations could be discharged where there has been exact performance of contractual obligations' or
where there has been agreement between the parties. 2 In addition, as will be seen.' a contract at
common law is terminated through the operation of the doctrine of frustration and in such cases future
obligations will cease as the termination operates in futuro. A contract can also be terminated for
breach of certain contractual terms. This chapter is concerned with an analysis of the conduct that
constitutes a breach of contractual terms so as to justify termination by an innocent party.
24.2 Initially, it should be noted that in manyofthe cases and writings dealing with termination for
breach of contract, one will see reference to 'rescission' for breach. Thus, as was pointed out by Sackar
J in Remax Developments Pty Limited v Chamwell Pty Limited & Hiwan Pty Limited,4 in the case of
McDonald v Dennys Lascelles Ltd 5 'Dixon J uses the term "rescind" in the sense of meaning
"terminated" Although the word 'rescission' is used in this context, it should not be confused with the
meaning of rescission in the context of setting aside contracts because of some vitiating factor. Indeed,
the word 'rescission' should be confined to that context, with the word 'termination' applied to
discharge for a breach of contract. In this respect, in Strzelecki Holdings Pty Ltd v J orgensen6 the Court
of Appeal in Western Australia said:
The common law and equity distinguish between the effects of termination of a contract for
breach or repudiation, on the one hand, and the rescission of a contract for frustration, fraud,
misrepresentation or mistake on the other hand. 7 Termination for breach operates to discharge
the parties from their obligation to perform their respective contractual duties. However, the
terms of the contract continue to inform the rights and liabilities arising from past conduct of
the parties, which may be enforced in the courts ( usually by action sounding
1. See 22.3.
2. See 23.1 and 23.23.
3. See 25.61.
4. [2011] NSWSC 695 at [103].
5. (1933) 48 CLR 457.
6. [2016] WASCA 177 at [99]. See also Johnson v Agnew [1980] AC 367 at 392-3; [1979] 1 All ER 883 at 889.
7. Richmond v Moore Stephens Adelaide Pty Ltd (2015] SASCFC 147 at [193]; Holland v Wiltshire (1954) 90 CLR
409 at 416.
-
of rescission set aside the contract from the beginning. 9 From the point of rescission, the
rights and liabilities of the parties, including those arising from past conduct, are generally
determined as if the contract was never made.
Similar cautionary remarks were made by the High Court in Commissioner of Taxation diance
Carpet Co Pty Limited." where the following was stated:
Something should be said immediately of the use here of the term 'rescission'. A relevant distinction
is expressed in the well-known passage in the reasons of Dixon Jin McDonald v Dennys Lascelles
Ltd. 11 A contract may be rescinded because of matters, such as fraud, which affect its formation,
with the consequence that, so far as possible, the parties are restored to their pre-contract positions.
Rescission in that sense is distinct from rescission [or termination) at the election of one party for
breach by the other, with the consequence that the contract, so far as it remains executory, is
determined, and damages for breach may be recovered.
4 The distinction between termination and rescission ab initio was also made in Highfield perty
Investments Pty Ltd v Commercial & Residential Developments (SA) Pty Ltd,12 where e J said:
Termination for breach of contract is a different act to rescission ab initio for misrepresentation. The
former discharges the parties from future performance of the contract and does not affect past
performance (subject to potential adjustments). By contrast, the latter involves setting aside the
contract from its inception, including acts of performance (including any transfers of property made
pursuant to the contract).
5 It was previously noted13 that a failure to exactly perform a contractual obligation when mised was a
breach of contract and may entitle the other party to terminate that contract. ether or not the party in
default has any rights in that situation because, for example, y may have substantially performed their
obligations, is a different question as to whether y are in breach of contract for not performing exactly as
promised and whether or not the ocent party can terminate the contract. Importantly, in order to
understand these grounds, type of conduct that constitutes a breach of contract needs to be appreciated.
6 According to Seddon, Bigwood, and Ellinghaus, 14 the law recognises that there are 1 forms of conduct
that constitute a breach of contract and thus form the basis of a right erminate. First, where the parties
agree that the contract is to be performed by a certain e, any failure to completely perform the contract
at the time agreed will constitute an actual
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, 469-70, 476-7; Heyman v Darwins Ltd [1942] AC 356
at362-3,371-4,379,399.
Vadasz v Pioneer Concrete (SA) Pty Ltd (1995)
184 CLR 102 at 111; (1995) 130 ALR 570; Alati v Kruger
(1955) 94 CLR 216 at 223-5.
(2008) 236 CLR 342 at 345; 246 ALR 448 at 449-
50. (1933) 48 CLR 457.
[2012] SASC 165 at [286].
See 24.1.
N C Seddon, R A Bigwood and M P Ellinghaus, Cheshire and Fifoot's Law of Contract, 10th Aust ed,
LexisNexis Butterworths, Sydney, 2012, p 401.
557
PRINCIPLES OF AUSTRALIAN CONTRACT LAW
breach of contract and could form the basis of an application to terminate the contract by the innocent party. In Foran v
Wight15 Brennan J said:
A stipulation for completion on a fixed day creates both a substantive and a temporal obligation; an obligation
to complete and an obligation to do so on the fixed day.
24.7 However, such a basis to terminate is not restricted to a failure to perform on time. A right to terminate may also
exist where there has been a failure to perform in the manner contemplated by the contract - for example, to a particular
standard. A breach of any such obligations, if regarded as a condition or particular type of intermediate or innominate
term, 16 may be a basis to terminate the contract. With respect to these types of breaches, the emphasis is on objectively
deciding whether performance, either in substance or on time, has occurred (breach of a condition) or whether the
breach is serious enough (breach of an intermediate term). In either case the innocent party may be able to terminate the
contract.
24.8 The second type of breach of contract occurs where a party indicates an unwillingness or inability to perform their
contractual obligations.17 This is known as 'repudiatory breach', 'repudiation', or 'renunciation'. These expressions are
analysed further in this chapter. According to Carter, 18 "repudiation" means "repudiation of obligation" and describes a
situation in which a promisor's absence of readiness or willingness to perform gives rise to a right to terminate'.
24.9 Unfortunately, however, the word 'repudiation' is used in different senses by the courts. 19 First, the word
'repudiation' has been used to refer to conduct which evinces an unwillingness or an inability to render substantial
performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to
be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations."
Unfortunately such a description has also been referred to by the courts as 'renunciation'. 21 The test is whether the
conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either
of the contract as a whole or of a fundamental obligation under it. 22
24.10 Second, the word 'repudiation' has been used to refer to any breach of contract which justifies termination by the
other party.23 In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd2 4 Gleeson CJ, Gummow, Heydon, and
Crennan JJ said:
The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness or
an inability to render substantial performance of the contract.
15. (1989) 168 CLR 385 at 420; 88 ALR 413 at 437.

16. See 24.25-24.42.
17. Kraguljac v A & B Property Developments Pty Ltd (No 2) [2012] SASC 1 at [76]-[77].
18. J W Carter, Contract Law in Australia, 6th ed, LexisNexis Butterworths, Australia, 2013, p 680.
19. Heyman v Darwins Ltd [1942] AC 356 at 378; Shevill v Builders Licensing Board (1982) 149 CLR 620 at
625-6.
20. Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634; 85 ALR 183 at 190.
21. Heyman v Darwins Ltd [1942] AC 356 at 397.
23. J W Carter, Carter's Breach of Contract, LexisNexis Butterworths, Sydney, 2011, p 300.
24. (2007) 233 CLR 115 at 135-6; 241 ALR88 at 100-1.
24
DISCHARGE BY BREACH
INTRODUCTION
24.1 Contractual obligations may be discharged for several reasons. It will be recalled tha such obligations could be
discharged where there has been exact performance of contractua obligations' or where there has been agreement between the
parties.2 In addition, as wil be seen,' a contract at common law is terminated through the operation of the doctrine o
frustration and in such cases future obligations will cease as the termination operates in future A contract can also be
terminated for breach of certain contractual terms. This chapter i concerned with an analysis of the conduct that constitutes a
breach of contractual terms so a to justify termination by an innocent party.
24.2 Initially, it should be noted that in many of the cases and writings dealing with terminatior for breach of contract, one
will see reference to 'rescission' for breach. Thus, as was pointed ou by Sackar J in Remax Developments Pty Limited v
Chamwell Pty Limited & Hiwan Pty Limited, in the case of McDonald v Dennys Lascelles Ltd 5 'Dixon J uses the term
"rescind" in the sens: of meaning "terminated". Although the word 'rescission' is used in this context, it should no be
confused with the meaning of rescission in the context of setting aside contracts because o some vitiating factor. Indeed, the
word 'rescission' should be confined to that context, with th: word 'termination' applied to discharge for a breach of contract.
In this respect, in Strzeleck Holdings Pty Ltd v J orgensen6 the Court of Appeal in Western Australia said:
The common law and equity distinguish between the effects of termination of a contract for breach or repudiation, on
the one hand, and the rescission of a contract for frustration, fraud, misrepresentation or mistake on the other hand. 7
Termination for breach operates to discharge the parties from their obligation to perform their respective contractual
duties. However, the terms of the contract continue to inform the rights and liabilities arising from past conduct of the
parties, which may be enforced in the courts ( usually by action sounding
I. See 22.3.
2. See 23.l and 23.23.
3. See 25.61.
4. [2011] NSWSC 695 at [103].
5. {1933) 48 CLR 457.
6. (2016] WASCA 177 at [99]. See also Johnson v Agnew (1980] AC 367 at 392-3; [1979] l All ER 883 at 889.
7. Richmond v Moore Stephens Adelaide Pty Ltd (2015] SASCFC 147 at [193]; Holland v Wiltshire {1954) 90 CLR 409 at 416.
556
CHAPTER 24: DISCHARGE BY BREACH in damages for breach of
contract). By contrast the common law and equitable remedies

8
of rescission set aside the contract from the beginning. 9 From the point of rescission, the rights and liabilities of the
parties, including those arising from past conduct, are generally determined as if the contract was never made.
24.3 Similar cautionary remarks were made by the High Court in Commissioner of Taxation v Reliance Carpet Co Pty
Limited, 10 where the following was stated:
Something should be said immediately of the use here of the term 'rescission'. A relevant distinction is expressed in
the well-known passage in the reasons of Dixon J in McDonald v Dennys Lascelles Ltd. 11 A contract may be rescinded
because of matters, such as fraud, which affect its formation, with the consequence that, so far as possible, the parties
are restored to their pre-contract positions. Rescission in that sense is distinct from rescission (or termination) at the
election of one party for breach by the other, with the consequence that the contract, so far as it remains executory, is
determined, and damages for breach may be recovered.
24.4 The distinction between termination and rescission ab initio was also made in Highfield Property Investments Pty Ltd v
Commercial & Residential Developments (SA) Pty Ltd, 12 where Blue J said:
Termination for breach ofcontract is a different act to rescission ab initio for misrepresentation. The former discharges
the parties from future performance of the contract and does not affect past performance (subject to potential
adjustments). By contrast, the latter involves setting aside the contract from its inception, including acts of
performance (including any transfers of property made pursuant to the contract).
24.5 It was previously noted13 that a failure to exactly perform a contractual obligation when promised was a breach of
contract and mar entitle the other party to terminate that contract. Whether or not the party in default has anr rights in that
situation because, for example, they may have substantially performed their obligations, is a different question as to whether
they are in breach of contract for not performing exactly as promised and whether or not the innocent party can terminate the
contract. Importantly, in order to understand these grounds, the type of conduct that constitutes a breach of contract needs to
be appreciated.
24.6 According to Seddon, Bigwood, and Ellinghaus,14 the law recognises that there are two forms of conduct that constitute
a breach of contract and thus form the basis of a right to terminate. First, where the parties agree that the contract is to be
performed by a certain time, any failure to completely perform the contract at the time agreed will constitute an actual
8. McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, 469-70, 476-7; Heyman v Darwins Ltd [1942] AC 356 at362-3,371-4,379,399.
9_ Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 111; (1995) 130 ALR 570; Alati v Kruger
(1955) 94 CLR 216 at 223-5.
J 0. (2008) 236 CLR 342 at 345; 246 ALR 448 at 449-50. J J. (1933) 48 CLR 457.
12. [2012] SASC 165 at [286]. I 3. See 24.1.
J4. N C Seddon, RA Bigwood and M P Ellinghaus, Cheshire and Fifoot's Law of Contract, 10th Aust ed, LexisNexis Butterworths, Sydney, 2012, p
401.
557
breach of contract and could form the basis of an application to terminate the contract by the innocent party. In Foran
v Wight15 Brennan J said:
A stipulation for completion on a fixed day creates both a substantive and a temporal obligation; an obligation
to complete and an obligation to do so on the fixed day.
24.7 However, such a basis to terminate is not restricted to a failure to perform on time. A right to terminate may also
exist where there has been a failure to perform in the manner contemplated by the contract - for example, to a
particular standard. A breach of any such obligations, if regarded as a condition or particular type of intermediate or
innominate term, 16 may be a basis to terminate the contract. With respect to these types of breaches, the emphasis is on
objectively deciding whether performance, either in substance or on time, has occurred (breach of a condition) or
whether the breach is serious enough (breach of an intermediate term). In either case the innocent party may be able to
terminate the contract.
24.8 The second type of breach of contract occurs where a party indicates an unwillingness or inability to perform
their contractual obligations.17 This is known as 'repudiatory breach', 'repudiation'. or 'renunciation'. These expressions
are analysed further in this chapter. According to Carter, 18 "repudiation" means "repudiation of obligation" and
describes a situation in which a promisor's absence of readiness or willingness to perform gives rise to a right to
terminate'.
24.9 Unfortunately, however, the word 'repudiation' is used in different senses by the courts. First, the word
19
'repudiation' has been used to refer to conduct which evinces an unwillingness or an inability to render substantial
performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to
be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations."
Unfortunately such a description has also been referred to by the courts as 'renunciation'. 21 The test is whether the
conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either
of the contract as a whole or of a fundamental obligation under it. 22
24.10 Second, the word 'repudiation' has been used to refer to any breach of contract which justifies termination by the
other party.23 In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd 24 Gleeson CJ, Gummow, Heydon, and
Crennan JJ said:
The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness
or an inability to render substantial performance of the contract.
15. (1989) 168 CLR 385 at 420; 88 ALR 413 at 437.

16. See 24.25-24.42.
17. Kraguljac v A & B Property Developments Pty Ltd (No 2) [2012] SASC 1 at [76]-[77].
18. J W Carter, Contract Law in Australia, 6th ed, LexisNexis Butterworths, Australia, 2013, p 680.
19. Heyman v Darwins Ltd [1942] AC 356 at 378; Shevi/1 v Builders Licensing Board (1982) 149 CLR 620 at
625-6.
21. Heyman v Darwins Ltd [1942] AC 356 at 397.
23. J W Carter, Carter's Breach of Contract, LexisNexis Butterworths. Svdnev. 2011. o 300
CHAPTER 24: DISCHARGE BY BREACH This is sometimes
described as conduct of a party which evinces an intention no longer

to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may
be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the
situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it.
... Secondly, it may refer to any breach of contract which justifies termination by the other party .... There may be cases
where a failure to perform, even if not a breach of an essential term, ... manifests unwillingness or inability to perform
in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially
according to its requirements. This overlapping between renunciation and failure of performance may appear
conceptually untidy, but unwillingness or inability
to perform a contract often is manifested most clearly by the conduct of a party when
the time for performance arrives. In contractual renunciation, actions may speak louder than words.
24.11 In Velik v Steingold,25 after citing the definition of repudiation referred to in Koompahtoo Local Aboriginal Land
Council v Sanpine Pty Ltd,26 Sackville AJA said:
Koompahtoo Council v Sanpine." as the plurality noted, was not concerned with issues that arise when the alleged
repudiation takes the form of one party asserting an erroneous interpretation of a contractual provision. However, the
authorities establish a number of principles relevant to such a case. A convenient statement of 'some of the key
principles' is to be found in the judgment of Ashley JA (with whom Kellam JJA, and Osborn AJA agreed) in R & A
Cab Co Pty Ltd v Kotzman.28 What follows is in part drawn on that statement:
whether a party to a contract has acted in such a way as to evince an intention not to carry out the contract is a
question of fact;
repudiation of a contract is a serious matter and is not to be lightly found or inferred; the question of repudiation
requires a consideration of all of the circumstances, including the conduct of the party claiming to have accepted
the repudiation;
repudiation is not determined by inquiring into the subjective state of mind of the party in default, but by
reference to conduct (verbal or otherwise) which conveys to the other party the defaulting party's intention not to
perform the contract or to perform it only in a manner inconsistent with that party's obligations and in no other
way;
where one party to a contract persists in maintaining that it will only perform an obligation of essential
importance in accordance with an untenable construction of that obligation, that conduct amounts to a repudiation
of the contract;
in some circumstances, an honest misapprehension as to the proper construction of the contract will not justify a
claim of repudiation, especially if the defaulting party indicates that he or she may be open to correction; and
whether the party propounding an erroneous construction of the contract has put forward that construction in
good faith is relevant to the question of whether he or she evinces an intention not to be bound by the contract.
25. [2013] NSWCA 303 at [86]-[87].

26. (2007) 233 CLR 115 at 135-6; 241 ALR 88 at 100-1.
27. (2007) 233 CLR 115; 241 ALR 88.
28. [2008] VSCA 68, at [44]-[49].
559
The High Court considered the consequences of one party acting on a mistaken interpretation of a contract for the
sale of land in DTR Nominees Pty Ltd v Mona Homes Pty Ltd. 29 Four members of the Court (Stephen, Mason, and
Jacobs JJ; Aickin J agreeing) analysed the position as follows:
No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an
intention that he will not perform the contract according to its terms. But there are other cases in which a party,
though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the
contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated
or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an
intention to repudiate the contract could not be attributed to him. As Pearson LJ observed in Sweet & Maxwell
Ltd v Universal News Services Ltd:30 'In the last resort, if the parties cannot agree, the true construction will have
to be determined by the court. A party should not too readily be found to have refused to perform the
agreement by contentious observations in the course of discussions or arguments .... '
In this case the [vendor] acted on its view of the contract without realizing that the [purchasers] were insisting
upon a different view until such time as they purported to rescind. It was not a case in which any attempt was
made to persuade the [vendor] of the error of its ways or indeed to give it any opportunity to reconsider its
position in the light of an assertion of the correct interpretation. There is therefore no basis on which one can
infer that the [vendor] was persisting in its interpretation willy nilly in the face of a clear enunciation of the
true agreement. ...
[O]n the evidence this Court would not be justified in finding that the [vendor] acted otherwise than in
accordance with a bona fide belief as to the correctness of the interpretation which it sought to place upon the
contract. Consequently it is a case of a bona fide dispute as to the true construction of a contract expressed in
terms which are by no means clear. In these circumstances the Court is not justified in drawing an inference
that the [vendor] intended not to perform the contract according to its terms or that it repudiated the contract.
24.12 In DCT Projects Pty Ltd v Champion Homes Pty Ltd31 Gleeson JA in the Court of Appeal in New South Wales, in light of
High Court authorities discussing repudiation, summarised the relevant principles as follows:
For the conduct of a party to constitute a renunciation of its contractual obligations it must be shown that the party is
either unwilling or unable to perform its contractual obligations, that is, it has evinced an intention to no longer be
bound by the contract, or stated that it intends to fulfil the contract only in a manner substantially inconsistent with its
obligations and in no other way. Repudiation is a serious matter and is not to be lightly found or inferred.
29. (1978) 138 CLR 423 at 432-3.

30. [1964] 2 QB 699 at 734.
31. [2016] NSWCA 117 at [39].
560
CHAPTER 24: DISCHARGE BY BREACH 24.13 The differing use
of the word 'repudiation' has attracted some criticism. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd32
Gleeson CJ, Gummow, Heydon, and Crennan JJ said:
In the past, some judges have used the word 'repudiation' to mean termination, applying it, not to the conduct of the
party in default, but to the conduct of the party relying upon such default. It would be better if this were avoided.
24.14 Furthermore, where a party indicates an unwillingness or inability to perform their contractual obligations in advance of
the time that that party was due to perform pursuant to the contract, this type of repudiatory breach is known as an
anticipatory breach of contract. It is to be contrasted with an actual breach of contract, which will occur where there has been
a failure to perform contractual obligations at a time when those contractual obligations were due to be performed - in other
words, where there has been a breach which fits into the first category of breach of contract referred to above. 33 Having said
this, however, it should be understood that there can be some overlap between the two types of breach - for example, where a
failure to perform is also tantamount to an indication of unwillingness or inability to perform contractual obligations.
24.15 A right to terminate performance of a contract exists at common law and may arise pursuant to statute. According to
Carter,34 unless the parties have agreed otherwise there are three situations in which the right to terminate will be implied:
 for breach of condition;
 for a sufficiently serious breach of an intermediate term; and
 in respect of an absence of readiness or willingness to perform constituting a repudiation of obligation or capable of being
treated as an anticipatory breach of contract.
24.16 These views are been echoed by others. 35 However, by way of contrast, Seddon, Bigwood, and Ellinghaus 36 classify the
circumstances where termination is justified as follows:
repudiation - this is breach consisting of a manifestation of unwillingness or inability to perform the contract in substance
or at all, before or at the time when performance is due;
32. (2007) 233 CLR 115 at 136; 241 ALR 88 at 101.

33. See 24.6-24.7.
34. Carter, Contract Law in Australia, note 18 above, p 679.
35. See A Burrows, A Restatement of the English Law of Contract, Oxford University Press, Oxford, 2016, pp 116-17. Professor Burrows
described the situation where an innocent party is entitled to treat the contract at an end in the following way: 'Breaches of contract
entitling the innocent party to treat the contract as at an end may be classified as follows:
(a) Breach of condition;
(b) Repudiatory breach, i.e., an actual breach of an innominate term where the consequences are such as to entitle the innocent party to treat
the contract as at an end;
(c) Renunciatory breach, i.e., an anticipatory breach of contract (i.e., in advance of the due date for performance), where the other party makes
clear to the innocent party that it is not going to perform the contract at all or is going to commit a breach of a condition or is going
to commit a breach of an innominate term and the consequences will be such as to entitle the innocent party to treat the contract as at
an end; in each case here, the innocent party has an election to accept the renunciatory breach at once and to terminate the contract,
without waiting for the due date of performance:
These remarks by Professor Burrows were cited with approval in Grand China Logistics Holding (Group) Co Ltd v Spar Shipping AS
[2016] EWCA Civ 982 at [21].
16. Seddon, Bigwood and Ellinghaus, Cheshire and Fifoot's Law of Contract, note 14 above, p 1057.
561
 breach of essential term ( or condition) - this breach consists of failure to perform a term regarded as essential by
the parties or by law at the time when performance is due;
 breach causing substantial loss of benefit - this consists of a failure to perform at the time when performance is
due, thereby depriving the injured party of the substantial benefit of the contract.
24.17 These rights to terminate apply to leases as well. 37
FAILURE TO PERFORM CONTRACTUAL OBLIGATIONS

24.18 In ascertaining whether a failure to perform contractual obligations entitles the innocent party to terminate the
contract, the term must be classified as a condition, warranty, or intermediate term. 38 Importantly, it does not matter
what name the parties give the term.
24.19 The general approach in relation to the classification of contractual terms, at least in the United Kingdom, is that
a term is innominate unless it is clear that it is intended to be a condition or a warranty. 39 In Bunge v Tradax 40
Lord
Scarman said:
Unless the contract makes it clear, either by express provision or by necessary implication arising from its
nature, purpose, and circumstances . . . that a particular stipulation is a condition or only a warranty, it is an
innominate term, the remedy for a breach of which depends upon the nature, consequences, and effect of the
breach.
24.20 A condition is sometimes also referred to as an essential term. In Wallis v Pratt" Fletcher Moulton LJ described
conditions as terms 'which go so directly to the substance of the contract or, in other words, are so essential to its very
nature that their non-performance may fairly be considered by the other party as a substantial failure to perform the
contract at all'. Thus, if the term breached is a condition, the innocent party may choose to proceed with the contract or
to terminate it and/or claim damages. The right to terminate arises for any breach of a term that is classified as a
condition.42 Until the innocent party elects to terminate, the contract still stands. 43 Alternatively, the innocent party 'may
treat the contract as continuing on foot, in which case it will remain in force for the benefit of both parties." In such a
case the innocent party may be able to enforce the contract by an order for specific performance.
37. Gum/and Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbel/town) Pty Ltd (2008) 234 CLR 237 at 259; 244 ALR l at 18.
38. Intermediate terms are sometimes called 'innominate' terms. See, for example, Cehave NV v Bremer Handeigesellschaft (The Hansa Nord)
[1976] QB 44; Bremer v Vanden [1978] 2 Lloyd's Rep 109; Bunge v Tradax [1981] 1 WLR 711; Grand China Logistics Holding (Group) Co
Ltd v Spar Shipping AS [2016] EWCA Civ 982 at [92], [98].
39. Cehave NV v Bremer Handelgesellschaft (The Hansa Nord) (1976] QB 44 at 70-1; Bremer v Vanden [1978] 2 Lloyd's Rep 109 at 113; Bunge
v Tradax (1981] 1 WLR 711 at 715-16, 717, 727. See also Grand China Logistics Holding (Group) Co Ltd v Spar Shipping AS [2016] EWCA
Civ 982 at (92].
40. (1981] 1 WLR 711 at 717.
41. (1910] 2 KB 1003 at 1012.
42. Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 138; 241 ALR 88 at 102.
43. Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435; [1946] ALR 390.
44. Peter Turnbull and Company Proprietary Limited v Mundus Trading Co (Australasia) Proprietary Limited (1954) 90 CLR 235.
562
CHAPTER 24: DISCHARGE BY BREACH 24.21 It is also clear
that if a party purports to terminate a contract on the ground of one fundamental breach by the other party, the party
terminating may rely upon a different fundamental breach that justified termination, even if unaware at the time that the breach
had occurred. 45
24.22 If the term is a warranty, there is no right to terminate the contract for breach of the terrn.f The remedy of the innocent
party lies in damages or specific performance.
24.23 Historically terms were classified as either conditions or warranties. Today, although most terms will be classified as
either conditions or warranties, a small number of terms will be classified as intermediate terms. With intermediate terms the
issue of termination is not determined merely by the existence of a breach. Rather, the court ascertains whether the extent of
the breach is sufficiently serious to give rise to a right to terminate. If it is not sufficiently serious, there is only a right to
damages or specific performance.
24.24 In addition to the rights of termination conferred by the common law, the parties to the contract itself may agree that a
right to terminate arises in particular circumstances." The basis of each of these rights to terminate will be examined in more
detail.
Conditions, warranties, and intermediate or innominate terms

24.25 A contract can expressly stipulate what type of term is involved. For example, terms implied by sale of goods
legislation48 are explicitly stated to be either conditions or warranties. Furthermore, it is open to the parties to expressly agree
to what type of term is involved. For example, '[t]he use of the word "condition" will usually (although not always) be
sufficient' for the term to be seen as a condition. 49 Similarly, in Personal Touch Financial Services Ltd v Simplysure Ltd50 the
Court of Appeal said:
Agreements often refer to all their terms as conditions, as in 'conditions of sale'. However, this was not such a case ....
While [ the use of the word 'condition'] is not conclusive, it must be given due weight when the agreement is
construed.
24.26 In the absence of any express stipulation, the court will construe the term. In Ankar Pty Ltd v National Westminster
Finance (Australia) Ltd51 Mason ACJ, Wilson, Brennan, and Dawson JJ said that 'courts are not too ready to construe a term
as a condition and at least where other considerations are finely balanced, will hold that a term is of such a kind that a breach
of it does not give rise to an automatic right to [terminate]'. This, their Honours said, 'is explained by a preference for a
construction that will encourage performance rather than avoidance of contractual obligations'. The distinction between
45. Downer EDI Ltd v Gillies [2012] NSWCA 333 at [131]; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 262; Secured Income Real
Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 611; Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR
359 at 377-8.
46. Bettini v Gye [1876] 1 QBD 183 at 188.
47. Stocznia Golynia SA v Gearbulk Holidays Ltd [2010] QB 27 at 36.
48. See 11.31-11.32.
Stocznia Gdynia SA v Gearbulk Holdings Ltd [2010] QB 27 at 36. SO. [2016] EWCA Civ 461 at [28].
S 1. (1987) 162 CLR 549 at 556-7; 70 ALR 641 at 645.
conditions, warranties, and innominate terms has been conveniently set out by Professor Burrows 52 in the following way:
A condition is a major term of the contract any breach of which entitles the innocent party to terminate the contract. ...
[A] warranty is, in contrast, a minor term of the contract such that no breach will entitle the innocent party to terminate
the contract. An innominate term (sometimes referred to as an 'intermediate term') is neither a condition nor a
warranty; and it would appear that most terms are now regarded as innominate. Where a term is innominate, the
question as to whether the contract can be terminated turns on the seriousness of the consequences of the breach
(judged at the time of the termination taking into account what has happened and is likely to happen ... ) rather than on
the importance of the term broken.
The classification of a term turns on the intention of the parties. Conditions
24.27 In Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd53 Jordan CJ set out the test for determining whether a term is
a condition, when he said:
The question whether a term in a contract is a condition or a warranty ie an essential or a non-essential promise,
depends upon the intention of the parties as appearing in or from the contract. The test of essentiality is whether it
appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the
promise is of such importance to the promisee that he would not have entered into the contract unless he had been
assured of a strict, or a substantial, performance of the promise, as the case may be, and that this ought to have been
apparent to the promisor .... If the innocent party would not have entered into the contract unless assured of a strict
and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise,
however slight. If he contracted in reliance upon a substantial performance of the promise, any substantial breach
would ordinarily justify a discharge. In some cases it is expressly provided that a particular promise is essential to the
contract, eg by a stipulation that it is the basis or of the essence of the contract ... but in the absence of express
provision the question is one of construction for the Court, when once the terms of contract have been ascertained.
24.28 In DTR Nominees Ltd v Mona Homes Ply Ltd 54 Stephen, Mason, and Jacobs JJ said: [Jordan CJ's] ... statement of the law
... emphasises that the quality of essentiality depends for its existence on a judgment which is made of the general nature
of the contract and its particular provisions, a judgment which takes close account of the importance which the parties
have attached to the provision as evidenced by the contract itself as applied to the surrounding circumstances.
24.29 The reference to 'surrounding circumstances' are to 'the circumstances in which a contract was made, and in which the
parties, objectively, should be taken to have understood that it would be performed'. 55
52. See A Burrows, A Restatement of the English Law of Contract, note 35 above, pp 113-14.
53. (1938) 38 SR (NSW) 633 at 641-2.
54. ( 1978) 138 CLR 423 at 431; 19 ALR 223 at 230.
55. South Dowling v Cody Outdoor Advertising [2005] NSWSC 391 at [54]. See also Kraguljac v A & B Property Development Pty Ltd (No 2)
[2012] SASC 1 at [69]-[71].
CHAPTER 24: DISCHARGE BY BREACH 24.30 In Associated
Newspapers Limited v Bancks56 the test stated by Jordan CJ was applied to a case in which Bancks was contracted by a
newspaper to provide a weekly comic strip involving the character, Ginger Meggs. The newspaper promised that the comic
strip would appear on the front page of its Sunday comic section. The newspaper breached its obligation by publishing the
comic strip on page three of the comic section. Bancks sought to terminate the contract. The High Court upheld his claim,
holding that the newspaper's obligation was a condition, on the basis that Bancks would not have entered into the contract
unless he had been assured that the comic strip would appear on the front page of the comic section.
24.31 In the United Kingdom general guidance as to whether a term of a contract is to be classified as a condition was given
in Bunge v Tradax. 57 This guidance was described in Grand China Logistics Holding (Group) Co Ltd v Spar Shipping AS58 by
Gross LJ as follows:
(i) First, the question was one of ascertaining the intentions of the parties and thus of the
true construction of the contract: As Lord Scarman59 put it:
'The first question is always, therefore, whether upon the true construction of a stipulation and the contract
of which it is part, it is a condition, an innominate term, or only a warranty:
It follows that where on the true construction of the contract a term was to be classified as a condition, then it was
unnecessary and inappropriate to explore the gravity of the breach; it was open to the parties to agree that any
breach of a particular obligation (regardless of its gravity) would entitle the innocent party to treat the contract as
at an end.
(ii) Secondly, if, on the true construction of the contract, the parties have not made a particular term a condition and if the
breach of that term may result in trivial, minor or very grave consequences, then the term is innominate.
(iii) Thirdly, unless the contract made it clear that a particular stipulation was a condition or only a warranty, it was to be
treated as an innominate term; the courts should not be too ready to interpret contractual clauses as conditions.
24.32 In Bunge v Tradax" a buyer had an obligation under a contract to give 15 days' loading notice to the seller. Until that
notice had been given, the seller could not nominate the loading port, which it was their contractual right to do. These
contractual terms were inter-dependent, as performance of the nomination by the buyer was necessary in order to enable the
seller to fulfil their obligation to nominate the loading port and ship the goods. It was therefore an illustration of a case in
which performance of a term by one party was a condition precedent to the ability of the other party to perform another term,
which was itself a condition.
Warranties
24.33 Historically, if a term was not a condition it was only a warranty. A breach of warranty did not give rise to a right to
terminate. 61 The innocent party could only seek damages at common law for breach of a warranty. Today this remains the
case, unless the term is classified as an intermediate or innominate term that has resulted in serious consequences to the
innocent party.
56. (1951) 83 CLR 322.

57. (1981] I WLR 711.
58. (2016] EWCA Civ 982 at [52]. In the same case Hamblen LJ agreed with these comments at [91].
59. Bunge v Tradax [1981] 1 WLR 711 at 717.
60. [1981] 1 WLR 711.
61. Bettini v Gye [1876] 1 QBD 183 at 188.
565
PRINCIPLES OF AUSTRALIAN CONTRACT LAW Intermediate or in
nominate terms
24.34 Following the judgment ofDiplock LJ in Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd, 62 a third type of
term, today referred to as an intermediate or innominate term, has been recognised by the common law. Treitel regards Dip
lock's judgment in this case as being one with 'a fair claim to being the most important judicial contribution to English
contract law in the past century'.63 In Australia the concept of intermediate terms was approved by the High Court in
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd64 With intermediate terms, a right to terminate only arises if the
consequences of the breach are sufficiently serious. This issue raises the need to identify the applicable test for deciding
whether the consequences of an actual or anticipatory breach of contract ( other than an actual or threatened breach of
condition) are sufficiently serious to entitle the innocent party to treat the contract as at an end. As Carters' points out, the
terminology of intermediate or innominate terms indicates that 'the character of the term in question cannot be judged by
construction, so that it takes on the "character" of a condition or a warranty in accordance with the seriousness of the actual
breach established:
24.35 In Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd 66 a seaworthiness term in a charterparty stipulated that
the vessel was 'in every way fitted for ordinary cargo service'. This term was breached when the vessel, 'Hongkong Fir; was
delivered to the charterers with an incompetent and insufficient engine room crew. This resulted in considerable
inconvenience to the charterers, who decided to terminate the charterparty for breach. The owners of the vessel claimed that
there was no right to terminate and brought an action against the charterers for damages for wrongful termination of the
charterparty. The dispute turned on whether the breach of the seaworthiness term justified termination by the charterers. The
Court of Appeal unanimously held that it did not. Sellers and Upjohn LH based their decisions upon the construction of the
seaworthiness term as a warranty. Diplock LJ regarded the term as what we now refer to as an intermediate or innominate
term. In coming to this conclusion Diplock LJ67 discussed the classification of terms as follows:
No doubt there are many simple contractual undertakings, sometimes express, but more often because of their very
simplicity ... to be implied, of which it can be predicated that every breach of such an undertaking must give rise to an
event which will deprive the party not in default of substantially the whole benefit which it was intended that he should
obtain from the contract. And such a stipulation, unless the parties have agreed that breach of it shall not entitle the
non-defaulting party to treat the contract as repudiated, is a 'condition'. So, too, there may be other simple contractual
undertakings of which it can be predicated that no breach can give rise to an event which will deprive the party not in
default of substantially the whole benefit which it was intended that he should obtain from the contract; and such a
stipulation, unless the parties have agreed that breach of it shall entitle the non-defaulting party to treat the contract as
repudiated, is a 'warranty'. There are, however, many contractual
62. [1962] 2 QB 26; 1 All ER 474.

63. G Treitel, Some Landmarks of Twentieth Century Contract Law, Oxford University Press, Oxford, 2002, p 113. See also Grand China
Logistics Holding (Group) Co Ltd v Spar Shipping AS [2016] EWCA Civ 982 at [18]-[19].
64. (2007) 233 CLR 139; 241 ALR 88.
65. Carter, Contract Law in Australia, note 18 above, p 279.
66. [1962] 2 QB 26; 1 All ER 474.
67. Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 at 69-70; 1 All ER 474 at 487.
566
CHAPTER 24: DISCHARGE BY BREACH
undertakings of a more complex character which cannot be categorised as being 'conditions' or
'warranties'. ... Of such undertakings, all that can be predicated is that some breaches will, and others
will not, give rise to an event which will deprive the party not in default of substantially
the whole benefit which it was intended that he should obtain from the contract; and the legal
consequences of a breach of such an undertaking, unless provided for expressly in the contract,
depend on the nature of the event to which the breach gives rise and do not follow automatically
from a prior classification of the undertaking as a 'condition' or a 'warranty'.
24.36 In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd68 Koompahtoo was the owner of
a large area of land near Morisset, south of Newcastle. In 1997 it entered into a joint venture agreement
with Sanpine, a property development company, to develop the land on rezoning. The agreement did not
expressly set out the circumstances in which either party could unilaterally terminate the agreement. The
development generated considerable controversy within the local Aboriginal community, attracted
criticism over environmental issues, and suffered from lack of capital. Despite considerable expense and
delay, rezoning was not secured by the time an administrator was appointed to take over Koompahtoo in
February 2003. The administrator sought information from Sanpine about the financial position of the
joint venture, including details about joint venture loans that were secured by the land. After Sanpine
failed to provide all the requested details, the administrator claimed there had been serious breaches by
Sanpine of its joint venture obligations, including unexplained expenses, banking irregularities, and
improper documentation and records. In December 2003 the administrator terminated the joint venture
agreement on the basis of the alleged breaches. San pine sought a declaration that the termination was
invalid.
24.37 The High Court held that Sanpine's actions amounted to serious breaches of an intermediate term
of the agreement, in that they deprived Koompahtoo's representatives on the joint venture management
committee of the capacity to make informed decisions about the project that was the very subject of the
agreement.
24.38 In Almond Investors Ltd v Kualitree Nursery Pty Ltd69 it was held that a particular breach of a non-
essential term did not justify termination.
24.39 In contracts for the sale of goods, because the sale of goods legislation only refers to conditions
or warranties, the question that arises is whether there can be intermediate terms in contracts for the sale
of goods. In England, at least, the Court of Appeal has answered this question in the affirmative."
Although the decision has not been applied in any Australian case, New South Wales has amended its
sale of goods legislation to introduce the tripartite classification of terms in sale of goods contracts.71
The future of conditions, warranties, and intermediate terms 24.40

The notion of intermediate terms is justified by Treitel" as follows:
[T)he policy of 'leaning in favour' of classifying stipulations as intermediate terms can be said to
promote the interests of justice by preventing the injured party from terminating on grounds that
are technical or unmeritorious.
68. (2007) 233 CLR 139; 241 ALR 88.

69. [2011] NSWCA 198.
70. Cehave MV v Bremer Handelsgesellschaft GmbH (The Hansa Nord) [1976] QB 44; [1975] 3 All ER 739.
71. Sale of Goods Act 1923 (NSW) s 4(5).
72. E Peel, Treitel, The Law of Contract, 14th ed, Sweet & Maxwell, London, 2015, p 989.
567
24.41 On the other hand, Carter 73 suggests that the tripartite classification of terms as either conditions, warranties, or
intermediate terms is unnecessary and that the warranty classification has now been rendered essentially redundant with
what were formerly considered warranties, now to be considered intermediate terms. They suggest that 'the concept of
the intermediate term has had the effect of making it virtually impossible to conclude that a term was intended by the
parties to be a mere warranty and this class of express term is, for practical purposes, virtually closed'.
24.42 Whether this view would apply in the context of warranties implied by sale of goods legislation is doubtful
because of the definition of warranty in the legislation which precludes termination for breach. On the other hand, in
Cehave MV v Bremer Handelsgesellschaft GmbH (The Hansa Nord)74 Orrnrod LJ suggested that termination for breach of an
implied warranty could be justified on the ground of a de facto failure of consideration.
Terminate for breach of a time stipulation

24.43 A time stipulation is an important contractual term and the question that arises is whether a contract can be
terminated for breach of such a stipulation. 75
24.44 Historically time stipulations were treated differently by the separate courts of common law and equity. At
common law time stipulations in a contract are of the essence and a failure to perform in a timely manner entitles the
innocent party to terminate the contract. 76 However, although equity recognises that time is of the essence, it will not
allow an innocent party to terminate the contract if it would be unconscientious to do so." As was stated by Sir Terence
Etherton C in Urban I (Blonk Street) Ltd v Ayres,7 8 '[ejquity's role, in this context, always has been to relieve a contract-
breaker against the strict legal rights of the other party'.
24.45 However, courts of equity would generally preclude the exercise of the common law right to terminate for breach
of a time stipulation and only permit termination of the contract in the following circumstances:
 if the contract expressly declared time to be of the essence;
 if there was an implication that time was of the essence": or
 if time, not being of the essence, was made of the essence by the service of a notice to
complete on a party who breached the time stipulation."
In these three situations equity is effectively saying that it is not unconscientious for the innocent party to terminate the
contract.
24.46 If time is of the essence and one party requests an extension of time to perform that is agreed to by the other party,
it does not mean that time ceases to be of the essence in relation to the new date for performance. 81
73. Carter, Contract Law in Australia, note 18 above, pp 281-2.

74. [1976] QB 44 at 84; (1975] 3 All ER 739 at 766.
75. The time for performance of contractual obligations is discussed in 22.5-22.11.
76. Noble v Edwardes (1877) 5 Ch D 378 at 393.
77. Stickney v Keeble [1915] AC 386 at 400.
78. [2014] 1 WLR 756 at 767.
79. Summers v Cocks (1927) 40 CLR 321; 34 ALR 107.
80. GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 at 87-9, 92-3, 97-9.
24.47 A consequence of equity's approach to time stipulations is that a party who has breached a time stipulated where
the innocent party cannot terminate the contract is not by reason of that breach precluded from subsequently seeking an
order for specific performance of the contract. 82 However, he or she will be liable to the other party for damages at
common law in relation to losses arising from the breach. 83
24.48 Following the fusion of the administration of the courts of common law and equity into one court in 1873,
legislation resolved this issue by giving effect to the equitable approach to time stipulations. 84 At the time this
legislation was passed, this would have meant that unless the circumstances were such that equity would have regarded
it as being of the essence, a time stipulation was regarded as being a warranty only. However, following the
development of the notion of intermediate terms, a time stipulation is clearly now to be seen as an intermediate term.
This is because, depending upon the circumstances of the case, a breach of the time stipulation may or mar not give
rise to a right to terminate. The circumstances that will give rise to a right to terminate are those in which equity has
always permitted termination of the contract for breach of a time stipulation: This was made clear in Zaccardi v Caunt,85
where Campbell JA said:
The effect of [the legislation that gave effect to the equitable rules of construction of time stipulations] is to
change the status of a provision fixing the time for taking a step in performance of a contract from an essential
term to an intermediate term. By 'intermediate term' I mean a term the breach of which in some circumstances
can give rise to a right to terminate, but the breach of which in other circumstances does not give rise to a right
to terminate. [One of t]he circumstances in which breach of such a term now gives rise to a right to
terminate ... is when ... a valid notice to complete has been served and not complied with.
24.49 In relation to time being of the essence by implication, it is the facts and circumstances of the case that lead to
the conclusion that the parties intended time to be of the essence. Thus, a finding that time is of the essence by
implication can often arise in circumstances where goods that are sold are perishable in nature or where the property
that is the subject of the contract is the subject of a volatile trading market in so far as price is concerned. It is also the
case that a term stipulating for the payment of a deposit in a contact for the sale of land almost always gives rise to an
implication that the time for payment of the deposit is of the essence. In this respect, in Samarenko v Dawn Hill House
Ltd86 Lewison LJ said:
Since the payment of a deposit at the executory stage of the contract is an earnest ( or guarantee) of further
performance, it is no surprise that a failure to pay the deposit on time is taken to demonstrate that the buyer is
unwilling to perform the contract as a whole. In addition without actual receipt of the deposit the seller does
not know where he stands. Is the buyer serious about the contract or not? A right to call off the contract for
failure to pay the deposit
82. Michael Realty Pty Ltd v Carr [1977] 1 NSWLR 533 at 572.
83. Canning v Temby (1905) 3 CLR 419 at 426; R V Pty Ltd v Connector Park Pty Ltd (No 2) [2017] TASSC 22 at [21].
84. See Civil Law (Property) Act 2006 (ACT) s 501; Conveyancing Act 1919 (NSW) s 13; Law of Property Act 2000 (NT) s 65; Property Law
Act 1974 (Qld) s 62; Law of Property Act 1936 (SA) s 16; Supreme Court Civil Procedure Act 1932 (Tas) s 11(7); Property Law Act 1958
(Vic) s 41; Property Law Act 1969 (WA) s 21.
85. [2008] NSWCA 202 at [92].
86. [2012] 2 All ER 476 at 486.
569
on time restores to the seller his freedom to market the property. In the case oflate completion, the seller at least has the
deposit in his hands as part compensation for any loss. If the deposit itself is not paid, he has nothing except a fetter on
his freedom to deal with his property. That is why in my judgment failure to make timely payment of a deposit amounts
to a repudiatory breach of contract. Any presumption that time is not of the essence is rebutted.
24.50 In relation to making time of the essence by service of a notice to complete, in Neeta (Epping) Pty Ltd v Phillips87
Barwick CJ and Jacobs J said:
In cases where the contract contains a stipulation as to time, but that stipulation is not an essential term, then before a
notice can be given fixing a time for performance, not only must one party be in breach or guilty of unreasonable delay,
but also the party giving the notice must himself be free of default by way of breach or antecedent relevant delay. Only
then may a notice be given fixing a day a reasonable time ahead for performance and making that time of the essence of
the contract.
24.S 1 In Louinder v Leis88 Mason J accepted this statement as being correct, and Brennan J said the following in relation to the
meaning of unreasonable delay:
[W]hatever time 'unreasonable' may connote, it is an epithet to describe a delay on the part of a purchaser in performing
an obligation after the time when he was bound to do so; delay is not to be found in an interval of time between the
making of the contract and the time for performing the obligation, though that interval may be relevant to the
description of any subsequent delay.
24.52 In Carrapetta v Rado89 Barrett JA summarised the law on when a notice to complete could be served as follows:
Case law ... makes it plain that the party seeking to make time of the essence must be an 'innocent' party who is not 'in
default' or 'in breach' and is 'ready, willing and able' to proceed to completion in accordance with the contract. The
underlying concept is that a party who gives a notice to complete and thereby calls on the other party to adhere to the
contract must be in a state of both present and prospective adherence to the contract. When it is the vendor who serves
the notice, he or she must be seen to be willing and able to perform, on the day the notice fixes for completion, the
obligations that the vendor is required to perform on completion - predominantly, in a 'cash on completion' case such as
the present, the obligation of delivering a clear title in return for the money that the contract requires the purchaser to
pay in cash on completion - and to have adopted up to the time of service of the notice a stance consistent with that
future performance. If the vendor is in breach of contract when the notice is given, he or she is not in such a state of
willingness and ability. Likewise, if the vendor has taken and made known an uncompromising stance that he or she
will not deliver title on completion except in return for payment of a sum greater than that required by the contract, that
vendor will be 'in default' (or 'in breach') and not be 'innocent' or relevantly 'ready, willing and able' because the
unequivocal stance inconsistent with the contract bespeaks lack of adherence in the nature of anticipatory breach.
87. (1974) 131 CLR 286 at 299; 3 ALR 151 at 161.

88. (1982) 149 CLR 509 at 531; 41 ALR 187 at 204.
89. [2012] NSWCA 202 at [27].
CHAPTER 24: DISCHARGE BY BREACH !4.53 According to
Lindgren,'? in order for a notice to complete to be valid:

, the recipient of the notice must be in default under the relevant contract;
, the person who gives the notice must themselves be ready, willing, and able to perform their own obligations under the
agreement;
, the time fixed by the notice for completion of the contract must be a reasonable time;
, the notice must be valid in form and must clearly call on the recipient of the notice to
perform the contract.
Dnce a notice to complete is served, it operates to make time of the essence for both parties to :he contract. 91
24.54 To understand the function of a notice to complete, one must appreciate the approach Jf equity towards time
stipulations. Equity always construed time stipulations in the same vay as did the common law. However, equity generally
prevented a party from insisting on an inconscientious exercise of his or her strict legal right to terminate a contract for breach
of a :ime stipulation by the other party. 92
24.55 The commonly accepted explanation for equitable intervention here is that equity was exercising a jurisdiction akin to its
jurisdiction to relieve against penalties and forfeiture. Equity's intervention meant that a court of equity would, subject to its
discretion, grant the party not complying with a time stipulation a decree of specific performance of the contract,
notwithstanding that party's prior failure to perform his or her contractual obligations on the igreed date. On the other hand, if
time was expressly or impliedly of the essence, the equitable bar to termination of the contract was removed. Furthermore, the
service of a valid notice to complete where time was not originally of the essence, also operated to remove the equitable bar to
the exercise of the common law right to terminate the contract. In effect, a notice to .ornplete disentitles the party not
complying with it to subsequently obtain an order that the .ontract be specifically enforced. Thus, in Michael Realty Pty Ltd v
Carr" Mahoney JA said:
In determining what is appropriate notice to complete ... the essential question is not what time does the purchaser in
fact need to do that which is necessary for completion, and is in fact not yet done. At law, a party is not entitled to rely
upon his own wrong or default. Given that a reasonable time for completion has already elapsed, the function of a
notice specifying a time for completion is, at law, prima facie to enable a party, who is assumed to be in an appropriate
state of readiness to perform his obligations, to do those things, eg, have ready the appropriate conveyance and title
deeds, relevant for the performance of those obligations. But the purchaser, if he desires effectively to terminate the
contract, must also do what, in equity, will be seen as a sufficient reason for refusing specific performance . In general,
equity will order specific performance, notwithstanding that a plaintiff is in breach as to a provision as to time, unless
the circumstances over and above the mere breach make it unjust or inequitable to do so. But non-compliance with a
notice effectively making time of the essence for completion will normally be seen as a reason for refusing specific
performance. The notice to complete, therefore, serves this function in equity .... Equity has . . . always required that ...
a notice [to complete] give a reasonable time for completion ....
0. K Lindgren, Time in the Performance of Contracts, 2nd ed, Butterworths, Sydney, 1982. IL. Barrak Corporation Pty Ltd v
Jaswil Properties Pty Ltd (2016] NSWCA 32 at [39].
Q. Stickney v Keeble [1915] AC 386 at 410.
B. [1977] 1 NSWLR 553 at 571-2.
571
[T]he stipulation as to time is, in such a case, not directed to securing performance of the contract. It is directed to giving such
a time that, at the end of the time specified, it would be inequitable or unjust for specific performance to be ordered. The time
is, therefore, to be calculated by reference, inter alia, to the interests of the party giving the notice, and the inequity of
maintaining him effectively bound by the contract thereafter.
24.56 In the context of a case involving a vendor's failure to comply with a non-essential time stipulation, in Michael Realty v
Carr94 Glass JA summarised the position on notices to complete as follows:
(1) Where the contract fails to make time of the essence, failure to complete by the time fixed for completion is at law, but not in
equity, an essential breach, which entitles the purchaser to [terminate].
(2) The vendor will, however, be guilty of an essential breach, in equity also, if he fails to complete within the time limited by a valid
notice to complete. For such breach the purchaser may validly l terminate].
(3) A notice to complete will not be valid unless, inter alia, it limits a time for completion which is, in all the circumstances,
reasonable. In determining the reasonableness of the time limited, the Court should consider, not merely what remains to be
done by the vendor at the date of notice, but all the circumstances of the case.
(4) The question whether the time limited by the notice is, in all the circumstances reasonable, is identical with the question whether
equity would consider it just and equitable to relieve the vendor who fails to complete at the expiration of the notice, and to
grant specific performance at his instance.
(5) It follows that the question whether it is reasonable to allow the vendor less time than he needs to prepare for completion is a
correlative of whether it is just and equitable to hold the purchaser to the contract for as long as the vendor requires before he
will be able to complete.
( 6) All the circumstances of the case in light of which these questions are to be decided include, but are not confined to, the delay of
the vendor and the urgency of the purchaser's need to complete. Other variants of the behaviour of vendor and purchaser, the
categories of which cannot be determined in advance, may raise circumstances which make it unjust and inequitable to allow
the defaulting vendor as much time as he needs.
In my opinion, each of these propositions is consonant with principle .... It follows that there is no principle of law that the
notice to complete must always limit a period which is sufficient to meet the preparatory needs of the party in default.
24.57 In some contexts, such as conveyancing, it is possible for a vendor, having first purported by notice to make time of the
essence of a contract and thereafter having purported to terminate the contract for failure to comply with the time so delimited, to then,
without prejudice to the claimed validity of the termination, give a second notice purporting to make time of the essence of the
contract. According to Einstein J in Manzer Tabbouch v Devlin,95 'such a second notice is properly construed as an "offer to start up
again'", that is to sar as an offer to re-instate the contract, being an offer capable of being accepted by the purchaser.
94. [1977] 1 NSWLR 553 at 566.

95. [2008] NSWSC 600 at [29].
CHAPTER 24: DISCHARGE BY BREACH Contractual
right to terminate
24.58 In addition to the above situations, a right to terminate may exist where the contract itself provides for
termination in the event of a breach of any of its terms. The right to terminate may be for breach of any term, whether
it is a major or minor breach. Such terms within a contract which purport to confer a right to terminate on a party are
enforceable unless they are uncertain, ambiguous, or unconscientious, or they involve a breach of any implied term of
good faith in relation to the exercise of the right to terminate, or where the right to terminate has been lost.
96
24.59 Where a contract provides for a right to terminate on a breach, it is presumed that such a clause operates
concurrently with any other right given by law to terminate. 97 However, the common law right to terminate can be
excluded, so that the right to terminate is governed solely by the terms of the contract. Thus, on the facts of
Commonwealth of Australia v Amann Aviation Pty Ltd, 98 the contractual right to terminate was the only means by which
the contract could be terminated, and the Commonwealth's termination of it was wrongful because it did not abide by
the termination procedures set out in the contract.
24.60 It is usually the case that contractual rights to terminate also require notice of termination to be given. Any such
notice requirement must be complied with, or the termination will be invalid. 99
24.61 In Sargent v ASL Developments Ltd three contracts for the sale of land were entered into between a purchaser
100
and the respective vendors of three different properties. Clause 16 in each contract was in the following form:
Should it be established prior to completion that at the date of this Agreement the property was affected by any
town and country planning scheme or interim development prepared or prescribed under the provisions of the
State Planning Authority Act or Part XIIA of the Local Government Act 1919 as amended otherwise than as
stated in the Fourth Schedule hereto or was affected by any Residential District Proclamation under Section 309
of the Local Government Act 1919, or by any existing proposals for re-alignment widening or siting of a road
by any competent authority otherwise than as disclosed in the said Fourth Schedule, either party shall be
entitled to rescind this Agreement by notice in writing to the other.
It was stated in the schedule to each of the three contracts that the respective properties were affected as shown in a
council zoning certificate that was said to be annexed to those contracts. However, no such certificate was annexed. At
the times when the contracts were entered into, the properties the subject of the contracts were zoned as 'Non-Urban
Zone No 1 (a) (County Green Belt)' under the Shire of Baulkham Hills Planning Scheme Ordinance made under Pt
XIIA of the Local Government Act 1919 (NSW), as amended (and were affected by the County of Cumberland
Planning Scheme). After the date of the contracts the vendors received payments of interest, instalments of principal,
and increased rates from the purchaser, and they joined with the purchaser in taking steps to bring the land under the
operation of the
96. Burger King Corp v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558.
97. Concut Pty Ltd v Worrell (2000) 176 ALR 693 at 699.
98. (1991) 174 CLR 64; 104 ALR 1.
Burger King Corp v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558. 100. (1974) 131 CLR 634; 4 ALR
257.
573
Real Property Act 1900 (NSW). Subsequently each of the vendors gave notice of rescission of their contract to the purchaser,
relying upon the circumstance that the lands were affected by the planning schemes. The purchaser then brought proceedings
for specific performance of the contracts.
24.62 The High Court'?' held that as no certificate was annexed to the particular contracts, cl 16 operated to confer a right of
termination. However, by their unequivocal conduct with knowledge of the facts giving the right to terminate the contract, the
vendors had elected to treat the contract as subsisting and were precluded from exercising the rights of termination.
REPUDIATION
24.63 As noted above, the word 'repudiation' is used by lawyers in various different ways. It is also known as 'renunciation'.
In this chapter the word is used to describe conduct by a contracting party that entitles the other contracting party to terminate
a contract. Further, it is well established that 'repudiation of a contract is a serious matter, not to be lightly found or
Inferred't'? With repudiation, emphasis is on the conduct or attitude of the party who manifests an unwillingness or inability
to perform. According to Seddon, Bigwood, and Ellinghaus:'?'
Breach of contract by repudiation occurs when a party evinces an intention no longer to be bound by it, or to fulfil it
only in a manner substantially inconsistent with his or her obligations. An alternative formula defines repudiation as
the manifestation of an intention to perform 'if and when it suits' or 'as and when it suits'. Repudiation can be
manifested by breach of a substantively inessential term .... An actual intention to repudiate is not necessary: the issue
is resolved objectively by reference to the effect it would have on a reasonable man. Repudiation comprises the
manifestation of inability as well as of recalcitrance. Conduct that is clearly self-disabling is repudiatory, for example,
disposal to a third party of the subjectmatter of a sale, or going out of business. Words or conduct by a party which
indicate an unwillingness to perform may constitute repudiation.
24.64 The above classifications are consistent with and derived from case law, where the following illustrative remarks on
the meaning of repudiation made by Gibbs CJ in Shevill v Builders Licensing Board'?' have been approved and adopted: 105
[R]epudiation is an ambiguous word and is used in various senses. We are of course concerned only with a case in
which it is admitted that there was a valid and binding contract. Such a contract may be repudiated if 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.
In
101. Sargent v ASL Developments Ltd (1974) 131 CLR 634; 4 ALR 257.
102. Ross T Smyth & Co Ltd v TD Bailey, Son & Co [1940] 3 All ER 60 at 71; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166
CLR 623 at 643,657; 85 ALR 183 at 196,207 (in the context of contracts for sale ofland and leases).
103. Seddon, Bigwood and Ellinghaus, Cheshire and Fifoot's Law of Contract, note 14 above, p 1057-9.
104. (1982) 149 CLR 620 at 625-6; 42 ALR 305 at 308.
105. Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 33, 40; 57 ALR 609 at 620, 626; Laurinda Pty Ltd v Capalaba Park
Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634, 643, 664; 85 ALR 183 at 190,196,212; Diploma Construction Pty Ltd v Marula Pty Ltd
[2009] WASCA 229 at [87]-[97].
574
such a case the innocent party is entitled to accept the repudiation, thereby discharging himself from further performance, and
sue for damages .... However, if one party, although wishing to perform the contract, proves himself unable to do so, his default
in performance will give the other party a right to [terminate] the contract, if the breach goes 'so much to the root of the contract
that it makes further commercial performance of the contract impossible.'?" There is high authority for treating such cases as a
form of repudiation of the contract. 107 In Honner v Ashton108 Mahoney JA said that he thought that the right to terminate for
fundamental breach should be seen as, in principle, distinct from the right to terminate for repudiation. For present purposes, it
is immaterial whether repudiation and fundamental breach are treated as separate categories, for in either case the innocent
party can [terminate] the contract and recover damages to compensate him for the failure to perform the contractual
obligations ... A [further] situation in which a right to [termination] arises is where there has been a breach of a fundamental or
essential term of the contract. In Suisse Atlantique Societe d'Armement Maritime SA v NV Rotterdamsche Kolen Centraler"
Lord Upjohn said:
A fundamental term of a contract is a stipulation which the parties have agreed either expressly or by necessary
implication or which the general law regards as a condition which goes to the root of the contract so that any breach of
that term may at once and without further reference to the facts and circumstances be regarded by the innocent party as
a fundamental breach and thus is conferred on him the alternative remedies at his option.
24.65 In Romero v Farstad Shipping (Indian Pacific) Pty Ltd"0 the Full Court discussed the meaning of repudiation as follows:
A breach of a contract by repudiation occurs when a party evinces an intention no longer to be bound by it or to fulfil it only in
a manner substantially inconsistent with the contractual obligations. Repudiation will arise where there is conduct consistent
with a renunciation either of the contract as a whole or a fundamental obligation under it. Repudiation of a contract is a serious
matter and is not to be lightly found or inferred. To amount to a refusal to perform the contract, the breach must be sufficiently
serious
24.66 An example of repudiation in the form of performing a contract substantially inconsistent with one's contractual obligations is
where an employer unilaterally reduces an employee's pay or diminishes the value of his or her salary package. Such conduct
undermines the entire foundation of the contract of employment and thus constitutes repudiation of it. 111
24.67 As noted above, a repudiation can arise either from a party showing an intention not to be bound by the entire contract, or by
showing that he or she does not intend to be bound by a term or terms which are of sufficient importance in the contract. 112
One way
of describing this
106. Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 at 64.
107. Suisse At/antique Societe d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 at
421-2; Federal Commerce v Molena Alpha [1979] AC 757 at 778-9.
108. (1979] 1 BPR 9478 at 9490.
109. (1967] l AC at 422.
110. (2014) 231 FCR 403 at 435; 315 ALR 243 at 275.
111. Actrol Parts Ltd v Coppi (No 2) (2015] VSC 694 at [40]-[41].
112. Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634, 641-2; 85 ALR 183 at 190, 195-6; Shevill v Builders
Licensing Board (1982) 149 CLR 620 at 625-9; 42 ALR 305; Almonds Investors Ltd v Kualitree Nursery Pty Ltd (2011] NSWCA 198 at (62].
575
is to focus upon whether the repudiatory conduct deprives the innocent party of substantially the whole of the benefit they are
intended to receive as consideration for performance of their future obligations under the contract. 113 Indeed, the question of
whether a party in breach of contract has shown the requisite intention which enables termination to occur, is decided by
reference to how their conduct would appear to a reasonable person in the position of the other contracting party. A party's
subjective intentions are irrelevant to this test, as an objective test is applied in assessing conduct. 114
24.68 In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd115 Deane and Dawsxon JJ, relying upon a description of
repudiatory conduct by Fullagar J in Carr v J A Berri man Pty Ltd, 116 said that such conduct arises where the facts are such
that 'a reasonable man could hardly draw any other inference than that the building owner does not intend to take the contract
seriously, that he is prepared to carry out his part of the contract only if and when it suits him'. In the same case Mason CJ1 17
noted that:
There is a difference between evincing an intention to carry out a contract only if and when it suits the party to do so
and evincing an intention to carry out a contract as and when it suits the party to do so. In the first case the party
intends not to carry out the contract at all in the event that it does not suit him. In the second case the party intends to
carry out the contract, but only to carry it out as and when it suits him. It is much easier to say of the first than of the
second case that the party has evinced an intention no longer to be bound by the contract or to fulfil it only in a
manner substantially inconsistent with his obligations and not in any other way. But the outcome in the second case
will depend upon its particular circumstances, including the terms of the contract. In some situations the intention to
carry out the contract as and when it suits the party may be taken to such lengths that it amounts to an intention to
fulfil the contract only in a manner substantially inconsistent with the party's obligations and not in any other way.
24.69 Relevantly, Deane and Dawson JJ118 observed the following:
It is not necessary for repudiation of a contract that the repudiator make plain that he will never perform his
contractual obligations at all. What Lord Dunedin described [in Fors/ind v Betchely-Crundall ] as the assumption of''a
119
shilly-shallying attitude in regard to the contract' and what Lord Shaw of Dunferrnline'" called 'procrastination ...
persistently practised' can in some circumstances reach the stage of repudiation even though accompanied by
assurances of ultimate performance at some future time.
113. Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 at 66, 72; Federal Commerce v Molena Alpha (The Nanfri, Benfri
and Lorfri) [1979] AC 757 at 778-9.
114. Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 643, 647-8, 666; 85 ALR
183 at 196, 207-8, 213; Sopov v Kane Constructions Pty Ltd (2007) 20 VR 127.
115. (1989) 166 CLR 623 at 658; 85 ALR 183 at 208.
116. (1953) 89 CLR 327 at 351.
118. Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 658-9; 85 ALR 183.
119. [1922] SC (HL) 173 at 190.
120. Fors/ind v Betchely-Crundall [1922] SC (HL) 173 at 192.
CHAPTER 24: DISCHARGE BY BREACH !4.70 Deane and Dawson JJ' ' 2
then referred with approval to the following passage of ard Shaw in Forslind v Bechely-Crundall: 122
If in short, A, a party to a contract acts in such a fashion of ignoring or not complying with his obligations under it, B, the other
party is entitled to say: My rights under this contract are being completely ignored and my interests may suffer by non-
performance by A of his obligations, and that to such a fundamental and essential extent that I declare he is treating me as if no
contract existed which bound him' ... in business over and over again it occurs - as, in my opinion, it occurred in the present
case - that procrastination is so persistently practised as to make a most serious inroad into stage the rights of the other party to
a contract. There must be a stage when the person suffering from that is entitled to say 'this must be brought to an end.
:4.71 In Galafassi v Kelly123 Gleeson JA said:
For the conduct of a party to constitute a renunciation of its contractual obligations it must be shown that the party is either
unwilling or unable to perform its contractual obligations, that is, it has evinced an intention to no longer be bound by the
contract or stated that it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and in no
other way. Where inability to perform is declared the conduct amounts to a refusal to perform and the innocent party need not
prove that the other party was actually unable to perform as a matter of fact.
A renunciation can be made either by words or conduct, provided it is clearly made. The test is whether the conduct of one
party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a
whole or of a fundamental obligation under it.
So far as factual inability to perform is concerned what needs to be shown is that the party in question has become wholly and
finally disabled from performing the essential terms of the contract altogether. It is well accepted that factual inability must be
proved 'in fact and not in supposition'. 124
4.72 In determining whether a party has repudiated the contract, the party's conduct must e evaluated taking account of all of the
circumstances. 125
4.73 Finally, it must be kept in mind that repudiation of a contract 'is a serious matter, not 1 be lightly found or inferred'.126
Repudiation 'is a drastic conclusion'. 127
4.74 Refusal to perform a contract because of an erroneous interpretation of provisions mtained in it could be repudiatory conduct,
and if it is found that a party has terminated ithout justification, this will be a repudiatory act in itself that entitles the other party to
!l. Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 659; 85 ALR 183 at 208, !2. (1922] SC (HL) 173 at 191-2.
!3. (2014) 87 NSWLR 119.
!4. Universal Cargo Carriers Corporation v Citaii [1957] 2 QB 401 at 50. See also Diploma Constructions Pty Ltd v Matula Pty Ltd; Diploma
Construction Pty Ltd v Marula Pty Ltd (2009] WASCA 229 at [87]-[97]; Sopov v Kane Constructions Pty Ltd (2007) 20 VR 127 at 130, 147.
!5. Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council [2006] NSWCA 291 at [102]. !6. Ross T Smyth & Co Ltd v TD
Bailey Son & Co [1940] 3 All ER 60 at 71.
!7. Woodar Investment Development Ltd v Wimpey Construction UK Ltd (1980] 1 All ER 571 at 576.
577
terminate. 128 It is also the case that delay in performance of one's obligations may be such as to demonstrate an unwillingness
or an inability to render substantial performance of the contract so as to amount to a repudiation. 129
24.75 Repudiation can also take place in consequence of a party making an anticipatory breach of contract. A party who by
words or conduct indicates an intention not to perform a promise in advance of the due date for performance commits an
anticipatory or renunciatory breach. Anticipatory breach can occur expressly or by implication. However, the innocent party
will only have a right to accept the renunciatory breach forthwith and to terminate the contract without waiting for the due
date of performance where the other party makes clear to the innocent party that it is not going to perform the contract at all,
or is going to commit a breach of a condition, or is going to commit a breach of an innominate term, with the consequences
such as to entitle the innocent party to treat the contract as at an end.!"
24.76 The applicable legal principles relating to renunciation were set out by Gross LJ in Grand China Logistics Holding
(Group) Co Ltd v Spar Shipping AS131 as follows:
First, it is readily apparent that there are a variety of formulations of the test for renunciation in the authorities. Thus,
in Ross T Smyth & Co Ltd v T. D. Bailey Son & Co132 Lord Wright put it this way:
I do not say that it is necessary to show that the party alleged to have repudiated should have an actual intention
not to fulfil the contract. He may intend in fact to fulfil it, but may be determined to do so in a manner
substantially inconsistent with his obligations, and not in any other way.
In Hong Kong Fir'33 Diplock LJ in the context of repudiation, posed the question whether the events which had occurred
as a result of the breach:
... deprived the charterers of substantially the whole benefit which it was the intention of the parties as
expressed in the charterparty that the charterers should obtain from the further performance of their own
contractual undertakings.
In Decro- Wall International SA v Practitioners in Marketing Ltd 134 Buckley LJ expressed the test as follows:
To constitute repudiation, the threatened breach must be such as to deprive the injured party of a substantial
part of the benefit to which he is entitled under the contract. ... Will the consequences of the breach be such
that it would be unfair to the injured party to hold him to the contract and leave him to his remedy in
damages ... ?
128. Kennedy v Vercoe (1960) 105 CLR 521; Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27
NSWLR326.
129. Galafassi v Kelly (2014) 87 NSWLR 119 at 140.
130. Grand China Logistics Holding (Group) Co Ltd v Spar Shipping AS [2016] EWCA Civ 982 at [21].
131. [2016] EWCA Civ 982 at [73]-[78].
132. [1940] 3 All ER 60 at 72.
133. Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 at 72.
134. [1971] 1 WLR 361 at 380.
578
Secondly, although efforts have been made to seize on the difference between 'substantially the whole benefit' 135 and 'a
substantial part of the benefit.!" there is less to this difference than meets the eye. As Lord Wilberforce observed,
authoritatively, in Federal Commerce v Molena Alpha (The Nanfri, Benfri and Lorfri): 13 7
The difference in expression between these two last formulations does not ... reflect a divergence of principle,
but arises from and is related to the particular contract under consideration: they represent, in other words,
applications to different contracts, of the common principle that, to amount to a repudiation a breach must go to
the root of the contract. ...
Thirdly, although these expressions are necessarily open-textured, that is a consequence of the need to apply them in
the widest range of factual circumstances. I respectfully agree with and adopt in this regard the following passage from
Arden LJ's judgment in Valilas v Januzai: 138
The common law adopts open-textured expressions for the principle used to identify the cases in which one
contracting party ('the victim') can claim that the actions of the other contracting party justify the termination of
the contract. I will use the formulation that asks whether the victim has been deprived of substantially the whole
of the benefit of the contract. The expression 'going to the root' of the contract conveys the same point: the
failure must be compared with the whole of the consideration of the contract and not just a part of it. There are
other similar expressions. I do not myself criticise the vagueness of these various expressions of the principle
since I do not consider that any satisfactory fixed rule could be formulated in this field.
Pausing here, I acknowledge with respect Lewison L]'s criticisms in Ampurius Nu Homes Holdings v Telford Homes 139
that the trouble 'with expressing important propositions of English law in metaphorical terms is that it is difficult to be
sure what they mean' - together with his further observation that the description of a breach 'going to the root of the
contract' is a 'conclusory description'!" However, in practice, such expressions are useful and readily capable of
application; a search for a more precise test is unlikely to be fruitful. Further, given Diplock L]'s analysis in Hongkong
Fir, 141 it is perhaps not surprising that the various formulations of the test focus on the nature and gravity of the
consequences of the breach and are, in that sense, conclusory.
Fourthly, the starting point when considering the seriousness of the anticipated breach of contract is the benefit the
innocent party was intended to obtain from performance of the contract. 142 This intended benefit serves as the yardstick
against which the divergence of the anticipated breach is to be measured. In this regard, it is important to keep in mind
that a renunciation is not confined to an evinced unwillingness to perform the contract
135. Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26; [1962] 1 All ER 474.
136. Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361 at 380.
137. [1979] AC 757 at 779.
[2014] EWCA Civ 436 at [59]. I. 39. [2013] 4 All ER 377 at 393.
I. 40. Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 140.
L 41. Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26; [1962] 1 All ER 474.
L 42. Ampurius Nu Homes Holdings v Telford Homes [2013] 4 All ER 377 at 393-4; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd
(2007) 233 CLR 115 at 140.
579
at all; an evinced unwillingness to perform the contract according to its terms (whether through inability or otherwise)
may likewise amount to a renunciation if the performance proffered is substantially inconsistent with that party's
obligations thereunder.143 Further, renunciation may be inferred where it is apparent that the defaulting party is doing
no more than procrastinating in the hope that something may turn up. 144
Fifthly, as is clear from the authorities, the test for renunciation is, mutatis mutandis, essentially similar to that for
repudiation. However, as renunciation looks to the future, it may be inferred from both the nature and causes of past
breaches ( even if by themselves insufficient or irrelevant for repudiation) and the evinced unwillingness to perform in
the future. As the test for repudiation has been equated with that for frustration, 145 the same could be said of the test for
renunciation; if so, then it is to be kept in mind that:
frustration occurs whenever the law recognizes that without default of either party a contractual obligation has
become incapable of being performed because the circumstances in which performance is called for would
render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni.
It was not this that I promised to do. 146
24.77 The above remarks are consistent with the following remarks by Lord Scarman in Woodar Investment Development Ltd
v Wimpey Construction UK Ltd: 147
If an anticipatory breach is relied on, the renunciation must be 'an intimation of an intention to abandon and altogether
to refuse performance of the contract; or to put it in other but equally clear words, 'the true question is whether the acts
and conduct of the party evince an intention no longer to be bound by the contract'. ... The emphasis upon
communication of the party's intention by his acts and conduct is a recurring theme in the abundant case law.
24.78 In relation to the development of the concept of anticipatory breach, in Bunge SA v Nidera B\1148 Lord Sumption said
the following:
Anticipatory breach of contract, probably more accurately referred to as 'renunciation; is a concept which can be traced
back to the earliest years of the common law but was first coherently formulated in terms oflegal principle in Hochster
v De La Tour149 in England and Howie v Anderson= in Scotland. In its modern form it is a response to the pragmatic
concern of Victorian judges to avoid the waste of economic resources implicit in any inflexible rule which required the
parties to go through the motions of performing a contract which was for practical purposes dead. The same concern
informs much of the law of contract, notably in the area of frustration and remedies. The early rules of pleading,
reflecting the terms of the contract, had required the plaintiff in an action for damages to plead that he had tendered
performance of any obligation to be performed by him as a condition precedent to the
143. Ross T Smyth & Co Ltd v T. I>. Bailey Son & Co [1940] 3 All ER 60.
144. Fors/ind v Bechely-Crundall 1922 SC (HL) 173 at 191.
145. Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962] 2 QB 26 at 69.
146. Davis Contractors Ltd v Fareham Urban District Council (1956] AC 696 at 729.
147. [1980] 1 All ER 571 at 589.
148. [2015] 3 All ER 1082 at 1088.
149. (1853) ll8 ER 922.
150. (1848) 10 D 355.
580
defaulting party's obligation. But as Lord Campbell CJ explained in Hochster v De la Tour,151 the effect of the
renunciation of a contract in advance of the time agreed for performance was (i) to confer on the injured party an
option to accept the renunciation as bringing the contract to an end and to treat himself as discharged from that
time onward from further performance; (ii) to enable the injured party to deal with the financial consequences by
suing for damages at once, without waiting for the time fixed for performance; and (iii) to bring forward the
injured party's duty to mitigate to the time when the renunciation was accepted.
24.79 The anticipatory breach may be established by reference to an act of abandonment of the contract by the party
concerned or by the party demonstrating an intention to fulfil in a manner inconsistent with the obligation under the
contract. Conduct amounting to repudiation may be motivated by impossibility of performance or by an unwillingness
to perform.
24.80 In Foran v Wight152 Mr and Mrs Wight contracted to sell land to Mr and Mrs Foran on 24 December 1982. The
Forans paid a deposit of 10 per cent upon entry into the contract. A term of the contract required the Wights to register a
right of way in relation to the land prior to completion. The contractual completion date of 22 June 1983 was made of
the essence. On 20 June 1983 the Wights advised the Forans that they had not yet registered the right of way and would
not be in a position to complete the contract on the due date. In the light of the Wights' stated inability to complete on
the due date, the Forans abandoned their efforts to secure the necessary finance for completion. On 22 June 1983 the
Forans did not attempt to perform their obligation under the contract of tendering the balance of the purchase price. On
24 June 1983 the Forans purported to terminate the contract. The Wights denied the validity of the termination notice
on the ground that the Forans would not have been able to raise the necessary finance to complete the purchase on 22
June 1983. After having the right of war registered on 22 July 1983, the Wights unsuccessfully sought to enforce
completion of the contract by the Forans. The Wights then purported to terminate the contract. The Wights
subsequently sold the property to other purchasers. The dispute between the parties was as to whether the Forans had
validly terminated the contract and were therefore entitled to a refund of the deposit. If the termination was invalid, the
Wights were entitled to forfeit the deposit on account of the Forans' failure to complete the purchase of the property,
24.81 The High Court153 held that even though the Forans failed to tender performance or were not ready and able to
complete on the contractual date for performance, the Wights' anticipatory breach was converted by repudiation into an
actual breach, entitling the Forans to terminate. Brennan J held that an intimation of non-performance of an essential
term amounted to repudiation, which releases a party who acts on it from performance. This party does not have to
terminate the contract. Brennan J154 said:
When a party gives an intimation of non-performance to another and the other acts upon it, the other is
dispensed from performing his obligation but if the other would not have completed his obligation in any event,
liability for breach cannot be visited on the party who gave the intimation.
151. (1848) 10 D 355.

152. (1989) 168 CLR 385; 88 ALR 413.
153. Foran v Wight (1989) 168 CLR 385; 88 ALR 413.
154. Foran v Wight (1989) 168 CLR 385 at 426; 88 ALR 413 at 442.
581
24.82 Deane and Dawson JJ said the applicable principle was estoppel by conduct. The Wights had indicated in
advance that they would not be settling and this led the Forans to alter their positions, with the consequence that it
would be inequitable to allow the Wights to take advantage of this situation. Gaudron J decided the issue on the
principles of waiver and held that the Wights had waived their rights.
24.83 In Ryder v Frohlich155 Ryder was an investment banker and Protected Equity Investments Pty Ltd (Protected), was
a private company wholly owned by Ryder's family trust. Frohlich was also an investment banker and Coastal Capital
Ltd ( Coastal) was his family company. Ryder was a director, but not shareholder, of Coastal. In early 1999 Frohlich
and Ryder agreed to create an 'absolute return' investment fund and to attract subscribers to it, and in June 2000 the
Coastal Magma Diversified Performance Fund (the Diversified Fund) was established. Coastal was the 'responsible
entity' for the Diversified Fund. Ryder contributed equally with Frohlich to the establishment of the Diversified Fund
and to attracting subscribers to it until March 2001. As at March 2001 the Diversified Fund had not made a profit and
as a consequence Ryder decided to take full-time employment with Salomon Barney Smith (Salomons). Due to
Frohlich's efforts in attracting additional subscribers, investment capital in the Diversified Fund rose substantially
between March 2001, when Ryder left to work for Salomons, and the time of the court proceedings. Ryder played no
part in attracting the additional subscribers. The trial judge found that a partnership existed between Ryder and
Frohlich, a fundamental term of which was that Ryder and Frohlich would contribute equally in terms of time and
effort to the establishment of the Diversified Fund, to advising in respect to it, and to attracting subscribers to it. His
Honour held that that partnership had been dissolved when Ryder went to work for Salomons. Ryder appealed to the
New South Wales Court of Appeal, which dismissed the appeal and affirmed that the partnership had been terminated
by Ryder's anticipatory breach and Frohlich's acceptance of that breach by his agreement to Ryder's departure.
24.84 In the Court of Appeal156 McColl JA cited with approval Lord Porter's speech i11 Heyman v Darwins Limited, 157
where his Lordship said:
The three sets of circumstances giving rise to a discharge of contract are ... : (1) renunciation by a party of his liabilities
under it;
(2) impossibility created by his own act; and
(3) total or partial failure of performance ....
[A]ll these acts may be compendiously described as repudiation, though that expression is more particularly used
of renunciation before the time for performance has arrived.
24.85 McColl JA also noted that in Universal Cargo Carriers Corporation v Citati 158 Devlin , after referring to the three
illustrations given by Lord Porter, said that ' [ t] he third of these ii the ordinary case of actual breach and the first two
state the two modes of anticipatory breach
155. [2004] NSWCA 472.

156. Ryder v Frohlich [2004] NSWCA 472 at [104].
157. [1942] AC 356 at 397.
158. [1957] 2 QB 401 at 436; [1957) 2 All ER 70 at 84.
582
CHAPTER 24: DISCHARGE BY BREACH t86 In Stepping Stones
Child Care Centre (ACT) Pty Limited v Early Learning Services 'mited 159
Refshauge J said:
The principle is that, where a party cannot perform a contract, the other party may terminate the contract, even if the time
for performance has not yet arrived. As Dixon CJ said in Rawson v Hobbs: 160
it is absurd to treat one party as tied to the performance of an executory contract although the other has neither
the means nor intention of performing his [ or her] part when his [or her] turn comes ....
As Devlin J said in Universal Cargo Carriers Corp v Citati, 161 '[s]ince a man [or woman] must be both ready and willing
to perform, a profession by words or conduct of inability is by itself enough to constitute renunciation'.
The party seeking to terminate must prove:
( 1) that the other party was 'wholly and finally disabled' from performing; and (2) that the inability existed
at the time of termination.
The notion of 'wholly and finally disabled' comes from what Lord Sumner ... said in British and Beningtons Ltd v North
Western Cachar Tea Co Ltd: 162
[B]ut I do not see how the fact, that the buyers have wrongly said 'we treat this contract as being at an end, owing
to your unreasonable delay in the performance of it' obliges them, when that reason, fails, to pay in full, if, at the
very time of this repudiation, the sellers had become wholly and finally disabled from performing essential terms
of the contract altogether.
In Rawson v Hobbs,163 a contract for the sale of land was conditional upon the Minister for Lands consenting to the
transfer, and it was agreed in the contract that, if the Minister refused to consent, either party could annul the sale.
Kitto J164 said:
Since the contract did not fix a time within which the Minister's approval should be obtained, an approval at any
time up to the agreed date for completion would suffice. But according to well-recognized principle, the
purchasers, if there had been no provision in the contract on the subject of cl 12, would not have been bound to
wait until the date for completion and to perform the contract on their part in the meantime, if before that date
they could show by sufficient evidence that the Minister's approval would not be obtainable. In order to show
this, a refusal given at any time would suffice, provided it were final and definite.
9. (2013] ACTSC 173 at [315]-[328]. 0. (1961) 107 CLR 466 at 481.

l. [1957] 2 QB 401 at 437.
2. [1923] AC 48 at 72.
3. (1961) 107 CLR 466 at 481.
4. Rawson v Hobbs (1961) 107 CLR 466 at 487.
583
His Honour165 then considered the facts of the case and continued:
If this be so, there remains only the question of fact, whether the Under-Secretary's letter of 9th March 1959 was a
sufficient refusal of the Minister's consent. It seems to me that it clearly was. It left no room for doubt that there
was no chance of the approval being given. The letter came from the permanent head of the department, to whom
s 168 gave authority to correspond with persons under the direction of the Minister; its terms were unequivocal; in
tone it was final, inviting no discussion or further representations; and the reason it gave was the unanswerable
reason of a statutory prohibition. In these circumstances I am of opinion that the plaintiffs' purported annulment of
the contract under cl 12 was effectual.
A similar situation arose in Fileman v Liddle's" where a contract was conditional upon the approval of a plan of
subdivision. Mahoney J167 said:
It is important in my opinion to bear in mind that the present condition is not one which provides for the contract
to be void or voidable upon such a consent being 'refused'. ...
Where, however, a contract is merely conditional upon such an approval being obtained, the effect of the refusal
of an application for approval must be assessed by reference to what the agreement provides as to the time for
obtaining such approval. In an ordinary contract of sale, where no special stipulation is made in this regard, the
approval of the plan of subdivision must be obtained before the time which the contract fixes (expressly or by
implication) as the time for completion ....
Therefore, prima facie, the condition will be fulfilled if the approval is obtained before that time or before such
time as otherwise the contract fixes as the time within which the approval must be obtained. If it is so obtained,
then no right to terminate the contract will arise ....
Upon this basis, the fact that approval has been refused prior to that date will not of itself establish the breach or
non-fulfilment of such a condition. However, in some cases, where refusal is given before the time by which the
condition requires that approval be obtained, a right to refuse to proceed with the contract may arise even though,
between the dates of refusal and the date on which the [approval] application is required to be obtained, it would
be possible for a further application for approval to be made. What will justify such a refusal to proceed with the
contract prior to the date by which, under the contract, the approval must be obtained will depend upon the
circumstances.
In Fylayne Pty Ltd v Berckr" a similar situation arose where the respondents contended that they were not bound by a
contract they had entered into with the appellant because it was conditional upon an extension of time being granted by
the Land Commissioner to fulfil a condition of a lease, which extension of time was refused. The contract stipulated no
time within which the condition was to be fulfilled. The respondents rescinded the contract. The appellant contended that,
as a reasonable time had not expired, it could not be said that the condition had not been fulfilled.
165. Rawson v Hobbs (1961) 107 CLR 466 at 489.

166. (1974) 2 BPR 9192.
167. Fileman v Liddle (1974) 2 BPR 9192 at 9202.
168. Unreported, Queensland Supreme Court, Full Court, 24 November 1988.
CHAPTER 24: DISCHARGE BY BREACH
Derrington J 169
said:
The condition, it is said, fails only upon the non-granting of the extension within a reasonable time; and until
that time has expired it cannot be said that the extension has not been granted, particularly as the only
application which has been made related to a proposal which is not the only available proposal. In other
words, non approval is not a single event, such as a refusal of a particular application, but a state of affairs.
Non-approval is reached only after the expiry of the relevant time, and an intermediate refusal does not defeat
this.
However, if the respondents have been able to show before the expiration of a reasonable time that the
Minister's approval for the extension would not be obtainable then the condition is seen to have failed and the
contract may be avoided by either party.
His Honour then considered the Minister's response and how it might be characterised in the context of these
principles. His Honour!" said:
That response has been made in unequivocal and final terms. Not only was the large development proposed by
the appellant rejected, but, by necessary implication, so too in anticipation was the application for the
extension of time in which to comply with the terms of the lease for a period of eighteen months. An extension
to 31st December, 1988 only was allowed, and that in respect of any proposed development alternative to that
which had been rejected. The finality of the decision as to the reduced extension of time has been made
perfectly clear, and the context indicates that it refers to the advancement of any alternative proposal without
qualification. This must include even a proposal to comply with the original condition of the lease.
Accordingly, although it may be argued with some force that the original application for the extension of time
was qualified by reason of its association by the appellant with the large development proposed it so that the
range of applications that was open to the parties was not thereby exhausted, the matter has been taken out of
their hands by the Commission which not only rejected the combined application for extension of time and
approval of the proposal but also rejected in anticipation any further application for an extension of time for an
alternative proposal.
This is partly of the making of the appellant itself which chose to submit a proposal which proved to be
unacceptable and which may have attracted such a limitation upon any extension of time for any alternative
proposal. The respondents undertook all that was necessary on their part to provide the formal support for the
application, and it cannot be said that they have defaulted in any way. Faced with the finality of the response
relating to an extension of time which did not meet the relevant condition and their perception of the sterility
of any further application, not unreasonably they regarded the deeds as terminated for non-fulfilment of the
condition and rescinded.
In this they were justified. The conclusive nature of the refusal established that the condition could not be
fulfilled at all, and accordingly, consistently with the above
[69. Fylayne Pty Ltd v Berck (Unreported, Queensland Supreme Court, Full Court, 24 November 1988) at 14-15. l 70. Fylayne Pty Ltd v Berck
(Unreported, Queensland Supreme Court, Full Court, 24 November 1988) at 16-17.
585
authorities, it was established then that there would be no grant of an extension within a reasonable time.
[In the case before this court,] Stepping Stones did not challenge these principles. It submitted that the cases, however,
all related to decisions by statutory authorities and were not applicable to a commercial contract of the kind here under
consideration. The principles, it was submitted, were not relevant.
I reject that contention. The principle has been applied in commercial situations where no statutory authority is
involved. It was invoked in Universal Cargo Carriers Corp v Citati, 171 which involved a charter party and delay without
any relevant statutory authority.
24.87 In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd , Bathurst CJ described repudiation as an unwillingness or
172
inability to render substantial performance of a contract, and observed that the test of whether repudiation has occurred is
whether there has been conduct that would convey to a reasonable person repudiation of the contract as a whole or of a
fundamental obligation under it.
TERMINATION AND ITS EFFECTS

24.88 Termination of a contract at common law for a failure by a party to perform his or her contractual obligations requires
an election by some unequivocal words or conduct to terminate the contract. In most cases this is done by means of service of
a notice of termination upon the party in breach.
24.89 A notice of termination must be expressed in sufficiently clear terms such that a reasonable person would understand
the notice to be one terminating the contract. 173 Thus, in Dee-Tech Pty Ltd v Neddam Holdings Pty Ltd 174 the alleged notice of
termination was a letter headed 'Notice to Vacate the Premises', which went on to state that the 'Landlord's solicitor has
advised us that you are in breach of your lease' and further stated that 'you are in breach of your lease and we have been
instructed to terminate this current lease'. The court held that this was not an effective termination of the lease. The letter
merely stated that the landlord had given instructions to terminate the lease. Furthermore, the letter did not state that the lease
was terminated forthwith, nor did it contain any demand for immediate possession of the premises. Sackville AJA175 reaffirmed
the basic proposition that 'an election to terminate a contract for repudiation or fundamental breach must be communicated by
an unequivocal act or statement that the innocent party is treating the contract as at an end'.
24.90 If a party terminates a contract and the stated ground is not a valid reason to terminate, but there are other grounds of
justification, the termination will be valid even if the promisee
171. (1957] 2 QB 401.

172. (2012] NSWCA 184 at (179]-[180].
173. Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 768.
174. [2010] NSWCA 374.
17r:::.. noo_ 'r.ori.. Dt,, T tA 1, 1\TnArln"" 1-lnTA;-.,,rr~ Pt11 T fA r?Ol Ol NC:.Wr.A 174. ::.t f i;hl
CHAPTER 24: DISCHARGE BY BREACH was not aware of the
justified reasons to terminate at the time he or she terminated the contract. 176
Thus, in Sunbird Plaza Pty Ltd v Maloney'?
Mason CJ said:
Shepherd v Felt & Textiles of Australia Ltd 178 stands as authority for the general proposition that a termination of a
contract may be justified by reference to any ground that was valid at the time of termination, even though it was
not relied on at the time and even though the ground actually relied on is found to be without substance.
24.91 However, in such cases the other right to terminate must exist at the time termination took place. In cases of
independent obligations it may be the case that the right to terminate may only have arisen after the purported
termination took place. As was pointed out by Gleeson JA in Bibby Financial Services Australia Pty Limited v Sharma, 179
'in the case of independent rights of termination, a promisee who purports to terminate on one contractual basis, cannot
rely upon a contractual right to terminate which would have come into existence at a later date'.
24.92 The effect of termination is that it discharges both parties from their future obligations under the contract.
Obligations that were to be performed prior to the terminating breach are enforceable. 180 Thus, in the context of a
terminating breach by a purchaser under a contract for the sale of land which is terminated by the vendor, the vendor is
entitled to sue to recover the deposit if it has not been paid by the purchaser.
24.93 Termination pursuant to a contractual right to terminate is governed by the procedures set out in the contract. If
the contract is silent on what is required to be done to terminate the contract, the common law right to terminate for a
failure to perform applies. The effect of a contractual right to terminate is that it discharges both parties from their
future obligations under the contract.
24.94 In the context of repudiation, for termination to occur the repudiation must be rccepted by the innocent party. To
achieve this, 'all that is required ... is for the injured party lo communicate clearly and unequivocally his intention to treat
the contract as discharged'. 181 kceptance of the repudiation can also occur through equally unequivocal conduct by the
injured party. 182 Prior to acceptance of the repudiation, the party in breach may be able to etract the repudiation and
insist upon performance of the contract. However, for retraction o occur, the party in breach must give notice of the
retraction and the circumstances must be uch that it is at the time of the retraction reasonable for the innocent party to
be expected to be ible to perform the contract. 183 The effect of acceptance of the repudiation is that both parties re
discharged from their future obligations under the contract. 184
76. Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 377.
77. (1988) 166 CLR 245 at 262.
78. (1931) 45 CLR 359.
79. [2014] NSWCA 37 at [126].
BO. McDonald v Dennys Lasce/les Ltd (1933) 48 CLR 457.
Bl. Stocznia Golynia SA v Gearbulk Holidays Ltd [2010] QB 27 at 46.
82. Vito/ SA v Norelf Ltd [1996] AC 800 at 810-11; [1996] 3 All ER 193 at 200.
3. Foran v Wight (1989) 168 CLR385; 88 ALR413; Cohen & Co v Ockerby & Co Ltd (1917) 24 CLR 288 at 298. !4. Stocznia Golynia SA v
Gearbulk Holidays Ltd [2010] QB 27 at 41.
587
24.95 A question arises in the context of anticipatory breach as to whether termination by acceptance of anticipatory
breach requires the assent of all the parties to the contract in circumstances where only one of two jointly liable parties
to a contract repudiated. In Net Parts International Pty Ltd v Kenoss Pty Ltd 185 the Court of Appeal in New South Wales
held that dicta in the High Court decision in Lion White Lead Ltd v Rogers 186 was authority for the proposition that
termination by acceptance of an anticipatory breach requires the assent of all the parties to a contract, at least where
the non-assenting party is a joint (but not several) contracting party.
RESTRICTIONS ON A PARTY'S ABILITY TO TERMINATE A

CONTRACT
24.96 A party who has a prima facie right to terminate a contract may nevertheless be precluded from exercising that
right for a number of reasons, including:
 that party is in breach of the contract or not ready, willing, and able to perform;
 that party has elected not to terminate the contract;
 that party has not acted in good faith; or
 the equitable doctrine of relief against forfeiture precludes that party from terminating the contract.
Party not ready, willing, and able or in breach

24.97 A party who is unable or unwilling to perform his or her obligations under a contract is not able to exercise
common law rights to terminate for a breach by the other contracting party. 187 In this regard it is important to identify
whether the contract provides for contemporaneous performance of contractual obligations. If this is the case, then each
contracting party must tender performance and it is not until one party fails to tender performance that a breach occurs.
Where such a tender of performance is not required under the contract, the party who elects to terminate must
nevertheless demonstrate that they were ready and willing to perform in substance at the time of termination. With
respect to anticipatory breach, the party terminating the contract does not have to show that he or she would have been
ready to perform on the day performance was due. However, they must show that at the time of termination they were
not already unwilling or unable to perform. 188 Thus, in Amaya v Everest Property Holdings Pty Ltd 189 the facts concerned
contacts for sale in which purchasers had failed to comply with notices to complete issued by the vendor in relation to
three separate contracts. The vendor then terminated the contracts. The three purchasers challenged the validity of the
terminations on the basis that the vendor was not, as a matter of fact, ready, willing, and able to complete on the date
stipulated in the notices to complete. This was true, in that the vendor had not arranged for all the necessary
documentation necessary for settlement on the said date.
185. [2008] NSWCA 324 at [17]-[29].

186. (1918) 25 CLR 533.
187. DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 433; 19 ALR 223 at 231; Barrak Corporation Pty Ltd v Jaswi/ Properties
Pty Ltd [2016] NSWCA 32 at [48], [59].
188. Foran v Wight (1989) 168 CLR 385 at 408, 430-1, 452; 88 ALR 413 at 428,444, 460-1.
189. [2010] NSWCA 315.
Court of Appeal held that a the vendor would not need to be actually ready, willing, and
~ to settle on the relevant date if:
the purchasers had sufficiently intimated that they would not be attending settlement; and the vendor
had acted on that intimation by not getting ready to settle on the due date.
ly if both these requirements were established on the facts, would the vendor be excused m being
ready, willing, and able and thereby entitled to terminate the contracts. On the facts, ; was found to be
the case in relation to two of the contracts, but not the third. 190
98 The right to terminate where both parties to a contract commit a terminating breach iends on the
order in which the breaches occurred. If party /\s breach is followed by party breach, party B has the
right to terminate the contract because party B had not breached contract at the time party A did.
.99 In relation to the situation where party A, having already committed a terminating ach of the
contract, seeks to terminate the contract for party B's subsequent terminating ach of the contract, it is
suggested that if party B had affirmed the contract after party breach, then party A can terminate the
contract for party B's subsequent breach. This :o because affirmation of the contract by party B leaves
the primary obligations of both ·ties unchanged and the contract remains in existence for the benefit of
both parties. As esult, party A should be able to terminate if party B subsequently commits a
terminating ach of the contract. 191
,100 In relation to a contractual right to terminate, the question of whether the terminating ty has also
to be ready, willing, and able to perform has been the subject of doubt and itroversy However, in
Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd 192 Perram J held that sting authority on the issue did not
support the proposition that a contractual right to rninate required the terminating party to be free of
any breach of wrongful conduct in order be able to terminate the contract pursuant to a contractual
right to do so.
,101 Finally, it can be noted that if one party to a contract has committed a terminating ach, the other
is not precluded from exercising his or her right to terminate merely because or she has committed a
non-terminating breach of the contract. In this context the rule ilies irrespective of whether the
terminating party's breach is an actual or anticipatory ach. 193 A party in breach can terminate a contract
despite its own breach unless the ligations breached are interdependent or the breach by the party
wishing to terminate has ised the breach that the party wishes to rely on. 194
1. For a critique of this decision see, R Angyal SC, 'Ready, Willing and Able, Court Makes New Law on
Notices to Complete' (2011) 49(2) Law Society Journal 66.
. State Trading Corporation of India v M Golodetz Ltd (1989] 2 Lloyd's Rep 277 at 286. !. (2009) 178
FCR 57 at 68-72.
I. Almond Investors Limited v Kualitree Nursery Pty Limited [2011] NSWCA 198 at [73], [78]; Sharjade Pty Ltd v The
Commonwealth of Australia (2009) NSWCA 373 at (174]; Roadshow Entertainment Pty Ltd v ACN 053 006 269 Pty Ltd (1997)
42 NSWLR 462 at 479.
I. Sharjade Pty Ltd v The Commonwealth of Australia (2009) NSWCA 373 at [56].
589
PRINCIPLES OF AUSTRALIAN CONTRACT LAW Election
24.102 As noted above, an innocent party must elect to terminate the contract. Once an election to terminate the contract is
made, it cannot be retracted. 195 However, the innocent party may also elect not to terminate the contract, but rather to affirm it.
196
Once a party has so elected, that party cannot later seek to terminate the contract.
24.103 In Bibby Financial Services Australia Pty Limited v Sharma197 Gleeson JA said:
An election occurs where a person has two truly alternative rights or sets of rights and with knowledge of the facts
giving rise to the inconsistent rights acts in a manner consistent only with the exercise of one of those rights and
inconsistent with the exercise of the other.
24.104 In The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9 )198 Owen J said the following in relation to the
doctrine of election:
The doctrine of election applies where a party to a legal relationship, confronted with a choice between alternative and
inconsistent rights, elects to enjoy one right and surrender the other. In relation to a contract, an election occurs when
the conduct of the party who is alleged to have affirmed the contract can only be consistent with the continued existence
of the contract. ... Conduct can only amount to an election when it is clear, unequivocal and inconsistent with the
continuance of the contract.
24.105 In Sargent v ASL Developments Ltd199 Mason J said the following in relation to election:
It will make for greater certainty, therefore, if the present cases are regarded as cases of election. A person is said to
have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he
has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to
insist on the continuation of the estate or the performance of the contract. It matters not whether the right to terminate
the contract is conferred by the contract or arises at common law for fundamental breach - in each instance the
alternative right to insist on performance creates a right of election.
Essential to the making of an election is communication to the party affected by words or conduct of the choice thereby
made and it is accepted that once an election is made it cannot be retracted .... No doubt this rule has been adopted in
the interests of certainty and because it has been thought to be fair as between the parties that the person affected is
entitled to know where he stands and that the person electing should not have the opportunity of changing his election
and subjecting his adversary to different obligations.
A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at
once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long
as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that
it would be justifiable only if an election had been made one way or the other .... So, words or conduct
195. Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 at 733.
196. Altan Mehmet t/as Altan Fashions v Nikitas Kesidis [2009] NSWSC 1087 at [7]-[12].
197. [2014] NSWCA 37 at [115].
198. (2008) 225 FLR 1 at 772.
199. (1974) 131 CLR 634 at 655-6.
CHAPTER 24: DISCHARGE BY BREACH which do not constitute the
exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an
election to affirm the contract.
The central problem in these cases lies in ascertaining what in the eye of the law are the elements essential to the mal<ing
of a binding election, in particular whether knowledge of the existence of the alternative right is a prerequisite in the party
against whom election is alleged. The question is complicated because in some instances election may take place as
a matter of conscious choice with knowledge of the existence of the alternative right and in other cases it may occur when
the law attributes the character of an election to the conduct
of a party .
106 In relation to the requirement of communication referred to by Mason J, it is clear t the innocent party can only be said to
have elected if he or she has communication his or election to the other party in clear and unequivocal terms.P?
107 As was pointed out by Sackar J in Yogesh Enterprises Pty Ltd v Jury, 201 before an .tion can be said to have been made
between two inconsistent rights, the elector 'must at ;t know of the material facts that give rise to those legal rights as between
which an election . be made'.
108 In relation to conduct amounting to an election to affirm a contract, in Immer , 145) Pty Ltd v Uniting Church in Australia
Property Trust (NSW)2°2 Brennan J said:
A basic requirement of an election between alternative rights arising under a contract is that the party electing should
know the facts which gave rise to those rights or, perhaps, at least be taken to have known of those facts .... An act
amounting to an election must be unequivocal. Where a contract can be terminated at the option of a promisee, the right to
terminate is not necessarily lost by the promisee doing any act consistent with the continuance of the contract. If the act is
also consistent with the reservation of a right to terminate in certain events, the right to terminate is not lost by the doing
of the act.
109 In Ailakis v Olivero (No 2)203 Martin CJ said:
In assessing the consequences of an election to affirm a contract after breach, there is a vital distinction between those
cases in which the election occurs after an act or omission which constitutes a single breach, and those cases in which the
conduct of the party in breach manifests a continuing intention not to be bound by the contract, and thereby constitutes a
continuing repudiatory breach. In cases falling within the former category, an election to affirm the contract will result in
the loss of the right to accept a breach as bringing the contract to an end at any time thereafter. However, in cases falling
within the latter category, if the conduct of the party in breach manifests a continuing intention not to be bound by the
contract, unless and until the party in breach retracts its implicit or express assertion to the effect that it is not bound by the
contract and agrees to perform its terms, the innocent party can at any time accept the breach and bring the contract to an
end.
. Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 at 39; 112 ALR 609 at 618; Cong Xu v Austino
Property Developments Pty Ltd [2013] NSWSC 1177 at [34] .
. [2011] NSWSC 131 at [33].
. (1993) 182 CLR 26 at 30; 112 ALR 609 at 611. . [2014] WASCA 127 at [115] .
591
24.110 Thus, in Ogle v Comboyuro Investments Pty Ltd204 it was held that even thou l a vendor may have commenced
proceedings for a decree of specific performance of contract for the sale of land where time is of the essence, he or she has not
necessarily lo the right to terminate the contract for the purchaser's breach. This is so because if thei is an ongoing failure of
the purchaser to perform, it may have the consequence that tl vendor may have to sell the land to another person and thus lose
his or her right to specif performance. However, the vendor may still retain the right to terminate the contract an seek damages.
Furthermore, even if the vendor in such a case obtains an order for specifi performance, he or she may, with the approval of
the court, elect to have the contra: terminated. In Johnson v Agnew2°5 Lord Wilberforce said:
Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of
common sense and equity. It is easy to see that a party who has chosen to put an end to a contract by accepting the
other party's repudiation cannot afterwards seek specific performance. This is simply because the contract has gone -
what is dead is dead. But it is no more difficult to agree that a party, who has chosen to seek specific performance, may
quite well thereafter, if specific performance fails to be realised, say, 'Very well, then, the contract should be regarded
as terminated: It is quite consistent with a decision provisionally to keep alive, to say, 'Well, this is no use - let us now
end the contract's life'. A vendor who seeks (and gets) specific performance is merely electing for a course which may
or may not lead to implementation of the contract - what he elects for is not eternal and unconditional affirmation, but a
continuance of the contract under control of the court which control involves the power, in certain events, to terminate
it. If he makes an election at all, he does so when he decides not to proceed under the order for specific performance,
but to ask the court to terminate the contract.
24.111 Furthermore, 'acts consistent with the continuance of the contract but also consistent with the reservation of a right to
terminate may in certain events not amount to an election." An example is when a party to a time of the essence contract
grants the other party an extension of time to perform. This will not necessarily be seen as an affirmation of the contract. On
the other hand, 'the exercise, despite knowledge of a breach entitling one party to be discharged from its future performance,
of rights available only if the contract subsists, will constitute an election to maintain the contract on foot."?
24.112 Finally, words or conduct that merely recognise the existence of a contract do not of themselves amount to an election
to affirm the contract.i" The same applies to '[a]cts maintaining a position while consideration is given to what action should
be taken in relation to the other party's breach also fall into this category's"
24.113 In assessing the question of whether election by conduct has occurred, the subjective intent of the party is not relevant.
210
204. (1976) 136 CLR 444; 9 ALR 309.

205. (1980] AC 367 at 398; [1979] 1 All ER 883 at 894.
206. The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 225 FLR 1 at 773.
207. Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at 589; 251 ALR 322 at 336.
208. Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 656; 4 ALR 257 at 274.
209. The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 225 FLR 1 at 773.
210. Craine v Colonial Mutual Insurance Co Ltd (1920) 28 CLR 305 at 325.
592
114 In Tele2 International Card Company SA v Post Office Ltd211 Aikens LJ summarised principles of election as follows:
(1) if a contract gives a party a right to terminate upon the occurrence of defined actions or inactions of the other party and
those actions or inactions occur, the innocent party is entitled to exercise that right. The innocent party has to decide
whether or not to do so. Its decision is, in law, an election. (2) It is a prerequisite to the exercise of the election that the
party concerned is aware of the facts giving rise to its right and the right itself. (3) The innocent party has to make a
decision, because if it does not do so then 'the time may come when the law takes the decision out if [its] hands, either by
holding [it] to have elected not to exercise the right which has become available to [it], or sometimes by holding [it] to
have elected to exercise it'. ( 4) Where, with knowledge of the relevant facts, the party that has the right to terminate the
212
contract acts in a manner which is consistent only with it having chosen one or other of two alternative and inconsistent
courses of action open to it (ie. to terminate or affirm the contract), then it will be held to have made its election
accordingly. (5) An election can be communicated to the other party by words or conduct. However, in cases where it is
alleged that a party has elected not to exercise a right, such as a right to terminate a contract on the happening of defined
events, it will only be held to have elected not to exercise that right if the party 'has so communicated [its] election to the
other party in clear and unequivocal terms."!
115 In Galafassi v Kelly214,Gleeson JA said the following in relation to the doctrine of :tion:
At the heart of election is the idea of confrontation which in turn produces the necessity of making a choice. Thus where a
party, faced with the choice of terminating .the contract or keeping it on foot, terminates the contract ordinarily that
conduct leaves no doubt as to the choice being made. This is because the contract no longer exists. But ... the question is
not answered so readily where the situation is the converse. This is because a party may act on the basis that the contract
remains on foot without necessarily being confronted with the necessity of making a choice to either terminate or affirm
the contract.
This is to be contrasted with a situation of inconsistent remedies to enforce a right where no question of election arises
until one or other claim has been pursued until judgment. The institution of proceedings for alternative remedies
(including relief of an equitable nature) is not an election by the promisee in favour of either remedy. The very purpose of
seeking alternative relief is to keep the promisee's options open. The distinction between alternate rights and remedies and
its consequences has been described by the High Court as 'fundamental'. 215
Although an election between inconsistent rights once made is irrevocable, it does not follow that an innocent party who
seeks (and gets) specific performance is treated as affirming the
[2009] EWCA Civ 9 at [53].

Motor Oil Hellas ( Corinth) Refineries SA v Shipping Corporation of India (The Kanchenjunga) [ 1990] 1 Lloyd's Rep 391 at 398.
Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (The Kanchenjunga) [ 1990] 1 Lloyd's Rep 391 at 398.
(2014) 87 NSWLR 119 at 135.
Ciavarella v Balmer (1983) 153 CLR 438 at 449.
593
contract irrevocably so as to prevent the innocent party from later bringing the contract to an end if the
repudiating party persists in its failure to perform.
24.116 His Honour,216 after examining relevant authorities, then concluded as follows: [T]he legal significance of
commencing proceedings for specific performance is as follows - a vendor who elects to sue for specific
performance is not thereby precluded from later terminating the contract and claiming damages for the continued
refusal by the purchaser to complete if the purchaser, after the institution of the proceedings, either committed a
breach of an essential term of the contract or otherwise evinced an intention to no longer be bound by the contract.
Termination not in good faith

24.117 The right to terminate a contract for breach is subject to an obligation to act in good faith. 217 According to
Seddon, Bigwood, and Ellinghaus218 factors that have been held relevant in determining whether a termination was in
good faith include:
 the deliberation and seriousness of the breach relied on; 219
 dishonest conduct by the breaching party; 220
 the degree to which the relationship has been damaged; 221
 the length of notice; 222
 whether the terminating party was prejudiced or misinformed; 223
 whether the terminating party's conduct was a cause of the breach; 224 and
 whether the terminating party was aware that specific harm would follow from termination. 225
Relief against forfeiture

24.118 In many cases termination of a contract for its breach may lead the breaching party to lose some interest in
property because of his or her breach of contract or as a result of the contract being terminated for some other reason.
However, that interest may be protected by a court pursuant to principles relating to the equitable doctrine of relief
against forfeiture. In Hyman v Rose226 Lord Loreburn LC said that equity's jurisdiction here was 'to prevent one man
from forfeiting what in fair dealings belongs to someone else, by taking advantage of a breach from which he is not
commensurately and irreparably damaged'.
216. Galafassi v Kelly (2014) 87 NSWLR 119 at 137.

218. Seddon, Bigwood and Ellinghaus, Cheshire and Fifoot's Law of Contract, note 14 above, p 1098.
219. Forklift Engineering Australia Pty Ltd v Powerlift (Nissan) Pty Ltd [2000] VSC 443.
220. Forklift Engineering Australia Pty Ltd v Powerlift (Nissan) Pty Ltd [2000] VSC 443.
221. Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) FCA 903.
222. Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) FCA 903.
223. Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234.
225. Walker v ANZ Banking Group Ltd (No 2) [2001] 39 ACSR 557.
226. [1912] AC 623 at 631.
CHAPTER 24: DISCHARGE BY BREACH !4.119 The jurisdiction to
relieve against forfeiture is underpinned by the principle of nconscientiousness. Relief will be granted if it would be
unconscientious to the contract to be irminated."? In Barrak Corporation Pty Ltd v Jaswil Properties Pty Ltd228 the Court of
Appeal bserved that in a case where a vendor terminates a contract following a purchaser's breach, rlief against forfeiture is
'appropriately conceptualized as relief against unconscientious rliance by the Vendor on the right of termination, as opposed to
relief against forfeiture of the urchaser's equitable interest'. The extent of this jurisdiction was outlined in Lord Wilberforce's
peech in Shiloh Spinners Ltd v Harding,229 where he said:
[E]quity expects men to carry out their bargains and will not let them buy their way out by uncovenanted payment. But
it is consistent with these principles that we should reaffirm the right of courts of equity in appropriate and limited cases
to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a
stated result which can effectively be attained when the matter comes before the court, and where the forfeiture
provision is added by way of security for the production of that result. The word 'appropriate' involves consideration of
the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of
the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by
the breach.
!4.120 In broad terms, equitable intervention on the basis of these principles relates to ircumstances involving fraud, accident,
mistake, or surprise. 230 In cases other than those nvolving accident or mistake, one must establish that the conduct of the party
seeking to nforce the right of forfeiture has 'in some significant respect caused or contributed' to the reach of contract by the
other party. 231
!4.121 In RHG Mortgage Securities v BNY Trusts Company232 McDougall J observed that in rder to establish a case for relief
against forfeiture, a plaintiff needs to do the following:
identify the right or rights that would be forfeited;
identify the legal rights, the exercise of which would effect the forfeiture; and identify the reasons why the exercise
of those legal rights would be unconscientious.
!4.122 In ascertaining whether the exercise of legal rights is unconscientious, the court does iot confine its enquiry only to the
conduct of the person exercising the legal right. In ING Bank Australia) Ltd v O'Shea233 Giles JA said:
Unconscientiousness does not mean attention is given only to the conduct of the person exercising the right, and regard
is had to the conduct of the party seeking relief and to other matters providing the circumstances in which the
unconscientiousness of the exercise of the right must be judged. But it remains the ultimate question.
27. Stern v McArthur (1988) 165 CLR 489 at 526-7; 81 ALR 463 at 488; Greenshell NZ Ltd (in receivership)
v Kennedy Bay Mussel Co (NZ) Ltd [2016] 2 NZLR 44 at 57.
28. [2016] NSWCA 32 at [69].
'29. [1973] AC 691 at 723-4; [1973] 1 All ER 90 at 101.
'30. Shiloh Spinners Ltd v Harding [1973] AC 691 at 723; [1973] 1 All ER 90 at 101.
'31. Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 335; 201 ALR 359 at 373. '32. [2009] NSWSC 1432 at
[137].
1
33. [2010] NSWCA 71 at [19].
595
24.123 In the context of relief against forfeiture of rights in leases, in Greenshell NZ Ltd (in receivership) v Kennedy Bay
Mussel Co (NZ) Ltd234 Harrison and Stevens JJ in the Court of Appeal in New Zealand, in elaborating on the principles upon
which relief should be given, said:
[T]he courts determine the appropriateness or otherwise of invoking the jurisdiction to grant relief with reference to
the particular facts of the case at hand. The broad principles governing when such jurisdiction may be invoked can be
summarised as follows:
(a) A critical question is whether B can show that it would be unconscionable for A to insist on enforcing a clause designed as
security for a primary stipulation. This depends on whether the clause would impose a burden on the forfeiting party,
or give the party insisting on forfeiture a benefit that is excessive when compared to that arising through the
performance of the secured duty.
(b) Relief can be granted even in the absence of bad faith or improper purpose.
(c) The fact that the party seeking to enforce the contractual provision may have some additional, collateral motivation for
enforcing a security right by means of a forfeiture clause does not of itself provide grounds for relief against forfeiture.
(d) The paradigm case for relief is where the primary object of a bargain is to secure a stated result which can be
effectively attained when the matter comes before the court, and where the forfeiture provision is added by way of
security for the production of the result. (e) Usually, relief will only be available if the party in default is ready and
willing to remedy that default or breach by providing the other party with the benefits the forfeiture clause is aimed to
secure.
(f) In the cases of equitable relief against forfeiture of a lease, it is no longer the case that the doctrine is limited to non-
payment of rent. Relief can be granted in relation to other duties.
Their Honours235 then went on to say the following:
In terms of the factors guiding the exercise of discretion to grant relief, the following considerations are likely, among
others, to be relevant:
(a) the conduct of the applicant for relief (in particular, whether there was wilful conduct
leading to the breach/default); (b) the gravity of the breach/
default;
(c) the disparity between the property forfeited and damage caused by the breach;
(d) whether it is reasonable for a Court to impose relief on a party with a contractual right to
re-enter or cancel the agreement in question.
Finally, their Honours236 cited with approval the following passage from the speech of Lord Simon of Glaisdale in Shiloh
Spinners Ltd v Harding,237 where in relation to the exercise of the court's discretion in these cases, his Lordship said:
Prominent but not exclusive among such considerations is the desirability that contractual promises should be
observed and contractual rights respected, and even more the
234. [2016] 2 NZLR 44 at 58-9.

235. Greenshell NZ Ltd (in receivership) v Kennedy Bay Mussel Co (NZ) Ltd [2016] 2 NZLR 44 at 61-2.
236. Greenshell NZ Ltd (in receivership) v Kennedy Bay Mussel Co (NZ) Ltd [2016] 2 NZLR 44 at 64.
237. [1973] AC 691 at 727; [1973] 1 All ER 90 at 104.
596
CHAPTER 24: DISCHARGE BY BREACH undesirability of the law
appearing to condone flagrant and contemptuous disregard of obligations. Other such considerations are how far it is
reasonable to require a party who
is prima facie entitled to invoke a forfeiture or penalty clause to accept alternative relief (eg money payment or re-
instatement of premises) and how far vindication of contractual rights would be grossly excessive and harsh having
regard to the damage done to the promisee and the moral culpability of the promisor.
1.124 The willingness of courts to exercise their jurisdiction to relieve against forfeiture ictuates from time to time. In
Australia the most recent High Court decision on the matter in 1nwar Enterprises Pty Ltd v Cauchi 238 suggests that the courts
are currently less willing to grant lief than in the immediately preceding decades. In that case the High Court made it clear
that .ourt should be reluctant to interfere with deliberately negotiated contractual rights, and that e jurisdiction to relieve
against forfeiture does not authorise it to remake a contract into a rm that it thinks is more reasonable or fair. Furthermore, the
High Court stated that a court ill not intervene where some supervening event operates more to the advantage of one party an
the other, and the event was one for which the parties might have made, but did not make, me express provision. The High
Court went on to approve a comment made by Mason CJ
Stern v McArthur, 239 where his Honour said that 'the jurisdiction to grant relief against rfeiture does not authorize a court to
reshape contractual relations into a form the court inks more reasonable or fair where subsequent events have rendered one
side's situation more vourable' On the other hand, the parties to a contract cannot oust the jurisdiction to relieve ;ainst
forfeiture by including an express term to that effect in their contract.>"
4.125 Although the principle of relief against forfeiture can apply in a number of contexts, is chapter will confine its analysis
to contracts for the sale of land where a purchaser seeks lief against forfeiture of his or her interest following termination of
the contract by a vendor.
4.126 In this context, relief against forfeiture will be permitted if it would be unconscientious 1r the defaulting purchaser to
lose his or her interest in land as a result of the termination of the mtract by the vendor. In such cases the defaulting purchaser
will seek the remedy of specific erforrnance rather than relief against forfeiture because at that time, the contract having been
slidly terminated by the vendor, the purchaser no longer has any interest - the vendor has lready forfeited the interest. The
logical consequence is that the purchaser cannot seek relief gainst forfeiture of a non-existent interest. He or she must seek
specific performance of the mtract. 241 In determining whether the contract should be specifically enforced, the court will eed
to ascertain whether it was in all the circumstances unconscientious for the vendor to ave forfeited the purchaser's interest.
4.127 A common example of the operation of these principles arises in cases where the urchaser has failed to complete a
transaction within the time stated in an essential contractual me stipulation and the vendor subsequently terminates the
contract. In Union Eagle Ltd v Golden chievement Ltd2 42 the House of Lords rejected a purchaser's application for specific
performance
J8. (2003) 217 CLR 315 at 328; 201 ALR 359 at 368. See also Damco Nominees Pty Ltd v Moxham [2012]
VSC 79 at [76].
l9. Stern v McArthur (1988) 165 CLR 489 at 503; 81 ALR 463 at 471.
JO. Federal Airports Corporation v Makucha Developments Pty Ltd (1993) 115 ALR 679 at 700. n. Tanwar Enterprises Pty Ltd v
Cauchi (2003) 217 CLR 315 at 334-5; 201 ALR 359 at 372-3. 12. [1997] AC 514; [1997] 2 All ER 215.
597
in circumstances where the vendor had terminated the contract after the purchaser was late · 10 minutes in seeking to tender
the balance of the purchase price in circumstances where tJ contract provided that time was of the essence. This aspect of the
decision has been criticised l Stevens243 as follows:
It seems unconscionable that a failure to comply with a time stipulation by a mere 10 minutes should entitle the vendor
to both the benefit of the substantial deposit and immediate resale at a higher price. The degree of fault on the part of
the purchaser is slight compared to the detriment he will suffer .... In such circumstances the only reason why a vendor
would want to [terminate], rather than accept performance tendered almost immediately after the appointed time, is
that he anticipates obtaining an increased price by reselling his asset, and the breach is exploited to escape the bargain
originally entered. . .. It is suggested that a purchaser who has tendered performance a de minimis period of time after
it was due should be entitled to seek equitable relief against forfeiture of his deposit if it can be shown that the vendor
has not in fact suffered any loss as a result of the failure to perform on time, which would prima facie be the case if he
resold the property at a profit.
24.128 Nevertheless, in very similar circumstances in Rick Dees Ltd v Larsen244 th New Zealand Supreme Court followed
the approach of the House of Lords in Union Eagl v Golden Achievement. 245
24.129 The leading Australian authority in this context is Tanwar Enterprises v Cauchi. In that case a purchaser of land
24
pursuant to three separate contracts was granted two length; extensions of time to complete the transactions. A further date
was agreed on for completion with time being of the essence. The purchaser failed to complete on this date and the vendor:
terminated the contracts. The purchaser's failure to complete was due to delay in getting finance in place to complete the
transactions. The purchaser was, however, in a position tc complete the contracts on the next day. The purchaser sought
specific performance of the contracts. The High Court unanimously ruled against the purchaser. In the joint judgment ol
Gleeson CJ, McHugh, Gummow, Hayne, and Heyden JJ247 their Honours said that there was nothing unconscientious in the
vendors being able to terminate the contract for the purchaser's failure to comply with an essential time stipulation. They also
noted that in broad terms such unconscientious conduct arose in circumstances involving fraud, accident, mistake, or surprise,
and that in cases other than those involving accident or mistake, the conduct of the vendor had to have 'in some significant
respect caused or contributed' to the breach of contract by the other party. On the facts of the case there was no such conduct
by the vendors.
24.130 Their Honours248 noted that 'the court will not readily intervene against the loss of a contract for sale validly
[terminated] by the vendor for breach of an essential condition'. In this respect their Honours referred to the outcome of the
earlier case of Union Eagle v Golden
243. J Stevens, 'Having Your Cake and Eating it? Union Eagle Ltd v Golden Achievement Ltd' (1998) 61 Modern
Law Review 255 at 260.
244. [2007] 3 NZLR 577.
245. [1997] AC 514; [1997] 2 All ER 215.
246. {2003) 217 CLR 315; 201 ALR 359.
247. Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 336; 201 ALR 359 at 373.
248. Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 328; 201 ALR 359 at 368.
598
\..nl'\r I en 4'."'t. LJIJ\..I 1nnuL u I unL..r"-' •
ievement. 249 Although their Honours recognised that the English courts were less flexible in lying relevant principles in this
area of the law, they were in agreement with the sentiments ressed by Lord Hoffmann,"? where his Lordship observed that it
was a 'beguiling heresy' uggest that the jurisdiction to relieve against forfeiture was 'unlimited and unfettered' and n continued
as follows:
It is worth pausing to notice why it continues to beguile and why it is a heresy. It has the obvious merit of allowing the
court to impose what it considers to be a fair solution in the individual case. The principle that equity will restrain the
enforcement oflegal rights when it would be unconscionable to insist upon them has an attractive breadth. But the reasons
why the courts have rejected such generalisations are founded ... upon practical considerations of business. These are, in
summary, that in many forms of transaction it is of great importance that if something happens for which the contract has
made express provision, the parties should know with certainty that the terms of the contract will be enforced. The
existence of an undefined discretion to refuse to enforce the contract on the ground that this would be 'unconscionable' is
sufficient to create uncertainty. Even if it is most unlikely that a discretion to grant relief will be exercised, its mere
existence enables litigation to be employed as a negotiating tactic. The realities of commercial life are that this may cause
injustice which cannot be fully compensated by the ultimate decision in the case.
.131 Lord Hoffmann251 then said the following in relation to the vendor's right to terminate ontract for breach of an essential
term:
Its purpose is ... to restore to the vendor his freedom to deal with his land as he pleases. In a rising market, such a right
may be valuable but volatile. Their Lordships think that in such circumstances a vendor should be able to know with
reasonable certainty whether he may resell the land or not.
-.132 Finally, in Tanwar Enterprises v Cauchi252 their Honours observed that mere pervening events and changes in
circumstances are insufficient to render forfeiture by a ndor unconscientious.
-.133 As already noted, in cases where fraud or surprise are the grounds on which .conscientiousness is based, the vendor
must have caused or contributed to the purchaser's each. In Tanwar Enterprises v Cauchi253 the High Court referred to and
explained the decision the earlier case of Legione v Hateley254 as being an instance of surprise. In that case, on e basis of
somewhat uncertain statements made by the office of the vendors' solicitors, the
rrchasers were lulled into a belief that the vendors would accept completion of the contract it occurred within a couple of days
of the due date for completion, time being of the essence respect of that date. In these circumstances, the High Court ruled
that the forfeiture by the ndors was unconscientious.
9. [1997] AC 514; [1997] 2 All ER 215.

0. Union Eagle v Golden Achievement [1997] AC 514 at 519; [1997] 2 All ER 215 at 218-19.
1. Union Eagle v Golden Achievement [1997] AC 514 at 520; [1997] 2 All ER 220.
2. (2003) 217 CLR 315 at 328; 201 ALR 359 at 369.
,3. (2003) 217 CLR 315 at 335-6; 201 ALR 359 at 374. 4. (1983) 152 CLR406; 46 ALR
1.
599
24.134 In establishing unconscientiousness based on fraud or surprise the conduct by the vendor will in many cases
give rise to a separate cause of action in favour of the purchaser - for example, it may constitute a vitiating factor such
as a misrepresentation,255 mistake,256 and undue influence,257 or it may give rise to a claim based upon the principles of
equitable estoppel.258 However, it is clear from the decision in Legione v Hateley259 that the conduct of the vendor does
not of itself have to give rise to a cause of action. In that case, notwithstanding that the vendors' conduct did not give
rise to an estoppel, the purchasers succeeded in establishing that the vendors' forfeiture was unconscientious.
255. See Chapter 14.

?<;Q (lQR~\ Jc;?rTll A()t;.At; ATO 1

IMAG0001

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IMAG0001

Uploaded by

Copyright:

Available Formats

24

15. (1989) 168 CLR 385 at 420; 88 ALR 413 at 437.

contract). By contrast the common law and equitable remedies

15. (1989) 168 CLR 385 at 420; 88 ALR 413 at 437.

described as conduct of a party which evinces an intention no longer

25. [2013] NSWCA 303 at [86]-[87].

29. (1978) 138 CLR 423 at 432-3.

32. (2007) 233 CLR 115 at 136; 241 ALR 88 at 101.

24.17 These rights to terminate apply to leases as well. 37

FAILURE TO PERFORM CONTRACTUAL OBLIGATIONS

Conditions, warranties, and intermediate or innominate terms

The classification of a term turns on the intention of the parties. Conditions

56. (1951) 83 CLR 322.

62. [1962] 2 QB 26; 1 All ER 474.

The future of conditions, warranties, and intermediate terms 24.40

68. (2007) 233 CLR 139; 241 ALR 88.

Terminate for breach of a time stipulation

73. Carter, Contract Law in Australia, note 18 above, pp 281-2.

87. (1974) 131 CLR 286 at 299; 3 ALR 151 at 161.

Lindgren,'? in order for a notice to complete to be valid:

94. [1977] 1 NSWLR 553 at 566.

:4.71 In Galafassi v Kelly123 Gleeson JA said:

151. (1848) 10 D 355.

155. [2004] NSWCA 472.

9. (2013] ACTSC 173 at [315]-[328]. 0. (1961) 107 CLR 466 at 481.

165. Rawson v Hobbs (1961) 107 CLR 466 at 489.

TERMINATION AND ITS EFFECTS

171. (1957] 2 QB 401.

RESTRICTIONS ON A PARTY'S ABILITY TO TERMINATE A

Party not ready, willing, and able or in breach

185. [2008] NSWCA 324 at [17]-[29].

204. (1976) 136 CLR 444; 9 ALR 309.

[2009] EWCA Civ 9 at [53].

Termination not in good faith

 dishonest conduct by the breaching party; 220

 the degree to which the relationship has been damaged; 221

 the length of notice; 222

 whether the terminating party was prejudiced or misinformed; 223

Relief against forfeiture

216. Galafassi v Kelly (2014) 87 NSWLR 119 at 137.

234. [2016] 2 NZLR 44 at 58-9.

9. [1997] AC 514; [1997] 2 All ER 215.

255. See Chapter 14.

You might also like