CONTRACT LAW REVIEW NOTES
PERFORMANCE
Standard of Performance
▪ Variability of contractual obligations: strict/exact performance required or just reasonable effort/care?
- e.g. contract for sale of goods, vendor is promising to deliver the goods, strict obligation, purchaser
isn’t to do reasonable best to pay for the goods it’s to pay the goods. When they promise to do
something if there’s a reason to suppose otherwise, law will interpret a strict obligation (no excuses
obligation) not an absolute obligation.
▪ Method of performance may be stipulated or left to performer’s discretion e.g. contract to pay me
money but I want it in cash, must do that.
▪ Everything depends on construction
Time of Performance (Time Stipulation)
▪ Time may be specified expressly: must be completed by a certain day or sale of land will be performed
in exchange of transfer of title and payment on particular time.
▪ If not stipulated, implied obligation to perform within a reasonable time
Good Faith and Performance
Fiduciary Duties
▪ Nature of fiduciary duties is the requirement to act in another’s best interests and the duty to avoid
conflicts of interest
▪ It is enforceable in equity - Equity can order compensation and grant remedies for breach of contract,
including account of profits or constructive trust over any property obtained
▪ Examples of fiduciary relationships
- Vertical relationships: obligations flow one way. One party has more power. (lawyer and client,
trustee and beneficiary, principal and agent, employee and employer)
- Horizontal relationships: obligations flow both ways. Both parties owe each other fiduciary duties
(partnership; two or more parties form a partnership to run a business, each partner owe all other
partners fiduciary duty, sets asides individual interest and act in the best interest of the partnership
and (joint ventures)
▪ When is a contractual relationship also a fiduciary relationship?
- Hospital Products v US Surgical Corp: US company entered into company with Aus company
where Aus distributing US product in Aus. US discovered that they were distributing product but also
a competitive product. Argument was because it was a long way away and no direct control of this,
Aus should be regarded as a fiduciary duty to act in best interest. Rejected. Since this case we
haven’t seen indication of high court being interested in expanding contracts of creating fiduciary
relationships, still possible to see instances to recognise relationship of having fiduciary relationship.
Contracts of Utmost Good Faith
▪ At common law, some contracts treated as uberrimae fidei (requiring utmost good faith) E.g insurance
contracts - both insurer and insured person is expected to utmost good faith
▪ Now confirmed/enshrined in statute: Insurance Contracts Act 1984 (Cth) s 13
The Implied Duty of Co-operation
▪ Duty of ‘co-operation’ implied by law into all contracts
- Each party must do all that is necessary to ‘enable the other party to have the benefit of the contract’:
Butt v McDonald (positive) e.g. you let a builder into your house if you want work done.
- Includes obligation not to hinder or prevent fulfilment of contractual purpose: Shepherd v Felt
(negative) e.g. can’t interfere with a worker whilst they’re working.
Discretionary Powers
▪ Where contract confers a discretionary power on one party, courts generally require it to be exercised
honestly and reasonably
- Decision to give you bonus based on performance, can’t make an arbitrary decision and not give you
bonus because you like Port = irrational exercise of discretionary power, need to act
honestly/reasonably and assess performance
- Renard Constructions v Minister for Public Works building contract provided client was NSW
PERFORMANCE
Standard of Performance
▪ Variability of contractual obligations: strict/exact performance required or just reasonable effort/care?
- e.g. contract for sale of goods, vendor is promising to deliver the goods, strict obligation, purchaser
isn’t to do reasonable best to pay for the goods it’s to pay the goods. When they promise to do
something if there’s a reason to suppose otherwise, law will interpret a strict obligation (no excuses
obligation) not an absolute obligation.
▪ Method of performance may be stipulated or left to performer’s discretion e.g. contract to pay me
money but I want it in cash, must do that.
▪ Everything depends on construction
Time of Performance (Time Stipulation)
▪ Time may be specified expressly: must be completed by a certain day or sale of land will be performed
in exchange of transfer of title and payment on particular time.
▪ If not stipulated, implied obligation to perform within a reasonable time
Good Faith and Performance
Fiduciary Duties
▪ Nature of fiduciary duties is the requirement to act in another’s best interests and the duty to avoid
conflicts of interest
▪ It is enforceable in equity - Equity can order compensation and grant remedies for breach of contract,
including account of profits or constructive trust over any property obtained
▪ Examples of fiduciary relationships
- Vertical relationships: obligations flow one way. One party has more power. (lawyer and client,
trustee and beneficiary, principal and agent, employee and employer)
- Horizontal relationships: obligations flow both ways. Both parties owe each other fiduciary duties
(partnership; two or more parties form a partnership to run a business, each partner owe all other
partners fiduciary duty, sets asides individual interest and act in the best interest of the partnership
and (joint ventures)
▪ When is a contractual relationship also a fiduciary relationship?
- Hospital Products v US Surgical Corp: US company entered into company with Aus company
where Aus distributing US product in Aus. US discovered that they were distributing product but also
a competitive product. Argument was because it was a long way away and no direct control of this,
Aus should be regarded as a fiduciary duty to act in best interest. Rejected. Since this case we
haven’t seen indication of high court being interested in expanding contracts of creating fiduciary
relationships, still possible to see instances to recognise relationship of having fiduciary relationship.
Contracts of Utmost Good Faith
▪ At common law, some contracts treated as uberrimae fidei (requiring utmost good faith) E.g insurance
contracts - both insurer and insured person is expected to utmost good faith
▪ Now confirmed/enshrined in statute: Insurance Contracts Act 1984 (Cth) s 13
The Implied Duty of Co-operation
▪ Duty of ‘co-operation’ implied by law into all contracts
- Each party must do all that is necessary to ‘enable the other party to have the benefit of the contract’:
Butt v McDonald (positive) e.g. you let a builder into your house if you want work done.
- Includes obligation not to hinder or prevent fulfilment of contractual purpose: Shepherd v Felt
(negative) e.g. can’t interfere with a worker whilst they’re working.
Discretionary Powers
▪ Where contract confers a discretionary power on one party, courts generally require it to be exercised
honestly and reasonably
- Decision to give you bonus based on performance, can’t make an arbitrary decision and not give you
bonus because you like Port = irrational exercise of discretionary power, need to act
honestly/reasonably and assess performance
- Renard Constructions v Minister for Public Works building contract provided client was NSW
