LAW5005 Principles of Contract Law B
CONTRACTS B EXAM TEMPLATES
TERMINATION
DEFINITION
● T
ermination is when a K is ended and each party’s future rights and obligations under it are
extinguished (Bowes v Chalayer)
TERMINATION BY AGREEMENT
RULES:
● Termination under original contract
● Termination by subsequent contract
● Abandonment
CRIPT:Xwill argue that agreement under the originalcontract allows termination of the contract.
S
OR
Xmay argue that the original contract was terminatedby effect of the subsequent contract.
RULE NOTES SCRIPT
ermination
T ● K expires at end of fixed term OR K he parties may mutually decide to end their
T
Under Original has express termination clause (e.g. contract.
LL can terminate lease if rent late;
Shevill) I f fixed term:Many contracts have a fixed term,
● If no termination clause, there may be after which the contract will terminate
an implied RTT on reasonable notice
● E.g. contract for gym membership I f express termination cl:The original contract
● If the contract isexecutory(both may contain a clause specifying the date for
parties will have obligations) each cessation of the contract (Shevill).Xmay argue
party provides consideration in that the original contract has an express
agreeing to release the other from the termination clause, allowing for termination if
original contract [reason] under cl [cl].
● If the contract has beenfully executed
by one party (but the other still has I f implied RTT:If no express clause specifying
obligations to perform) it is necessary termination date is included (i.e. an indefinite
to have a deed or ensure there is contract), an implied right to terminate may exist
consideration provided by the party upon reasonable notice.Xmay argue that the
being relieved of performance. original contract is of an indefinite duration, and
(These are often called ‘accord and thus the implied right to terminate with reasonable
satisfaction’ agreements) notice applies.
1
, LAW5005 Principles of Contract Law B
ermination
T ● P arties form 2nd K (satisfying K ermination by express agreement is essentially a
T
Under formation elements) agreeing to contract to end a contract. Parties form a second
Subsequent release each other of future obs under contract agreeing to release each other from future
original K obligations under the original contract.Xmay
○ 2nd terminates original argue that the original contract was terminated by
● If K partly performed (both parties the second contract formed between the parties.
still have obs under K) - The
consideration element is agreeing to I f the original contract waspartly performed,X
release OP’s obs will emphasize that the consideration for the
● If K wholly performed (by only 1 second contract is the mutual agreement to release
party) - Must have deed or some each other from future performance obligations.
surety from party being relieved of
performance I f the original contract wasfully performedbyX,
then the second contract must be executed as a
deed or include surety from the party being
released from performance.
bandoned
A ● A
fter a period of inactivity or other may argue that the contract was abandoned due
X
Contract conduct that indicates the parties no to [reason e.g. a prolonged period of inactivity,or
longer desire their contract to be on conduct by the parties that suggests they no longer
foot, the courts may treat the parties wish to continue with the agreement] (DTR
as having mutually agreed to abandon Nominees).
that contract (McDermott)
could assert that the parties' [actions] or failure
X
to act effectively constitutes mutual consent to
abandon the contract (Cedar Meats; DTR
Nominees).
CRIPT:OTF, it is satisfied that the contract wasterminated by agreement under the [original contract,subsequent
S
contract, abandonment], as the parties either [fulfilledthe terms of the original contract, formed a second contract
releasing each other from future obligations, or demonstrated mutual conduct indicating the abandonment of the
contract]. Therefore, the court may find that theoriginal contract is no longer in force, and the parties are relieved of
their respective obligations.
TERMINATION FOR BREACH
( Identify obligation and nature of non-performance on the facts, if anticipatory, go straight to 2.3 Repudiation)
●
● Condition: yes, right to terminate: If the term isa condition, the aggrieved party will be entitled to terminate the
contract for any breach of that term, even if it was of little gravity or consequence (Arcos)
● Intermediate Term: may be right to terminate: If theterm is an intermediate term, the aggrieved party may be
entitled to terminate, depending on the gravity and consequences of the breach. A serious breach allows for
termination.
2
, LAW5005 Principles of Contract Law B
● W
arranty: no right to terminate (rare): If the breached term is a warranty, no breach allows termination; the
aggrieved party will be entitled only to damages.
CRIPT:The common law right to terminate co-existswith an express right to terminate (Progressive MailingHouse v
S
Tabali). A breach of contract occurs whenever oneof the parties to the agreement did not perform its obligations as
required under the contract.Xwill argue thatY’sis in breach as they have/have not done [action].Every breach will give
rise to damages, but only breach of condition or serious breach of intermediate term may give rise to the right to
terminate. First, the contractual obligation and the nature of the non-performance need to be identified.
CONDITION
RULES:
● RTT
● Term is so important that wronged party would not have entered the contract if not assured strict performance of
it (Tramways)
● FACTORS SUGGESTING CONDITION:
○ Term very important to parties (Tramways; Ankar; Bancks)(e.g. If promised front page of paper, must
be on FP)
○ Other party’s corresponding ob. is a condition (Bancks;one ob. can’t be a condition and the other a
warranty)
○ Performance has commences (Bancks)
○ Consequences of breach are severe
○ Damages inadequate to compensate for breach OR loss difficult to prove (Ankar)
○ Parties pre-contractual correspondence suggests cond. (Tramways; agreed to advertising expectations
prior to K)
CRIPT:Xwill argue that the [term],Yhas breachedwas a condition, thus any breach (regardless of gravity) will
S
entitleXto termination. This is a high thresholdas courts prefer to keep contracts on foot (Ankar).Whether a clause is a
condition depends on the intention of the parties, in regards to the terms and subject matter of the contract. If the [term]
is a condition, it must be considered so important thatXwould not have entered the contract if notassured of strict
performance of it (Tramways).
RULE NOTES SCRIPT
tatutory
S ● S 16 of theGoods Actprovides that whether a X will argue that the term is a condition, as it
Classification stipulation in a contract of sale of goods is a is covered by statute.
condition (the breach of which may give rise
to terminate) depends in each case on the
construction of the contract.
● S 18 of theGoods Actspecifies implied
condition that goods correspond with their
description
3
, LAW5005 Principles of Contract Law B
● S 19 of theGoods Actimplied condition that
goods are fit for particular purpose
● NB:can contract out of these implied
conditions (s 61)
xpress
E ● A stipulation may be a condition though will argue that [term] was expressly
X
Classification called a warranty for the sale of goodss 16(2) classified as a condition in the contract. This
Goods Act 1958 (Vic) may be evidenced by express (intended)
● Depends on the construction of the contract classification of the term by the parties within
○ Parties may not have meant to mean the contract, howeverX/Ymay argue that the
condition in the technical legal sense terminology and the use of the word
● Court will decide the intention of the parties “condition” is not conclusive/decisive (L
having regard to the terms and subject matter Schuler).
of the contract (to give effect to right to
contract freely)
○ i.e. “did the parties intend that any
breach however small would allow X
to terminate?”
○ relevant consideration includes
whether a particular construction
leads to an unreasonable result
(where the nature of the term is such
that breach is likely)
■ in this case, unlikely that
strict compliance is required
(Schuler v Wickman)
I ntention of ramways:
T I n the absence of express identification,X
Parties Consider: may argue that it was the parties’ intention
Factors which suggest condition: that the term be a condition, on the
● Term is very important to parties (Tramways, construction of the contract. The courts will
Ankar, Bancks). apply the essentiality test inTramways: It
● Other party’s corresponding obligation is a must be shown that the promise ofXwas of
condition – e.g. delivered (Bancks) such importance to the promisee that he
● Performance has commenced (Bancks– made would not have entered into the contract
it clear that ad was to be placed on front unless he had been assured of a strict or
page). substantial performance of the promise, and
● Consequences of breach are severe. this ought to have been apparent to the
● Damages inadequate to compensate for promisor.
breach/loss is difficult to prove (Ankar).
● Parties’ pre-contractual correspondence
suggests term is a condition (Tramways)
● Promissory language (condition)
4
CONTRACTS B EXAM TEMPLATES
TERMINATION
DEFINITION
● T
ermination is when a K is ended and each party’s future rights and obligations under it are
extinguished (Bowes v Chalayer)
TERMINATION BY AGREEMENT
RULES:
● Termination under original contract
● Termination by subsequent contract
● Abandonment
CRIPT:Xwill argue that agreement under the originalcontract allows termination of the contract.
S
OR
Xmay argue that the original contract was terminatedby effect of the subsequent contract.
RULE NOTES SCRIPT
ermination
T ● K expires at end of fixed term OR K he parties may mutually decide to end their
T
Under Original has express termination clause (e.g. contract.
LL can terminate lease if rent late;
Shevill) I f fixed term:Many contracts have a fixed term,
● If no termination clause, there may be after which the contract will terminate
an implied RTT on reasonable notice
● E.g. contract for gym membership I f express termination cl:The original contract
● If the contract isexecutory(both may contain a clause specifying the date for
parties will have obligations) each cessation of the contract (Shevill).Xmay argue
party provides consideration in that the original contract has an express
agreeing to release the other from the termination clause, allowing for termination if
original contract [reason] under cl [cl].
● If the contract has beenfully executed
by one party (but the other still has I f implied RTT:If no express clause specifying
obligations to perform) it is necessary termination date is included (i.e. an indefinite
to have a deed or ensure there is contract), an implied right to terminate may exist
consideration provided by the party upon reasonable notice.Xmay argue that the
being relieved of performance. original contract is of an indefinite duration, and
(These are often called ‘accord and thus the implied right to terminate with reasonable
satisfaction’ agreements) notice applies.
1
, LAW5005 Principles of Contract Law B
ermination
T ● P arties form 2nd K (satisfying K ermination by express agreement is essentially a
T
Under formation elements) agreeing to contract to end a contract. Parties form a second
Subsequent release each other of future obs under contract agreeing to release each other from future
original K obligations under the original contract.Xmay
○ 2nd terminates original argue that the original contract was terminated by
● If K partly performed (both parties the second contract formed between the parties.
still have obs under K) - The
consideration element is agreeing to I f the original contract waspartly performed,X
release OP’s obs will emphasize that the consideration for the
● If K wholly performed (by only 1 second contract is the mutual agreement to release
party) - Must have deed or some each other from future performance obligations.
surety from party being relieved of
performance I f the original contract wasfully performedbyX,
then the second contract must be executed as a
deed or include surety from the party being
released from performance.
bandoned
A ● A
fter a period of inactivity or other may argue that the contract was abandoned due
X
Contract conduct that indicates the parties no to [reason e.g. a prolonged period of inactivity,or
longer desire their contract to be on conduct by the parties that suggests they no longer
foot, the courts may treat the parties wish to continue with the agreement] (DTR
as having mutually agreed to abandon Nominees).
that contract (McDermott)
could assert that the parties' [actions] or failure
X
to act effectively constitutes mutual consent to
abandon the contract (Cedar Meats; DTR
Nominees).
CRIPT:OTF, it is satisfied that the contract wasterminated by agreement under the [original contract,subsequent
S
contract, abandonment], as the parties either [fulfilledthe terms of the original contract, formed a second contract
releasing each other from future obligations, or demonstrated mutual conduct indicating the abandonment of the
contract]. Therefore, the court may find that theoriginal contract is no longer in force, and the parties are relieved of
their respective obligations.
TERMINATION FOR BREACH
( Identify obligation and nature of non-performance on the facts, if anticipatory, go straight to 2.3 Repudiation)
●
● Condition: yes, right to terminate: If the term isa condition, the aggrieved party will be entitled to terminate the
contract for any breach of that term, even if it was of little gravity or consequence (Arcos)
● Intermediate Term: may be right to terminate: If theterm is an intermediate term, the aggrieved party may be
entitled to terminate, depending on the gravity and consequences of the breach. A serious breach allows for
termination.
2
, LAW5005 Principles of Contract Law B
● W
arranty: no right to terminate (rare): If the breached term is a warranty, no breach allows termination; the
aggrieved party will be entitled only to damages.
CRIPT:The common law right to terminate co-existswith an express right to terminate (Progressive MailingHouse v
S
Tabali). A breach of contract occurs whenever oneof the parties to the agreement did not perform its obligations as
required under the contract.Xwill argue thatY’sis in breach as they have/have not done [action].Every breach will give
rise to damages, but only breach of condition or serious breach of intermediate term may give rise to the right to
terminate. First, the contractual obligation and the nature of the non-performance need to be identified.
CONDITION
RULES:
● RTT
● Term is so important that wronged party would not have entered the contract if not assured strict performance of
it (Tramways)
● FACTORS SUGGESTING CONDITION:
○ Term very important to parties (Tramways; Ankar; Bancks)(e.g. If promised front page of paper, must
be on FP)
○ Other party’s corresponding ob. is a condition (Bancks;one ob. can’t be a condition and the other a
warranty)
○ Performance has commences (Bancks)
○ Consequences of breach are severe
○ Damages inadequate to compensate for breach OR loss difficult to prove (Ankar)
○ Parties pre-contractual correspondence suggests cond. (Tramways; agreed to advertising expectations
prior to K)
CRIPT:Xwill argue that the [term],Yhas breachedwas a condition, thus any breach (regardless of gravity) will
S
entitleXto termination. This is a high thresholdas courts prefer to keep contracts on foot (Ankar).Whether a clause is a
condition depends on the intention of the parties, in regards to the terms and subject matter of the contract. If the [term]
is a condition, it must be considered so important thatXwould not have entered the contract if notassured of strict
performance of it (Tramways).
RULE NOTES SCRIPT
tatutory
S ● S 16 of theGoods Actprovides that whether a X will argue that the term is a condition, as it
Classification stipulation in a contract of sale of goods is a is covered by statute.
condition (the breach of which may give rise
to terminate) depends in each case on the
construction of the contract.
● S 18 of theGoods Actspecifies implied
condition that goods correspond with their
description
3
, LAW5005 Principles of Contract Law B
● S 19 of theGoods Actimplied condition that
goods are fit for particular purpose
● NB:can contract out of these implied
conditions (s 61)
xpress
E ● A stipulation may be a condition though will argue that [term] was expressly
X
Classification called a warranty for the sale of goodss 16(2) classified as a condition in the contract. This
Goods Act 1958 (Vic) may be evidenced by express (intended)
● Depends on the construction of the contract classification of the term by the parties within
○ Parties may not have meant to mean the contract, howeverX/Ymay argue that the
condition in the technical legal sense terminology and the use of the word
● Court will decide the intention of the parties “condition” is not conclusive/decisive (L
having regard to the terms and subject matter Schuler).
of the contract (to give effect to right to
contract freely)
○ i.e. “did the parties intend that any
breach however small would allow X
to terminate?”
○ relevant consideration includes
whether a particular construction
leads to an unreasonable result
(where the nature of the term is such
that breach is likely)
■ in this case, unlikely that
strict compliance is required
(Schuler v Wickman)
I ntention of ramways:
T I n the absence of express identification,X
Parties Consider: may argue that it was the parties’ intention
Factors which suggest condition: that the term be a condition, on the
● Term is very important to parties (Tramways, construction of the contract. The courts will
Ankar, Bancks). apply the essentiality test inTramways: It
● Other party’s corresponding obligation is a must be shown that the promise ofXwas of
condition – e.g. delivered (Bancks) such importance to the promisee that he
● Performance has commenced (Bancks– made would not have entered into the contract
it clear that ad was to be placed on front unless he had been assured of a strict or
page). substantial performance of the promise, and
● Consequences of breach are severe. this ought to have been apparent to the
● Damages inadequate to compensate for promisor.
breach/loss is difficult to prove (Ankar).
● Parties’ pre-contractual correspondence
suggests term is a condition (Tramways)
● Promissory language (condition)
4
