General rule
• Each clause has diff effect if breaches
• Classification determines type of remedy available
Promissory terms
• Promissory clauses = party promises to undertake to do/refrain from doing smth
• Classified into 3 further categories
o Conditions
o Warranty
o Intermediate terms
• Classified based on essentialness
o Classification ascertained objectively by considering parties' intention at time of
contract formation
• Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286
• What would parties have intended consequences of breach to be
Conditions
• Most essential term that goes to root of contract
o Bettini v Gye (1875) LR 1 QBD, Per Blackburn J
• Term of contract that is so essential that if breached, party can terminate/repudiate
contract and/or sue for damages
o Luna Park; Associated Newspapers; Bettini
o Essentiality = matter of construction
• Test for intention for essential term = test of essentiality
o Luna Park
o Essential term = Promise so important to promisee that contract entered into based
on assurance of strict/substantial performance of promise
• Promisor ought to be aware of this
• HC in Associated Newspapers Ltd v Bancks (1951) 83 CLR 322
• Courts don't readily construe condition
o Every breach no matter seriousness justifies termination = essential term
• Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233
CLR 115, 147
o 2 factors persuading court to construe term as condition
• Damages inadequate remedy for breach / difficult to prove
a. Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987)
162 CLR 549, 556-7
• Construction leads to unreasonable result
a. L Schuler
, o Parties describing term as condition isn't conclusive it is a condition
• Sale of Goods Act defines condition = stipulation in contract for sale, where if breached party
may treat contract as repudiated and a right to reject goods
o Contracts for sale of goods, s 14(2)
• Abandoning a project = breach
o Refusing to do work under wrong interpretation of a clause can still be a breach
• Courts will prefer a construction of contract that encourages performance rather than
avoiding it
o Ankar v Westminster
o If term is essential, general rule won't override ability to terminate for breach of
essential term
• Other relevant factors
o Precedent can be looked at for standard form contract/term used across many
contracts
• Maredelanto Compania Navieera SA v Bergbau-Handel GmbH [1971] 1 QB
164
▪ Ship had to be ready for loading by decided date. If not person
hiring boat could end contract = essential term
▪ Not getting the boat there in time = anticipatory refusal of contract
o Language used to describe obligation - Luna park
• Important but not decisive
▪ Saying smth is guaranteed is an impt statement but not
determinative
▪ Language used around condition may help court interpret it
o Whether damages = adequate remedy (Ankar v Westminster)
• Ankar lost ability to safeguard its interests and negotiation = diff to put price
on ability to negotiate new safeguards
• Conditions argument failed in
o Bettini v Gye
• Bettini was supposed to be in London 6 days prior to start of show
• Gye terminated contract saying 6 days prior was a condition
• Bettini said what was essential was singing (performance of work) and
payment
• Court said there was no obligation prior to the performance (no rehearsal
etc.) so not condition
o Donut King Australia Pty Ltd v Wayne Gardner Racing Pty Ltd [2001] NSWCA 275
• Wayne changed colour of sponsor's logo (Donut King) on his car
• Wayne sued saying there was no stipulation about the colour
▪ Just had to have certain texts and shapes
• Court agreed colour wasn't stipulated as essential to the contract
▪ Change wasn't damaging to the brand etc.
▪ Breach of warranty and can seek damages NOT termination
▪ Wayne could sue for damages for wrongful termination
Warranties
• Warranty =
o Promise constituting collateral contract
o Term in insurance contract treated as essential OR
o Denoting term subsidiary to main purpose of contract
• ^ relevant in classification context
• Less important terms subsidiary to main purpose of contract
o Inessential term
• Each clause has diff effect if breaches
• Classification determines type of remedy available
Promissory terms
• Promissory clauses = party promises to undertake to do/refrain from doing smth
• Classified into 3 further categories
o Conditions
o Warranty
o Intermediate terms
• Classified based on essentialness
o Classification ascertained objectively by considering parties' intention at time of
contract formation
• Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286
• What would parties have intended consequences of breach to be
Conditions
• Most essential term that goes to root of contract
o Bettini v Gye (1875) LR 1 QBD, Per Blackburn J
• Term of contract that is so essential that if breached, party can terminate/repudiate
contract and/or sue for damages
o Luna Park; Associated Newspapers; Bettini
o Essentiality = matter of construction
• Test for intention for essential term = test of essentiality
o Luna Park
o Essential term = Promise so important to promisee that contract entered into based
on assurance of strict/substantial performance of promise
• Promisor ought to be aware of this
• HC in Associated Newspapers Ltd v Bancks (1951) 83 CLR 322
• Courts don't readily construe condition
o Every breach no matter seriousness justifies termination = essential term
• Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233
CLR 115, 147
o 2 factors persuading court to construe term as condition
• Damages inadequate remedy for breach / difficult to prove
a. Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987)
162 CLR 549, 556-7
• Construction leads to unreasonable result
a. L Schuler
, o Parties describing term as condition isn't conclusive it is a condition
• Sale of Goods Act defines condition = stipulation in contract for sale, where if breached party
may treat contract as repudiated and a right to reject goods
o Contracts for sale of goods, s 14(2)
• Abandoning a project = breach
o Refusing to do work under wrong interpretation of a clause can still be a breach
• Courts will prefer a construction of contract that encourages performance rather than
avoiding it
o Ankar v Westminster
o If term is essential, general rule won't override ability to terminate for breach of
essential term
• Other relevant factors
o Precedent can be looked at for standard form contract/term used across many
contracts
• Maredelanto Compania Navieera SA v Bergbau-Handel GmbH [1971] 1 QB
164
▪ Ship had to be ready for loading by decided date. If not person
hiring boat could end contract = essential term
▪ Not getting the boat there in time = anticipatory refusal of contract
o Language used to describe obligation - Luna park
• Important but not decisive
▪ Saying smth is guaranteed is an impt statement but not
determinative
▪ Language used around condition may help court interpret it
o Whether damages = adequate remedy (Ankar v Westminster)
• Ankar lost ability to safeguard its interests and negotiation = diff to put price
on ability to negotiate new safeguards
• Conditions argument failed in
o Bettini v Gye
• Bettini was supposed to be in London 6 days prior to start of show
• Gye terminated contract saying 6 days prior was a condition
• Bettini said what was essential was singing (performance of work) and
payment
• Court said there was no obligation prior to the performance (no rehearsal
etc.) so not condition
o Donut King Australia Pty Ltd v Wayne Gardner Racing Pty Ltd [2001] NSWCA 275
• Wayne changed colour of sponsor's logo (Donut King) on his car
• Wayne sued saying there was no stipulation about the colour
▪ Just had to have certain texts and shapes
• Court agreed colour wasn't stipulated as essential to the contract
▪ Change wasn't damaging to the brand etc.
▪ Breach of warranty and can seek damages NOT termination
▪ Wayne could sue for damages for wrongful termination
Warranties
• Warranty =
o Promise constituting collateral contract
o Term in insurance contract treated as essential OR
o Denoting term subsidiary to main purpose of contract
• ^ relevant in classification context
• Less important terms subsidiary to main purpose of contract
o Inessential term
