Discharge

Introduction
• Discharge by Frustration
• Discharge by Breach
• Discharge by Performance
• Discharge by Agreement
Discharge by Frustration
 Meaning of Frustration
• A contract is discharged by frustration if after its formation, an event beyond the control of
both parties occurs which renders performance of the contract impossible. The contract
cannot be performed due to the changed circumstances which were not foreseen.
• The common law sets out principles to determine whether a contract is frustrated and the
effects of frustration. In three states (New South Wales, South Australia and Victoria ),
statutes have been enacted to provide a fairer allocation between the parties to bear the
consequences of frustration.
• Australian Consumer Law and Fair Trading Act 2012 (Vic), Pt 3.2. apply to certain contracts
that are said to be frustrated. Frustrated Contracts Act 1978 (NSW)
 Development of the Doctrine of Frustration
• The common law doctrine of frustration was first recognised in Taylor v Caldwell
(1863) 122 ER 309 to mitigate the strict rule of doctrine of absolute contract
in Paradine v Jane (1648) 82 ER 897 that a promise to perform is absolute unless
otherwise qualified. 
• The strict rule in Paradine was further eroded by the decision in Jackson v Union
Marine Insurance Company (1873) LR 8 CP 572. This case is important because it
was in a clearly commercial context (an insurance contract of a commercial cargo
ship)
• The doctrine of frustration became firmly established as part of the common law
after the so-called ‘Coronation Cases’ that arose due to the postponement of
celebrations marking the coronation of Edward VII and cases affected by World War
I.
 Theories supporting the Doctrine of Frustration
• The theory of implied term and the foundation theory hold that the courts gave effect to an implied
term that the contract should end on the occurrence of an event in which the implied “foundation”
of the contract had disappeared. Taylor v Caldwell; F A Tamplin Steamship Co Ltd v Anglo-Mexican
Petroleum Products Co Ltd [1916] 2 AC 397, 403-4
• The implied contract theory was challenged and superseded by the just solution theory that the
doctrine of frustration is a device which the courts impose on the parties a result that would be
“just and reasonable” due to the changed circumstances. Hirji Mulji v Cheong Yue SS Co Ltd [1926]
AC 497
• In Davis Contractors Ltd v Fareham UDC [1956] AC 696 at 729, Lord Radcliffe based the doctrine on
the “radical change in the obligation” of the performance of the contract following the changed
circumstances. This is the construction theory. The test of frustration is:
– Frustration occurs whenever the law recognises 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. It
was not this that I promised to do.
 Theories supporting the Doctrine of Frustration continued
• The contract is frustrated if, when performed after the supervening event had occurred,
performance of the contract would be “radically different” from what the parties had
originally agreed. Lord Radcliffe’s test was reformulated by Lord Simon in National Carriers
Ltd v Panalpina (Northern) Ltd [1981] AC 675 at 696
– Frustration of a contract takes place when there supervenes an event (without default of
either party and for which the contract makes no sufficient provision) which so significantly
changes the nature (not merely the expense or onerousness) of the outstanding contractual
rights and/or obligations from what the parties could reasonably have contemplated at the
time of its execution that it would be unjust to hold them to the literal sense of its stipulations
in the new circumstances; in such a case the law declares both parties to be discharged from
further performance.
• In Codelfa Construction v State Rail Authority of New South Wales (1982) 149 CLR 337, the
High Court endorsed the legal principles and the construction theory enunciated in Davis
Contractors.
Elements of Frustration
 Elements of the Doctrine of Frustration
• In National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675 at 700, Lord Simon of
Glaisdale listed several conditions to be met before the establishment of frustration
– There must be a supervening event that significantly changes the nature (not merely the
expense or onerousness) of the outstanding contractual rights.
– There must be no fault in either party
– The supervening event must not have been reasonably contemplated by the parties at the
time of the making of the contract
– It must be unjust to hold the parties to the original contract
 Elements of the Doctrine of Frustration
• Element 1 Radical impact: the event makes the performance now radically different from what was
contemplated by the parties.
• In applying the test of frustration whether the performance is radically different, the terms of the
particular contract and the effects of the supervening event to that contract have to be considered.
• It involves a comparison between the situation that eventuated as a result of the intervening event
and the counterfactual situation as contemplated by the parties when forming the contract. If the
discrepancy between the two scenarios can be characterised as radical or “fundamental”, the
contract is considered to have been frustrated.
• The key point is that each set of facts must be tested against whether the supervening event results
in the obligation being fundamentally or radically different from that which was originally
contemplated by the parties.
• To amount to frustration, the effect of the supervening event must cause the obligation to
be impossible to perform; it is insufficient that it is more burdensome or costly to
perform. Edwinton Commercial Corporation and another v Tsavliris Russ (Worldwide Salvage &
Towage) Ltd (The “Sea Angel”) [2007] 2 Lloyd’s Rep 517 at 537
 Elements of the Doctrine of Frustration
• Element 2 Absence of fault: Frustration must not be self-induced. A promisor who caused
or contributed to the occurrence of the event cannot invoke frustration and is not
discharged.

• Element 3 Unforeseeability: The event must be unforeseen and was not contemplated by

the parties.

• Element 4 Injustice and unfairness : It must be unjust or unfair to hold the parties to the
original contract
 Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255

• Facts: Ooh! Media Roadside entered into a licence agreement with Diamond Wheels to
hire the outside of a building to display advertisements. Some time after the licence
agreement was entered into, an office tower was constructed on previously unoccupied
land across the road from the building. This obstructed the visibility to people passing by to
see the advertisements which resulted in Ooh! Media’s revenue falling by over 85 per cent.
Ooh! Media submitted that the contract was frustrated by the construction of the office
tower.
• Issue: Did the construction of the office tower frustrate the contract?
• Held: The contract was not frustrated. As the obstruction of the visibility of the
advertisements was foreseeable, it did not render the performance of the contract
fundamentally different from that which was contemplated by the parties at the time of
contract formation.
 Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR
255
• In this case at 273, Nettle JA said that :

– I take the law to be that a contract is not frustrated unless a supervening event:
– (a) confounds a mistaken common assumption that some particular thing or state of affairs
essential to the performance of the contract will continue to exist or be available, neither party
undertaking responsibility in that regard; and
– (b) in so doing has the effect that, without default of either party, a contractual obligation
becomes 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.
Instances of Frustration
 Destruction of Subject Matter
• The doctrine of frustration originated in the context of destruction of the subject matter of
the contract. Taylor v Caldwell (1863) 122 ER 309 
• The sale of goods legislation includes a provision which reflects Taylor v Caldwell. It states
that a contract to sell specific goods is frustrated if the goods perish without fault by either
party before risk passes to the buyer. The contract is not frustrated if destruction occurs
when the goods are at the buyer’s risk. Vic: Goods Act 1958, s12; NSW: Sale of Goods Act
1923, s 12.
 Taylor v Caldwell (1863) 3 B & S 826; 122 ER 309
• Facts: The plaintiffs entered into a contract with the defendants to use the Surrey Gardens
and Music Hall for the purpose of holding a series of concerts in return for a fee of £100 for
each day. After entering into the agreement but before the first day the hall was to be used
for the concert, the hall was destroyed by fire. The plaintiffs claimed for their losses
incurred in promoting the concerts, arguing that the defendants had breached the
contract.
• Issue: Did the destruction of the hall by fire frustrate the contract?
• Held: As the subject matter upon which the parties contracted ceased to exist, the contract
was frustrated.
 Frustration of Purpose
• Frustration can occur when an event strikes at the basis or purpose of the contract. In such
situations, the very purpose or basis of the contract is affected, causing performance to be
impossible. This is illustrated by the so-called coronation cases, an example is Krell v Henry
[1903] 2 KB 740
• A partial failure of a contractual purpose will not frustrate a contract. Herne Bay Steamship
Company v Hutton [1903] 2 KB 683
 Krell v Henry [1903] 2 KB 740
• Facts: The defendant hired a flat from the plaintiff for two days. While the contract did not expressly
refer to the coronation procession, the plaintiff’s advertisement stated that windows of the flat
were available for hire to view the procession which would pass the flat on the stated days. The
coronation procession was postponed due to the illness of King Edward VII. When the plaintiff
sought to recover the balance of the money for the hire, the defendant refused to pay.
• Issue: Did the cancellation of the coronation processions frustrate the contract? Was the contract
discharged?
• Held: As the basis of the contract was to let and use the flat for the purpose of seeing the
coronation procession (rather than a simple room hire agreement), the basis of the contract
disappeared when the procession was rescheduled. The contract was therefore frustrated.
Importantly, the purpose of the hire of the flat was shared by both parties. Both parties were
discharged from further performance of the contract.
 Herne Bay Steamship Company v Hutton [1903] 2 KB 683
• Facts: Hutton had agreed to hire a steamship for the day of a Royal naval review, which was to take
place two days after the Edward VII’s coronation. The contract referred to the ship being at Hutton’s
disposal for the purpose of viewing the naval review and for a day’s cruise round the fleet. The
review was cancelled because the coronation procession was postponed due to the illness of King
Edward VII. The company contacted Hutton for instructions and informed him that the ship was
ready to start and demanded a payment. Hutton did not reply, so the company decided to use the
ship for their own purposes. The company sued Hutton later to recover the balance for the rent less
of the profits they made using the ship.
• Issue: Could the company recover the rent due for the two days even though the naval review was
cancelled?
• Held: The court decided that the company was entitled to recover the rent because:
– (1) the venture was Hutton’s and therefore, he should bear the risk;
– (2) taking people to see the Royal naval review was not the sole purpose and basis of the
contract, another purpose was to taking people round the fleet, so there had been no total
destruction of the purpose of the contract.
 Commercial impossibility
• A modern example where the basis of the contract has disappeared due to a frustrating
event is seen in cases argued in the context of commercial impossibility. In Brisbane City
Council v Group Projects (1979) 145 CLR 143, although the contract was not physically
impossible to perform, the supervening event had extinguished the purpose for which the
contract was entered into. It also illustrates that compulsory acquisition of land by the
government is a frustrating event.
 Brisbane City Council v Group Projects (1979) 145 CLR 143
• Facts: Group Projects owned land which they wished to apply for rezoning for purposes of
development. They entered into an agreement with Brisbane City Council which agreed to have the
land rezoned in consideration of Group Projects carrying out some works including paving roads and
footpaths and contributing to the cost of sewerage, water, electricity and bridges. Although the
rezoning was subsequently approved by the Council, the State government compulsorily acquired
the land on 13 November to develop a school. Group Projects submitted that the contract was
frustrated on 13 November as the purpose of the contract was destroyed and the compulsory
acquisition adversely impacted the anticipated benefit from the contract.
• Issue: Did the government’s acquisition of the land frustrate the contract between Brisbane City
Council and Group Project?
• Held: The contract was frustrated as the compulsory acquisition of the land by the government had
destroyed Groups Projects’ purpose in undertaking the works.
 Other Instances
• Death or incapacity, preventing the provision of personal services agreed.
• War:
• Illegality: A change in the law can also render performance of a contract illegal.
• Court order
• Delay
• Government intervention
Effects of Frustration
 Effects of Frustration under the Common Law
• Under the common law, when a contract is frustrated, the contract is automatically
terminated by law. Both parties are discharged from all their future obligations from the
time of frustration. Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169, 203.
• A contract that is frustrated is terminated as to the future. Since it is not void ab initio,
rights and liabilities accrued before the frustrating event are unaffected by the frustration. 
• Parties can sue for damages for breach of contractual rights which have unconditionally
accrued.
• Where money has been paid prior to a supervening event, the party who has paid the
monies can recover in restitution provided that there was a total failure of consideration.
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour [1943] AC 32
• Recovery of monies paid, however, will not be allowed if there is only a partial failure of
consideration, that is, the promisee has received some of the performance under the
contract. 
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour [1943] AC
32
• Facts: In July 1939, the respondents, Fairbairn agreed to manufacture and deliver
machinery to the appellants, Fibrosa, for £4800, of which £1600 was to be paid on the
execution of the agreement. Fibrosa paid £1000. World War II broke out in September
1939. The buyer claimed that the contract was frustrated and sought to recover the £1000
that it had paid.
• Issue: Was the contract frustrated? Was the buyer, Fibrosa, entitled to recover the monies
that it had paid before the contract was frustrated?
• Held: The buyer’s claim was allowed since the consideration had totally failed. Due to the
outbreak of war, Fibrosa did not receive the consideration it had bargained for, that is, the
manufacture and delivery of the machinery.
Baltic Shipping v Dillon (“The Mikhail Lermentov”) (1993) 176 CLR 344
• Facts: Dillon, a passenger on a cruise, sued Baltic Shipping, the owner and operator of the
cruise vessel, for damages for breach of contract. The cruise started on 7 February 1986,
and after nine days of the cruise, the ship sank, which caused Dillon to suffer personal
injuries and loss of possession. Dillon sued for damages for his losses suffered. Dillon also
claimed in restitution for return of the fares paid for the cruise.
• Issue: Could Dillon recover the fare paid for the cruise on the ground of total failure of
consideration?
• Held: The claim for return of the fare was disallowed as the failure of consideration was
only partial, not total; the passenger, Dillon, having enjoyed part of the cruise before the
ship sank.
 Effects of Frustration under Statute
• Despite the improved position after the decision in Fibrosa allowing recovery of monies
paid before the frustrating event if there was a total failure of consideration, the common
law position still produces unjust outcomes in relation to partial failure of consideration. As
observed by Viscount Simons LC in Fibrosa, the party who has to return the money may be
disadvantaged as he or she may have incurred expenses in partially performing the
contract. Further, the party would not be paid for the work completed before the contract
was frustrated. This inadequate and unsatisfactory position and the resulting inequities led
to legislative changes.
• The legislation only sets out the effects of frustration; thus, the common law is still
applicable to determine whether the contract was frustrated in the first place.
• Australian Consumer Law and Fair Trading Act 2012 (Vic), Pt 3.2.
Discharge by Breach
 Actual Breach and Repudiation
• Actual breach of contract focuses on the term that was breached and its consequences
• Repudiation focuses on the wrongful conduct of the party.
Actual Breach
 Discharge by Breach
• While every breach of contract entitles the innocent party to claim for damages, under the common law it is
only serious breaches of contract and repudiation which entitles the innocent party to terminate the
contract. Parties may also contractually agree to terminate their agreement.
• When there is a breach of an essential term or a breach resulting in serious consequences or repudiation
occurs, the innocent party is given an election to choose between two alternative inconsistent
rights, whether to terminate or to affirm the contract. Peter Turnbull & Co Pty Ltd v Mundus Trading Co
(Australasia) Pty Ltd (1954) 90 CLR 235.
• The innocent party must know of the facts that give rise to this right. Sargent v ASL Development Ltd (1974)
131 CLR 634, 658. 
• If the option is taken to terminate (and to be discharged from the contract), this choice must be exercised
unequivocally and within a reasonable time, otherwise the party is deemed to have affirmed the contract.
Khoury v GIO of NSW (1984) 165 CLR 622, 633–634.  
• Until and unless the innocent party exercises the option to terminate, the contract remains on foot. Once an
election is made, it is binding and cannot be retracted. Sargent v ASL Development Ltd (1974) 131 CLR 634,
655.
• Either option does not take away the right to damages which is available as of right upon a breach of
contract.
 Classification of Terms (Breach Perspective)
• A breach of contract occurs when a party fails to perform the terms of the contract as agreed.
Under the common law, a breach of any term of a contract gives rise to a right to damages.
However, a right to terminate only arises where there is a breach of essential terms or the breach
results in serious consequences or where one party repudiates the contract.
• Under the common law, whether there is a right to terminate depends on a threefold
classification of terms: conditions, warranties and intermediate (or innominate) terms. These
terms are promissory terms and are contractually binding, as opposed to mere representations.
Whether a term is a condition, warranty or an intermediate term is a question of construction
where the court seeks to determine the intention of the parties at the time the contract is made.
– a condition – a right to terminate arises with a right to damages.
– a warranty – only a right to damages arises.
– an intermediate (or innominate) term – depending on the seriousness of the breach: a right to
terminate arises if the consequences are so severe and deprive the innocent party of substantially the
whole benefit of the contract, otherwise only an award of damages is available.
 Condition
•  A condition is an essential term and the more important term, breach of which gives rise to the
right to terminate, in addition to damages. 
• The test of essentiality was set out by Jordan CJ in  Tramways Advertising Pty Ltd v Luna Park (NSW)
Ltd (1938) 38 SR (NSW) 632; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 
– The question whether a term in a contract is a condition or a warranty, that is, 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.
• The test of essentiality proposed by Jordan CJ in Tramways Advertising v Luna Park was later
approved by the High Court in Associated Newspapers v Bancks (1951) 83 CLR 322
 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632
Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 
• Facts: Tramways Advertising (the plaintiff) entered into a contract with Luna Park (the defendant) to advertise the
defendant’s park. The plaintiff agreed to exhibit the advertising materials for the defendant on boards displayed on
the roofs of the trams for three “seasons”. The agreement consisted of a letter and a contract note. The letter
stated that “the average time that each car is on the track is eight hours per day”. The letter was indorsed by
Tramways that “we guarantee that these boards will be on the tracks at least eight hours per day throughout your
season.” After two seasons, Luna Park alleged that Tramways breached the contract by not displaying the board for
at least eight hours on each and every day. Luna Park claimed to have rightfully terminated the contract due to
Tramways’ breach. Tramways claimed for the charge for a calendar month at the beginning of the third season and
contended that the obligation imposed by the contract was performed if during each season each board was
displayed for an average of eight hours per day. Tramways also sued for repudiation by Luna Park. Luna Park
counter claimed for damages for breach of contract.
• The trial judge held for the defendant. Upon appeal, the Supreme Court (Jordan CJ) held that even if there was a
breach, there was no evidence that the breach was serious. The defendant, Luna Park, appealed to the High Court.
• Issue: Was the term that the boards “will be on the track at least eight hours a day throughout the season” an
essential term giving Luna Park the right to terminate the contract?
• Held: Appeal allowed. The plaintiff’s undertaking was a condition and it was not fulfilled, this entitled the
defendant to terminate the contract. The defendant was also entitled to nominal damages.
 Associated Newspapers v Bancks (1951) 83 CLR 322
• Facts: Bancks, the defendant, entered into an agreement with the plaintiffs to provide a full
page of drawings weekly. Associated Newspapers agreed to put Bancks’ drawing on the
front page of the comic section of the newspaper. The contract was for 10 years. After two
years, Bancks’ drawing appeared on the third page of the newspaper several times. Bancks
then gave notice that the contract was terminated. Associated Newspapers sought an
injunction restraining the threatened breach of Bancks’ employment contract.
• Issue: Did Bancks have a right to terminate the contract? Was the term that Bancks’
drawing would be placed on the front page of the comic section a condition or warranty?
• Held: The plaintiff’s undertaking to place the defendant’s drawings on the front page was a
condition or essential term, which was breached. The defendant was entitled to terminate
his contract with the plaintiff.
 Warranty
• A warranty, on the other hand, is a less important term giving rise only to an action for
damages upon a breach. 
 Test
• Whether a term is a condition or a warranty depends on the intentions of the parties as to
the importance given to the said term. The court looks at the general nature of the contract
and its particular provisions as applied to surrounding circumstances. DTR Nominees Pty
Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 431. The court will construe the contract as
a whole to determine the parties’ objective intentions.
 Intermediate or Innominate term 
• The traditional approach to distinguish terms as a condition or warranty operated well in most
cases. However, there are terms when they are breached, may result in different consequences: the
effect of the breach may be minor or it may be serious, which makes it difficult to place it in a clear-
cut category of condition, or of warranty. These terms are classified as intermediate or innominate
term.
• Under this classification of intermediate term, the right to terminate depends on the nature of the
breach and its consequences. If the breach goes to the root of the contract and the consequences
are so severe and deprive the aggrieved party of substantially the whole of the benefit of the
contract, a right to terminate arises. However, if the effect of the breach is only trivial, only damages
will be granted.
• A classic example is a clause that a ship is seaworthy as in Hong Kong Fir Shipping Co Ltd v Kawasaki
Kisen Kaisha Ltd [1962] 2 QB 26 
 Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2
QB 26 
• Facts: Hongkong Fir Shipping, the shipowners, chartered a ship that they owned to
Kawasaki Kisen, the charterers, for a period of 24 months. A clause in the agreement
guaranteed that the ship would be in good seaworthy condition. The ship was not in a good
condition and required many repairs. Kawasaki notified Hongkong Fir Shipping that the
contract was breached and elected to terminate the contract. The shipowners considered
Kawasaki to have wrongfully terminated the contract and sued Kawasaki.
• Issue: Did the breach by the shipowners as to the seaworthiness of the ship entitle the
charterers to terminate the contract?
• Held: The charterers were not entitled to terminate the contract. The term as to the
seaworthiness of the ship was an intermediate term which Hongkong Fir Shipping had
breached. The delays caused by the repairs were not serious enough to deprive Kawasaki
of the substantial benefit of the contract. Thus, Kawasaki had wrongfully terminated the
contract.
 Ankar v National Westminster Finance (Australia) (1987) 162 CLR 549
• Facts: This case concerned two clauses in a suretyship (guarantee) agreement. A surety
guaranteed the performance of a hirer under a contract for the hire of machinery. Clause 8
of the guarantee required the owner of the machinery to notify the surety if the hirer
proposed to sell or assign its interest in the machinery. Under cl 9, the owner agreed to
notify the surety if the hirer was in default under the contract, whereupon the surety and
the owner would confer about the course of action the owner would take pursuant to the
default. The owner breached both clauses.
• Issue: Was the surety entitled to terminate the contract?
• Held: The two clauses, cls 8 and 9, amounted to conditions, breach of which entitled Ankar
to terminate its agreement with National Westminster Finance.
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR
115
• Facts: Sanpine, a management development company, entered into a joint venture agreement with
Koompahtoo in July 1997. Under the agreement, various obligations were imposed on Sanpine
including for Sanpine to establish a development program, prepare annual accounts of the joint
venture and submit reports to the management committees. Sanpine did not fulfil its obligations,
and following difficulties Koompahtoo went into administration. On 12 December 2003, the
administrator on behalf of Koompahtoo, terminated the agreement, which Sanpine challenged. The
trial judge found for Koompahtoo. Sanpine then appealed to the Court of Appeal, which upheld the
appeal. Koompahtoo appealed to the High Court.
• Issue: Did the multiple breaches of a non-essential term give rise to the right to terminate a
contract?
• Held: Appeal allowed. Applying the doctrine of intermediate term, the multiple breaches of Sanpine
were serious enough to deprive Koompahtoo of a substantial part of the benefit of the contract
which justified Koompahtoo’s termination of the contract.
Repudiation
 Repudiation
• Repudiation occurs when one party intimates, through words or conduct, that he has no intention to perform
his or her obligation when it falls due in future. The party may also show that he intends to fulfil the contract
only in a manner which is substantially inconsistent with what has been agreed.
• Repudiation can occur in two ways: (1) a refusal to perform meaning there is an absence of readiness and
willingness to perform which can be referenced to the promisor’s words and conduct Shevill v Builders
Licensing Board (1982) 149 CLR 620, or (2) by reference to the promisor’s actual inability to perform. Sunbird
Plaza Pty Ltd v Maloney (1988) 166 CLR 245
• A repudiation may also be implied from a party’s words or conduct. Laurinda Pty Ltd v Capalaba
Park Shopping Centre (1989) 166 CLR 623; Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 
• Only serious repudiation by the defaulting party allows an innocent party to be discharged from the contract.
Thus, for conduct to amount to a repudiation, there must be a refusal to perform or an inability to perform
essential terms, or to perform substantially all of the obligations. However, without a finding whether or not
the terms are essential, multiple or consecutive breaches of the term can amount to a repudiation.
• Clear proof of repudiation is required before an innocent party has the right to accept the
repudiation and end the contract. The courts adopt an objective approach to determine whether a
party’s conduct amounts to a repudiation. 
 
 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
• Facts: Tabali (the lessor) leased factory premises to Progressive Mailing House (the lessee) for five
years. There were two key clauses in the lease agreement: Clause 10.1 allowed the lessor to retake
possession of the property if rent was unpaid; Clause 16.1 required the lessor to carry out some
work on the premises before the lessee takes possession of the property, and then notify the lessee.
In fact, the lessee took possession of the property before the lease was executed. The lessor gave
notice of the work that was carried out. The lessee claimed that the work was not satisfactorily
completed and ceased to pay rent. The lessee also committed a number of small breaches. Despite
notices served by the lessor, the lessee failed to remedy his breaches. The lessor, Tabali, sued to
regain possession and obtain damages and the outstanding rent.
• Issue: Did the conduct of the lessee, Progressive Mailing House, in committing the various breaches
amount to a repudiation of the lease?
• Held: While mere breaches of the agreement by the lessee when viewed in isolation would not
amount to repudiation, the various breaches in totality amounted to a repudiation. The lessor could
validly terminate the lease.
 Associated Newspapers v Bancks (1951) 83 CLR 322
Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 
• The same facts from one case may provide a different basis to give rise to a right to
terminate. The concept of repudiation was also considered in cases which dealt with the
test of essentiality.
• In Associated Newspapers v Bancks, the Court held that the term (that Associated
Newspapers would print Bancks’ drawings on the front page of the newspaper) was a
condition. At the same time, the failure of Associated Newspapers to place Bancks’
drawings at the front page for three consecutive weeks indicated an unwillingness to
perform, amounting to a repudiation. Similarly, in Tramways Advertising v Luna
Park, besides holding that the obligation of Tramways Advertising to display the boards for
“at least 8 hours a day” is a condition, the Court also held that the Tramways Advertising
had renounced the contract, by leading Luna Park to believe that the contract would not be
performed according to its true construction.
Laurinda Pty Ltd v Capalaba Park Shopping Centre (1989) 166 CLR 623
• Facts: The parties entered into an agreement to lease a shop. The registration of a formal lease or
registrable lease was to be completed by the lessor, Capalaba Park Shopping Centre. The lessee,
Laurinda, having executed the lease and paid the stamp duty to the lessor gave the lessor the
authority to complete any details for the registration. Despite the lessee’s request for the completed
lease, the lease was still not registered 9 months later. The lessee then wrote to the lessor’s solicitor
requesting registration within 14 days. The lessor’s solicitor only responded one day before the
expiry of the notice informing that they were seeking instructions from their clients. As the lease
was not registered, the lessee terminated the agreement.
• Issue: Could an inference of repudiation be drawn by the unjustified delay by the lessor, Capalaba
Park Shopping Centre, together with their unwillingness to deliver a registrable lease to the lessee,
Laurinda?
• Held: The lessor’s delay and conduct in failing to deliver a registrable lease to the lessee amounted
to a repudiation which entitled the lessee to terminate the contract.
 Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 
• Facts: JA Berriman, a builder entered into a contract to build a factory on land owned by the owner, Carr.
Under the contract, Carr, was responsible for the excavation of the site and the supply of steel work. Carr
failed to excavate the site within the time specified in the contract and failed to supply the steel works.
Eventually, Carr informed Berriman that he had engaged another contractor to carry out a large part of the
work comprised in the contract. Berriman brought proceedings to terminate the contract and claim damages
on the ground of Carr’s failure to prepare the site and provide for the steel work.
• The trial judge held for the builder, Berriman. The owner, Carr, appealed to the Full Court which dismissed
the appeal. Carr appealed to the High Court.
• Issue: Did the successive breaches by the contractor, Carr, show an intention on the part of Carr not to
perform the contract?
• Held: Appeal dismissed. Carr’s repeated failures to remedy the breaches evinced an intention no longer to
be bound and this amounted to a repudiation.
• [The Court considered the first breach, that is, the owner, Carr’s failure to deliver the excavated site by 20
May. However, the builder, Berriman had not made the election to rescind the contract. The Court then
considered the second breach of Carr for not delivering the steel and finally the announcement made by
Carr that he had engaged another contractor to carry out a large part of the works contained in the
contract.]
 Anticipatory breach
• Repudiation may occur before the time due for performance. This is known as
an anticipatory breach. 
• When an anticipatory breach occurs, the promisee can immediately exercise his or her
legal right to accept the repudiation and be discharged from the contract; the promisee
does not need to wait for the time when performance becomes due.
• A promisee has to be certain that there is sufficient factual evidence to give rise to a
repudiation. If the promisee wrongly assumes an anticipatory breach (when there is none)
and acts on it to terminate the contract, the promisee faces the risk that he or she may be
in breach of the contract instead. Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR
444
 Foran v Wight (1989) 168 CLR 385
• Facts: Mr and Mrs Wight agreed to sell their property to Mr and Mrs Foran. The completion
date of the sale and purchase agreement was 22 June 1983. On 20 June 1983, the vendors
informed the purchasers that they would be unable to complete the contract on 22 June.
Neither party took any action on 22 June. On 24 June, by way of notice, the purchasers, Mr
and Mrs Foran, purported to terminate the contract.
• Issue: Was the termination by the purchasers valid?
• Held: The termination by the purchasers was valid. The purchasers had not elected to
terminate for repudiation by anticipatory breach and the contract was ending on 22 June.
By notice of 24 June the purchasers elected to terminate for an actual breach by the
vendors who failed to complete on 22 June.
Discharge by Performance
 Discharge by Performance
• When both parties have fully performed the obligations that were promised (exactly and
according to its terms), the parties are discharged from the contract; this means that they
have no further obligation or owe any further liability to each other under the agreement.
Whether parties have fully performed depends on the terms of the contract they have
agreed to. The terms will be construed as to what the parties have agreed (intended) to
perform, the order and the time for performance.
 Performance must be complete
• The general rule on performance is that performance must be complete and exact before a
party can be discharged. This however can give rise to harsh and inequitable results as seen
in Cutter v Powell (1795) All ER Rep 159. The modern position is that parties are discharged
provided it can be shown that the party has substantially performed. Steele v Tardiani
(1946) 72 CLR 386
• In deciding whether a contract is substantially performed, two tests are applicable: (1) the
nature of the defects, and (2) the proportion between the cost of rectifying the defects and
the contract price. 
 Steele v Tardiani (1946) 72 CLR 386
• Facts: The plaintiffs were employed by the defendant to cut firewood into lengths of six
feet long and six inches in diameter. Payment was to be made at the rate of 8 shillings per
ton. The plaintiffs failed to split the wood to the required width but had cut 1,500 tons split
into lengths varying from 6 to 15 inches in diameter. The defendant refused to pay for the
work, and the plaintiffs sued to recover some payment. The Full Court awarded the
plaintiffs £400, and the defendant appealed to the High Court.
• Issue: Could the plaintiffs recover for their performance of the contract?
• Held: The plaintiffs were entitled to the contract price in respect of the firewood which
substantially complied with the specifications stipulated in the contract.
 Order of Performance
• If a contract expressly provides for the order of performance, it is a question of
construction of the agreed terms as to the intention of the parties. If the contract does not
provide for the order of performance, the court will have to decide which party is to
perform first. The order of performance is determined based on whether the promises
made are dependent or independent promises
 Time for Performance
• As part of the substantive obligations of the agreed performance, most contracts provide
for the time to complete the performance. This is known as a time stipulation clause. This
can be provided by stating a specified date, or by way of a duration of time in days, weeks
or months, or by referring to a specified event. In the absence of an express term fixing
time for performance, it will be implied that performance will be completed within a
reasonable time. Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1. Determining the
length of time that is a reasonable time depends on the facts of each case in the light of
the circumstances at the time when performance takes place or should have taken place.
• When time is made of the essence, the time stipulation clause is an essential term and thus
construed as a condition, a breach of which gives rise to a right to terminate. If time is not
made of the essence of a contract, a breach of a time stipulation clause (being a
warranty/non-essential term) merely allows a claim for damages.
 Time for Performance
• Time is usually regarded to be of the essence in commercial contracts, Bowes v Chaleyer (1923) 32
CLR 159 although not in conveyancing and sale of land transactions. Louinder v Leis (1982) 149 CLR
509
• If time is not of the essence, a party can serve a notice having the effect of making time of the
essence by stipulating a new date which provides a reasonable time for performance. If the party
does not perform at the expiry of the time provided, the party would then be guilty of
unreasonable delay. The unreasonable delay thus amounts to a repudiation which justifies the
termination.
• In order for the notice making time of the essence to be valid, the notice must state the following:
– the promise that was breached, that is, the delayed performance;
– the steps that the defaulting party has to take to perform the contract;
– the time/date for performance; this must be a reasonable time to allow performance; and
– the time fixed for performance is of the essence, or that the party giving the notice will regard himself
or herself as being entitled to terminate should the notice not be complied with.
Discharge by Agreement
 Discharge by Agreement
• The parties to a contract may discharge it by a subsequent agreement or pursuant to a
term within the original contract. Either way the parties’ outstanding obligations under the
original contract are discharged, with the result that no enforcement action can be taken
against them with respect to those obligations. Thus, the parties’ future obligations and
rights will be brought to end.