Category Archives: Contract

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5 | 4 March 1987

ON THIS DAY IN 1987, the High Court of Australia delivered Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 (4 March 1987). http://www.austlii.edu.au/au/cases/cth/HCA/1987/5.html A builder was entitled to recover remuneration for building work done despite there being no written enforceable contract because the client had accepted the benefit and therefore was obliged under the doctrine of unjust enrichment or restitution to pay fair and just compensation for the benefit accrued.

Section 45 of the Builders Licensing Act 1971 (NSW) (which provided that a building contract is not enforceable unless in writing and signed) did not prevent a builder from bringing an action in quantum merit (“as much as he has earned”) for the work done and materials supplied.

A claim based upon quantum merit does not require there to be an implied contract. A claim in quantum meruit is based upon restitution or unjust enrichment.

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Hadley v Baxendale [1854] EWHC Exch J70 | 23 February 1854

ON THIS DAY IN 1854, the Court of Exchequer Chamber delivered Hadley v Baxendale [1854] EWHC Exch J70
(1854) 9 Ex Ch 341; 156 ER 145 (23 February 1854).

http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html

The decision lays down the rule for assessing damages for breach of contract. There are two limbs: (1) losses which “may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself”; or (2) losses which “may reasonably be supposed to have been in the contemplation of the parties, at the time they made the contract, as the probable result of the breach of it”.

Per Alderson B:

“Now we think the proper rule is such as the present is this: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made where communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For such loss would neither have flowed naturally from the breach of this contract in the great multitude of such cases occurring under ordinary circumstances, nor were the special circumstances, which, perhaps, would have made it a reasonable and natural consequence of such breach of contract, communicated to or known by the defendants. The Judge ought, therefore, to have told the jury, that, upon the fats then before them, they ought not to take the loss of profits into consideration at all in estimating the damages. There must therefore be a new trial in this case.”

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Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7 | 19 February 1988

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 (19 February 1988).

http://www.austlii.edu.au/au/cases/cth/HCA/1988/7.html

Maher owned a commercial property at Nowra. Waltons was a national department store. Waltons and Maher entered into negotiations regarding the lease of Maher’s property conditional upon Maher demolishing the existing building and constructing a new one in accordance with Waltons’ requriements.

Waltons provided Maher with a draft lease contract. Maher suggested amendments and indicated they needed to complete the agreement in the next day or so in order to arrange building supplies before Christmas. Maher indicated that he did not want to demolish the building until he knew there was no problem with the lease. The solicitor for Waltons said to Maher that Waltons had informed him that the amendments were acceptable but would obtain formal instructions and inform him by the next day if they did not agree with any of the amendments. The solicitor for Waltons then sent Maher’s solicitor a redrafted lease with the suggested amendments and did not object to the amendments the next day, or at all. Maher then sent Waltons an executed lease by way of exchange and then proceeded with the demolition. A week later, Waltons had concerns about the transaction and, not having exchanged their counterpart of the lease, instructed their solicitor to go slow. Waltons then became aware that the building had been demolished and when the new building was 40% completed advised Maher that they did not wish to proceed with the transaction.

Maher sued Waltons in the Supreme Court of NSW, obtaining an order for specific performance or damages in lieu. An appeal to the NSW Court of Appeal was dismissed, as was an appeal to the High Court of Australia.

Per Mason CJ, Wilson, Brennan and Deane JJJ, Waltons was bound to enter into a lease agreement and estopped from denying an implied promise to complete the contract as it would be unconscionable for Waltons to take a course of inaction that exposed Maher to detriment by acting on a false assumption.

The High Court brought together proprietary and promissory estoppel under the broader principle of equitable estoppel. When a person makes a non-contractual or voluntary promise and knowingly induces the other party to act to his or her detriment in reliance on that promise, that person is precluded from resiling from the promise without avoiding the detriment. The person who makes the promise is liable to either honour the promise or avoid detriment to the other party.

Per Brennan J at 428-9:

“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.”

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Baltic Shipping Company v Dillon [1993] HCA 4 | 10 February 1993

ON THIS DAY IN 1993, the High Court of Australia delivered Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344; (1993) 111 ALR 289; (1993) 67 ALJR 228 (10 February 1993).

http://www.austlii.edu.au/au/cases/cth/HCA/1993/4.html

As an exception to the rule that damages are not available for mental distress and disappointment arising from a breach of contract, such damages may be awarded if the contract in question contemplated the delivery of enjoyment, relaxation or peace of mind.

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Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd [1938] HCA 66 | 23 December 1938

ON 23 DECEMBER 1938, the High Court of Australia delivered Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd [1938] HCA 66; (1938) 61 CLR 286 (23 December 1938).

http://www.austlii.edu.au/au/cases/cth/HCA/1938/66.html

Only nominal damages should be awarded when a breach of contract causes no identifiable loss. The right to nominal damages follows as “a matter of course”.

A term of a contract will be regarded as a condition if it goes to the very substance of the contract.

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Balmain New Ferry Co Ltd v Robertson [1906] HCA 83 | 18 December 1906

ON 18 DECEMBER 1906, the High Court of Australia delivered Balmain New Ferry Co Ltd v Robertson [1906] HCA 83; (1906) 4 CLR 379 (18 December 1906).

http://www.austlii.edu.au/au/cases/cth/HCA/1906/83.html

A party who wishes to rely on a contractual term is required to show that it did all that was reasonable to bring term to the other party’s attention.

The plaintiff was not considered to have been falsely imprisoned by the ferry terminal’s turnstiles as he was considered to be free to leave the premises by water.

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Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357 | 17 December 2010

ON THIS DAY in 2010, the NSW Court of Appeal delivered Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357 (17 December 2010).

http://www.austlii.edu.au/au/cases/nsw/NSWCA/2010/357.html

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Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 | 7 December 1892

ON 7 DECEMBER 1892, the England and Wales Court of Appeal delivered Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1; [1893] 1 QB 256.

Carbolic Smoke Ball Company was the manufacturer of the Carbolic Smoke Ball which they claimed could prevent “influenza, colds, or any disease caused by taking cold…”.

Carbolic promoted the product with the following advertisement:

“100 pounds reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1,000 pounds is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter”.

On the strength of the advertisement, Carlill purchased the smoke ball, used it as directed but nevertheless caught the flue. She claimed the 100 pounds which Carlill refused to pay on the basis that there was no binding contract because the advertisement was a “mere puff” that meant nothing.

The Court of Appeal held that there was a binding contract.

Per Lindley LJ ((1893) 1 Q.B. 256, at p. 262): “…the person who makes the offer shows by his language and from the nature of the transaction that he does not expect and does not require notice of the acceptance, apart from notice of the performance.”

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Barton v Armstrong [1973] UKPC 2 | 5 December 1973

ON 5 DECEMBER 1973, the United Kingdom Privy Council delivered Barton v Armstrong & Ors [1976] AC 104; [1973] UKPC 2 (5 December 1973).

http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/cases/UKPC/1973/2.html&query=BARTON+and+V+and+ARMSTRONG&method=boolean

A contract may be set aside on the grounds of duress if the use of illegitimate pressure was one of the causes for a party to enter into the agreement. If illegitimate pressure is established, the burden is on the person who applied such pressure to show that the pressure did not operate to cause the party to enter into the agreement.

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The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239 | 28 October 2008

ON 28 OCTOBER 2008, Justice Owen of the Supreme Court of WA delivered The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239 (28 October 2008).

http://www.austlii.edu.au/au/cases/wa/WASC/2008/239.html

One of Australia’s longest cases.

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