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ADVANCED CONTRACTS UNIVERSITY OF TECHNO LOGY, SYDNEY SPRING SEMESTER, 201 6

FULL SUBJECT NOTES…………………………………………………p2

EXAM SUMMARY NOTES………………………………………….p153

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76047 ADVANCED CONTRACTS SUBJECT NOTES CONTENTS COURSE ADMIN ..............................................................................................................................................4

Description ..................................................................................................................................................4

Subject Topics .............................................................................................................................................4

ASSESSMENTS .................................................................................................................................................6

Assessment task 1: Submit a contract portfolio .....................................................................................6

Assessment task 2: Team Presentation ..................................................................................................7

Assessment task 3: Restricted Open Book Examination ........................................................................7

SEMINAR 1 – DEFECTIVE PERFORMANCE; IMPLIED TERMS; STATUTORY WARRANTIES ...............................9

PORTFOLIO QUESTIONS: WEEK 1 FOR WEEK 2 – DEFECTIVE PERFORMANCE .........................................16

SEMINAR 2 – ENTIRE PERFORMANCE; SUBSTANTIAL PERFORMANCE; SEVERABLE CONTRACTS ................20

PORTFOLIO QUESTIONS: WEEK 2 FOR WEEK 3 – Entire Performance, substantial performance and

severable contracts ...................................................................................................................................31

SEMINAR 3 – TERMINATION FOR BREACH ...................................................................................................37

PORTFOLIO QUESTIONS – Week 3 for Week 4 – Termination for breach ................................................46

SEMINAR 4 – REPUDIATION OF CONTRACT ..................................................................................................49

WEEK 4 (FOR WEEK 5) – REPUDIATION OF CONTRACT ............................................................................57

SEMINAR 5 – QUANTUM MERUIT ................................................................................................................63

WEEK 5 FOR WEEK 6 – QUANTUM MERUIT .............................................................................................78

SEMINAR 6 – QUANTUM MERUIT: ACCEPTANCE OF THE BENEFIT ..............................................................80

WEEK 6 FOR WEEK 7 – QUANTUM MERUIT 2: ACCEPTANCE OF THE BENEFIT ........................................90

SEMINAR 7 – ESTOPPEL ................................................................................................................................92

WEEK 7 FOR WEEK 8 – ESTOPPEL IN CONTRACT ....................................................................................... 102

SEMINAR 8 ................................................................................................................................................. 105

WEEK 8 FOR WEEK 9 – RECOVERY OF THE LIQUIDATED SUM (THE CONTRACT PRICE) ............................ 111

SEMINAR 9 ................................................................................................................................................. 113

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WEEK 9 FOR WEEK 10 – CONTRACT DAMAGES (GENERAL PRINCIPLES) ................................................... 124

SEMINAR 10 ............................................................................................................................................... 125

SEMINAR 11 ............................................................................................................................................... 126

STUDENT’S PRESENTATIONS ...................................................................................................................... 129

Grant v Australian Knitting Mills Ltd [1936] AC 85 ................................................................................ 129

Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 ................................................................ 131

Gloucestershire County Council v Richardson [1969] 1 AC 480 ............................................................ 133

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 ............................. 137

DTR Nominees v Mona Homes (1978) 138 CLR 423 .............................................................................. 139

Quantum Meruit: Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880 ............... 141

Field v Dettman [2011] NSW DC 125 ..................................................................................................... 143

Gamerco SA v ICM/Fair Warning (Agency) Ltd [1995] 1 WLR 1226 ...................................................... 145

Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221. ............................................................. 146

D & C Builders Ltd v Rees [1965] EWCA Civ 3 ........................................................................................ 148

Arfaras v Vosnakis [2016] NSWCA 65 .................................................................................................... 149

LAST CLASS – CLASS OVERVIEW ................................................................................................................. 151

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COURSE ADMIN

Description This subject focuses on how contract law assists in the enforcement of agreements and defences to contract-

based claims. It deals with selected areas of practical relevance in the application of principles of contract law

to solve contractual disputes.

The subject utilises a 'life-cycle' approach to a contractual dispute, moving through issues of formation, written

requirements, express terms, implied terms, good faith, interpretation, repudiation, breach, termination,

defences and applications in law and equity, questions of enforcement, legislative intervention, remedies, and

the use of evidence.

Subject Objectives

Upon successful completion of this subject students should be able to:

1. Demonstrate in-depth understanding of selected areas of contract law

2. Identify, comprehend and relate relevance and importance of legal and factual issues and to develop

arguments in response to a problem in the context of contract law

3. Articulate concise, coherent and persuasive written and oral arguments - PG at an advanced level

4. Research, critically evaluate and creatively articulate a legal proposition - PG at an advanced level

5. Demonstrate and reflect upon the skills and techniques necessary to work effectively in a team

environment

6. Accurately record various statements and documents used in conducting a contractual dispute

Subject Topics Formation Theory

Uncertainty / Agreements To Negotiate

Contract Law Theories

Electronic Commerce

Express terms

Implied Terms

Duty Of Good Faith

Unconscionability and other vitiating factors

Repudiation/Breach/Discharge

Contractual and Restitutional Remedies

Resources

Any recent Contracts textbook or casebook

o Carter, JW, Cases and Materials on Contract Law in Australia, Sydney, (6th ed. 2016),

LexisNexis Butterworths

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o Carter JW, Contract Law in Australia (6th ed, 2013) LexisNexis Butterworths, Australia

Other resources

Reports and Journals:

Australian Contract Law Reporter, CCH Australia, (2 volume loose –leaf service)

Journal of Contract Law published by Butterworths. UTS Library Digital Resources Register

Some articles are also available relevant to this subject from the UTS Digital Resources Register.

Useful Web Sites

www.cch.com.au

www.findlaw.com.au

www.lawsearch.gov.au

www.hcourt.gov.au

www.fedcourt.gov.au

www.consumer.gov.au/html/relatedsites.hmt

www.accc.gov.au

www.austlii.edu.au

www.lawportal.nsw.gov.au

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ASSESSMENTS Assessment Length Due Weighting

Contract Portfolio 1-2 pages Week 11 (18 Oct) 30%

Team Presentation 12-15 minutes; 1400 words (1 page)

Week 3 (16 Aug) 20%

Final exam – restricted open book

In class exam 50%

ASSESSMENT TASK 1: SUBMIT A CONTRACT PORTFOLIO Weight: 30%

Task: Students will submit a portfolio of tasks and exercises related to the subject and based on the contractual

disputes considered in class, including a summation of facts from plaintiff and defendant, a statement or affidavit

of plaintiff and defendant, points of claim, case analysis in brief form and relevant summaries of academic works,

approaches to evidence, commentary on aspects of the case/scenario, appraisals of points raised in discussion

by presenters. The portfolio will consist of both individual and group work. Each week a task will be done in class

or in preparation for a class. Print on ONE SIDE ONLY. Each section/week of work to be clearly labelled and

separated by page dividers when handed up.

Length: Each task will vary in length but will generally fall into the range of one to two pages.

Due: Week 11

Further information:

Contracts Portfolio

Each week students will be given written tasks to complete either individually or as a group/team. Some tasks

will be performed during class, others are to be done prior to class - in preparation. Each page of each task must

be numbered with a heading clearly printed at the top of the page and dated. Each task is to be placed into a

folder - the first task at the front (NOT into plastic sheets). Marks will be allocated according to the structure of

responses, clarity of writing, practicality and usefulness of responses, correctness, viability of argument and

other relevant criteria particular to each task. Above all, each task must be fully completed. Students should

note that work may be examined prior to or during class for purposes of assessment. The portfolio will be handed

in at the last class of the semester.

Attendance: Given that the assessment involves a class presentation, participation and the production of a

portfolio, which in turn requires an audience to listen, participate and encourage by their presence, the

minimum attendance required of individual students will be set at 80% of all classes. Any student who falls below

this figure will be ineligible to be awarded a mark higher than 50% for the subject irrespective of their actual

performance – subject to medically certificated illness or misadventure. Of course, class members should attend

all, not merely 80% of sessions, to enhance their learning and to support their fellow students. A similar

observation can be made regarding the lectures.

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ASSESSMENT TASK 2: TEAM PRESENTATION Weight: 20%

Task: Students will do a class presentation individually or in pairs (or team) based on an article, case, or other

document.

The task will look to the capacity of students to summarise a point of law and fact succinctly. A strict time limit

for presentation will apply.

Students will send their written report on the case or article to the lecturer who will then place it on UTSonline.

Students will use the case or article to explore a point of law raised in the factual materials. Students will be

expected to demonstrate how the law applies, why it may not apply and any counter arguments or to respond

to questions raised by the case, article or document.

This assessment will also include marks awarded for the capacity of students to engage with, be involved in and

contribute to general class discussions throughout the course.

Students will be encouraged to be creative in their presentation of material and may use, where appropriate,

multimedia tools to assist. This segment is very much about the art of communication.

Students will be allocated individual marks for their presentation. Students must do approximately equal work.

Marks will be allocated according to the overall quality of the presentation, including voice, presence, projection

and any other criteria relevant to a good presentation. This will include accuracy, precision, brevity, explanation

of points of law and the capacity to answer the question correctly and succinctly and the ability of the presenter

to relate the article, case or document to the contract materials dealt with in class.

At the beginning of the class the students must hand up a written summary of the main points of the

presentation - this is to be less than one page and will have an influence over the mark for this assessment.

Students are expected to stick to the time limit. Marks may be deducted for exceeding the time allocation.

Length: Each team will present for approximately 12 minutes. Marks may be deducted if the time limit is

exceeded. A notional word limit of around 1,000 words UG and 1,400 words PG is expected. Again, you must

stick to the word limit. Font limit 11

Due: Marks allocated on the day of the presentation.

ASSESSMENT TASK 3: RESTRICTED OPEN BOOK EXAMINATION Weight: 50%

Task: The exam will be a restricted open book exam. No books or photocopies of books permitted. Your own

notes are permitted. The exam may include problem questions, short answer questions, multiple choice

questions or materials dealt with in class, seminar, the student portfolio or class presentations.

Your portfolio answers will be useful to answer exam questions and may be used in the exam. As your portfolio

will be handed up prior to the exam it is suggested you make a copy for use during the exam.

Due: As allocated: See timetable

Further information:

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The exam will assist in encouraging students and measuring the demonstrated capacity of students to critically

evaluate legal problems; to demonstrate writing skills pertinent to the subject; to identify, comprehend and

relate the relevance of legal and factual issues and respond to these issues in a written form. The exam is an

opportunity for students to apply what they have learned in group work, lectures, presentations and team work.

The exam provides as incentive for all students to work towards a goal that encourages them to seriously engage

with the other forms of assessment.

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SEMINAR 1 – DEFECTIVE PERFORMANCE; IMPLIED TERMS; STATUTORY WARRANTIES 2 August 2016

Topics:

o Breach by Defective Performance

o Implied terms

o Statutory warranties

Provision and reading of base materials

Preparation of portfolio materials

Work on provided materials and insertion into portfolio

Group and class discussion

DEFECTIVE PERFORMANCE CASES

Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 [HC]

Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 [ECA]

Chin Keow v Govt of Malaysia [1967] 1 WLR 813 at 816:

Reg Glass Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516

Bolam v Friern Hospital management Committee [1957] 1 All ER 118

Carew Counsel Pty Ltd v French [2002] VSCA 1

Erwin v Iveco Trucks Australia [2010] NSWCA 113

Defective Performance (as breach of contract)

Late performance

A breach of contract can occur in three ways Non-performance

Defective Performance

What is defective performance?

Defective performance is a breach of contract and will entitle the promisee (the ‘victim’ to use an

inaccurate descriptor) to damages in compensation.

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Breach through defective performance occurs:

(1) where the performance is deficient in quality or quantity as per the terms of the contract (usually

associated with a failure to use reasonable skill and care) or

(2) where the performance is not fit for the purpose for which the goods or services were intended.

In contrast, where the promisee rejects performance (say, does not take possession of the goods and

services in question) due to non-conformity to the contract, the breach is one of ‘non-performance’.

Where performance does not meet the requirements of the contract and the promisee retains the goods

or service the breach is one of defective performance.

This question is: by what standard is the performance of the promisor to be tested. When is quality

deficient? When is quantity deficient? When are goods not fit for their purpose?

Determining the Standard of Contractual Duty

Whenever we agree to perform a contact there is, to a lesser or greater degree, an intended standard of

performance.

The promisor, to win a suit at law claiming breach of the standard of care, must be able to show what the

required standard of performance was intended to be, and that this standard was breached.

1. Express standard within the contract.

In this circumstance, the contract expressly states what the intended standard of performance. The

meaning and scope of the standard of performance is a matter of construction to be gleaned from the

surrounding circumstances (factual matrix) in which the contract was formed. The express standard could

require ‘perfect’ performance or it may be ‘reasonable’ performance or the exercise of ‘reasonable skill

or care’.

2. Implied standard (two subsets)

A standard of performance will often be an implied standard. In such circumstances a court will have to

decide what standard of performance the parties impliedly agreed to. a matter of implication. Two

Categories of Implied Standard:

A. The ‘fit for purpose’ standard (a strict liability standard). The product produced or service

provided must actually do the job it was designed to do.

B. The ‘reasonable diligence, skill and care’ standard (the ‘professional’ standard). The result is

not guaranteed, merely that in delivering performance the promisor will do so with care and skill.

The connection to broader questions of performance:

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Where there is a claim for defective performance, particularly where the breach concerns the quantity or

quality of performance, debate may ensue as to whether the promisor is entitled to payment under the

doctrine of ‘substantial performance’ or whether the contract is expressed in severable form. In other

words performance may be defective but may nonetheless be substantial or severed into what is, in

effect, a number of separate contracts. Where the promisor believes that performance has been

substantial, although defective, a claim may be made for payment minus the amount required to remedy

the defect. Where, however, the performance is truly defective there is no value and the victim may sue

for damages in breach.

Acceptance by promisee needed to claim defective performance:

By and large, if performance is accepted (goods retained) the breach will be treated as defective. If

rejected, the breach will be treated as non-performance. The breach can be either of express or implied

terms.

To classify a breach as ‘non-performance’ or’ defective performance’ much depends on the capacity of

the promisee to reject goods or services. For example, if you order a bespoke suit and it arrives at the

shop in the wrong colour, you are able to reject it – non-performance. If you wear the suit and the seam

splits, that is defective performance.

What of damages:

Where performance is defective, the promisee will generally be entitled to the reasonable cost of

rectifying the defect. See Bellgrove v Eldridge (1954) 90CLR 613. We will consider this case later in the

course.

[Q. Why is there a difference in standard? What is the base reason for this? Can we extend the

application of the ‘professional standard’ to ‘non-professional’ jobs, such as some within the building

industry? We will come back to this.]

[Q. Can you make a case that rock-coting is ‘skill and care’ or strict liability ‘fit for purpose’? Is it not

more an art than a science? What factors could you argue to apply to the question?]

A. Defective Performance: Not Fit for Purpose

Implied warranty that goods are fit for use

Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 [HC]

Dixon J:

‘It became one of the terms of the agreement about the plaintiff's fencing that he should

have the use of the electric saw during the week-end. In other words, they might

reasonably find that it became part of the agreement that he should do the fencing. ..’

[So a term, but how do we know if that term has been breached?]

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What if he was a gratuitous bailee?

The ‘expert’ and ‘non-expert’ standard

Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 [ECA]

Forklifts in warehouse. Terms implied in fact and in law. The ‘expert’ and ‘non-expert’ standard.

Note again there are two ways to approach failure to meet the requisite standard of care; one, the

general obligation, which is implied in law, for the engineer to use reasonable skill and care; and two, the

obligation, implied as fact, that it was the intention of the parties that the engineer would produce a

design reasonably fit for purpose. This case discusses both.

Court Referred to Chin Keow v Govt of Malaysia [1967] 1 WLR 813 at 816:

‘... where you get a situation which involves the use of special skill of competence, then the test

as to whether there has been negligence or not is not the test of the man on the top of the

Clapham omnibus, because he has not got this special skill. The test is the standard of the

ordinary skilled many exercising and professing to have that special skill, A man need not possess

the highest expert skill; it is well established law that it is sufficient if he exercises the ordinary

skill of an ordinary competent man exercising that particular art.’

The role of circumstances:

In applying that test, it must be remembered that the measures to be taken by a professional

man depend on the circumstances of the case. Although the judge talked about a ‘higher duty’, I

feel sure that what he means was that in the circumstances of this case special steps were

necessary in order to fulfil the duty of care.

[I agree with the judge in Keow who said]: ‘I do, however, find that he knew or ought to have

known, that the purpose of the floor was safely to carry heavily laden trucks and that he was

warned about the dangers of vibration and did not take these matters sufficiently into account,

the design was inadequate for the purpose.’

Reg Glass Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516

This case is also about causation in contract loss.

Is the opinion of Owen J, dissenting, preferable?:

‘The only warranty that could possibly be implied would be one to the effect that the door as

fitted and hung would offer some substantial impediment to unlawful entry and cause a

significant period of delay to a would-be intruder who might for that reason desist from trying

to force an entry through it.

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It is, I think, impossible in these circumstances to say the plaintiff established that the door did

not impede or delay the thief to a significant or substantial extent and, if that be so, no breach

of warranty was proved.’

But what of causation and damages: Is it the cost of repair to the door, or the loss of goods from the

shop. Rivers were liable for the loss of stock from the shop. Why?

B. Performance as ‘Reasonable Care and Skill’

Note that the breach of contract by failing to use reasonable skill and care may also constitute negligence

at common law.

Ordinary standard versus expert standard.

Bolam v Friern Hospital management Committee [1957] 1 All ER 118

[case only deals with instructions to jury]

The ‘ordinary’ standard:

‘In an ordinary case it is generally said, that you judge that by the action of the man in the street.

He is the ordinary man. In one case it has been said that you judge it by the conduct of the man

on the top of a Clapham omnibus. He is the ordinary man.

But where you get a situation which involves the use of some special skill or competence, then

the test whether there has been negligence or not is not the test of the man on the top of a

Clapham omnibus, because he has not got this special skill.

The ‘expert standard’:

‘The test is the standard of the ordinary skilled man exercising and professing to have that

special skill. ... in the case of a medical man negligence means failure to act in accordance with

the standards of reasonably competent medical men at the time. That is a perfectly accurate

statement, as long as it is remembered that there may be one or more perfectly proper

standards; and if a medical man conforms with one of those proper standards then he is not

negligent.’

[Q. In contractual terms did the doctor the contract by failing to exercise proper skill and competence.]

[Q. Can a case be made that the workmanship, say of the renderer, was of acceptable standard

because it is virtually impossible to do a perfect job?]

Carew Counsel Pty Ltd v French [2002] VSCA 1

Breach of obligation of care by solicitor

[Q. So what were the circumstances?]

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Industry Standard

Does the industry standard apply in determining if there was a breach by defective performance?

Erwin v Iveco Trucks Australia [2010] NSWCA 113

[110] In addition to these matters, any assessment of the design precautions required of a

reasonable manufacturer in 1989 must take into account the fact that the design was the

industry norm at that time. While this is not decisive, in the absence of evidence that the

industry practice itself was deficient or that potential safety issues had been identified at the

time but not acted upon, the respondent's adherence to the industry norm is a strong indication

that a reasonable person in the respondent's position would not have adopted additional

precautions to guard against the risk. Furthermore, on the primary Judge's findings, the

respondent had no reason in 1989 to believe that the risk would or might eventuate. Indeed

there was no such indication until the crash occurred in 2002.

Conclusion:

Q. Is the home owner contracting to do ‘fit for purpose’ or ‘care and skill’? Does it matter? Is it possible to

produce a perfect rockcote job? What of other jobs?

My notes:

There are two avenues

1. Express terms (in contract), or 2. Implied (at common law)

Implied in…

- Fact – skills and care / fit for purpose; or

- Law (skill and care)

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If you take delivery… Breach (by defective performance)… by what standard?

If you have not taken delivery… “non-performance” – difficult as a homeowner to show ‘non-

performance’ – so the claim here would be defective performance, not non-performance

Condition allows you to terminate - “but for” – essence of the contract; you don’t get ‘essentially’ what

you bargained for

Warranty allows for damages – there is a problem but you still ‘got what you bargained for’

Diminimas rule “the court does not concern itself with trifles”

Workmanlike “reasonable skill and care” – professional performance and Fit for purpose – must be able

to do the thing - are these two things different? Yes

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PORTFOLIO QUESTIONS: WEEK 1 FOR WEEK 2 – DEFECTIVE PERFORMANCE

(a)

Claims of breaches of contract by defective performance / statements that go to establish that the

builder contractually agrees not to produce defective work:

4 – Mr Steve represented himself to the Applicants as an ‘experienced builder’

11 – Two weeks into the works the Respondent had not made significant progress

13 – Work progressed at a slow and delayed rate

22 – Mr Steve represented that he would supervise the subcontractor and ensure that all rendering

and rockcoting works would be done in a proper and workmanlike manner and take care of those

works

30 – The Respondent failed to properly supervise its subcontractor and its employees

31 – The Respondent by its subcontractor failed to render and rockcote the front and side fences

of the Property

32 – The Respondent failed to complete the first floor extension to the property

34 – The render and rockcoting were not completed in a proper and workmanlike manner

55 – Respondent performed defective work

(b)

Do the breaches go to ‘fit for purpose’ or failure to exercise ‘skill and care’ at common law?

A breach may be implied at common law. This breach may be implied:

In fact – skill and care / fit for purpose; or

In law – skill and care

For there to be a breach of the ‘fit for purpose’ standard, the produce produced / service provided must

not do the job it was designed to do.

For there to be a breach for failure to exercise ‘skill and care’, the performance of the Respondent must

be found to breach the ‘professional’ standard, ie there was skill and care taken in delivering the

performance.

In this case, there is not enough detail provided in the Home Owners Statement in the particulars to

characterise an implied breach at common law. We would need to know:

Fit for purpose:

o Was the first floor renovation completed to a level that it would be fit for purpose as a

living area?

o Was the rockcoting and rendering fit for purpose as an exterior coating, either to provide

protection from elements, or to provide a pleasing aesthetic?

Skill and care:

o Was the standard of performance of the renovations and rockcoting / rendering

completed to a professional standard?

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Here we have a little more detail to work with – according to the Home Owners

Statement, the Respondent and the subcontractors abandoned the property,

admitted to defects in the work, and failed to remedy these defects.

This would indicate that the standard of performance breached the ‘professional

standard’, therefore breaching the implied standard of skill and care in fact and

in law, at common law.

(c)

Breaches for ‘fit for purpose’ may pertain to:

The purpose of the first floor extension: will result to the extent of the work conducted, in a

dwelling that is reasonably fit for occupation as a dwelling – that is, it is to be a liveable area for

the purpose of that particular room, be it a living room / kitchen / bedroom – this is not clear in

the particulars and would need to be made clear in the Home Owners Statement to characterise

a breach for fit for purpose

The purpose of the rockcoting / rendering may be to provide additional weather protection and to

improve the aesthetic appearance of a home. Render finish may vary between tradespeople and

so the definition of a ‘perfect’ render / rockcote finish is flexible

(d)

Defective performance breach – express / statutory requirements:

Express requirements:

Clause 3 – General conditions of contract

o (a) The contractor will diligently proceed and complete all work to be done under this

contract in a proper and workmanlike manner

Clause 6 – Time for completion

o The contractor must diligently proceed and complete the work within six calendar weeks

from the date the work is due to commence

Clause 8 – Completion of work

o The work will be complete when the contractor has finished the work in accordance with

the contract documents and any variations, it is free of apparent defects…

Clause 9 – Statutory Warranties

o a) The work will be performed in a proper and workmanlike manner and in accordance

with the plans and specifications set out in the contract

o d) the work will be done with due diligence and within the time stipulated in the contract

o e) …the work will result to the extent of the work conducted, in a dwelling that is

reasonably fit for occupation as a dwelling

Clause 23 – Defects rectification

o The contractor must rectify omissions and defects in the work which become apparent

within the period of 13 weeks from the date the work has been completed.

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Statutory requirements – Home Building Act 1989 (NSW)

18B Warranties as to residential building work

(1) The following warranties by the holder of a contractor licence, or a person required to hold

a contractor licence before entering into a contract, are implied in every contract to do residential

building work:

(a) a warranty that the work will be done with due care and skill and in accordance with the plans and

specifications set out in the contract,

(b) a warranty that all materials supplied by the holder or person will be good and suitable for the

purpose for which they are used and that, unless otherwise stated in the contract, those materials will be

new,

(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,

(d) a warranty that the work will be done with due diligence and within the time stipulated in the

contract, or if no time is stipulated, within a reasonable time,

(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or

additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the

work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation

as a dwelling,

(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the

specified purpose or result, if the person for whom the work is done expressly makes known to the

holder of the contractor licence or person required to hold a contractor licence, or another person with

express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or

person, the particular purpose for which the work is required or the result that the owner desires the

work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.

(2) The statutory warranties implied by this section are not limited to a contract to do residential building

work for an owner of land and are also implied in a contract under which a person (the

"principal contractor" ) who has contracted to do residential building work contracts with another person

(a "subcontractor" to the principal contractor) for the subcontractor to do the work (or any part of the

work) for the principal contractor.

(e)

From the Home Owner’s Statement only – as we have not yet seen the particulars of the defects /

breaches, or the expert’s report, or the Respondent’s statement – this case has a number of elements

regarding breach of contract and defective performance. Overall the case involves uninformed Home

Owners and builders / subcontractors who appear to have taken advantage of this in a number of ways

including non-completion of works and defective performance as well as contractual issues such as

writing, insurance, variations, suspension of work.

Variations… not in writing

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SEMINAR 2 – ENTIRE PERFORMANCE; SUBSTANTIAL PERFORMANCE; SEVERABLE CONTRACTS 9 August 2016

Topics:

o Breach by defective performance (continued)

o Implied terms

o The written contract

o Contract performance

o Termination for breach

o Repudiation of contract

o Provision and reading of base materials

Work on provided materials and insertion into portfolio

Group and class discussion

Class presentations

Entire Performance, substantial performance and severable contracts CASES

Cutter v Powell (1795) 101 ER 573

Sumpter v Hedges [1898] 1 QB 673

William Thomas & Sons v Harrowing SS Co [1915] AC 58

Shipton, Anderson & Co v Weil Bros & Co [1912] 1 KB 574.

Boone v Eyre (1777) 126 ER 169

Luna park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286

Hoenig v Issacs [1952] 2 All ER 176

Bolton v Mahadeva [1972] 1 WLR 1009.

Government of Newfoundland v The Newfoundland Railway (1888) 13 App Cas 199

Steele v Tardiani (1946 CLR)

Jacob & Yong Inc v Kent (1921) 230 NY 239

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Entire Performance, substantial performance and severable contracts

Introduction

The builder dispute: For the parties in our dispute, substantiating, or not substantiating, a claim of defective performance to the point where there is no value delivered to the home owner, is a prime concern in respect to the purported breach. (Leaving aside the issue that variations were not recorded in writing or insurance was inadequate per the Act.)

The owners are claiming the builder’s performance was so inadequate that he is not entitled to any payment whatsoever. In fact, to rehabilitate the site requires all the builder’s render/rockcote work to be removed and replaced.

What do the facts so far indicate? Refer to the Report and to the Photos – put your response in your portfolio.

Some ancillary issues:

If the builder is willing to go on site to complete defects known prior to the job being finished is there a breach by the owners?

Is a job concluded if the builder has not left the site but there are defects in the work that the builder is willing to fix?

What the contract says:

As the written contract may override common law doctrine, it is essential to always make first reference to its provisions. Look at:

Clause 8: Completion of work The work will be complete when the contractor has finished the work in accordance with the contract documents and any variations, it is free of apparent defects, any damage of the kind referred to in Clause 19 has been repaired, and all rubbish and surplus material has been removed from the site.

Clause 15: Final payment

When the work is complete in accordance with Clause 8 the owner must pay the amount remaining unpaid under the contract. Payment must be made in the manner specified in Clause 14. If the amount is not paid, interest in accordance with Clause 14 applies.

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Clause 23: Defects rectification The contractor must rectify omissions and defects in the work which become apparent within the period of 13 weeks from the date the work has been completed. The date of completion shall be determined in accordance with Clause 8.

[HOME BUILDING ACT 1989 - SECT 18B

Warranties as to residential building work

18B Warranties as to residential building work

The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work:

(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract, ...

(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.

Note that warranty period is 6 years]

The general right to entire performance

The common law does not recognise a right to payment for doing a proportion of the contract under which payment is to be made. In particular instances performance less than ‘entire’ will elicit payment from the promisee.

Jacob & Yong Inc v Kent 230 NY 239 per Cardozo J:

The court will never say that one who makes a contract may fill the measure of his duty by less than full performance. They do say, however, that an omission, both trivial and innocent, will sometimes be atoned for by allowance of the resulting damage, and will not always be the breach of condition to be followed by forfeiture.

An entire performance contract is one where the parties have agreed that the contract must be complete before the promisor is entitled to payment. That is, entire performance is a condition precedent to payment.

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How do we know if a contract is ‘entire performance’? This is a matter of construction looking to express or implied terms and the factual matrix of the contract.

Contract Construction

When can you be paid when you don’t entirely perform?

The answer to this question is very important because many cases are brought where a promisee believes the quantum of work performed or the quality of work performed is less than that required by the terms of the contract. Alternatively it is not uncommon, particularly in building contracts, for an owner to claim work is not up to scratch to avoid payment.

Within this sphere is also the claim that work done off-contract, where a written contract is required, need not be paid for because the contract is not in the correct form.

It is an objective test: the reasonable bystander – what would they think, knowing the written expression and the facts surrounding.

Meaning:

Construction (construing) a contract is the interpretation of the terms of the contract. This involves giving meaning to the words (or terms) in their context and determining the legal effects of those words of terms or terms. For example, is ‘delivery of toys by 20 December’ to be construed as a condition or a warranty.

The ‘object’ of construction is to give effect to the intention of the parties. ‘Intention’ is the objectively determined ‘express’ intention of the parties:

‘The question to be answered always is: “what is the meaning of what the parties have said” not, “What did the parties mean to say?” … it being a presumption [of law] … that the parties intended to say that which they have said.’ L Schuler AG v Wickman

Machine Tool Sales Ltd (1947) AC 235 at 263.

Therefore, courts in construing a contract will give meaning to the intention of the parties as that intention is expressed, not as subjectively held.

The old and new law: ‘independent and dependent promises’

Under the ‘old’ law of contract, each parties promise was independent of the other. This meant that it did not matter if the other party did not perform their side of the bargain, they could still sue, and vice versa. In Nichols v Raynbred a farmer was able to recover the price of a cow even though he had not delivered it to the purchaser. This was pure contract – the supremacy of the obligation.

Modern contract law concentrates on the order of performance. Where a promise, say to pay, is dependent on the performance of the other party, no payment will be made until that