Semester 2
2001
Semester 2
2001
General Aims......................................................................................................................................................... 4
Readings................................................................................................................................................................... 6
Instructors........................................................................................................................................................... 6
Assessment............................................................................................................................................................ 7
Extensions.............................................................................................................................................................. 9
Appeals, Complaints and
Fair Process.............................................................................................. 10
Learning Assistance Centre..................................................................................................................... 10
Services................................................................................................................................................................... 10
Law Faculty Policy on
Discrimination............................................................................................. 10
TImetable.................................................................................................................................................................. 12
KEY.................................................................................................................................................................................. 12
1 INTRODUCTION............................................................................................................................................... 13
A Introduction........................................................................................................................................... 13
B Freedom
of Contract?....................................................................................................................... 13
2 AGREEMENT...................................................................................................................................................... 15
A Offer and
Acceptance....................................................................................................................... 15
B Consideration......................................................................................................................................... 18
C Estoppel
and its effect on consideration............................................................................ 20
D Intention
to Create Legal Relations....................................................................................... 20
E Contracts
Requiring Written Evidence.................................................................................. 21
3 TERMS
AND PARTIES.................................................................................................................................... 22
A Express
Terms.......................................................................................................................................... 22
B Incorporation
of terms................................................................................................................... 24
C Implied
Terms........................................................................................................................................... 25
D Construction
of Contracts.......................................................................................................... 27
E Classification
of Terms................................................................................................................... 27
F Exclusion
Clauses................................................................................................................................ 27
G Privity........................................................................................................................................................... 28
4 BREACH
AND FRUSTRATION..................................................................................................................... 29
A The Order
of Performance.............................................................................................................. 30
B Prevention
of Performance........................................................................................................... 30
C Discharge
by Performance............................................................................................................. 30
D Discharge
for breach of a term................................................................................................. 31
E Discharge
for Repudiation............................................................................................................. 31
F Discharge
for delay and time stipulations....................................................................... 32
G Termination............................................................................................................................................. 32
H Discharge
by Frustration............................................................................................................... 33
I Discharge by Agreement........................................................................................................................ 34
5 REMEDIES........................................................................................................................................................... 34
A Damages...................................................................................................................................................... 34
B Sums
fixed by the contract........................................................................................................... 37
C Restitution................................................................................................................................................ 37
D Equitable
Remedies.............................................................................................................................. 38
6 Unfair
Dealing............................................................................................................................................. 39
A Duress........................................................................................................................................................... 39
B Undue
Influence..................................................................................................................................... 39
C Unconscionability............................................................................................................................... 39
D The Position of
Lenders in Unconscionable Transactions........................................ 40
E The Position of
Lawyers................................................................................................................... 40
F Misrepresentation............................................................................................................................... 40
G Mistake........................................................................................................................................................ 43
7 The
Future of Contract?..................................................................................................................... 44
8 REVISION
PROBLEMS................................................................................................................................... 45
Research
Assignment....................................................................................................................................... 59
Class
Participation Self Assessment.................................................................................................. 61
Contract law is the bedrock of exchange in Australia, both in the
commercial and also in the ‘domestic’ realm. Individuals continually make
contracts, for instance in their capacity as consumers, employees, home renters
or buyers. In this course we shall critically examine the legal framework which
regulates various aspects of contractual relations.
Contract law has evolved primarily through the courts as they have
grappled with the endless array of disagreements which people have produced.
This course is thus principally based on case materials. Case analysis and
problem solving will be the main method of conveying the course, with some
secondary and critical readings. Furthermore, some contracts will be examined
to see the forms used in different contexts and to raise certain drafting
issues that are helpful in conflict avoidance. Although a preponderance of
appellate decisions in contract law concern commercial parties (often in
shipping and building disputes), we will also look at examples concerning
individuals (especially, in Australia, decisions involving contracts for the
sale of land).
This course attempts to place the law of contracts in context, and to
both explain and critique it.
Course Objectives:
1.
Students should have a detailed knowledge of particular topics of this
subject matter sufficient to allow the student to demonstrate the skills
referred to below.
2.
Students should appreciate the method by which contract law has
developed.
3.
Students should appreciate the contexts within which lawyers might
encounter particular contract problems.
4.
Students should be able to critically think about the doctrines that
govern the law of contract.
Skills Objectives:
1. Students
should be able to read and understand all material on the course outline
including case law, statutes, textbooks and articles.
2. Students
should be able to communicate both orally and in writing their knowledge of the
laws governing contract.
3. Students
should be able to apply their knowledge of the material in constructing
arguments as to the resolution of contract problems.
4.
Students should acquire an understanding of the theoretical
underpinnings of contract, and should develop their skills in legal research
and legal writing through the preparation of either an essay or judgment.
5. Students
should be able to co-operate with their colleagues within limits set by rules
governing proper academic discourse.
University
Generic Attributes
The above mentioned objectives also aim to
further the University's generic attributes for graduates. Those generic
attributes are:
1. Knowledge skills
Graduates should
(a) have a body of knowledge in the field(s) studied;
(b) be able to apply theory to practice in familiar and unfamiliar
situations;
(c) be able to identify, access, organise and communicate knowledge in
both written and oral English;
(d) have an appreciation of the requirements and characteristics of
scholarship and research; and
(e) have the ability to use appropriate technologies in furthering all
of the above
2. Thinking skills
Graduates should
(a) be able to exercise critical judgement;
(b) be capable of rigorous and independent thinking;
(c) be able to account for their decisions;
(d) be realistic self evaluators;
(e) adopt a problem solving approach; and
(f)
be creative and imaginative thinkers.
3. Personal skills
Graduates should have
(a) the capacity for and a commitment to life-long learning;
(b) the ability to plan and achieve goals in both the personal and the
professional sphere; and
(c) the ability to work with others.
4. Personal attributes
Graduates should
(a) strive for tolerance and integrity; and
(b) acknowledge their personal responsibility for
(i)
their own value judgements; and
(ii)
their ethical behaviour towards
others.
5. Practical skills
Graduates should
(a)
be able to use information technology
for professional and personal development; and, where appropriate, be able to:
(b)
collect, correlate, display, analyse
and report observations;
(c)
apply experimentally-obtained results
to new situations;
(d)
test hypotheses experimentally; and
(e)
apply technical skills appropriate to
their discipline.
Classes will be conducted in seminar style; however the lecturer will
provide some measure of summary and explanation. Thus the bulk of class time
will be focused on discussion and debate of the assigned readings. This will
require your active participation. Consequently, prior reading is essential,
and when you don’t have a clue it will be really
obvious.
Required Materials
·
Carter and Harland, Cases and
Materials on Contract Law in Australia, 3rd ed, 1998, Butterworths
(referred to as ©).
·
Carter and Harland, Contract Law
in Australia, 3rd ed, 1996, Butterworths (referred to as < ).
The text and casebook are expensive, but both are necessary. You will
find the text a concise guide to issues raised by the cases. You must read the
cases designated as compulsory (4). The optional readings will give you a deeper
insight into the topics discussed in class. Additional topical readings, such
as newspaper articles, will be provided in class, as will additional problems
and questions.
Additional Readings
Other sources you may find helpful are:
Seddon and Ellinghaus, Cheshire
and Fifoot’s Law of Contract, 7th ed, Butterworths, 1997
Hocker, Heffey and Paterson, Contract
Cases and Materials, 8th ed, LBC, 1998.
Graycar and
Morgan, Including Gender Issues in the
Core Law Curriculum, Contract
Materials, (DEET, 1996)
Carter, Outline of Contract Law,
2nd ed, Butterworths, 1994
Honnold, Uniform Law for
International Sales, 3rd ed, Kluwer, 2000 (see also reference
material available through <http://www.cisg.law.pace.edu/>)
The course co-ordinator and instructor of one stream this semester is
Luke Nottage. His room is 1333 at the Law School. Tel: 9351 0210; email:
luken@law.usyd.edu.au.
The instructor for the other stream is Greg Tolhurst. His room is 1144
at the Law School. Tel: 9351 0306; email: gregt@law.usyd.edu.au.
All forms of assessment are compulsory. It is a rule of the
University that students attend 80% of classes in order to be eligible to
complete the course. The assessment for this course is a mixture of written
work and class work.
Due: Wednesday
19 September, at level 12 counter, law school before 12pm.
Length: 3000
words
Length: 2-hour
open book exam.
2. Class work – worth: 15%
The major part of this
course is taught in seminars. The work you do in class is very important. The
assessment for class work will be made up of the following components:
·
Attendance
·
Preparation for class
·
Small Group work - discussing cases, problems etc
·
Short quizzes on material already covered
·
Oral contributions, which demonstrate that reading has been done and
your mind has turned to the issues will be rewarded. This includes coming
prepared with questions and issues which you haven’t yet understood and want
explained. Talking over, dominating, or denigrating other students'
contributions will not be rewarded and may be negatively marked.
If you have a compelling
reason for not wishing your participation to be assessed, an alternative form
of assessment, such as an additional written assignment, will be considered
upon request. This request must be well before the end of the semester.
We will provide you with the
opportunity to assess your contribution to class in writing using the form
attached at the back of this outline. While we are not bound by your
self-assessment, I will take it into account and if your mark differs
significantly from that which you think you deserve you can request reasons
why.
Reasons for choice of
Assessment Methods
1. (a) Essay
The essay is designed to enhance student learning of a discrete area of
the law. The assignment will allow students to consider in depth legal
principles in a particular area. The essay will also allow students to
critically analyse the nature and effect of an area of the law and consider
alternatives. The option of working in pairs allows students to work
co-operatively if they choose.
(b)
Examination
The questions on the examination evaluate student's achievement of the
course objectives and skills objectives 1, 2 and 3.
2. Class work
Class work is an important part of the learning process and therefore
will be assessed. Students will be given the opportunity to enhance their
skills of working co-operatively and putting legal arguments orally.
·
A warning on word
lengths:
Anything over length may be penalised. Part of the task given is to
answer the question within the word limit assigned. Word counts that are so
wildly inaccurate as to appear deceptive will increase the penalty. Footnotes are
included in the word count.
·
A warning on
plagiarism:
Make sure you use appropriate sourcing and understand the rules of
academic misconduct
Plagiarism is the use of
another person’s words or ideas without giving credit for them. That is, you
try to pass off someone else’s work as your own. The rules against plagiarism
apply equally to the work of published authors, internet sources, and the work
of other students. Plagiarism also includes the unacknowledged use of prior
work of your own if such work has previously been submitted in another course
and awarded a grade
If you are found to have
plagiarised you will receive a
fail mark for that piece of work, and may be excluded from the course.
Examples
of plagiarism
Lord Reid, in his article,
“The Judge as Lawmaker” (1972) 12 Journal
of the Society of Public Teachers of Law 22 wrote at page 22,
“There
was a time when it was thought almost indecent to suggest that judges make law
– they only declare it. Those with a taste for fairy tales seem to have thought
that in some Aladin’s cave there is hidden the Common Law in all its splendour
and that on a judge’s appointment there descends on him [or her] knowledge of
the magic words Open Sesame. Bad decisions are given when the judge has muddled
the password and the wrong door opens. But we do not believe in fairy tales any
more.”
If you read this and
submitted work which reproduced, without crediting Lord Reid, all or part of
those sentences, it would be plagiarism. Changing word order, or substituting a
few of your own words and still not crediting the idea to the author is still
plagiarism. So, for example, writing “The
idea that judges do not make law, they only declare it, is a fairy tale. It is
no longer accepted that judges are given the password to the Common law hidden
in Aladin’s cave upon their appointments and simply need to utter the magic
words Open Sesame to discover it” as if it is your own work, is plagiarism.
Appropriate
Sourcing means that you credit both words and ideas of other people’s which you
have used when you use them. Where you have quoted directly, this should be
indicated by quotation marks for short quotes, and indentation for long quotes.
The footnote or reference mark should follow directly after this, and not, for
example, at the end of a paragraph.
Appropriate
sourcing also means that you use sources for what they actually said or did,
and do not misrepresent them. A common mistake is to refer to a published
author’s opinion as though this establishes a fact or conclusion. If a student
wrote,
“Judge
made law will never work because it is a fairy tale” (footnote 1)
(1) Lord Reid, “The
Judge as Lawmaker” (1972) 12 Journal of
the Society of Public Teachers of Law 22 at 22
it would be inappropriate
sourcing. Reid is expressing an opinion in his piece, he is not establishing a
fact, and his opinion is misused here as though it provides an evidentiary
basis for a broad overstatement by the student. An appropriate use would be, “Reid argues that there no longer any
widespread belief in the declaratory theory of law. Judges themselves make the
common law. (footnote 1).”
(1) Lord Reid, “The Judge as
Lawmaker” (1972) 12 Journal of the
Society of Public Teachers of Law 22 at 22.
Co-operation
versus collusion. You are permitted and encouraged to discuss the course and the
assignment topics with your fellow students. You should not, however, read each
other’s written work prior to submitting it, nor should you co-operate so
closely that you are jointly selecting quotes, planning essay structure or
copying each other’s ideas.
Requests for extensions have
to be compelling and communicated to
your instructor directly. They must be made before (preferably well before) the
due day.
Extensions requests will be given far more credence
if you present documentary evidence, such as doctor's certificates, and we may
refuse extensions without it. The rate of computer failure on due dates is
notoriously high.
The essay will be penalised
at the rate of 1 mark per day for lateness.
Special consideration forms
from the Student Centre are not a substitute for an extension – they are there
for misadventure during exams and are taken into account in pass/fail
situations. They will not stop you being penalised if you have no extension.
We are committed to fair process in our teaching.
All fail grades are double marked. If you are unsure of, or unconvinced
by, the written feedback you receive on any of your assignments, you can meet
with your instructor to discuss it in person.
If you feel you have been unfairly treated in any way, you should first
approach your instructor. The first step in any appeal process is to request
reasons for a decision. If you are unsatisfied with the reasons given, you may
then approach the course convenor, Luke Nottage. You are not automatically entitled to a double mark on an assignment you
are dissatisfied with.
If you are having
difficulties with your written expression, including essay writing style or
structure, the Learning Assistance Centre runs several courses each semester
which may be helpful for you. The LAC is located in the Education Building Room
722, Level 7, Ph: 9351 3853, Email: lac@stuserv.usyd.edu.au
The law counter on level 3 of the Old
Teacher’s College, staffed by Student Services, is open only on Mondays and
Wednesdays from 9 until 12. At other times you should contact Student Services
at the law school if you need assistance.
The Faculty believes that it is important to encourage debate and
discussion in surroundings which are tolerant and sensitive.
Discriminatory language and behaviour is not tolerant or
sensitive. It can lower students’
self esteem and can make them feel:
é
distracted and upset
é intimidated,
and
é
isolated from other students, from the Faculty and from the academic
environment.
Discriminatory language and behaviour has long-term costs for the
Faculty of Law as an institution.
These costs include:
é loss
of diversity in our student body
é failure
to reach our equity objectives
é undermining
of our high standards of academic excellence and
é damage
to our national and international reputation.
Accordingly, the Faculty wishes to eliminate discriminatory language
and behaviour and therefore resolves as follows:
Resolution:
Members of the academic and
administrative staff and students of the Faculty of Law must not use
discriminatory language and behaviour.
The Faculty should inform students that discriminatory language or
behaviour is unacceptable.
Definitions:
Discriminatory language and behaviour includes offensive comments or
actions which degrade a disadvantaged group because of their race, colour,
place of origin, ethnic origin, religion, citizenship, ancestry, gender, age,
sexual preference, or disability.
A person or group may be degraded by language or behaviour which:
é is
patronising and demeaning
é exclusionary
é involves
group stereotyping, or
é consists of
irrelevant descriptions or exaggerates and generalises relevant descriptions.
Remarks or practices designed to serve the needs or promote the
interests of disadvantaged individuals or groups will not constitute
unacceptable discriminatory language and behaviour for the purposes of this
resolution.
|
Week |
Topic |
|
1 |
Introduction Offer |
|
2 |
Offer Acceptance |
|
3 |
Consideration |
|
4 |
Estoppel Intention Writing |
|
5 |
Express Terms Incorporation of Terms |
|
6 |
Implied terms Construction Exclusion Clauses |
|
7 |
Privity Order of Performance |
|
8 |
Discharge by performance Discharge for breach Repudiation |
|
9 |
Termination Frustration |
|
10 |
Damages |
|
11 |
Restitution Equitable remedies Duress Undue influence |
|
12 |
Unconscionability Misrepresentation |
|
13 |
Mistake Revision |
< = Text, ie
Carter and Harland
© = Casebook, ie Carter and Harland
4 = compulsory
reading
w
= optional reading
* Class Handouts
Aims:
§
to explore some limits on the notion of 'freedom of contract' imposed
by the courts and parliament.
§
to become familiar with current ideas about theories of contract and
ways contract law might develop in the future.
Background to the instructor
What the course involves and what will be expected of you.
We shall consider perspectives that criticise the state of the law (cf ©1.19):
(a) the realist view: in practice courts
focus on policy objectives to decide in whose favour a legal rule should be
applied
(b)
the critical legal studies
approach: contract law is indeterminate and used to legitimise both the system
and the decisions of those who wield power
(c)
contract as promise thesis: promise alone
is the basis of contract enforcement
(d) feminist approach: gender issues should
be considered in critically evaluating existing legal doctrine
(e) relational approach: contract is
unsuitable to the resolution of contract disputes because it gives insufficient
emphasis to the relational interests and social conditions to contracts
(f) law and economics approach: the law is
incomplete without an economic perspective
(g) sociological approach: business people
do not generally consult lawyers when planning contractual relationships or
even when a contract dispute arises.
Trans-border borrowings and globalisation of contract law:
4 119 and 276
* United Nations Convention on Contracts for the International Sale of
Goods (“CISG”: full text also available through <http://www.uncitral.org/english/texts/sales/CISG.htm>,
incorporated into NSW by the Sale of
Goods (NSW) Act 1986):
-
Art. 1 defines scope of application to trans-border sales (see also updated
list of member states at <http://www.uncitral.org/english/status/status-e.htm>).
-
For a concise overview, see also the NZ Law Commission Report which led
to that country adopting the Convention (<http://www.cisg.law.pace.edu/cisg/wais/db/articles/newz2.html>)
While traditionally contract has been considered part of private law,
increasingly public issues are involved. While the notion of 'freedom of
contract' is still mentioned, not all contracts concluded between parties will
be enforced by courts. Furthermore, legislation and common law doctrines
severely limit the extent to which parties can behave ruthlessly in business
deals.
Name 3 types of contracts
you have entered into in the last year. (How many were on standard forms or set
clauses?)
Do you think all contracts should be enforced by courts? (Is this
course outline an enforceable contract, or should it be?)
Class activity: recall or follow contract disputes discussed in TV
soaps like Ally McBeal
w Coote "What
is contract?" © 1.18
< 801-803, 827 (minors); 838 (mental
disability/intoxication); 849-50 (companies); 869 (the Crown); 874 (bankrupts);
877, 881 (married women – in NSW)
< 1601-1619
(a) There are many heads of
public policy considered by courts in relation to contracts. The following list
is not closed, as courts could create new heads: contracts to commit a legal wrong, contracts injurious to public life,
immoral contracts, contracts in restraint of trade, contracts injurious to
foreign relations, contracts prejudicial to the status of marriage, contracts
purporting to oust the jurisdiction of the courts and contracts prejudicial to
the administration of justice.
If contracts infringe some types of public policy, the contract will be
considered illegal (eg contract to commit a legal wrong), whereas other
contracts or clauses will just be unenforceable or void (eg in restraint of
trade).
4
Andrews v Parker [1973] Qd R 93, ©16.28
w Minister
of Education v Oxwell and Moreschini [1966] WAR 39
Although public policy is meant to prohibit anything contra bonos mores
('against good morals': Jones v Randall
(1774) 1 Cowp 37 at 39), the law has primarily been concerned with sexual
morality. Can you suggest why this is so?
The common law must sometimes balance two principles: upholding freedom
of contract of individuals to agree to contracts and the public interest in
freedom of competition and trade. The issue is whether the restraint agreed to
in a contract is reasonable in the circumstances. Often opinions differ as to
the correct result.
< 1634-7, 1648, 1653
w Schroeder
Music Publishing Co v Macaulay [1974] 1 WLR 1308
Buti “Salary Caps in Profesional Team Sports” (1999) 14 JCL 130
Some agreements that restrict competition are prohibited by Trade
Practices Act 1974 (Cth), irrespective of whether or not those agreements would
be enforceable at common law.
Some contracts will not be enforced because they are not considered
'fair', because they are affected by undue
influence, duress or unconscionability. These ideas are considered later.
Still other clauses may be held unenforceable on public policy grounds,
such as harsh exclusion clauses
(clauses excluding liability) and penalty
clauses. These are dealt with later too.
Aims:
§
to understand the model of offer and acceptance as well as how this
model fails in some instances to explain some agreements
§
to critically examine the doctrine of consideration and its
relationship with promissory estoppel
§
to understand the requirements of certainty and intention to create
legal relations and the objective construction rules used to determine whether
these requirements are satisfied
§
to examine contracts that must be evidenced in writing to be valid.
Offer and acceptance are useful analytical tools, but they do have
their limits.
< 201-207, 211,
215
© paras 2.2-2.5
4 Pharmaceutical Society of Great Britain v
Boots Cash Chemists Ltd [1953] 1 QB 401, ©2.6
4 Australian Woolen Mills Pty Ltd v Cth
(1954) 92 CLR 424, ©3.20
w
Seppelt & Sons Ltd v
Commission for Main Roads (1975) 1 BPR 9147, ©2.18
How do you distinguish between an invitation to treat, provision of
information, a declaration of intention and an offer?
4 Carlill v Carbolic Smoke Ball Company
[1893] 1 QB 256, ©2.12
Simpson
"Quackery & Contract Law: Case of the Carbolic Smoke Ball" (1985)
14 J L Stud 345
Graw “Puff, Pepsi and ‘That Plane’: The John Leonard Saga” (2000) 15 JCL 281
·
Would the result have differed had Carlill caught the flu 6 months
after using the smokeball?
·
What if Carbolic had not said that it had deposited £1000 in the bank
to show its sincerity?
·
Is it relevant whether £1000 was in fact deposited?
<
225-228
w Felthouse v Bindley (1862) 142 ER 1037;
©2.51
w Empirnall Holdings Pty Ltd v Machon Paul
partners Pty Ltd (1988) 14 NSWLR 523
w Airways Corp of NZ v Geyserland Airways Ltd
[1996] 1 NZLR 116
< 217-222, 224
4 Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (Eng) Ltd [1979]
1 All ER 965, ©2.32
4 UN Convention on Contracts
for the International Sale of Goods (1980), art 19, ©2.38
4 Uniform Commercial
Code (USA), s2-207, ©2.40
Remember that this rule only applies to acceptance, NOT revocations of
offers or acceptances.
< 230-238
w Bressan v Squires [1974] 2 NSWLR 460,
©2.58
Gardner,
"Trashing with Trollope: Deconstruction of the Postal Rules in
Contract" (1992) 12 OJLS 170
Hill “Flogging a
Dead Horse- The Postal Acceptance Rule and Email” (2001) 17 JCL 151
Can an offeree who has posted an acceptance withdraw it, by phone, fax
or email before it arrives? (see eg Brinkibon
Ltd v Stahag Stahl mbH [1983] AC 34, ©2.62; Bressan v Squires [1974] 2 NSWLR 460, ©2.58)
Is the rule practical today? How would you ensure that it did not apply
to your contract?
< 241
4 R v Clarke (1927) 40 CLR 227, CH2.68
An offer may be withdrawn at any time prior to acceptance if it is
communicated to the offeree. This is even if it is expressly stated to be open
for a certain period. However, options must be kept open for the agreed time
because consideration has been paid.
< 243-244,
246-247, 249-250
w Goldsborough Mort & Co Ltd v Quinn (1910)
10 CLR 674, © 2.97
If the contract is a 'unilateral contract' (promise is made in return
for the performance of an act) and the act has been part performed, can the
offer be revoked?
w Mobil Oil Australia Ltd v Lyndel Nominees
Pty Ltd (1998) 153 ALR 198
Should the law recognise 'firm' offers?
< 251-257
4 Stevenson, Jaques & Co v McLean (1880) 5 QBD 346, ©2.87
Cf * UN Convention on
Contracts for the International Sale of Goods 1980 (“CISG”), arts 14-24,
reproduced in ©2.103
The rights and obligations of the parties must be sufficiently certain
to be enforceable. Also, there may be no contract if some contractual
obligation has yet to be agreed on. But the courts strive to give effect to
contracts if possible.
< 258-270
* CISG Art. 55
< 272
4 Whitlock v Brew (1968) 118 CLR 445,
©2.124
< 271
4 Coal
Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1, ©2.129
Paterson,
"The Contract to Negotiate in Good Faith: Recognition and
Enforcement" (1996) 10 JCL 120
Lowcay “’Best Endeavours’ and ‘Reasonable Endeavours’” [1999] New
Zealand LJ 211
< 273-275
4
Masters v Cameron (1954) 91 CLR
353, ©2.135
w Carruthers v Whittaker [1975] 2 NZLR 667
4 Meehan
v Jones (1982) 149 CLR 571, ©2.117
Wilson, “Using
Best Endeavours to obtain finance – enforcing conditions in contracts” (1998)
12 Australian Property Law Bulletin
79-80
Class Activity: sketch the
typical sequence of events in concluding a sale of residential property
< 301-4, 307,
313-314, 316
Contracts in the form of deeds do NOT require consideration: Text 312,
358
Can you explain the difference between contracts with consideration and
conditional gift promises?
Should non-negotiability of terms render an agreement lacking in
consideration? Compare W v Essex County
Council [1998] 3 All ER 111 with critique in Coote “Common Forms,
Consideration and Contract Doctrine” (1999) 14 JCL 116
< 315, 318
4 Australian Woollen Mills Pty Ltd v Cth
(1954) 92 CLR 424, ©3.20
< 319, 321
4 Coulls v Bagot’s Executor and Trustee Co Ltd
(1967) 119 CLR 460, ©3.27
< 323-327
4 Chappell & Co Ltd v Nestle & Co Ltd
[1960] AC 87, ©3.46
< 328-334
We need to distinguish between:
executory consideration – a
promise is exchanged for a promise;
executed consideration – a
promise is exchanged for an act
If the plaintiff has performed services
as the request of the defendant, who subsequently promises to pay, the promise
will be enforceable if it was assumed at the time of the request that the
services would be paid for:
w Re Casey’s Patents [1892] 1 Ch 104,
©3.38
< 336-340
4 Placer Developments Ltd v Cth (1969) 121
CLR 353, ©3.61
w Meehan
v Jones (1982) 149 CLR 571, ©2.117
Meyer-Rockow, "The
Requirement of Consideration" (1997) 71 ALJ 532
Consideration only exists if duty is
exceeded
< 341-343
4 Glasbrook Bros Ltd v Glamorgan County
Council [1925] AC 270, ©3.70
4 Popiw v Popiw [1959] VR 197, © 3.83
w Newjur Pty Ltd v Panagas (1993) 17 Fam
LR 245
4 Ward v Byham [1956] 2 All ER 318, ©3.77
Consideration exists if duty is owed to a third party, but not if owed
to other contracting party
< 344-349
Frug “A Critical Theory of Law” (1989) 1 Legal Educ Rev 43
Part payment of a debt is not consideration for a promise to discharge
the debt
< 356-357
4 Foakes v Beer (1884) 9 App Cas 605,
©3.89
4 Williams v Roffey Bros & Nicholls
(Contractors) Ltd [1991] 1 QB 1, < 348
w
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR
723
w
Machirus Properties v Power
Sports World (1987) Ltd, unreported, High Court at Wellington, 26/5/98:
criticised in Coote, op cit.
< 350, 355
< 361-364
< 365-387
4 Waltons Stores (Interstate) Ltd v Maher
(1988) 164 CLR 387, ©3.119
w Austotel v Franklins (1989) 16 NSWLR 582
w Commonwealth of Australia v
Verwayen (1990) 170 CLR 394
w Giumelli v Giumelli (1999) 73 ALJR 547
w W. v. G. (1996) 20 Fam LR 49
w
English Law Revision Committee, ©3.142
Drahos &
Parker "Critical Contract Law in Australia" (1990) 3 JCL 31
There is a rebuttable presumption that such agreements are not meant to
be legally enforceable.
< 401-404
w Cohen
v Cohen (1929) 42 CLR 91, ©4.11
4 Balfour v Balfour [1919] 2 KB 571, © 4.6
4 Jones v Padavatton [1969] 2 All ER 616,
©4.15
¨
Greek Orthadox Community of
South Australia v Ermogenous [2000] SASC 329
The presumption is such contracts are intended to be binding.
< 405-408
4 Esso Petroleum Ltd v Commissioners of
Customs & Excise [1976] 1 All ER 117, 4.27
w Rose and Frank Co v JR Crompton & Bros
Ltd [1923] 2 KB 261, © 4.21
w Banque Brussels Lambert SA v Australian
National Industries Ltd (1989) 21 NSWLR 502
4Statute of Frauds
1677, s4, 4503
4Conveyancing Act
1919 (NSW), s54A, ©5.15
In NSW today only contracts for the sale or transfer of interests in
land (4509) need to be
evidenced in writing. Other states retain different rules, eg Tasmania and
Western Australia still regarding certain sales of goods (4509), and there are no form
requirements in CISG (* Art. 11, see also Art. 29; but subject to Art. 96)
What functions are served by such rules? 4502
How important are they, especially in an internet era? Should writing
requirements be abolished?
w New Zealand Law
Commission, Repeal of the Contracts Enforcement Act 1956: A Discussion Paper
(Preliminary Paper No 30, 1997, available through <http://www.lawcom.govt.nz/>)
< 513-516
(a) Section
54A Conveyancing Act does not require the contract itself to be in writing, but
merely that there be written evidence of it. The “note or memorandum” can come
into evidence after the contract was made and need not have been intended to
provide evidence of the contract.
w Popiw
v Popiw [1959] VR 197, ©5.39
(b)
The document must be ‘signed’, but this is loosely interpreted.
(c)
A number of documents can together constitute the note or memorandum,
but there must be some internal reference between them. The cases do not
provide coherent rules. For example, it is unclear how specific the reference
must be.
w Harvey
v Edwards Dunlop & Co Ltd (1927) 39 CLR 308, ©5.43
(d)
The note must contain all the material terms of the contract, and the
failure to include a material term in the oral contract will mean the note is
insufficient.
w Pirie v Saunders (1961) 104 CLR 149, ©5.53
< 519-520
A contract not complying with s54A is not void, but unenforceable.
Can a party who has done work under an unenforceable contract sue on a
quantum meruit for reasonable remuneration?
w Pavey & Matthews Pty Ltd v Paul
(1987) 69 ALR 577, ©5.56
< 520-524
In order to mitigate the
hardship often caused by the Statute of Frauds, equity developed the doctrine
of part performance. You will study this in the Equity course.
An oral discharge of contract is effective. However, oral variation of
a contract requiring writing causes difficulties.
< 525-527
w Morris v Baron & Co [1918] AC 1,
©5.87
Aims:
§
to understand the distinction between
express terms and representations,
and to appreciate how parties incorporate terms and how courts imply terms.
§ to see how courts
construe terms, in particular exclusion clauses.
§
to understand the rules of privity which
restrict who may enforce benefits or be subject to the burdens of contracts.
A contract can be written or oral or part of each.
We need to distinguish between these types of statements, because if
the statement is false the remedies for breach of term are different to those
for the law of misrepresentation, which will be discussed later.
< 601-605
< 606-610
4 Couchman v Hill [1947] KB 554, ©6.7
4 Oscar Chess v Williams [1957] 1 WLR 370,
©6.12
4 Dick Bentley Productions Ltd v Harold Smith
Ltd [1965] 1 WLR 623, ©6.18
Parties create a ‘collateral contract’ when one party’s consideration
is the entry into another contract.
< 611-613
4 Shepperd v Ryde Corporation (1952) 85
CLR 1, ©6.37
4 JJ Savage & Sons Pty Ltd v Blakney
(1970) 119 CLR 435, ©6.42
Problems arise when a party tries to include a written term in an oral contract
by way of notice, such as signs in
carparks. Many of these terms are exclusion clauses, such as “While all care is
taken, cars parked here are the owner’s own risk an no responsibility will be
taken for loss or damage”.
© 6.51
Class Activity: for discussion, collect
examples of such notices and their locations
A party who signs a contract is presumed bound whether they understood
or read the contract, unless there is fraud or misrepresentation (or non est
factum, discussed in Mistake).
< 615
w L’Estrange v Graucob [1934] 2 KB 394,
©6.64
w Curtis v Chemical Cleaning & Dyeing Co
[1951] 1 KB 805, ©6.58
Adequate notice must be
given of clauses before entry into the contract.
< 616-617
4 Causer v Browne [1952] VLR 1, ©6.64
4 Thornton v Shoe Lane Parking Ltd [1971]
2 QB 163, ©6.74
4 Interphoto Picture Library Ltd v Stilletto
Visual Programmes Ltd [1989] QB 433, ©6.80
< 618
4 DJ Hill & Co Pty Ltd v Walter H Wright
Pty Ltd [1971] VR 749, ©6.93
w Henry Kendall & Sons v William Lillico
& Sons [1969] 2 AC 31, © 6.85
Swanton, "Incorportation of Contractual Terms by a Course of
Dealing" (1989) 1 JCL 223
< 619
< 620-624
Peden “’Cooperation in English Contract Law- To Construe or Imply?”
(2000) 16 JCL 56
< 625-635
4 Codelfa Constructions Pty Ltd v State Rail
Authority of NSW (1982) 149 CLR 337, ©6.99
w Breen
v Williams (1996) 186 CLR 71
w Byrne v Australian Airlines (1995) 185 CLR 410, ©6.107
< 631-635
4 Liverpool City Council v Irwin [1977] AC
239, ©6.113
w Reid
v Rush Tompkins [1990] 1 WLR 212
w Scally
v Southern Health Board [1992] 1 AC 294
4 Trade Practices Act
1974 (Cth), ss 69-74, ©6.135
How important are these rules – do suppliers abide by them in their
dealing with you?
< 644
© 6.142 – summary of Con-Stan
Industries of Australia Pty Ltd v Norwich Winterthur (Australia) Ltd (1986)
160 CLR 226
There is a growing interest in the notion of 'good faith' in contract
law. Currently, Anglo-Australian courts have not accepted that any such general
obligation exists, except in cross-border sales to which CISG is applicable (*
Art. 7(1)). This is in contrast to the law eg in USA, Germany, France, and
Japan. However, many contractual doctrines can be seen to incorporate ideals
that parties co-operate, act fairly and reasonably.
w Australia 12
March 1992, Court of Appeal, New South Wales (Renard Constructions v. Minister
for Public Works) [http://cisgw3.law.pace.edu/cases/920312a2.html]
w Alcatel Australia Ltd v Scarcella (1998)
44 NSWLR 349w Australia 3 November
2000 (South Sydney District Rugby League Football Club Ltd v News Ltd) [http://cisgw3.law.pace.edu/cases/001103a3.html]
Why are courts reluctant to adopt a general principle that parties are
not allowed to act contrary to good faith?
w Peden,
"Incorporating Terms of Good Faith in Contract Law in Australia"
(2001) 23 Syd LR 222
w Nottage, "Form and Substance in US, English, New
Zealand, and Japanese Law: A Framework for Better Comparisons in the Law of
Unfair Contracts", (1996) 26/2 Victoria
University of Wellington Law Review247
< 701-704
Hall, “Power and
Privilege: Objectivity, Commercial Interests and Standard Form Contracts”
(1997) 6 Griffith Law Review 30,
pp34-40
< 705-706, 709-712
4 LG Thorne & Co P/L v Thomas Borthwick & Sons (A’Asia) Ltd
(1956) 56 SR (NSW) 81, ©7.25
4 Codelfa Constructions Pty Ltd v State Rail
Authority of NSW (1982) 149 CLR 337, ©7.45
4 Prenn v Simmonds [1971] 1 WLR 1381,
©7.31
Exceptions to the rule: < 716-723
The classification of terms into conditions, warranties and
intermediate terms is important for breach of contract and is considered in
more detail later. © 7.83
Class
Activity: for discussion, collect examples of such clauses
Exclusion clauses are
generally interpreted narrowly and against the party for whose benefit they are
included (known as the contra proferentem rule). However, this interpretation
only applies if there is ambiguity on the face of the document.
4 Wallis v Pratt [1911] AC 394, ©7.97
The English courts developed a principle known as ‘fundamental breach’.
It was said that it was not possible for a party to exclude fundamental
breaches. This principle is now considered a rule of construction.
It was never adopted in Australia as a rule of law:
4 The Council of the City of Sydney v West
(1965) 114 CLR 481, ©7.104
4 Photo Production Ltd v Securicor Transport
Ltd [1980] AC 827, ©7.124
4 Darlington Futures Ltd v Delco Australia
(1986) 161 CLR 500, ©7.146
< 769-772
4 Trade Practices
Act 1974 (Cth), Part V, Div 2, esp ss 68, 68A, ©7.157
Harland,
"The Regulation of unfair contracts in Australia" in Rachagan, ed, Developing Consumer Law in Asia (1994),
pp89-103
How important are these rules – do suppliers abide by them in their
dealing with you?
Should the law permit less scope for exclusion clauses in consumer
transactions?
To what extent?
Some unconscionable contracts are also not enforced. These will be
discussed later. See eg:
Contracts Review Act 1980 (NSW)
Trade Practices Act 1974 (Cth), ss51AA, 51AB, 87
Consumer Credit Code
Only persons who are parties
to a contract may enforce benefits or be subject to burdens arising under it.
< 901-904
w Dunlop
Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847
Exceptions have arisen mainly because of dissatisfaction with the rule.
< 917-922
4 Trident
General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, ©9.6
After reading Deane J’s decision, what would you say to Craig if Andrew
promises Bella in return for consideration supplied by Bella that Andrew will
pay $1000 to Craig? Can Craig argue that Bella obtained Andrew’s promise as
trustee for Craig?
< 910-912
If Alf promises Barbara, in return for consideration supplied by
Barbara, that Alf will pay $1000 to Cliff, Cliff cannot under the strict
privity doctrine sue Alf if he does not pay.
Barbara could enforce the contract against Alf, BUT
(a)
Can Barbara claim damages or obtain specific performance of the promise
to pay Cliff?
4 Beswick v Beswick [1968] AC 58, ©9.16
(b)
Can Alf and Barbara rescind their contract by agreement without Cliff’s
consent?
(c)
Can the contract be construed as containing a promise made to Barbara
and Cliff jointly in return for Barbara’s consideration? If so could Cliff
enforce A’s promise?
4 Coulls v Bagot’s Executor and Trustee Co Ltd
(1967) 119 CLR 460, ©3.28
(iv) Contracts that attempt
to burden a third party
< 913
If Alf promises Barbara for consideration supplied by Barbara that
Cliff will confer a benefit on Barbara, Cliff cannot be sued by Barbara for not
performing even if Cliff is obliged under another contract with Alf to confer
the benefit on Barbara.
There are exceptions in relation to real property and the charters of
ships.
< 914-916
4
One exception is created by Conveyancing Act 1919 (NSW), s36c, ©9.23, however,
its effect is unclear.
Property Law Act 1974 (Qld), s55, ©9.41
Insurance Contracts Act 1984 (Cth), ss48, 49, 51
Trade Practices Act 1974 (Cth), Part V Div 2A
Sale of Goods Act 1923 (NSW), s64
Do you think Australia should adopt reforming legislation like the Contracts
(Rights of Third Parties) Act 1999 in England, (downloadable from <http://www.hmso.gov.uk/acts.htm>),
and as long ago as 1982 in New Zealand (<http://rangi.knowledge-basket.co.nz/gpacts/public/text/1982/an/132.html>)?
w English Law
Commission Report No 242: Privity of
Contract: Contracts for the Benefit of Third Parties? (<http://www.lawcom.gov.uk/library/lc242/summary.htm>)
Sometimes people have
succeeded in obtaining the benefit of an exclusion clause contained in a
contract made between other parties. Can these cases be reconciled with the
privity doctrine?
< 923-926
4 New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd (‘The Eurymedon’)
[1975] AC 154, ©9.30
4
Broken Hill Pty Co Ltd v Hapag-Lloyd
Aktiengesellschaft [1980] 2 NSWLR 572, ©9.35
Aims:
The question of the order in which parties must perform their
obligations is a question of construction of the contract.
< 1801-1809
4 Automatic
Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435, ©18.28
Where a party cannot perform without the co-operation of the other, a
tender (or offer of performance) is sufficient to make the other party liable.
The offer to perform is treated as equivalent to performance to the extent that
the party refusing to co-operate will be liable in damages.
< 1810-1811
< 1812-1840
What performance is sufficient to discharge the parties?
Where A's obligation to perform is
dependent on B completely performing his or her obligations, B will not be
discharged until he or she has completely performed, and cannot call upon A to
perform.
4 Cutter v Powell (1795) 6 TR 320, ©18.12
4 Sumpter v Hedges [1898] 1 QB 673, ©23.24
Can a party who has substantially performed enforce the other party's
promise to pay?
4 Hoenig v Isaacs [1952] 2 All ER 176,
©18.37
Where a contract contains a number of
obligations the question will arise whether those obligations are severable
from one another. If they are then a party who has performed the severable
obligation will be entitled to sue for the performance promised in respect of
that obligation. For example, often a seller is entitled to receive payment in
respect of goods delivered, even though the contract has not been completed.
Does the doctrine of substantial performance apply to contracts
containing several obligations?
w See Steele
v Tardiani (1946) 72 CLR 386, ©23.30
How do we decide if a breach
has occurred? Provisions of the contract must be construed to see whether there
has been a failure to act as required. Usually liability is ‘strict’, that is,
negligence and intention are irrelevant, unless provided by the contract.
< 1841-1846, 1853-1859
Carter, Breach of Contract, 2nd
ed, 1991, appendix
We need to consider the type of term that has been breached and the
seriousness of the breach. A party will only be discharged by the failure of
the other party to perform if the breach is of an important promise or has
serious consequences.
< 724-747, 1901-1927
4 Associated Newspapers Ltd v Bancks
(1951) 83 CLR 322, ©19.17
4 Hong Kong Fir Shipping Co v Kawasaki Kisen
Kaisha Ltd [1962] 2 QB 26, ©19.27
4 Bunge Corporation New York v Tradax Export
SA Panama [1981] 1 WLR 711, ©19.50
4
Ankar Pty Ltd v National Westminster
Finance (Australia) Ltd (1987) 162 CLR 549, ©19.21
4 Luna Park (NSW) Ltd v Tramways Advertising
Pty Ltd (1938) 61 CLR 286, ©19.10
* = CISG Art. 25 (“fundamental breach” – a “false friend”: cf this
phrase in debates about exclusion clauses!)
w Australia 28
April 1995 Federal Dist. Ct., Adelaide (Roder v. Rosedown Park Pty Ltd et al)
[http://cisgw3.law.pace.edu/cases/950428a2.html]
A party stating that he or she will not or cannot perform contractual
obligations is repudiating. It will be an ‘anticipatory repudiation’ if it
occurs before the arrival of time for performance. Anticipatory breach need not
take the form of an express statement. If a party will not be able to perform
on time then the other party can sue for anticipatory breach. A renunciation
after the arrival of the time for performance may also entitle the other party
to terminate the contract.
The party alleging the right to terminate must show that he or she will
be deprived of substantially the whole of the benefit of the other party’s
promised performance.
< 1928-1947, 1965-1966
4 Federal Commerce & Navigation Co Ltd v
Molena Alpha Inc [1979] AC 757, ©19.81
4 Universal Cargo Carrier Corporation v Citati
[1957] 2 QB 401, ©19.92
w Laurinda
Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 85 ALR 183
w Sale of Goods Act 1923 (NSW), 34(2)
* CISG Arts. 71-72 (“anticipatory breach”)
w Australia 17
November 2000 Supreme Court of Queensland (Downs Investments v. Perwaja Steel
SDN BHD) [http://cisgw3.law.pace.edu/cases/001117a3.html
At common law time was of
the essence of the contract, unless there was a contrary intention. In equity,
the presumption was the opposite.
The equitable rule has been adopted by legislation:
4 Conveyancing Act
1919 (NSW), s13, ©18.67
< 1847-1852, 1948-1964
w Louinder
v Leis (1982) 149 CLR 509, ©19.59
The innocent party must elect to terminate the contract, it is not
automatic. This right is lost if there is an election to continue.
< 1967-1984
4 McDonald
v Dennys Lascelles Ltd (1933) 48 CLR 457, ©22.54
w Photo Production Ltd v Securicor Transport Ltd [1980] AC
827, ©7.124
4 Tropical Traders Ltd v Goonan (1964) 111
CLR 41, ©19.130
* CISG Art. 26
4 Legione v Hateley (1983) CLR 406,
©19.138
w Foran
v Wight (1989) 168 CLR 385
< 1985-1995
4 McDonald v Dennys Lascelles Ltd (1933)
48 CLR 457, ©22.54
w
Shevill v Builders Licensing
Board (1982) 149 CLR 620, ©21.133
* CISG Art. 81
< 2001-2030
Historically there was a strict rule that people contracting were
absolutely liable and supervening and unforeseen events preventing performance
were no excuse. Frustration relaxes this rule and occurs when:
4 Taylor v Caldwell (1863) 3 B&S 826,
©20.9
4 Krell v Henry [1903] 2 KB 740, ©20.19
4 Codelfa Construction Pty Ltd v State Rail
Authority of NSW (1982) 149 CLR 33, ©20.27
4 Davis Contractor Ltd v Fareham UDC
[1956] AC 696, ©20.38
w Bank
Line Ltd v Arthur Capel & Co [1919] AC 435, ©20.74
Death or incapacity for personal service of a party in a contract of
personal service. Supervening legal impossibility.
< 2031-2037
< 2038-2039
< 2040-2042
w Simmonds
Ltd v Hay (1964) 81 WN (Pt 1) (NSW) 358, ©20.82
< 2043-2048
w Maritime
National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524, ©20.91
w J
Lauritzen AS v Wijsmuller BV (Super Servant Two) [1990] 1 Lloyd’s Rep 1
Frustration discharges the whole contract automatically and either
party may rely upon it, except in cases of self-induced frustration.
< 2057-2078
w Fibrosa
Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, ©20.130
w Baltic
Shipping Co v Dillon (The Mikhail Lermontov) (1993) 176 CLR 344, ©23.6
4 Frustrated
Contracts Act 1978 (NSW), ©20.139
The Frustrated Contracts Act 1978 (NSW) replaces the common law in NSW
in relation to contracts covered by it. It provides a series of fixed rules for
the adjustment of the parties’ rights. Students are not expected to master the
intricacies of the adjustments in ss9-11.
(iv) Review: compare structure of “exemptions” in CISG
* CISG Art. 79
Should the common law rules be comprehensively reformed?
Nottage, "Planning
and Renegotiating Long-Term Contracts in New Zealand and Japan: An Interim
Report on an Empirical Research Project" [1997] New Zealand Law Review 482; "Economic Dislocation and Contract
Renegotiation in New Zealand and Japan: A Preliminary Empirical Study", (1997)
27/1Victoria University of Wellington Law
Review 59.
A contract may be discharged
by the agreement of the parties, provided there is consideration for the
agreement to discharge. An oral discharge or variation of written contract is
effective and does not conflict with the parol evidence rule. With respect to
contracts requiring evidence in writing see 2E.
Aims:
§ to understand the
purpose of damages awards
§ to be able to
determine whether damage is caused by contractual breach and whether it is too
remote and whether the loss has been mitigated
§ to understand the
differences between the different measures of damages
§ to be able to
distinguish between liquidated damages clauses and penalties
§ to recognise the
basic elements of claims for restitution
§ to understand the
use of the equitable remedies of specific performance and injunction in the
contractual context.
Damages for breach of contract are intended to put the injured parties
in the position they would have been in if the contract had been performed, so
far as money can do so.
(i) Loss
¨
Alfred McAlpine
Constructions Ltd v Panatown Ltd [2000] 3 WLR 946
Damage must have been caused by the defendant.
< 2119-2122
w Luna
Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286, ©21.9
w Reg
Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516, ©21.16
< 2123-2128
w Hadley
v Baxendale (1854) 9 Ex 341
4 Victoria Laundry (Windsor) Ltd v Newman
Industries Ltd [1949] 2 KB 528, ©21.25
4 Koufos v Czarnikow Ltd [1969] 1 AC 350,
©21.29
* CISG Art. 74
< 2110-2113
Expectation damages attempt to place the plaintiff in the same
situation as if the contract had been performed.