LAWS1204 Contracts
Semester 2, 2013
Question 1
Alice is seeking:
- To confirm her right to terminate the contract
- Any potential available remedies
- To determine her right to work for another newspaper
Was there a contract?
On the facts, there was clearly a contract between the parties. Marion’s offer was accepted by Alice. The consideration was Marion’s payment in exchange for Alice’s comics and intention is clearly established for both parties. Thus, a contract was clearly formed and Alice is bound by the terms contained in the written document regardless of whether or not she has read them (L’Estrange v Graucob).
Did Alice have a right to terminate the contract?
Alice can potentially terminate on the basis of a breach of clause 6 or Marion’s repudiatory conduct.
a)Breach of clause 6?
Alice’s potential right to terminate depends on the construction of clause 6. Applying the test of essentiality (Tramways), a term is essential if the promise wouldn’t have entered the contract without being assured of a strict or substantial performance of the promise. Alice can terminate if clause 6 is found to be essential and was breached (Koompahtoo).
Alice’s situation is analogous to Associated Newspapers v Bancks. In Bancks, the clause stipulating that the comics be displayed on the front page was found to be an essential term. This was on the basis that Bancks’ salary and reputation was entirely dependent on Associated Newspapers and the nature of his work as a freelance artist placed great importance on his drawings being in front of the public as he contracted for. Because of this, he would not have entered the contract without assurance that his drawings would be on the front page. Alice can draw a direct analogy, so clause 6 is likely to be an essential term.
The term was clearly breached by Marion’s displaying the comic on page 3 for several weeks. It may also be worth noting here that in Bancks, the breach occurred for three weeks. Assuming that ‘several’ means three or more weeks, the breach in Alice’s case was just as severe (if not more) than Associated Newspapers’. However, any breach of an essential term will give rise to the right to terminate (Luna Park).
b)Was Marion’s conduct repudiatory?
Another potential argument available to Alice is that Marion’s conduct constituted repudiation through an evidenced intention to perform her obligations in a manner inconsistent with the true construction of the contract. A series of breaches can be gathered to form repudiation (Luna Park). As previously mentioned, the breaches occurred on three or more occasions (inferred from the facts), which are likely to be serious enough to justify repudiation. In Maple Flock, repudiation was not justified, as only 15% of goods were unacceptable. In this case at least 3 breaches occurred in the period from 5 May – 15 November (approx. 3/26 weeks) which is a higher rate than Maple Flock.
What remedies are available to Alice?
In order to claim any substantive expectation damages, Alice must establish that she has suffered a quantifiable loss, caused by Marion’s conduct that is not too remote. The damages aim to put her in a place as though the contract had been performed (Robinson v Harman).
a)Loss
This is difficult to establish as it is assumed that Alice has been paid her agreed salary throughout the period of breaches. If she cannot establish a quantifiable loss, nominal damages may be awarded (Luna Park).
Alice can potentially argue loss of future earnings as a result of lack of public exposure.
b)Causation
Given that she is able to establish loss, Alice must then establish that the loss wouldn’t have occurred ‘but for’ Marion’s conduct. This is easily established.
c)Remoteness
The losses must not be too remote. It is unclear whether Alice has expressly indicated the importance of future earnings, however her stress on the importance could potentially have this effect and allow the loss to have been in the contemplation of both parties at the time of formation (Hadley v Baxendale). Alice could also argue that the loss was reasonably foreseeable given her statement (Hadley). However, Marion will argue that the losses aren’t too remote.
d)Mitigation
Alice’s termination and seeking legal advice is sufficient mitigation.
Overall, Alice is most likely to be awarded nominal damages.
Can Alice take on work for the rival newspaper?
Yes. Alice is able to terminate the contract with Marion and is no longer bound by its terms. (✓) Election?