Tuesday, June 8, 2010

Contracts - Excuses for Non-Performance - Overview

Excuses for Non-Performance

  • Impose only minimum standards of behaviour when contracting
    • Eg - no fraud, duress or undue influence
  • Grounds for legitimately refusing to perform
  • Non-performance “justified” so defence to breach
  • Contract normally voidable rather than void
  • Rescission ab initio remedy
  • But occasionally
    • Partial rescission, rectification
    • Contract declared void/nullity (eg, non est factum)

Advantage taking

  • Doctrine of unconscionable dealings [equitable]
  • Knowingly taking advantage of other party’s special disability

Non-Disclosure or Misinformation

  • Fraudulent misrepresentation [common law and equitable]
  • Innocent Misrepresentation [equitable]
  • Failure to ensure volunteer guarantor wives understand terms of guarantee (wives’ special equity) (National Australia Bank v Garcia) [equitable]
  • Mistake [common law and equitable]

Improper Pressure, Coercive Conduct or Abuse of Trust

  • Duress [common law]
    • Illegitimate pressure
      • Threats to life or limb or property
      • Economic duress [livelihood]
  • Undue influence [equitable]
    • Solicitor viz à viz client;
    • Doctor/patient;
    • Priest/penitent etc

Focus of Excuses

  • Either:
  • Absence of true consent by plaintiff
    • eg, duress; non est factum
  • or
  • Conduct of defendant
    • eg, unconscionable dealings

Common Rationale

  • Prevention of unconscionable assertion of contractual right
    • Eg Garcia (1998) 194 CLR 395, 409-10
  • Retention of benefit of contract against equity and good conscience
    • Amadio (1983) 151 CLR 447, 461;
    • Vadasz (1995) 184 CLR 102, 111;
    • Bridgewater (1998) 194 CLR 457, 478

Unconscionability Standard

  • Evident in excuses
  • But cf estoppel (Waltons Store et al)
  • Partial rescission (Vadasz v Pioneer Concrete)
  • Statutory initiatives
    • Trade Practices Act 1974 (Cth)
      • Deceptive or misleading conduct (s 52)
      • Statutory unconscionability (ss 51AA-AC)
    • Fair Trading Act 1999 (Vic)

A Change in Values?

  • Shift from19th century liberal ideology with only limited common law ‘good faith’ exceptions to greater emphasis on concern for others See Finn, Commerce, Common Law and Morality

Straddle Common Law and Equity

  • Duress, non est factum [common law]
  • Fraudulent misrepresentation, mistake
    • common law and equity
  • Undue influence [equitable]
  • Breach of fiduciary duty [equitable]
  • Innocent misrepresentation [equitable]
  • Special equity for mistaken guarantor wives [equitable]
  • Classification of excuse affects remedies

Strategic Use of Excuses

  • Use affirmatively or defensively
  • Affirmatively
    • Self help to rescind contract
  • Defensively
    • To resist action for specific performance
    • To resist action for breach of contract

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