Discussing Recreation And Sports Facilities In Ipswich - Breach Of Contract

Background of the Contract

Question:

Discuss About The Recreation And Sports Facilities In Ipswich?

The plaintiff and the defendant entered into a contract to construct five multi-purpose recreation and sports facilities in Ipswich, Brisbane and Beaudeser, Toowoomba and Logan City. Although the plaintiff commenced manufacturing and designing but did not start the construction as was required by the contract and the defendant terminated the contract. Plaintiff claims reliance damages for the works done under the contract as the termination notice was an invalid exercise.

Wrongful Termination

The defendant had entered into a contract with the Plaintiff in July 2016 and the subject matter of the contact was to construct a five multi-purpose recreation and sports facilities in Ipswich, Brisbane and Beaudeser, Toowoomba and Logan City.

The plaintiff failed to commence with the construction of the sports and the recreational facilities and merely initiated with the manufacturing and designing of the project.

The defendant terminated the contact based on the ground that the plaintiff had repudiated when he failed to commence construction, which forms the subject matter of the contract. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] 233 CLR 115, 135 party to a contract is said to have repudiated the contract when their conduct is such that any prudent person would believe that the party the does not have any intentions to be bound by the contract. Such conduct shall also imply that the plaintiff intends to fulfill the contract in a manner that is contrary to the obligations conferred on such party[1].

The plaintiff had initiated the design and manufacturing of the multi-purpose sports and recreational facilities but did not commence with the construction of the recreational and sports facility, which signifies that the plaintiff did not have any intention to perform the contract[2]. Hence, the defendant had terminated the contract on the ground of breach of the contract which in order to be considered as repudiation must be sufficiently severe to give rise to the right to terminate. The plaintiff committed a breach of contract by failing to commence construction of the multi-purpose sports and recreational facilities.

In law of contract if either party to the contract commits a breach of the contractual terms, the innocent party is entitled to terminate the contract. This is particular when the contractual term infringed by the breaching party has been agreed to be an essential term (i.e. a condition) between the parties to the contract as was ruled in the Koompahtoo’s case. If the breached term is a condition, the aggrieved party shall be entitled to terminate the contract with respect to the breach of such contractual term.

Termination of the Contract

In order to determine whether the term breached was essential (i.e. condition) the test of essentiality must be applied. Thos would enable to comprehend whether the nature of the contract signifies that the promise made to the promise was so essential that in the absence of such promise, he would not have formed the contract if he had not been assured of the performance of the promise. If the contractual term breached by the plaintiff was a warranty or a non-essential term, the innocent party shall be entitled to claim damages but cannot end the contract. If the violated term is an intermediate or an innominate term, the contract is entitled to be terminated[3]. However, the termination depends on the seriousness of the breach of such contractual term.

A contract can be terminated for breach of any non-essential or an intermediate contractual term. In Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kisha Ltd [1962] 2 QB 26[4], it was held that for claiming a breach of any contractual term, the innocent party must establish that the breach was of serious nature and the seriousness of the breach shall enable the innocent party to end the contract. The aggrieved party must establish that such breach has deprived him of the significant benefits that he was otherwise entitled to receive had the contract been performed. In Ankar v national Westminster Finance, it was held that in some cases the it becomes difficult to determine whether the term breached is intermediate term or not owing to the ambiguousness of the language of the term. Under such circumstances, such terms shall be considered as both an essential and non-essential term. The seriousness of the breach shall determine whether the termination of the contract was justified. 

The subject matter of the contract entered into between the defendant and the plaintiff as to construct multi-purpose sports and recreational facilities but the plaintiff failed to commence with the construction, which implies his intention of not performing his contractual obligation. Due to such failure on part of the plaintiff, the defendant had been deprived of the benefits he would have obtained otherwise, if the plaintiff had fulfilled his contractual obligations. As mentioned in the Hongkong’s case, the defendant is entitled to repudiate the contract on the ground of breach of the contract on part of the plaintiff.

2.1. If the defendant had not terminated the contract, even then it still would have been deprived of the benefits as the plaintiff had merely started with the designing and manufacturing process and the defendant could not make use of the sports and recreational facilities as its construction had not yet been commenced. It could be said that the breach had an overarching impact on the end objective of the contract.

Essentiality of the Contractual Terms

2.2. In the case Piattchanine, Iouri v Phosagro Asia Pte Ltd [2015] SGHC 25[5], the High Court held that the employer is entitled to terminate a contract under Common Law on the ground of breach of a contractual term and the essence of the contractual term breached depends on the facts of the case. The plaintiff had failed to start the construction of the multi-purpose project, which formed the subject matter of the contract and hence can be considered as an essential term of the contract. The defendant is entitled to terminate the contract under Common Law on ground of breach of an essential contractual term.

2.3. If a party is free to terminate a contract on notice, there is no stipulated requirement under the Common law to provide reasons to the party for terminating the contract as was ruled in Intico (Vic) Pty Ltd & Ors v Walmsley [2004][6].

2.4. In order to end the contract on the grounds of breach of any contractual term, it is imperative to identify the term that is alleged to have been infringed and the nature of the term should also be determined. If the term breached is an essential term irrespective of the fact how minor the term is, it shall be considered as a breach of an essential contractual term and the innocent party shall become entitled to terminate the contract.

2.5. If the term is not an essential term, that nature of the breach should be taken into consideration. As was observed in the Koompahtoo’s case, it is essential for the defendant to establish that the plaintiff had committed a breach of the proviso of the contra and the term was fundamental to the contract, hence the breach is of serious nature. The breach goes to the ‘root of the contract’ and deprives the defendant or the aggrieved party significantly of the benefits that the innocent party as entitled to if the breach of the contractual term had not taken place on part of the plaintiff[7].

2.6. The termination of the contract by defendant was based on the ground of a breach of an essential term of the contract, which was to construct a multi-purpose recreational, and sports facilities in Ipswich, Brisbane and Beaudeser, Toowoomba and Logan City. Due to the failure to commence the construction, it amounted to a breach of an essential term of the contract, which formed the subject matter of the contract. Such breach is considered as a fundamental breach and goes to the root the contract, thus, depriving the defendant from significant benefits which he was entitled to, had the contract was not breached. The defendant is entitled to claim compensation as ruled in the Kommpahtoo’s case.

Determining Breach of Contractual Terms

2.7. The defendant had terminated the contract based on the breach of contractual term, which is considered as condition that gives rise to the right of the innocent party to terminate the contract. The defendant had notified the plaintiff about the termination of the contract and that the termination was conducted based on the breach of the contractual terms and not on the basis of repudiatory breach. In case the breach was conducted on the grounds of repudiation, the defendant would have had a chance to raise new grounds for terminating the contract.

2.6. the plaintiff had claimed that he relied on the contractual promise stipulated in the contract that it shall not be terminated unless the defendant notifies the plaintiff regarding the termination of the contract by giving reasons for it. However, as observed in the Intico’s case, the employer is entitled to end a contract without giving any reasons for such termination under the Common law. The failure of the plaintiff to construct the multi-purpose project was a willful breach and the defendant had notified the plaintiff about the termination of contract on the grounds of breach of the contractual term, which was fundamental to the contract.

2.7. The plaintiff had further contended under clauses 5.5 that the plaintiff had entered into the contract with the belief that this contract would led him to earn huge profits in the future and that the defendant would form future contracts with him as well[8]. However, in order to form a valid contract it is imperative that both the parties to the contract agree by the terms of the contract and have legal intend to become legally bound by the contractual terms. In other words, both the parties to the contract must have the intention to perform the contractual terms of the contract without committing any breach of the contract. The plaintiff was aware that the subject matter or an indispensable term of the contract was the construction of the multi-purpose project in the five locations. The plaintiff commenced with the designs and the manufacturing but did not commence the construction of the project which implies that the plaintiff did not have any legal intention to perform his part of the obligations and by non-commencing the construction of the project, it signified breach of an essential contractual term or a condition.

2.8. The defendant would have entered into other contracts with the plaintiffs had the plaintiff not failed to perform his part of the contractual obligations. Further, the defendant did not compel the plaintiff to enter into the contract at the cost of incurring a loss of $250000. The plaintiff had agreed to the terms of the contract and had entered into the contract voluntarily. The defendant promised the plaintiff of the substantial performance of the contract and was willing to perform the contractual obligation on part of the defendant. The plaintiff had willfully committed a breach of the contractual term by not fulfilling his obligation to construct the multi-purpose sports and recreational facility project in the five stipulated locations.

2.9. The plaintiff claims reliance damages to recoup the expenses incurred by the plaintiff to the extent that the plaintiff would have been entitled to recoup, had the contract was performed and not terminated[9]. As observed in the Piattchanine’s case, the defendant dismissed the claim of the plaintiff with respect to expenses incurred on the ground that the plaintiff had committed a willful breach of a contractual term, which amounts to a fundamental breach of the contract. Such willful breach deprives the defendant from substantial benefits that he would have otherwise obtained if the contract as fulfilled. The plaintiff failed to exercise reasonable care while performing his part of the obligation and has failed to the act in the best interests of the defendant.

Reference list

Stewart, Andrew. Stewart's guide to employment law. Vol. 3. Sydney: Federation Press, 2013.

Painter, Richard, and Ann Holmes. Cases and materials on Employment Law. Oxford University Press, USA, 2015.

Selwyn, Norman M., and Astra Emir. Selwyn's law of employment. Oxford University Press, USA, 2014.

McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.

Adriaanse, Mr John. Construction contract law. Palgrave Macmillan, 2016.

Hughes, Will, Ronan Champion, and John Murdoch. Construction contracts: law and management. Routledge, 2015.

Intico (Vic) Pty Ltd & Ors v Walmsley [2004]

Piattchanine, Iouri v Phosagro Asia Pte Ltd [2015] SGHC 25

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kisha Ltd [1962] 2 QB 26

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] 233 CLR 115, 135

[1] [2007] 233 CLR 115, 135

[2] Stewart, Andrew. Stewart's guide to employment law. Vol. 3. Sydney: Federation Press, 2013.

[3] Painter, Richard, and Ann Holmes. Cases and materials on Employment Law. Oxford University Press, USA, 2015.

[4] [1962] 2 QB 26

[5] [2015] SGHC 25

[6] [2004]

[7] Selwyn, Norman M., and Astra Emir. Selwyn's law of employment. Oxford University Press, USA, 2014.

[8] Adriaanse, Mr John. Construction contract law. Palgrave Macmillan, 2016.

[9] Hughes, Will, Ronan Champion, and John Murdoch. Construction contracts: law and management. Routledge, 2015.