Two recent decisions by Courts in WA (Fuel Tank and Pipe Pty
Ltd v Integrated Fuel Services Pty Ltd  WASC 71 and
Downing v Newsflash Nominees Pty Ltd  WADC 26)
contain timely reminders about:
the need to exercise caution before terminating a contract on
the basis that the other party has breached their obligations under
the importance of letting the other party know why full
performance of the contract is important and what you stand to lose
if the contract is breached.
On the first point, the Fuel Tank and Pipe case reminds
us that terminating a contract is a serious step to take, even if
you think it is justified because of the seriousness of the other
party's breach. Where there is disagreement as to whether a
particular act or failure to act constitutes a breach of contract,
courts generally expect that the party alleging the breach will not
terminate the contract until they have:
identified in writing to the other party precisely what they
are alleged to have done, or not done, to breach the contract;
say what part of the contract is said to have been breached and
how the conduct in question breaches it;
try and find a way to remedy a breach and then propose it;
give the breaching party reasonable time to acknowledge and
remedy the breach.
In addition, contracting parties are reminded that certain
statutes (laws made by Parliament) require certain things to be
done before certain contracts may lawfully be terminated. In this
case, the discussion was about section 6 of the Sale of Land
Act 1970 which requires parties to give notice before
terminating contracts for the sale of land on grounds of certain
breaches. But this is not the only statute of its kind, so again,
terminating parties are advised to tread carefully.
The other interesting finding in Downing was based on a
recent decision by the New South Wales Court of Appeal (Palasty
v Parlby  NSWCA 345). In that case:
a vendor and a purchaser entered into a contract for the sale
before the contract was signed, the vendor had told the
purchaser about how the vendor intended to invest the proceeds of
the sale of the land which the purchaser agreed to buy; and
as a result of the vendor's breach of the contract to buy
that land, the vendor lost the opportunity to invest the proceeds
of sale as intended.
Having been told of this intention on the vendor's part, it
was held to have been in the contemplation of (that is, in the
conscious mind of) the purchaser at the time of entering into the
contract that the loss of this investment opportunity would
probably arise out of the purchaser's failure to follow through
with the purchase. Based on this finding, the vendor was
compensated for the loss of this investment opportunity.
On the flip side, the purchaser in Downing, who was not
so informed about the purchaser's intentions, did not have to
compensate the vendor for losses arising in a similar way.
It pays, then, to take legal advice about what information you
should give to people that you intend to do business with, and how
and when you should give it, before you close the deal.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Many retail leases include a covenant to trade, requiring the tenant to open the premises for trade during certain hours.
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