Rapid changes and uncertainties. What this means for contract law.
In these challenging times, many companies will be unable or unwilling to perform their contractual obligations and may be driven to rely on 'legal technicalities' to defend breach of contract proceedings. Last year was a difficult one for parties seeking to rely on such technicalities. The courts were inclined to take a commercial approach in upholding parties' bargains and to award damages against those who breached their agreements. When we look in more detail at these cases, however, they are a reminder of the numerous traps that can ensnare parties seeking to perform or enforce contractual obligations.
Contracting with governments is a common aspect of business in Australia. It is therefore easy to forget there is considerable uncertainty about when governments can enter into binding, enforceable contracts. In one of the most important contract law cases in this year's Update, the NSW Court of Appeal considered the interaction between the 'fettering doctrine' and the desirability of governments being able to enter into enforceable contracts. The proposed reconciliation may bring much-needed certainty to this area of the law.
That decision was one of a number of Australian appellate court judgments handed down during 2019 that considered fundamental, but uncertain, issues of contract law. These include:
- Can every party to a contract enforce every promise in the contract?
- In the absence of ambiguity or absurdity, is a court bound to apply the natural interpretation of a clause that is commercially (but not legally or literally) inconsistent with another clause?
- Is the standard wording 'such consent not to be unreasonably withheld' promissory or merely a proviso?
- Is a notice invalid if it doesn't comply strictly with a notices clause?
- Will a party lose its entitlement to be paid if it breaches its performance obligations in a manner that does not affect the other party?
- Will a right to terminate be lost if it is not exercised quickly?
- What breaches are 'capable of being remedied' before a contract can be terminated?
- Can a party that terminates a construction contract choose to recover a quantum meruit award, rather than damages?
- At what date should damages be calculated if the 'innocent' party seeks to enforce the relevant contractual obligation following the other party's breach?
We hope you enjoy reading this year's Contract law Update.