Innocent party indicates to the other party that they are affirming OR does nothing, then that is a final election to affirm.
Not ready and willing to perform
If innocent party is themselves in breach of contract, then as a general rule that does not preclude them from electing to terminate except where the innocent party’s breach would give the other party a right to terminate.
Foran v Wright - Could purchaser of land terminate following statement by vendor that they would be unable to complete the contract on time (which was a condition) because they couldn’t register for a right of way over the land.
Party wishing to terminate must themselves be ready and willing to perform the contract.
On the facts, P gave up trying to find finance on basis of vendor’s statement. Deane and Dawson (estoppel), Gaudron (waiver).
Estoppel
Where innocent party by words/conduct leads party in breach to believe that contract will not be terminated and they rely.
Suspends rights rather than terminating them; can bring it to an end with reasonable notice. Too long affirmation?
Relief against forfeiture
As a result of the breach, party in breach loses (by virtue of termination) a proprietary/property or possessory right, then relief against forfeiture may be granted.
Typically occurs in the context of leasehold covenants, where a court may grant extra time to perform. Restricts a landlord’s right to forfeit the a lease for breach of the covenant.
It is clear that courts are disinclined to grant relief where the parties are commercial parties: The Scrap Trade.
Legione v Hateley - if termination were allowed, purchaser would lose their interest in the land. HC said where time is of the essence, granting relief against forfeiture will be exceptional; on the facts, however, it is appropriate.
It was significant that payments were by installments and during the time the purchaser was paying these, they had built a house. The value of the land had increased.
Relief could only be granted where there was an interest. Other factors listed by Mason and Deane JJ:
1. Whether the conduct of the vendor contributed to the purchaser’s breach.
2. Whether the breach was trivial or slight and inadvertent and not wilful.
3. Would damage or adverse consequences follow to the vendor as a result of the purchaser’s breach.
4. What was the magnitude of the purchaser’s loss and vendor’s gain if the forfeiture was allowed to stand.
5. Was the vendor sufficiently protected by an order for specific performance with or without compensation.
Relief against unconscionable termination
Stern v McArthur - sale of land, payment in installments, vendor entitled to some profits, and any fault by the purchasers of any installment entitled vendor to whole contract price, and if that whole price remained unpaid, the vendor was entitled to terminate. Marriage broke down later, husband stops paying without wife’s knowledge. She tries to make up for it when she realises, but the vendor demands payment of entire price, and then terminates as she cannot pay.
Relief against forfeiture granted by majority (Mason and Brennan dissenting) as it would be unconscionable to rely on that legal right to terminate.
Deane and Dawson JJ said that to rely on the right was unconscionable because of the nature of the arrangement. Gaudron J said it wasn’t necessary for the vendor to bring the contract to an end to get what they wanted (money) because they could simply have gotten a court order to get the installments paid.
Election to Affirm
Sargent v ASL Developments - Mason CJ- It is a requirement that you know the other party is in breach, but you do not need to know that you have a legal right to terminate.
Rule was also applied in Khoury v GIO NSW and Tropical Traders v Goonan.
Electing to affirm is final: Sargent.
Right to Affirm Barred
Australian position not clear.
White and Carter v McGregor - D changed mind later in the day. Renunciated. Is a breach sufficient to allow termination. HoL said they could affirm (no obligation to accept D’s breach). But exceptions mentioned by Lord Reid:
1. Where the innocent party cannot continue his performance without cooperation of party in breach.
2. Where can show innocent party has no legitimate interest of any kind (financial or otherwise) in performing contract, he ought not be allowed to saddle the other party with an additional burden with no benefit at all.
The Alaskan Trader - Ship chartered by P to D for 24 months; needed repairs after a year; D said they had no further use for ship but P insisted charter continue. P acted wholly unreasonably in refusing to accept D’s breach.
Consequences of electing to terminate
Neither party has to perform the remaining obligations AND the innocent party can receive damages for loss of their bargain for past breaches damages for unperformed future obligations.
What about rights arising prior to termination?
McDonald v Denny Lascelles - Sale of land by installments. Vendor terminates. Installments that fall due after termination are not payable. Those already paid? HC distinguished between installments and deposits. Installments relate to the contract as a whole, and therefore can be recovered. Deposits cannot be recovered.
Baltic Shipping v Dillon - P tried to recover in a restitutionary claim the ticket price on the basis of failure of consideration. HC rejected because the contract had been partly performed.
