Foran v Wight
168 CLR 38588 ALR 413
(Judgment by: GAUDRON J)
Between: Foran
And: Wight
Judges:
MASON CJ
BRENNAN J
DEANE J
DAWSON J
GAUDRON
Subject References:
Vendor and Purchaser
Judgment date: 15 November 1989
Canberra
Judgment by:
GAUDRON J
The facts are comprehensively set out in the judgment of Brennan J. Those facts reveal that the vendors under a contract for sale of land were unable, and thus failed, to convey title on the stipulated day made essential for settlement by the contract. The purchasers, who had previously been informed of the vendors' inability, did not tender performance on the stipulated day but thereafter purported to rescind the contract. The purchasers were not themselves ready and able to settle on the stipulated day.
On behalf of the purchasers (the appellants in this Court) it was contended that, by failing to settle on the stipulated day, the vendors committed a breach of an essential term of the contract and that that breach entitled the purchasers to bring the obligations under the contract to an end and to recover the deposit paid.
Settlement of a contract for sale of land ordinarily involves, as was contemplated by the contract in the present case, the contemporaneous performance by vendor and purchaser of their obligations under the contract. Those obligations are concurrent and dependent. Thus, there is no actual breach by one party of an obligation to settle unless the other party tenders performance of his or her obligation to settle. See Dainford Ltd. v. Smith (1985) 155 CLR 342 , at p 365; Sunbird Plaza Pty. Ltd. v. Maloney (1988) 62 ALJR 195, at p 206; 77 ALR 205 , at p 223. In point of principle that must be so, whether or not the time of settlement has been made essential. Accordingly, the vendors could only be regarded as in breach of their obligation if their intimation to the purchasers that they would be unable to complete on the stipulated date relieved the purchasers of their obligation to tender settlement and had legal operation as if such tender had been made.
When one party to a contract intimates to the other that the latter's performance of a contractual obligation will be futile the latter is not required to tender performance of that obligation. See Peter Turnbull & Co. Pty. Ltd. v. Mundus Trading Co. (Australasia) Pty. Ltd. (1954) 90 CLR 235 . Thus, following an intimation by one party that a tender of settlement of a contract for sale of land will be futile, the failure of the other party to tender settlement at the time made essential will neither defeat a claim by the latter party for specific performance (Mahoney v. Lindsay (1980) 55 ALJR 118; 33 ALR 601 ), nor put that latter party in breach of his or her obligation (Sunbird Plaza, at p 206; p 223 of ALR).
In Peter Turnbull Dixon C.J. stated (at pp 246-247):
"Now long before the doctrine of anticipatory breach of contract was developed it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied, it was equal to performance thereof: Hotham v. East India Co. ((1787) 1 TR 638 (99 ER 1295)). But a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so. If the plaintiff acts upon the intimation it is just as effectual as actual prevention."
It is, I think, clear from that passage that his Honour contemplated that the particular result there identified was effected by operation of an estoppel. It seems likely that the operation of that estoppel precluded an assertion of non-fulfilment of the condition precedent - "it was equal to performance" although the same effect would have been achieved by waiver. See also per Kitto J. at p 252.
It may be appropriate in some, if not all, cases of condition precedent to treat an intimation that performance will be futile as conduct capable of creating an estoppel which operates to preclude an assertion of non-performance. However, it is otherwise in the case of an intimation that it will be futile to tender performance of a concurrent obligation to settle a contract for sale of land. If an intimation that it is futile to tender performance were to operate to preclude an assertion that performance had not been tendered, it would operate to enable a person who had not in fact tendered performance to recover damages on the basis that he or she had done so. Such a result is contrary to long-standing authority: Hensley v. Reschke (1914) 18 CLR 452 , at pp 467-468. See also Henry Dean & Sons (Sydney) Ltd. v. P. O'Day Pty. Ltd. (1927) 39 CLR 330 , especially at p 358; Forrestt and Son Limited v. Aramayo (1900) 83 LT 335, especially per Lord Halsbury at p 338.
In Mahoney v. Lindsay, Gibbs J. (with whom the other members of the Court agreed) cited with approval (at p 119; p 603 of ALR) the passage from the judgment of Dixon C.J. in Peter Turnbull set out above. However, the decision in Mahoney v. Lindsay is based on the impermissibility of drawing an inference of unreadiness or inability from the failure to tender performance and not on the operation of an estoppel. Similarly, in so far as Sunbird Plaza was concerned with the effect of an intimation that tender of performance would be futile, the issue was whether there had been an actual breach of contract rather than whether an estoppel operated to preclude the assertion of such a breach.
In Waltons Stores (Interstate) Ltd. v. Maher (1988) 164 CLR 387 , I expressed the view (at p 458) that an estoppel may operate by reference to an assumption as to legal rights as well as by reference to an assumption as to a matter of fact. See also per Brennan J. at p 432 and per Deane J. at p 452. It may be that an intimation that it is futile to tender performance on the day made essential for settlement could ground an assumption that a right of election as between rescission and affirmation of the contract will come into existence as if performance had been tendered. If so, it would remain necessary to ascertain whether that assumption was adopted as the basis of the failure to tender performance. Questions of readiness, willingness and ability to settle would not be irrelevant to that issue. However, in my view, a consideration of estoppel is unnecessary in the present case.
If a party entitled to insist on the essentiality of a stipulated time in a contract for sale of land leads the other to assume that that essentiality is not being maintained time thereupon ceases to be essential: Mehmet v. Benson (1965) 113 CLR 295 , per Barwick C.J. at p 303. In such a case, it is said that there has been a waiver of the benefit of the essentiality of the provision. See Green v. Sommerville (1979) 141 CLR 594 , especially per Wilson J. at p 612. Thus, if both parties to a contract for sale of land in which time of completion is made essential allow the date fixed for completion to pass without tendering performance, they may, and ordinarily will, be taken to have each waived the essentiality of the requirement as to time of performance. That waiver is ordinarily inferred from the failure of one to tender performance on the stipulated day and the failure of the other to insist upon performance on the date fixed for completion or a combination of both. In such a case it is said that the contract continues on foot. But it continues on foot in what is, in effect, varied form. It is transformed from one requiring performance at a specified time to one requiring performance within a reasonable time. That transformation follows from the waiver by each party of the essentiality of the requirement as to time of performance.
In the present case the vendors, by their intimation that they were unable to settle on the day made essential by the contract, waived any benefit accruing to them from that essentiality and freed the purchasers from the obligation to tender settlement on that day. Being freed of the obligation, no inference of the purchasers' waiver of the benefit of that essentiality can be drawn from their failure to tender performance. The purchasers' notice of rescission, forwarded to and received by the vendors two days after the day stipulated for settlement, precludes any inference of waiver which might have been drawn if there had been mere silence on the part of the purchasers. Unless an inference of waiver is to be drawn from the purchasers' failure to accept the vendors' repudiation, evidenced by the communication of their inability to settle on the day stipulated for settlement, the situation which arose once the stipulated settlement date had passed was one in which the contract could no longer be performed according to its essential term and there existed no consensual basis for a variation of that term.
A party to a contract which has been repudiated may either terminate the obligations under the contract or affirm the contract. See Bowes v. Chaleyer (1923) 32 CLR 159 , per Knox C.J. at p 169, per Higgins J. at p 190; Carr v. J.A. Berriman Pty. Ltd. (1953) 89 CLR 327 , at p 348; Peter Turnbull, per Kitto J. at p 250; Tropical Traders Ltd. v. Goonan (1964) 111 CLR 41 , per Kitto J. at p 55. A party is taken to have affirmed the contract if he or she does an act which is consistent only with its continued existence: Sargent v. A.S.L. Developments Ltd. (1974) 131 CLR 634 , per Stephen J. at p 646 and per Mason J. at p 656. However, there may be situations in which delay by the party having the right to repudiate will give rise to an assumption on the part of the other party that the contract has been affirmed and in which departure from that assumption will cause detriment so that, by operation of estoppel, the former is treated as having affirmed the contract. See Sargent, per Mason J. at p 656, although his Honour dealt with the matter on the basis of prejudicial delay rather than in terms of an estoppel.
It was said by Lord Ackner in Fercometal v. Mediterranean Shipping Co. (1988) 3 WLR 200 , at p 212; [1988] 2 All ER 742 , at pp 751-752, that "(t)here is no third choice, as a sort of via media, to affirm the contract and yet to be absolved from tendering further performance unless and until (the other party) gives reasonable notice that he is once again able and willing to perform". Subject to the operation of an estoppel or waiver (as was seemingly recognized by his Lordship (at pp 212-213; p 752 of All ER) and as operated in Peter Turnbull), that is an accurate statement of the law. Thus, in the present case it was possible for the purchasers to affirm the contract and yet to be freed from tendering performance on the essential day by the vendors' waiver of the benefit of that essentiality. However, it should be emphasized that affirmation is no more than an acknowledgement of the continued existence of the contract.
In the present case the purchasers did not rescind upon receipt of the communication that the vendors were unable to settle on the stipulated day made essential for settlement by the contract. Even if it be accepted that this amounted to an election to affirm the contract, the obligations affirmed were the obligations brought into existence by the contract, namely, to settle on the day made essential by the contract. Nothing that the purchasers did following receipt of the communication amounted to a waiver of that essentiality. The consequence was that, once the day made essential had passed, the contract could no longer be performed according to its essential term and there was no consensus, as in the case of mutual waiver, to support a variation of that term. The conclusion to be drawn from that situation is that the contractual obligations had come to an end, and the notice of rescission operated to put the matter beyond dispute such as might arise in the event that no action were taken and it were to be asserted that that inaction amounted to waiver of essentiality. That being so, I agree with Brennan J. that the deposit was recoverable as money paid for a consideration that wholly failed.
The appeal should be allowed, the orders of the Court of Appeal of the Supreme Court of New South Wales should be set aside and in lieu thereof it should be ordered that the appeal to that court be dismissed with costs.