Foran v Wight
This is another case where one wonders how on earth it ended up in the High Court having regard to the amount involved. The facts are relatively simple. Purchasers paid a deposit of $7500 for the purchase of land. Settlement was due on 22 June, time being of the essence. The vendors were obliged under the contract to register a right of way in favour of the purchasers but on 20th June they informed the purchasers that they would not be able to get this done by settlement date. The 22nd June came and went without action by either party. The purchasers then terminated ("rescinded") the contract on 24th June on the basis that the vendors were not ready to complete. They sought the return of the deposit. This is all the case was about: could the purchasers get back their deposit?
On the face of it, this seems to be a clear-cut case. But the evidence at the trial showed that the purchasers were having difficulty obtaining finance and probably would not have been able to carry out their side of the contract on 22 June. Of course they in fact did not carry out their side of the contract on the 22nd June. The vendors argued that because the purchasers were not ready, willing and able to perform on the day of settlement, they could not complain about the vendors’ inability to register the right of way.
Well, this simple problem got the courts into a terrible knot. Some judges thought that the vendors were right (a majority of the NSW Court of Appeal) and that therefore the purchasers should forfeit their deposit and some (the trial judge and the majority in the High Court) said that the purchasers were right and that they did not have to be ready, willing and able to perform on the day when it would be futile to do so. In fact some of these judges used estoppel to say that the vendors by their conduct were estopped from insisting on performance by the purchasers. So, in the end common sense prevailed and the purchasers were able to get back their deposit.
On the question of being ready, willing and able to perform, it is reasonably clear that this does not mean that the innocent party must bear a heavy onus of showing that he or she was actually ready, willing and able to perform. To start with it is assumed unless the contract breaker raises this issue. If the contract breaker does raise the issue, the innocent party bears a light onus of showing that he or she was not wholly disabled from performing.
One way of looking at this case is to say that, when the vendors indicated that they would not be able to perform on the day, this was an anticipatory breach which, of course, then gave the purchasers the right to elect to terminate forthwith. They chose not to do so. The result was that the contract was still on foot and both parties were therefore bound to perform, including the purchasers. They did not perform or tender performance on the day. But the common sense answer to this was, of course, that they were relieved of the obligation to perform on the day because of the vendors’ conduct.
Mason CJ dissented - but only on his interpretation of the facts. He said that the purchasers would not have been ready and willing to perform on the day of settlement. They were not induced by the vendor's conduct into not tendering the money on the 22nd. They would not have done so anyway, according to Mason CJ. In short, they did not act to their detriment as a result of the vendor's conduct. Because the purchasers would not have been ready and willing to perform, they did not have the right to terminate.
There is a great deal said in Foran which goes to show how a relatively simple problem can be elaborated in skilled hands.
The final issue to deal with under the general heading of termination for breach is this. Suppose one party wrongfully repudiates the contract and this is accepted by the other side so that the contract is terminated. Suppose further that the effect of this is to deny the innocent party a payment that would have been due for work performed by the innocent party. We came across this problem before when we looked at frustration, but there the answer, in the absence of legislation, was that the loss lies where it falls. The rule is different if there has been breach.
