Breach Of Contract



Suing For Breach of Contract

If a party to a contract does not meet their contractual obligations, the other party may suffer loss. If this loss could have been avoided had the contract been performed, that party may have a cause of action.

It is important to understand:

  • what will amount to a “breach of contract“; and
  • what can be done if a party breaches their contractual obligations.

Knowing whether you can end the contract based on the other party’s repudiation is essential.

Termination without proper cause can itself be a breach. This can open you up to a claim for damages being brought against you.

If you find yourself in a contract dispute, on either side, the first step is to seek legal advice.

Our commercial litigation lawyers assist with a range of contracts and contract disputes. We will ensure you take the right steps to achieve the best result.

What Is a Breach of Contract?

A contract is an enforceable agreement between parties. Those bound by the contract are obligated to carry out its terms.

A breach occurs when one party does not fulfil their obligations per the terms of the contract.

This can be frustrating for the other party. As such, the non-breaching party may look to terminate the contract based on the breach.

The remedies available and whether the contract can be terminated will depend on:

  • the terms of the contract;
  • the significance of the breach; and/or
  • the type of term that was breached.

A breach does not need to have actually occurred before a party can take action. An “anticipatory breach” will occur if, before they are due to perform a contract term, one party states:

  • an unwillingness or inability to perform the contract term; or
  • an unwillingness or inability to perform a substantial part of the term or carry out the term as agreed.

The other party may be able to take action based on this anticipatory breach and not need to wait for it to occur.

If a party you have contracted with informs you they will not be able to carry out the contract, contact a lawyer. You should act quickly to preserve your rights.

Terms Of a Contract – Express and Implied

Express terms of a contract are:

  • expressly stated in the contract; and
  • dictate what the parties to a contract can and cannot do.

These terms set out the rights and obligations of each party.

In addition to these express terms, contracts may also carry implied terms. Implied terms are not expressly stated in the contract but are:

  • still enforceable; and
  • form part of the agreement.

Terms can be implied from the presumed intention of the parties based on their actions. They may also exist for practical business purposes. For example, where an “obvious” term is not expressly stated, but:

  • gives way to the commercial purpose of the contract; or
  • allows the contract to be carried out efficiently.

Terms can also be implied by law. These are “default” terms stemming from common law or legislation. Certain terms apply to all contracts, whereas others apply based on the type of contract. For example:

  • under a lease agreement, the lessor will allow the lessee quiet enjoyment of the property;
  • under the Australian Consumer Law, statutory guarantees apply to consumer contracts; and
  • the parties to a valid contract will do what is reasonably necessary to carry out the terms of the contract.

Some terms, such as those under the Australian Consumer Law, cannot be “contracted out” and apply whether or not they are expressly stated.

It is still important to expressly state the terms that capture your intention. This will ensure the contract aligns with your wants. For this reason, it is imperative to engage a lawyer to either draft or review the contract prior to signing.

Implied Terms in Commercial Contracts

Commercial contracts are generally formal, written contacts that contain substantial detail. As such, additional implied terms (other than those implied by law) will only apply if:

  • they are equitable, i.e., do not benefit one party and burden the other;
  • they are necessary, i.e., the contract will not be effective without the inclusion of the term;
  • they are obvious or “go without saying”;
  • they can be clearly expressed; and
  • they do not contradict the express terms of the contract.

In summary, an implied term will generally be one the parties:

  • agree on; and
  • intended to include; but
  • overlooked.

Determining whether a term is implied can involve complex legal analysis. It should not be assumed that a term is or will be implied. If something is important to you, this should be expressly stated. A contract lawyer will:

  • assess your business and personal needs; and
  • make sure the terms of any contract are suitable for you.

Ambiguity In Contracts

If a contract dispute arises, the Courts may need to interpret the terms of the contract. Contract terms should be interpreted as the parties intended them to be. If the contract is well-drafted, the meaning, or intention, behind each term will be obvious. The Courts will consider how a reasonable person would objectively interpret the term.

Where this fails, as there is ambiguity, there are guidelines to determine the meaning of a term. Generally, these are that the Court will:

  • not rely on “extrinsic evidence” unless it is necessary to interpret the contract; and
  • consider that the contract is the entire scope of the agreement between the parties.

This is known as the “parol evidence rule” and applies to contracts that have been reduced to writing. Extrinsic evidence is evidence outside of those written terms. This might include:

  • statements made during pre-contract negotiations that did not make it into the contract;
  • the parties’ “actual intentions” where these haven’t been expressed in the contract;
  • market circumstances; or
  • third-party contracts that could be said to impact the contract in question.

The broad purpose of the rule is to exclude such evidence so that it does not:

  • add to the written terms of the contract;
  • subtract from the written terms of the contract; or
  • vary the written terms of the contract.

The Court may consider the circumstances in which the contract was made. However, this will only be done if necessary to assist in its interpretation.

Contract interpretation is subject to a variety of intricate legal principles. Having a well-drafted contract can:

  • assist in the resolution of disputes; or
  • avoid a dispute altogether.

Engaging a skilled lawyer is the easiest way to ensure your contract is suitably drafted.

Exceptions To the Parol Evidence Rule

There are certain exceptions to the parole evidence rule, for example, if:

  • a party can show that there was a verbal agreement to additional terms and that these form part of the contract; or
  • promises were made during negotiations that enticed one party to enter the contract.

In the case of the first point, the contract will be partly written and partly verbal. Therefore, the factual circumstances will need to be examined to determine the agreement.

If the second point applies, this promise may give rise to an entirely separate contract.

Our lawyers can guide you if any of these things have occurred leading to a complex contract dispute. We also have experience in what exceptions exist that may allow you to put evidence before the Court. If you have been accused of breaching a contract, we can assist. It may be that other factors are not been taken into account.

When Can You Terminate a Contract Due to A Breach?

Most minor breaches of a contract will not entitle the other party to terminate the contract

Termination may be available, however, where:

  • the term breached was an “essential term” of the contract; or
  • the breach was sufficiently serious.

Repudiation” occurs if a party cannot or will not substantially perform the contract. If a contract has been repudiated, the other party is entitled to terminate and claim for damages.

Contracts may also have clauses that state:

  • what will constitute a breach; and
  • that the contract can be terminated upon breach of certain terms.

Remember, wrongful termination can have significant consequences. You should always speak to a lawyer before terminating a contract.

Breach Of an Essential Term

Some terms are so important to a contract that they are essential terms. If there is a breach of an essential term, the non-breaching party can elect to terminate the contract. This will be the case regardless of the severity of the breach.

The High Court of Australia has set a test for determining whether a contract term is essential. This is outlined in the case of Koompahtoo Local Aboriginal Council v Sanpine. Whether a term is essential is based on the importance of the performance of that term to the parties. Their Honours held that a term was essential if the parties would not have entered the contract:

  • without the inclusion of the term; and
  • unless assured of its complete or substantial performance.

To understand the importance of a term to the parties, the Courts must learn their common intent. The written terms in the context the contract was entered into will be used to ascertain this.

Where a party breaches an essential term, they will have repudiated the contract.

Outlining that the performance of a term is essential can make it clear when a breach has occurred. This can streamline any dispute process, making it evident:

  • when the contract is able to be terminated; and
  • what remedies may be available.

If a party has breached an essential term, both parties will require legal advice. Our lawyers can assist you to either limit your liability or sue for breach of contract.

Serious Breach Of an Intermediate Term

The case Koompahtoo Local Aboriginal Council v Sanpine established a stringent legal standard. This standard is used to determine whether a contract term is essential. Due to this high standard, most contract terms will not be characterised as such. This does not mean that the failed performance of other terms will not amount to repudiation. The remedies available for the breach of certain contract terms will depend on:

  • the severity of the breach; and
  • the impact of the breach on the other party.

These terms are “intermediate terms“.

This means the innocent party can terminate the contract following any “serious breach”.

Koompahtoo Local Aboriginal Council v Sanpine also discusses:

  • breach of an intermediate-term; and
  • when such a breach is sufficiently serious for the other party to terminate the contract.

The majority held that whether a breach justifies termination is based on its impact. If it deprives the injured party of a large part of the benefit entitled to them, they can elect to terminate.

To determine whether this has occurred, the Courts will look to understand:

  • the nature of the contract;
  • the nature of the term breached;
  • the significance and degree of the breach; and
  • the consequences of the breach on the innocent party.

If a party’s failure to perform terms under a contract is impacting you, you should seek legal advice. Our lawyers can advise you on your options and whether the contract has been repudiated.

Electing To Terminate a Contract

A party may have the right to terminate the contract due to a breach by the other party. This does not mean that they must terminate, and can also opt to affirm the contract and continue. In this case they will have waived their right to termination.

Alternative or additional options available to the non-breaching party may be to:

  • force the breaching party to comply with the terms; and/or
  • commence court proceedings for damages suffered due to the repudiation of the contract.

The non-breaching party can also do nothing following repudiation of the contract. This will have the same outcome as if they affirmed the contract.

Questions can therefore arise if there is a delay in the non-breaching party coming to a decision. These centre around:

  • whether that party has inadvertently waived their right to termination; or
  • if the option to terminate the contract is still open to them.

Where delays are unavoidable, a party should:

  • reserve their right to terminate in writing; and
  • make it explicit that they are yet to make an election.

Once a decision of whether or not to terminate has been made, however, this is binding upon the party. They cannot later decide to terminate based on an earlier breach.

Types Of Contracts We Can Assist With

Aitken Whyte Lawyers can assist with disputes relating to any commercial contract. We commonly see disputes regarding:

This is not an exclusive list and if you need assistance with a business or commercial contract, we can help.

Focused On Results

Engaging an experienced lawyer can:

  • ensure you understand your contractual rights and obligations; and
  • achieve the best result in a contract dispute.

If you are involved in a contract dispute, our lawyers can make sure your rights are protected.

Aitken Whyte Lawyers Brisbane are focused on results. Our lawyers can assist you with all commercial disputes. Call us today to discuss your needs.

Office Location and Contact Details


Aitken Whyte Lawyers Brisbane
2/414 Upper Roma Street
Brisbane QLD 4000

Ph: 07 3229 4459
Fax: +617 3211 9311