1. Anthony is a prestige property developer who is well known in the building and construction industry for developing high quality apartment complexes. He engages Emma as the main contractor to construct a new luxury apartment complex. Due to a previous experience with Emma’s sub-contractors, James insists on a building contract with Emma that provides for the following conditions:
a) Contract price is $15,000,000 and payable to the main contractor in the following manner:
(i) $2,000,000 upon site clearance;
(ii) $8,500,000 after completion of the walls, floors, roof, electrics and plumbing to all the units in the apartment complex;
(iii) $4,500,000 upon certification by the architect that full and final completion has occurred.
b) The main contractor shall at the direction of the developer terminate the employment of any sub-contractor engaged by the main contractor if in the opinion of the developer the sub-contractor’s work is unsatisfactory or his or her conduct constitute gross misconduct.
c) The date for completion is 12 December 2016, time being of the essence.
The site is cleared and Anthony pays Emma $2,000,000. Emma is having trouble with staff refusing to work and engaging in rolling strikes. As a result, the construction works start to fall behind schedule. Emma employs Bruce (her brother-in-law) as the electrician for the project. Bruce has a tendency to visit the local pub at lunchtime and has sometimes arrived back at the work site drunk. On the 1st October, when Anthony visited the work site, he notices Bruce swaggering back to work. Anthony approaches him and an altercation develops in which Bruce throws a punch.
The walls, floors, roof, electrics and plumbing are completed on 15 November. Anthony inspects the work on the 16 November and finds fault with the electrical work. He engages a consultant who values the cost of rectifying the defects in the electrical work at $200,000. Anthony notifies Emma of the problems with the electrical work, but she continues with the rest of the construction work without making the required electrical rectifications. Anthony also requests that Bruce be sacked for throwing a punch and being drunk on the job. Emma refuses to sack Bruce.
On 11 December, a shortage of labour means that Emma has not completed the construction work. The remaining work is estimated to cost $1,500,000. In addition, the electrical work has still not been rectified.
On 12 December, Anthony terminates the contract with Emma citing construction delay, faulty work and a failure to comply with Conditions (a) (ii) and (iii), (b) and (c) above. Emma has not received any further payments from Anthony other than the initial $2,000,000.
Emma seeks your advise on her legal position and whether she is entitled to the contract price.
Your answer must refer to all relevant legal principles and cases to support your advise to Emma.
(a) Reading: Chapter 8 in the textbook (particularly from page 209 – 218).
(b) P Clarke, J. Clarke, Contract Law, Commentaries, Cases and Perspectives, 3rd Edition, Oxford University Press, 2016: Chapter 9.
(c) Daniel Khoury, Yvonne Yamouni, Understanding Contract Law, 8th Edition, LexisNexis Butterworths 2010: Chapter 11 (Discharge by Performance).
(d) Journal articles
- Jane Swanston, ‘Discharge of Contracts for Breach’ (1981) 13(1) Melbourne University Law Review 69;
- C Kidd, ‘Partial Performance o Lump Sum Contracts: Proposals for Reform’ (1985) 59 Australian Law Journal 96;
- G L Williams, ‘Partial Performance of Entire Contracts’ (1941) 57 Law Quarterly Review 373;
- M Dockray, ‘Cutter v Powell: A Trip Outside the Text’ (2001) 117 Law Quarterly Review 664;
- G J McGarry, ‘No Work, No Pay’ (1983) 57 Australian Law Journal 378;
- Elisabeth Peden, ‘Co-operation in English Contract Law: to Construe or Imply? (2000) 16 Journal of Contract Law 56.