Commercial Law Update - Contracts and restitution: termination for anticipatory breach

Commercial Law
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Almond Investors Ltd v Kualitree Nursery Pty Ltd  [2001] NSWCA 198 confirms the principle that a party does not lose the right to terminate for breach merely because it is itself in breach of a non-essential term of the contract.

Almond Investors Ltd v Kualitree Nursery Pty Ltd  [2001] NSWCA 198 confirms the principle that a party does not lose the right to terminate for breach merely because it is itself in breach of a non-essential term of the contract.v

However, up to now, it has been unclear whether this principle applies in circumstances where a party seeks to rely on an anticipatory breach, rather than an actual breach, to found the right to terminate. The Almond Investors case arguably makes new law because it is now clear that a party, itself in breach of a non-essential term, can nevertheless terminate for anticipatory breach.

Facts

The appellant, Almond Investors Limited, agreed to purchase 90,000 one-year old almond trees from the respondent. The agreement was contained in a letter from the appellant to the respondent of 30 October 2006, confirming earlier discussions. The letter from the appellant included the following:

“I confirm my verbal order on 27 October 2006 for 90,000 one year old almond trees.”

“Delivery of the trees is to be for planting commencing 1st June 2007…”

“Our [ie the appellant’s] expectation is for a tree at a minimum height of 0.9m.”

The agreement also included a payment schedule whereby the appellant would pay 25% of the purchase price after inspection and a further 25% after first bud strike, following by 50% on delivery. The first two 25% instalments, being approximately $363,000 in total, were paid by the appellant as agreed.

In June 2007, the respondent delivered around 29,000 (of the agreed 90,000) trees, of which the appellant accepted about 23,000 – the difference being rejected on quality grounds. The value of this delivery, $96,296.20, was invoiced by the respondent but never paid for by the appellant (the appellant’s breach).

After delivery of the 23,000 trees it became apparent that the respondent would not be able to deliver the agreed 90,000 one-year old trees of a height on 0.9m by the agreed time in 2007.

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Adam Rollnik practises in commercial law

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