Burger King Corp v Hungry Jacks Pty Ltd [2001] NSWCA 187

Contract; contents; universal terms; duty of good faith; dishonest use of contractual power
Facts: Hungry Jacks (HJ) was a large Australian franchise of Burger King Corp (BK). However,
over the years, difficulties emerged in the relationship between the two companies. BK decided
to force HJ to sell out of its franchising rights. To achieve this, BK exercised certain of its
contractual powers in a way that made it impossible for HJ to perform its franchise obligations.
In particular, BK refused to approve new sub-franchise outlets that, in terms of the franchise
agreement, HJ was obliged to open each year. BK then gave HJ notice that it was terminating
HJs franchise rights because of HJs failure to open the required sub-franchise outlets.
Issue: Among other issues, the court considered whether BK owed a duty of good faith to HJ
and had breached that duty.
Decision: A duty of good faith was implied by law into this contract and had been breached by
the refusal to approve the sub-franchise outlets.
Reason: There are now numerous Australian cases recognizing an implied duty of good faith in
appropriate contracts, perhaps in all commercial contracts. The duty will exist if, without it, the
rights conferred by a contract would be made worthless or seriously undermined. In light of this
duty, BK was obliged to exercise its contractual powers (such as the power to approve subfranchise agreements) honestly and reasonably, and not for a purpose outside the contract (e.g
to thwart HJs contractual rights)
Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537
Contract; formation; agreement; conditional agreement; universal terms; duty to cooperate;
reasonable time for fulfilment of condition
Facts: In April 1978, Perri agreed to buy a property in Cronulla from Coolangatta Investment
(CI). The performance of this contract was made subject to the condition that Perri should first
sell a property in Lilli Pilli that he owned. Finding a purchasing for the Lilli Pilli property proved
difficult, especially since Perri initially wanted a high price. In July 1978, CI asked Perri to
complete the purchase of the Cronulla property before August 8. When Perri failed to do so,CI
told him that they were terminating performance of the contract. CI then sought a declaration
from the court that they had validly terminated performance. Perri said he still wanted to
complete the purchase of the Cronulla property, even though his Lilli Pilli property was not yet
sold.
Issue: Had CI validly terminated further performance of their contract with Perri?
Decision: In the circumstances, performance of the contract had been validly terminated by CI
because Perri had failed to sell his Lilli Pilli property within a reasonable time, thereby unduly
delaying the completion of the Cronulla sale.
Reason: Perri had not promised to sell his house in Lilli Pilli within any specified time, but the
court held that it was an implied condition of the agreement that Perri would do all that was
reasonable to bring about the sale of the Lilli Pilli property and would do so within a reasonable
time, thereby allowing the Cronulla contract to be completed. What is a reasonable time is
treated as a question of fact and depends on what is fair to both parties in the circumstances. In
this case, in which CI could not deal with the Cronulla property while it remained subject to the

sale of the Lilli Pilli property, the court held that a reasonable time had passed and that CI had
therefore been entitled to terminate the contract.
Syndey Corporation v West [1965] HCA 68; (1965)
Contract; contents; terms; assent to express terms printed to ticket; interpretation of exclusion
clauses contra proferentem; four corners rules.
Facts: West drove his car into Syndey City Councils car park, obtaining a ticket from a machine
at the entrance. When West Returned to the car park, his car was gone. It turned out that, while
West was away, another person had approached the car park attendant. This person told the
attendant that he had lost his parking ticket and the attendant gave him a duplicate ticket.
Without doing any checks, the attendant allowed this person to drive Wests car away. The car
having been lost, West sued the Syndey City Council for damages. The council denied liability
on the basis that the ticket obtained by West when entering the car park contained an express
statement saying:
The council does not accept any responsibility for the loss or damage to any vehicle however
such loss, damage or injury may arise or be caused
Issue: Did the statement on the ticket effectively exclude liability in these circumstances?
Decision: The exclusion clause on the ticket had become a term of the contract but properly
interpreted, it did not exclude the liability for what had happened.
Reason: This was a contract of bailment, whereby the Syndey City Council for reward,
promised to retain custody of Wests car and release the car on presentation of the parking
ticket and not otherwise. The clause in question excluded liability for negligent acts done while
carrying out the terms of this contract. It could not apply to acts which were neither authorized
nor permitted by the contract. Allowing the thief to remove the car with a duplicate ticket was an
unauthorized delivery of the car, not negligence in the performance of an authorized act. The
exclusion clause did not cover this situation because it fell outside the four corners of the
contract.
Australian Broadcasting Commission v Australasian Performing Right Association Ltd
[1973] HCA 36; (1973) 129 CLR 99
Contract; interpretation of terms; preference for commercially convenient interpretation
Facts: The Australian Broadcasting Commission (ABC) bound itself by contract to pay the
Australasian Performing Right Association (APRA) an annual licence fee for certain musical
works performed on radio and television. The contract laid down a formula for the calculation of
the fee. After some years, APRA contended that the agreement was intended to provide against
depreciation in the value of money, and the formula as implemented was not doing so. It argued
that a different interpretation needed to be put on the formula to ensure the constant value of
the licence fee.
Issue: Was it open to the court to interpret the formula differently?
Decision: It is not the function of a court to attribute to the parties an intention for which their
express words do not provide

Reason: The words in which the formula was expressed were clear and gave rise to no
ambiguity. The courts construe such agreements uncritically in accordance with the text. Givvs J
said:
If the words used are unambiguous the court must give effect to them, notwithstanding that the
result may appear capricious or unreasonable, and notwithstanding that it may be guessed or
suspected that the parties intended something different. The court has no power to remake or
amend a contract for the purpose of avoiding a result which is considered to be inconvenient or
unjust. On the other hand, if the language is open to two constructions, that will be preferred
which will avoid consequences which appear to be capricious, unreasonable, inconvenient or
unjust.
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
Contract; performance; interpretation of terms
Facts: Hid & Skin (HS) were exporters of animal products. The buyers of these products often
paid for them up to six months after purchases and to finance their ongoing businesses, HS
needed a third party to provide advance payment for goods sold but not yet paid for. Oceanic
arranged the necessary financial facility for a period of two years. The facility was subject to
termination on six months notice. When Oceanic gave notice to terminate the facility, they
argued that they were not obliged to give advance payments to HS for money that would only
be repaid by the purchasers after the facility had ended. HS argued that they should be given
advances right up to the end of the period of notice, even if repayment by the purchasers took
place up to six months thereafter.
Issue: Whose interpretation of the agreement was correct?
Decision: The agreement had the meaning suggested by HS
Reason: Although to interpret the agreement in this way might be disadvantageous to Oceanic,
and not be what Oceanic had privately intended, the courts construe the terms of a contract:
firstly, by applying words used their ordinary and natural meaning; secondly, by applying an
objective (reasonable third party) test to ascertain the intended meaning of terms; thirdly, by
resolving ambiguities in commercial agreements by preferring alternatives that avoid
commercial inconvenience or nonsense; and fourthly, by basing the decision on the actual
agreed terms in the contract rather than on any post-contractual behaviour of the parties.
Hoenig v Isaacs [1952] 2 All ER 176
Contract; breach; substantial performance; remedies for breach
Facts: Hoenig contracted to paint Isaacs apartment and supply some furniture for $750. After
painting the apartment and supplying the furniture, Hoenig claimed payment in full. Isaacs
complains that the work had been badly done. It cost $55 to have another workman rectify the
defects. In view of the imperfect work, Isaacs paid only $400 to Hoenig. Hoenig sued Isaacs for
the balance of the agreed price.
Issue: Was Isaacs obliged to pay the agreed price in full?
Decision: Isaacs was not obliged to pay the full price, but was only entitled to deduct the actual
cost of the necessary repairs ($55)

Reason: Payment of the agreed price by Isaacs was due in exchange for the performance by
Hoenig of his obligations under the contract. Although Hoenig had not performed perfectly, the
faults in his work were easily fixed at modest cost. In the circumstances, he had performed
substantially. Where substantial performance has taken place, the failure to render complete
performance, while still a breach of contract, will be treated as a breach of a warranty rather
than a breach of a condition (unless the parties have expressly agreed otherwise). The
substantial performance must be accepted and paid for proportionately. Isaacs was therefore
required to pay the agreed price, less the amount needed to rectify the defects.
Holland v Wiltshire [1954] HCA 42; (1954) 90 CLR 409
Contract; breach; late performance; remedies; termination of performance
Facts: Wiltshire sold some land to Holland for $3750. The written agreement provided for
payment to be made on the day fixed for settlement namely January 14th 1952. At Hollands
request, Wiltshire agreed to an extended deadline, but Holland failed to meet the extension.
Holland then informed Wiltshire he did not intend to proceed with the sale at all. Wiltshire did not
immediately terminate the contract but said that if Holland did not settle by 28th March, he
(Wiltshire) would commence legal action for breach of contract.
Issue: Was Wiltshire entitled, failing payment by 28th March, to terminate further performance of
the sale, resell the land to a third party and claim any loss from Holland?
Decision: Wiltshire was entitled to these remedies
Reason: There were two breaches of contract by Holland. The first occurred when Holland
failed to perform at the agreed (extended) time. On the facts of this case, the court held that the
time of performance was agreed to be of essential importance. This meant that Hollands failure
to perform on time amounted to a breach of condition and entitled Wiltshire to terminate the
contract immediately. Wiltshire chose not to end performance of the contract immediately. It was
only after a second breach occurred, when Holland said he would not proceed with the sale at
all, that Wiltshire gave a deadline for performance and then terminated the contract when that
deadline passed. Wiltshire then resold the property to a third party, but at a lower price. He was
entitled to claim as damages the difference between the lower price on resale and the original
contract price.
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524
Contract; performance; frustration; fault.
Facts: Maritime National chartered the St Cuthbert, a trawler, from Ocean Trawlers. To use the
trawler for fishing, as was intended, it had to be licensed, but the government issued only three
licenses to Maritime National, and the company had five boats needing licences. Maritime
National allocated licences to three of their other boats and asked Ocean Trawlers to take back
the St Cuthbert, claiming that the contract had been frustrated by the lack of a licence.
Issue: Did the unavailability of a licence for the St Cuthbert frustrate the contract?
Decision: The plaintiff was not entitled to rely on frustration in these circumstances.
Reason: It was Maritime Nationals own decision not to allocate one of their available licences
to the St Cuthbert. In seeking to avoid the contract, Maritime National was not entitled to rely on

a situation they had deliberately brought about. For frustration to discharge the contract, the
changed situation must arise without any fault or deliberate act by the party who is seeking
relief.
Steele v Tardiani [1946] HCA 21; (1946) 72 CLR 386
Contract; breach; partial performance; acceptance of partial performance; duty to pay pro rata
for accepted performance
Facts: Tardiani and others were employed by Steele to cut firewood. The agreement provided
that payment would be made at the rate of six shillings per ton of wood cut in six foot lengths
and split six inches in diameter. Tardiani and the other cut 1,500 tons of timber but split it into
pieces ranging from six to fifteen inches in diameter.
Issue: Was Tardiani entitled to payment for the work done?
Decision: Although performance was incomplete, Steele did not choose to reject the work done.
Having accepted it, he had to pay for the value of the work.
Reason: The contract was not substantially completed; it was only partly performed. However,
Steele was obliged to pay for the value of the work done by the woodcutters. This was because,
knowing that the woodcutters were splitting some of the wood to a diameter of more than six
inches, Steele had nevertheless said he would pay the woodcutters when the wood was sold to
customers. He had also allowed Tardiani to finish working without requiring him to split the
thicker logs properly. Accordingly, the court decided that Steele had chosen to dispense with his
right to insist on complete performance. Furthermore, because Steele had accepted the benefit
of the partial performance, he was bound to pay the woodcutters for the actual value of the work
they had done (as distinct from the agreed price).
Associated Newspapers Ltd v Bancks [1951] HCA 24; (1951) 83 CLR 322
Contracts; contents; terms; conditions and warranties; breach of contract; remedies; termination
of performance
Facts: Banks, a cartoonist, agreed to produce a weekly full-page drawing for Associated
Newspapers (AN). AN agreed to pay Bancks a salary and to publish the drawing on the front
page of the newspapers comic section. However, for three weeks because of paper shortages
and consequent production problems. Banckss drawings appeared on page 3 of the comic
section. Bancks protested but AN ignored him. Bancks then decided to terminate further
performance of the contract.
Issue: Was the promise to publish Banckss drawings on the front page of the comic section an
essential term, breach of which would justify terminating further performance of the contract?
Decision: The term was an essential one (a condition) and Bancks was therefore justified in
terminating further performance
Reason: The court said (at [7]):
The test was succinctly stated by Jordan C.J. in Tramways Advertising Pty. Ltd. v. Luna Park
(N.S.W.) Ltd The decision was reversed on appeal, but his Honours statement of the law is
not affected. He said The test of essentiality is whether it appears from the general nature of

the contract considered as a whole, or from some particular term of terms, that the promise is of
such importance to the promise that he would not have entered into the contract unless he had
been assured of a strict or a substantial performance of the promise, as the case may be, and
that this ought to be apparent to the promisor
The word warranty describes terms of lesser importance than conditions.
Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653
Contract; remedies for breach; damages; mitigation of loss
Facts: MAN Automotive supplied a large commercial vehicle to Burns. The vehicle supplied was
defective. The defects became apparent after a year, but Burns persisted in trying to use it, and
accumulated substantial operating losss in the process. Burns sued for damages to compensate
for lost profits calculated over the four years during which the vehicle would have been expected
to have a useful operating life.
Issue: To what extent must a plaintiff take steps to mitigate loss?
Decision: A plaintiff is not required to take steps to mitigate loss if the plaintiff does not have the
necessary means to do so.
Reason: In discussing the need to mitigate loss, Gibbs CJ said (at [7], [8]):
the appellant was bound to take all reasonable steps to mitigate the loss, and one course
open to him to mitigate the damage was to have the engine reconditioned, or to buy another
to replace it. However, his impecuniosity [lack of money] prevented him from taking that course.
The question arise whether it should be held that the appellant is debarred from claiming such
part of the damages as is attributable to his failure to take the necessary steps in mitigation,
when he was unable to take those steps because of his lack of means.
That question must be answered in the negative A plaintiffs duty to mitigate his damage does
not require him to do what is unreasonable and it would seem unjust to prevent a plaintiff from
recovering in full damages caused by a breach of contract simply because he lacked the means
to avert the consequences of the breach
Lumley v Wagner (1852) 42 ER 687
Contract; remedies for breach; specific performance
Facts: Wagner contracted to sing in Lumleys theatre for a fixed period. She also promised that,
during this period, she would not perform anywhere else. Lumley wished to enforce both of
these promises.
Issues: Would the court enforce specific performance of Wagners promise to sing in Lumleys
theatre?
Decision: Actual performance of this promise would not be ordered.
Reason: The courts will not normally enforce positive promises to render personal services
because it is difficult to ensure that the performance of such performances will be properly
carried out in the absence of genuine goodwill.
Radford v De Froberville [1978] 1 All ER 33

Contract; remedies for breach; objective of damages

Facts: Radford owned two adjacent blocks of land. He sold one to de Froberville on the
condition that she build an expensive brick wall on the boundary. She failed to build the wall,
and resold her property to a third party. Radford sued de Froberville for damages for breach of
contract. He claimed the cost of actually constructing the promised brick wall. De Froberville
argued that Radford was entitled to the amount by which her failure to build the wall had
decreased the value of Radfords property. This was less than the cost of actually building the
wall.
Issue: What was the appropriate measure of damages?
Decision: Radford was entitled to claim damages equal to the cost of actually constructing the
wall.
Reason: The objective of an award of damages is to put the non-defaulting party in the position
that would have occupied had the breach of contract not occurred. If de Froberville had
performed the contract, the wall would have been built, and it was the cost of this that Radford
was entitled to claim.
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8
Contract; breach of contract; claim for damages; objective of damages for breach of contract
Facts: Bowen Investments Pty Ltd (Bowen) leased a building to Tabcorp Holdings Ltd (Tabcorp)
for 10 years. It was a term of a lease that the tenant would not make any substantial alternation
or addition to the building without first obtaining the landlords written consent. Six months into
the lease, and without first obtaining the landlords consent, the tenant demolished the foyer of
the building and rebuilt it in the way they preferred. The landlord sued for the cost of restoring
the foyer to its previous state, which amounts to just over $1.3 million. The judge held the tenant
in breach of contract but only awarded of $34,820, being the difference between the value of the
building with the old foyer and the value of the building with the new foyer. On appeal, Bowen
claimed that they were entitled to the higher amount.
Issue: was the landlord entitled, on grounds of the tenants breach of contract, to claim the full
cost of restoring the foyer to its previous state?
Decision: The appropriate measure of damages was the cost of restoring the foyer to its
previous state.
Reason: The ruling principle is that, when a party suffers a loss because of a breach of contract,
damages may be claimed to put that party in the same situation as if the contract had been
performed, so far as money can do it. This does not mean simply in the same financial
position, but in the same actual position, so that the party has or can acquire what was actually
contracted for. In this case, that meant the cost of actually restoring the foyer to its original state,
because this is the position the landlord would have been in if the contract had not been
breached. There may be exceptional cases where to award such damages becomes
unreasonable, but that was not so in the present case.
Rogers v Whitaker [1992] HCA 58; (1992) 175 CLR 479

Tort; Negligence; the duty of care; breach of the duty of care; relevance of defendants specialist
skills
Facts: While still a child, Whitaker suffered an injury that left her blind in one eye. Nonetheless
she led a normal life until at the age of 40, she consulted Rogers, an eye surgeon. He advised
her that an operation on her blind eye would improve its appearance and probably restore
significant sight. He did not warn her of any risks associated with the operation. In the result, the
operation failed to improve the sight in Whitakers blind eye. The operation also caused her to
develop a rare condition that eventually caused blindness in her other eye. This condition, as
well as being rare, was not always so catastrophic in effect.
Issue: had the defendant, a specialist ophthalmic surgeon, breached the duty of care that he
owed his patient?
Decision: As a specialist ophthalmic surgeon, the defendants duty of care required him to warn
his patient of the possible risks involved in treatment which he failed to do.
Reason: In considering the appropriate standard by which to judge the duties owed by a
defendant with specialist skill, Mason CJ, Brennan, Dawson, Toohey and McHugh JJ said (at
[6], [12])
The standard of reasonable care and skill required is that of the ordinary skilled person
exercising and professing to have that special skill in this case, the skill of an ophthalmic
surgeon specializing in corneal and anterior segment surgery
That standard is not determined solely or even primarily by reference to the practiced followed
or supported by a responsible body of opinion in the relevant profession or trade The courts
have adopted the principle that while evidence of acceptable medical practice is a useful
guide for the courts, it is for the courts to adjudicate on what is the appropriate standard of
care.
Romeo v Conservation Commission of the Northern Territory [1998] HCA 5; (1998) 193
CLR 431
Tort; Negligence; breach of the duty of care; assessing reasonable care; factors; likelihood of
harm
Facts: Romeo, a 16-year-old girl, went with friends to a nature reserve (the Dripstone Cliffs) in
Darwin. At some point in the night, after drinking some rum, she and a friend wandered near the
unfenced edge of the cliffs. Romeo fell from the top of the cliff to the beach and was badly
injured. She sued the Conservation Commission of the Northern Territory, the government
authority responsible for the reserve.
Issue: Had the commission breached a duty of care to Romeo?
Decision: The commission owed a duty of care to Romeo. However, the High Court held that, in
the circumstances, the risk of harm was so unlikely that by failing to take action to avoid it, the
commission had not breached its duty of care.
Reason: Kirby J said (at [128]):

Insufficient attention has been paid in some of the cases, and by some of the critics, to the
practical considerations which must be balanced out before a breach of the duty may be
found thus, under the consideration of the magnitude of the risk, an occupier would be
entitled, in the proper case to accept that the risk of a mishap such as occurred was so remote
that a reasonable man, careful of the safety of his neighbour, would think it right to neglect it. It
is quite wrong to read past authority as requiring that any reasonable foreseeable risk, however
remote must in every case be guarded against precautions need only be taken when tat
course is required by the standard of reasonableness. Although it is true, as the appellant
argued, that an occupier is not entitled to ignore safeguards against dangers because of the
absence of past mishaps, it is equally true that years of experience without accidents may tend
to confirm an occupiers assessment that the risks of harm were negligible.