Abandonment of a Contract

Abandonment of a contract occurs where it is apparent from the conduct of the parties to a contract, that neither intends on continuing to perform their obligations under the contract, and the parties are regarded as having so conducted themselves as to abandon the contract.

What is abandonment of a Contract?

Abandonment of a contract is the relinquishment of a legal claim or interest, with the intention of never reclaiming it by one or all parties. In the event of a unilateral abandonment, the innocent party may treat itself as being discharged from further performance, seek damages for loss, or keep the contract on foot and recover damages for the breach.

Establishing Mutual Abandonment

If neither party performs their obligations as required by the contract and the innocent party does not take steps to enforce the contract for an extended period, this may result in a finding that the contract has been mutually abandoned. When determining whether the contract has been mutually abandoned, the Court will objectively look at the conduct of the parties and whether an inordinate length of time has lapsed.

Conduct of the Parties

In D.T.R Nominees Pty. Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 the Court held that to establish mutual abandonment of the contract, it needs to be apparent from the conduct of the parties that neither intends that the contract be further performed. This approach was sustained by the Court in Ryder v Frohlich [2004] NSWCA 472.

Inordinate length of time

The Court in Fitzgerald v Masters (1956) 95 CLR 420 held that even if an inordinate period of time has elapsed, it will not always be conclusive that the contract has been mutual abandoned, as it will also be determined on the objective intentions of the parties and their conduct. In the more recent case of Tonner -v- Delaporte [2018] WASCA, the Court held that an inference of abandonment may be drawn when an inordinate length of time has been allowed to elapse during which neither party has attempted to perform, or called upon to perform, the contract between. Therefore, a party is entitled to assume from the long continued ignoring of the contract from both sides that the matter is off altogether.

Can the parties revive the contract at a later date, if a contract has been abandoned?

Yes, however, a party attempting to revive a contract at a later date confirms that the contract was not abandoned in the first instance. In addition, there is also other issues that arise when reviving a contract once a significant time has lapsed, which can include but is not limited to:

  • For a sale contract – the accrual of unpaid tax interest on transfer duty; or
  • For all contracts – time will likely no longer be of the essence, which means the parties are no longer under the obligation to complete their tasks within the timeframe specified.

Repudiation

In addition to the issues set out above, a delay in a person performing their obligations under the contract, it may also give rise to repudiation of the contract, however, repudiation of a contract is a serious matter and is not to be lightly found. To satisfy the requirements of repudiation a party must demonstrate a clear indication of an absence of readiness and willingness or an inability to perform their obligations when viewed objectively by a reasonable person, based upon a party’s words or conduct.

Repudiation does not automatically bring the contract to an end but rather the innocent party must accept the repudiation to validly be able to terminate the contract. Upon termination of the contract, the innocent party has the right to seek damages from the repudiating party.

If you or someone you know needs assistance in relation to an abandonment or repudiation of a contract, please feel free to call our office on 07 5444 4750 or email at [email protected]