Business Law

This document discusses the application of the doctrine of frustration in the context of the given case of Professor Chris Berlin and Kent Institute Australia (KIA). It also discusses the liability of Repairer Pty Ltd for the loss of KIA and whether they are liable to pay damages to KIA.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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IRAC to question 1
Issue
To ascertain as to whether it would be lawful for Kent Institute Australia (KIA) to
terminate Professor Berlin’s contract.
Rule
Under the common law, contracts that are beyond the control of the parties are often
concluded or terminated without proper execution, which is known as frustration of contract.
Frustration of contract occurs under limited circumstances when the events of an agreement and
the performance of the parties could not be anticipated, leading to exhaustion or frustration of
contract. In case a contract is terminated by way of frustration, in that case the parties cannot be
held responsible for the termination of the contract as it was beyond the foreseeability of the
parties. In the circumstances where the doctrine of frustration is applied, the contract is
terminated for the parties to the contract does not bear any control or responsibility over the
performance or termination of the contract. However, it is evident from past precedents that the
quotes have not been sympathetic towards the party who has led to the frustration of the contract,
if the court thinks that the party responsible for the termination had the potential to anticipate or
foresee the probability of the frustration but did not undertake any precaution of prevention.
Nevertheless, the court discharges the parties from their obligation to execute the frustrated
contract (Lawhandbook.sa.gov.au 2019).

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The doctrine of frustration was first developed in the case of Taylor v Caldwell (1863) 3
B & S 826 where the doctrine of frustration of contract arose because of the existence of strict or
absolute liability rule. It is evident that the application of the doctrine of frustration would
entirely depend on the performance of an agreement that varies on the performance of the
parties; any discrepancy in the performance of the parties would affect the contract, which would
result in discharge of contract due to frustration.
Application
In the context of the given case professor, Chris Berlin was appointed as the new vice
chancellor and Chief executive of Kent institute Australia (KIA). She was made to sign the
agreement on 1st of August 2018 that stated 1st January 2019 as per date of joining. The
agreement of the employment mentioned her tenure of holding the position as 3 years along with
her remuneration of $200,000 every year in addition to incentives based on performance. The
signed document of the agreement but prove that the contracting parties, that is, professor Chris
Berlin and KIA, had the intention to form a legal relationship between themselves and wanted to
legally enforce the agreement in case any dispute arose. In this case, it can be clearly seen that
the essentials of the valid contract, that is, a valid offer and acceptance, meeting of mind and
consensus along with the exchange of a valid consideration is present. Therefore, the contract
between professor Chris Berlin and KIA is valid in can be legally and forced. However, the court
would consider several other factors apart from the essentials of a valid contract to enforce the
agreement in case of dispute arises. The institute can claim a breach of terms of contract for
professor Berlin failed to join from the agreed date mentioned in the agreement due to her
accident. In accordance with the advice of the medical expert, Professor Berlin was not

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recommended to comments work before 25th of April 2019. Such long gap from the date of
joining to the advised date of commencement of work proves to be the deal breaker and thus the
agreement between the parties falls apart. The good food order for a discharge by frustration as
the contract could not be executed outperformed due to the unforeseeability of the uncertain
event that led to the accident of professor Berlin resulting her delay in joining.
Conclusion
Therefore, it would be lawful for Kent Institute Australia (KIA) to terminate Professor
Berlin’s contract.
IRAC to question 2
Issue
To ascertain whether Repairer Pty Ltd would be held responsible for the loss of Kent
Institute Australia (KIA) and whether it is liable to pay damages to KIA.
Rule
Breach of contract is resultant when a contracting party fails to deliver goods within the
stipulated time. Such failure to adhere to the specification of the terms of contract leads to breach
of contract or infringement of contractual terms. Under common law, the breaching party is held
to be liable to pay damages to the aggrieved party for any damage to property, physical injury all
pure economics loss. Awarding Damages is the main aim and purpose of the law of tort, for
compensating the aggrieved party for the lost that he has suffered from the wrongful act or

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omission of the defendant. To execute or perform a contract, it is significant that the parties to
the contract carry out their responsibilities as per the terms of agreement, as otherwise the
agreement would face a breach. However sometimes the involvement of a third party, even if
they are unrelated to the original agreement, has significant effect on the performance of a
contract (Lawhandbook.sa.gov.au 2019).
On contravention of the terms of agreement, that has given effect to the breach of the
agreement; the aggrieved party can claim for compensation related to such breach of agreement.
It is the responsibility of the parties to intimate each other if they anticipate any situation that
might lead to breach or frustration of the agreement. Several defences of the breach of the
contract can be cited by the defendant, which might even include the contributory negligence of
a third party or certain circumstances that could not be avoided (Gergen 2013.). In such
circumstances, it is directed that the defendant along with the third party must carry the burden
of sharing the damages. In addition, the defendant could also cite the defence of contributory
negligence that refers to the contribution of the claimant to the causation of the damage.
Pure Economic loss arises when a party experiences monetary loss due to the negligent
act of the other (Stickley 2016). Candlewood Navigation Corporation Limited v Mitsui OSK
Lines Limited and Matsuoka Steamship Co Limited PC [1986] 1 AC 1, damages were awarded
by the court for pure economic loss. However, at present under Common Law and landmark
precedents (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465), the courts are not
much considerate and generous when it comes to awarding damages for pure economic loss.
This approach of the court is justified with the theory of limitless liability or the theory of
floodgate (Naquin 2013.). This theory refers to the unaccounted financial loss that a person

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experiences due to the breach of duty of care of another and it would be extremely difficult for
the court to evaluate the amount of damages. It is also avoided and unentertained by the court for
it would increase the number of litigation and eventually would increase the burden of the court
(Victoria Park Racing & Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479). The
revolutionary landmark case that changed the approach of the court is the Hedley Byrne & Co
Ltd v Heller & Partners Ltd [1964] AC 465 case where it was discussed by the judges that pure
economic loss only be compensated if the parties to the agreement could establish the fact that it
was reasonably impossible to foresee the causation of damage (Sawaya 2014). The risk of the
damage should not be so remote that it would be impossible to foresee that it would lead to such
damage or loss to the claimant (Farnsworth 2015).
Application
Repairer Pty Ltd breach the contract with Kent Institute Australia for they did not deliver
two out of the three ovens within the agreed time that were given to them for repair work. One of
the undelivered oven was damaged in the process of transit whose responsibility was given to a
third party carrier. While, the other oven could not be arranged to be delivered for the workers at
Repairer Pty Ltd had a strike. This costed KIA a good amount of loss of money for they could
not host some of the students for the course due to the lack of the two ovens. A clear picture of
pure economic loss can be seen in this case.
In this context, the court cannot held Repairer Pty Ltd for the damage of the second oven
that was damaged in transit, for which a third party carrier was responsible. The third party could
be held responsible for the damage and could be ask to pay damages to KIA. While, as for the

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pure economic loss effected by the breach of contract by Repairer Pty Ltd for not arranging for
the timely delivery of the third oven, they would be held liable to pay damages, as it can be
argued that the strike of the workers was not sudden and it could have been foreseen by the
company. They must have taken reasonable steps to prevent the breach of contract.
Conclusion
Therefore, Repairer Pty Ltd would be held responsible for the loss of Kent Institute
Australia (KIA) and they would be held liable for paying damages to KIA.

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References
Candlewood Navigation Corporation Limited v Mitsui OSK Lines Limited and Matsuoka
Steamship Co Limited PC [1986] 1 AC 1
Farnsworth, W., 2015. The Economic Loss Rule. Val. UL Rev., 50, p.545.
Gergen, M.P., 2013. Negligent misrepresentation as contract. Cal. L. Rev., 101, p.953.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
Lawhandbook.sa.gov.au. (2019). Discharge by frustration. [online] Available at:
https://lawhandbook.sa.gov.au/ch10s02s13s03.php [Accessed 23 Jan. 2019].
Naquin, L.B., 2013. Closing the Floodgates: Defining a Class of Third-Party Plaintiffs for Title
VII Retaliation Claims. Louisiana Law Review, 73(2), p.11.
Sawaya, D., 2014. Not Just for Products Liability: Applying the Economic Loss Rule Beyond Its
Origins. Fordham L. Rev., 83, p.1073.
Stickley, A.P., 2016. Australian torts law. LexisNexis Butterworths.
Taylor v Caldwell (1863) 3 B & S 826
Victoria Park Racing & Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479

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