Case: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 ; (2003) 128 FCR 1
Outcome: cited
Tropical Traders Ltd v Goonan [1964] HCA 20 ; (1964) 111 CLR 41 at 55 Kitto J said that the person with the choice might keep the question open '... so long as it did nothing to affirm the contract and so long as the [other party's] position was not prejudiced in consequence of the delay'. He said that when the vendor in that case told the purchaser that it would not rescind a contract for the sale of land before a particular date if the purchaser paid an additional sum for interest, costs and expenses, the vendor was doing no more than promising that it would not elect to rescind the contract before that date if the conditions were complied with. Kitto J said that in that case a grant of an extension of time was not an election to affirm but, rather, amounted to an announcement of an intention to refrain from electing either way until the money had been paid or the extended time for performance had elapsed: see too Champtaloup v Thomas [1976] 2 NSWLR 264 at 268C-269B per Glass JA; 273D-274D per Mahoney JA; Street CJ agreeing with both at 266: Hunter BNZ Finance v GC Maloney Pty Ltd (1988) 18 NSWLR 420 at 435C-436B per Giles J: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 ; (2003) 128 FCR 1 at 89-92 [356] - [364] per Finn J. And, as the judgment of the Exchequer Chamber written by Blackburn J (see Scarf 7 App Cas at 360) established, this principle applies to a party to a contract who discovers his entry into it was induced by the fraud of the other: Clough v London &amp; North Western Railway Co (1871) LR 7 Ex 26 at 34-35. 22.2 Consideration Allphones accepted that, while a requirement to act in good faith was implied in many contracts, it said that was not necessarily so in every contract. As Finn J observed in GEC Marconi 128 FCR at 208-209 [920] it is not yet clear in Australian law whether a duty of good faith and fair dealing is implied as term of all contracts, or is an incident of particular classes of contract. I need not decide that here because I am not persuaded that Mr Donnellan was motivated by an extraneous purpose, or that he acted capriciously or otherwise than in good faith when Allphones was contemplating the exercise of its right to terminate in early July 2006, or when he caused the notice of intention to terminate to be given in late August 2006. I find that Mr Donnellan was genuinely concerned by the discovery of the fraud in which Hoy Mobile had been engaged. He was entitled to be so concerned. A party to a contract is entitled to exercise contractual rights conferred on him or her honestly. Rarely do people act from a single motive, particularly where they have been involved in a long-term relationship with the other party or parties. In a contractual context, relationships can give rise to a complex set of considerations which one party may apply to the other. Thus, in a contract for the sale of goods where time is of the essence, and one party defaults in timeous performance, the law merchant recognises that the innocent party has a right to terminate. And such rights exist in the Sale of Goods Act 1923 (NSW) and its analogues. Thus, when a vendor fails to deliver goods, or a purchaser fails to pay for them, on the due date, the innocent party is permitted to terminate without being subjected to an enquiry as to its motive. Often merchants terminate contracts when the other party defaults so as to take advantage of a substantive change in the market price for the goods that has occurred between the date of contract and the date on which default occurs. Indeed, the primary reason for termination at that time may be that the innocent party wants to get the benefit of the market change. In one sense, that motivation could be characterised as a purpose extraneous to the contract because it implies a disloyalty to the mutually co-operative relationship created by the contract. However, such a view would protect contract breakers from the consequences of their own disloyalty to the contractual obligation of which they were in breach.