A party which intimates that it will not be able to complete a contract may escape liability where the other party to the contract is not ready, willing and able to perform its obligations, if those obligations are sufficiently interdependent. The first party may find itself liable where the other party can show that it could have taken steps to ensure that it was ready, willing and able, but that such steps would be futile given the intimation of an inability to complete by the first party.
In 2007, Ryan entered into a contract for the sale of some property in Glenelg for $3 million to Urban Construct (SA) Pty Ltd (Urban) on the condition that settlement occurred by 31 December 2008 (the agreed settlement date). On 19 December 2008, Urban advised Ryan that it could not settle by the agreed settlement date and requested a year’s extension. Then, in a letter to Ryan dated 8 January 2009, Urban asserted that the circumstances leading up to execution rendered the contract void or voidable and that it had avoided the contract at the time it advised Ryan of its inability to complete. After serving two notices to complete, to which Urban failed to respond, Ryan served a notice of termination on 11 February 2009 and claimed damages from Urban.
Urban’s arguments that the contract was void or voidable were that as the sale was a GST taxable supply, Ryan’s omission to register for GST and provide a tax invoice to Urban by the agreed settlement date showed that she was not “ready, willing and able” to perform the contract and constituted repudiation by Ryan. Urban argued that it then accepted such repudiation by failing to complete (and was therefore not in breach) which invalidated Ryan’s notices to complete and terminate.
The Court rejected Urban’s argument regarding Ryan’s GST obligations, finding that the payment of GST was not interdependent with Ryan’s obligation to transfer the land. Further, the Court found that the contract allowed Ryan discretion as to whether to claim the GST from Urban.
The Court also noted that, even if it had found that the payment of GST was an interdependent obligation, GST registration for Ryan was a quick and simple process. There was no evidence that Ryan would not have registered by the agreed settlement date but for Urban’s intimation that it could not perform, which then rendered any further action by Ryan to register for GST futile.
On the basis of the above, the Court held that Urban’s letter of 19 December 2008 was a definite and final statement that it was unable to perform and therefore constituted an anticipatory breach and repudiation of the contract of sale.
See the case.