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Recission

Checchia v Insurance Australia Ltd t/as NRMA Insurance (No 2) [2010] NSWSC 112. Rothman J. 26.02.10.

In this ancillary disposition to interest, costs and appeal stay, Rothman J said, infra [15]: “A contract, including the Settlement Agreement, may be rescinded for fraud and other matters affecting its formation, in which case the parties are restored to their pre-contract positions: Commissioner of Taxation v Reliance Carpet Co PL [2008] HCA 22; (2008) 236 CLR 342 at [2]…

"As the High Court there made clear, such a rescission is distinct from a rescission (hereinafter … “termination”) at the election of one party, or indeed arising from frustration: see also Photo Production v Securicor Transport Ltd [1980] AC 827 at 844; and Johnson v Agnew [1980] AC 367.”

Then, “Absent agreement of the parties, and absent frustration, a party may terminate the contract, under the common law, for a breach of a condition (or essential term), or for a sufficiently serious breach of an intermediate term: Koompahtoo Local Aboriginal Land Council v Sanpine PL [2007] HCA 61; (2007) 233 CLR 115; Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26.” [18]

And, “Once there has been breach of an essential term (or a sufficiently serious breach of an intermediate term), the party not in breach (the obligee) may elect to terminate the contract and sue for damages arising from the breach: McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457, at 476-477, per Dixon J.” [21]

“The alternative course to termination is to elect to keep the contract on foot and sue for the breach, without terminating. It is this course for which Mr Checchia has elected. More accurately, Mr Checchia has declined to elect to terminate the contract and, with the contract in existence, has sued for damages for breach of the contract. Those damages were the subject of the principal proceedings.”

 

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