Australia and the Intermediate Term: 'No Country for Old Rules'

The High Court recently provided guidance on the circumstances in which an innocent party can terminate a contract under the common law. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd, the Court confirmed that there are three situations in which termination for breach can occur: first, where one party has 'renounced' the contract; second, where there has been a breach of an essential term and third, where there has been a serious breach of a non-essential term. In endorsing the status of the intermediate term as a third category of contractual term, the Court approved of the tripartite classification of contractual terms first discussed in the UK case of Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd. In doing so, the Court adopted a policy that favours contractual performance over greater simplicity and certainty. Kirby J agreed with the decision but argued strongly for the preservation of the traditional dualistic approach. '[The intermediate term] is a comparatively recent invention,finding little or no reflection in the common law that preceded Hong Kong Fir.'