Sargent v ASL Developments Ltd; Turnbull v ASL Developments Ltd (1974) 131 CLR 634
Contract; remedies for breach; election; knowledge of relevant facts.
Facts: Sargent agreed to sell land to ASL Developments (ASL). The contract provided that either party could terminate the contract if it were discovered before completion of the contract that the land was subject to a planning scheme not disclosed in the contract. Sargent was not aware of this provision. After buying the land, Sargent discovered that it was subject to a planning scheme, but did nothing to terminate the agreement. Much later, Sargent became aware of the contractual right he had to terminate performance of the contract because of the planning scheme.
Issue: Was Sargent bound by his decision to treat the contract as continuing after discovering the planning scheme, even though at the time he was unaware of his legal right to terminate the contract?
Decision: The failure to terminate the agreement within a reasonable time of learning of the planning scheme amounted to a binding decision to continue with the contract.
Reason: Some authorities have suggested that a choice to terminate or not requires the non-defaulting party to be aware of the legal right to terminate. But the better view is that it is enough for the non-defaulting party to know of the facts that constitute the breach of condition (or serious breach of an innominate term) if they behave in a way that induces the other party to believe that the contract is continuing.