Cihan v Border Hotels No 2 Pty Ltd

The case of Cihan v Border Hotels No 2 Pty Ltd involved the plaintiffs, who sought to purchase a business and lease premises from the defendants. The contract stipulated that a substantial deposit was to be paid upon entering into the contract, and rent was to be paid in advance. The defendants took possession of the premises and began operating the business, providing post-dated cheques as security for the deposit and first month’s rent. However, the cheques were dishonoured when presented, and the contract for the sale of the business had not been exchanged. Consequently, the plaintiffs retook possession of the business. The central legal issues were whether the defendants were entitled to damages, and if the plaintiffs were entitled to the contract measure of damages and rent.

The court found that the defendants were not entitled to rely on the failure of the condition for the exchange of the contract for the sale of the business. The plaintiffs had agreed to an extension of time for the deposit payment but the defendants failed to pay the deposit when required. Thus, the defendants had no continuing right of possession. The court also ruled that the defendants were not entitled to damages because they had repudiated the agreement by failing to pay the deposit. The agreement for the sale and lease was terminated when the plaintiffs accepted the defendants' repudiation by retaking possession. The plaintiffs were not required to claim or prove damages to put them in the same position as if the contract had been performed, nor were mesne profits claimed. The plaintiffs were entitled to ten percent deposit and one month’s rent, less amounts already received.

The court concluded that the plaintiffs were entitled to the contract measure of damages and rent. The defendants had repudiated the agreement by their failure to pay the deposit. This repudiation was accepted by the plaintiffs when they retook possession upon the cheques being dishonoured. The plaintiffs were thus entitled to the deposit and one month’s rent, less amounts already received. The court's final order was that the plaintiffs were to be paid ten percent of the purchase price as a deposit and one month’s rent, less any amounts already received by the plaintiffs.