Donnellan v Garlick

The case involved Donnellan, the vendor, and Garlick, the purchaser, who had entered into a contract for the sale of a property. Garlick failed to complete the contract, leading Donnellan to terminate the agreement. Donnellan then resold the property and sought damages from Garlick under the contractual right to claim loss on resale. The dispute reached the Supreme Court of Victoria, where the validity of the termination and the calculation of damages were at issue.

The central legal issues the court needed to address were whether Donnellan's termination of the contract was valid and, if so, the appropriate measure of damages for the loss on resale. Specifically, the court had to determine if Donnellan had complied with any conditions precedent to terminating the contract and if the resale price was a reasonable measure of the loss incurred. The court also considered whether Garlick's failure to complete constituted a repudiatory breach, entitling Donnellan to terminate the contract.

The court held that Donnellan's termination was valid as Garlick's failure to complete the contract constituted a repudiatory breach. The court found that Donnellan's re-sale of the property and the subsequent loss incurred were reasonably foreseeable consequences of Garlick's breach. Regarding the calculation of damages, the court determined that the difference between the contract price and the resale price was a fair measure of the loss suffered by Donnellan. The court rejected Garlick's argument that the resale price was inflated, concluding that Donnellan had acted reasonably in mitigating the loss.

The Supreme Court of Victoria ordered Garlick to pay Donnellan the difference between the contract price and the resale price, plus interest, as damages for the breach of contract. The court also found that Donnellan was entitled to recover legal costs associated with the resale of the property.