Hart v Macdonald

This case involved an appeal to the High Court of Australia concerning a contract for the erection of a dairy plant and butter factory. The plaintiff, Mr. Hart, had entered into a written agreement with the defendant, Mrs. Macdonald, to construct the factory on her land. Payment for the plant was to be made from the proceeds of butter produced by Mrs. Macdonald's cows and manufactured within the factory. The contract also contained a clause stating that no agreement or understanding existed between the parties that was not embodied in the written contract. Following the erection of the plant, Mrs. Macdonald made no payments, and Mr. Hart sued for the contract price.

The central legal issues before the High Court were whether the written contract implied a promise by Mrs. Macdonald to produce sufficient butter within a reasonable time to pay for the plant, and if so, whether Mr. Hart had discharged the onus of proving that such a reasonable time had elapsed. The court also considered the admissibility of evidence regarding the circumstances surrounding the contract's formation and the impact of a severe drought on the feasibility of performance.

The High Court held that, despite the clause excluding external agreements, the contract's language necessarily implied a promise by Mrs. Macdonald to produce butter within a reasonable time for payment. Evidence of surrounding circumstances was admissible to determine what constituted a reasonable time. However, the onus was on Mr. Hart to prove that the prevailing conditions, both at the time of the contract and subsequently, allowed for the production of sufficient butter within a reasonable period. The court found that the extensive evidence, particularly the correspondence detailing a severe and prolonged drought, demonstrated that it was impossible to carry on dairying in the ordinary way. Consequently, Mr. Hart had failed to discharge his onus of proof.

The appeal was allowed, and the verdict entered for the plaintiff was set aside, with a nonsuit to be entered. The court also determined that no interest was payable on the contract price, as the condition precedent for interest to accrue – the factory operating for six months – had not been met due to the non-commencement of operations.