(C) IS THE REQUIREMENT THAT THE BASIS MUST TOTALLY FAIL DEFENSIBLE?
The reliance of the courts on mechanisms such as characterization of benefits as collateral and apportionment of basis, appears to stem from a desire to award restitutionary remedies, even where the basis for a particular transaction has only failed partially. In Giedo van der Garde BNV v Force India Formula One Team Ltd[1] Stadlen J described the total failure requirement as ‘unsatisfactory and liable in certain cases to work injustice’. But, as the law stands, restitution on the ground of partial failure of basis will only be awarded in certain limited categories.[2] It would surely make the law of restitution more just if partial failure of basis was recognized as a ground of restitution in its own right.[3]
(i) Arguments in Favour of Recognizing Partial Failure of Basis
A number of reasons can be identified why partial failure of basis should be recognized as a general ground of restitution.
- (1) Where the claimant has transferred a benefit to the defendant and has obtained part of the expected basis in return, restitution can still be justified since the claimant’s intention that the defendant should retain the benefit, which is contingent on the fulfilment of a condition, has still been vitiated to the extent that the condition has not been completely fulfilled.
- (2) Recognizing partial failure of basis would also mean that there would no longer be any need for the courts to manipulate the concept of basis to enable it to conclude that the basis had totally failed where it was felt that restitution was justified. It would still, of course, be necessary to identify what the anticipated basis was, in order to determine whether the benefits the claimant had received had been bargained-for, since if they were the claimant could not obtain restitution of money paid in advance in respect of those benefits.
- (3) Partial failure of basis is already recognized as a ground of restitution where a contract has been frustrated.[4] There is no reason why the ground of restitution following the termination of a contract should differ depending on whether the contract has been discharged for frustration or for breach. Indeed, the fact that Parliament in the Law Reform (Frustrated Contracts) Act 1943 accepted the legitimacy of partial failure of basis as a ground of restitution should mean that there is no reason why the Common Law should not extend this ground of restitution to other areas where the contract has ceased to operate.
- (4) Stoljar[5] analysed in detail the history of the doctrine of total failure of basis and concluded that the total failure requirement is an historical myth, although some of the older cases can be interpreted as suggesting that the failure must be material. The total failure requirement appears to have developed in the nineteenth century by virtue of the rules on pleading and proof. But those rules no longer exist, so the total failure requirement should no longer be necessary either.[6]
- [1] Ibid, [367]. 2 See p 355, below.
- [2] 99 See Birks, ‘Failure of Consideration’, 179; P Mitchell, ‘Artificiality of Failure of Consideration’ (2010) 29
- [3] UQLJ 191.
- [4] Law Reform (Frustrated Contracts) Act 1943, s 1(2), (3). See p 357, below.
- [5] SJ Stoljar, ‘The Doctrine of Failure of Consideration’ (1959) 75 LQR 53.
- [6] See also R Goff, ‘Reform of the Law of Restitution’ (1961) 24 MLR 85, 90.
