By John Gooley -
Snapshot
- The High Court, in Shao v Crown Global Capital Pty Ltd, has clarified how contractual terms may have a ‘double operation’, showing how a single clause can function both as a condition for discharge and as an independent obligation.
- The case examines non‑conforming performance and why accepting repayment does not necessarily waive a breach or amount to ratification of an unauthorised act.
- This article unpacks the case in depth and highlights the practical implications of the decision for drafting, advising and litigating contractual disputes—especially where joint instructions, repayment mechanics and lender protections are involved.
It is well recognised that contractual terms may have a ‘double operation’ and create both a duty and a condition (see, e.g., Behn v Burness [1863] EngR 329, Ardern v Bank of New South Wales [1956] VLR 569 (‘Ardern’), Catlin v Cyprus Finance Corporation (London) Ltd [1983] 1 QB 759 and DAR International FEF Co v AON Ltd [2004] EWCA Civ 921).
In Westacott v Hahn [1918] 1 KB 495 (‘Westacott’), a lease provided for a covenant by a lessee to repair (being allowed all the necessary materials for the purpose). The Court found, on proper construction, the clause was both a covenant and a qualification. According to Scrutton LJ:
‘Words may be both a covenant by one party and the condition precedent of the obligation of the other party. … a condition precedent is a limitation or qualification of another term of a contract, while it may also be itself a term of a contract whose breach gives a cause of action’ (at 512-513).
