To understand how the Australian common law developed to adopt this position, it is necessary to examine the establishing line of authorities starting with the Privy Council decision in Lodder v Slowey [1904] NZPC 3. In that case, the Privy Council held that contracts terminated for repudiation were rescinded ab initio. This meant that the contract was treated as though it had never existed, so claims for compensation were not restricted by the contract price. Rather, they were at large. Without a contract to constrain the claimant to breach of contract damages, a restitutionary claim for quantum meruit became available as an alternative cause of action. An action for quantum meruit allows recovery of a fair and reasonable sum for services or goods supplied when there is no contract or no contractual agreement to govern payment. The amount recoverable in quantum meruit could therefore far exceed that available under a breach of contract claim, particularly if the contract had been underpriced. The result of the Privy Council decision in Lodder was that the contract price agreed in a contract, which had been partially performed but terminated prior to completion, could be entirely irrelevant to the question of quantum of damages if one party could prove repudiation of the contract by the other party. There was significant criticism of this position. The next key development is found in a decision of the High Court of Australia in the case of McDonald v Dennys Lascelles Ltd [1933] HCA 25. In that case, the High Court rejected the notion that termination of a contract for repudiation had the effect of rescinding the contract in its entirety. In doing so, it overturned the ‘rescission fallacy’ — the notion that the repudiation of a contract has the effect of rescinding it ab initio. McDonald corrected the illogicality that an existing contract under which parties had performed some obligations could be rescinded ab initio. However, subsequent cases persisted in applying the ‘rescission fallacy.’