Remedies for Breach of Contract PDF

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REMEDIES FOR BREACH OF CONTRACTIf there has been a breach of contract, what remedies are available?DAMAGES:● Purpose is to put the claimant in the position he would have been in had the contract been properly performed ( Robinson v Harman) ● Is for compensation to the claimant, not punishment to the...

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REMEDIES FOR BREACH OF CONTRACT If there has been a breach of contract, what remedies are available? DAMAGES: ● ● ●

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Purpose is to put the claimant in the position he would have been in had the contract been properly performed (Robinson v Harman) Is for compensation to the claimant, not punishment to the defendant Claimant must prove that he has suffered loss and that the loss or damage is not too remote a consequence of the breach (Omak Maritime Ltd v Mamola Challenger Shipping Co (The Mamola Challenger)) If no loss is suffered, claimant can claim nominal damages only If the claimant brings a claim where there was no damage to him, the claimant may be ordered to pay the defendant’s costs (Obagi v Stanborough Developments Ltd)

When quantifying damage, the following are taken into account: (EXPECTATION LOSS) ○ Difference in value between the actual value of the goods and the value the goods would have had if they had not been defective ○ Cost of cure, ie. in contracts of services, damages awarded will be the cost of putting the work right ○ Loss of amenity (Ruxley Electronics and Construction v Forsyth) ■ Ie. in instances where a house etc. has no lost market value because of the defect, but has lost comfort as it isn’t how he wanted it to be ■ Disproportionate to award the whole cost of cure, but got to award something to acknowledge the lost comfort ■ Lord Mustill said that the test of reasonableness plays a central part in determining the basis of recovery ○ Usually cannot claim for loss of pleasure (Addis v Gramophone Co Ltd) ■ unless the purpose of the contract was for the claimant’s enjoyment (Jarvis v Swan’s Tours) ■ Claimant’s enjoyment need not be the sole purpose of the contract, but must be important to the basis of the contract (Farley v Skinner) ● If you can’t quantify expectation loss, consider RELIANCE LOSS ○ Covers expenditure wasted as a result of the breach ○ Aim is different - aim here is to put the claimant in the position he would have been in had the contract never been entered into ● Court can also award damages for a lost opportunity (Chaplin v Hicks); (Blackpool & Fylde Aero Club v Blackpool Borough Council) REMOTENESS: 1. Loss must be within the reasonable contemplation of the parties (Hadley v Baxendale), ie. a. It arises from the ordinary course of things, or b. The special circumstances causing the loss are known to parties at the time the contract is made 2. When deciding if the loss is within the reasonable contemplation of the parties, the defendant’s knowledge of the claimant’s business practice is considered (Balfour

Beatty Construction (Scotland) Ltd v Scottish Power plc) 3. Loss of normal profits is foreseeable, but profits from a special contract are not (Victoria Laundry (Windsor) Ltd v Newman Industries Ltd) 4. The test in contract is not the same as the one in court, it is not ‘reasonably foreseeable’, but ‘within the reasonable contemplation of the parties’ (The Heron II) 5. If a particular type of loss is within the parties’ reasonable contemplation then the culpable party is liable for the full scale of that loss, no matter if it is higher than contemplated (Parsons (Livestock) Ltd v Uttley Ingham Ltd), eg recovery is not limited because the degree of physical injury could not have been anticipated 6. Normal profit is a different kind of loss to high profits resulting from a specially lucrative contract (Brown v KMR Services Ltd) 7. In commercial, financial cases where loss is difficult to quantify you can look at the commercial context, not simply reasonable contemplation (Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) 8. The standard rule is that of reasonable contemplation but there might be unusual cases where you must look at the commercial context and surrounding circumstances to consider whether or not a party had assumed responsibility for losses of that particular kind (John Grimes Partnership Ltd v Gubbins) Overview - the loss will not be too remote a consequence of the breach if it is of a kind which would have been within the reasonable contemplation of the parties at the time the contract was made as being not unlikely to result ●

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Claimant must take reasonable steps to mitigate his loss (British Westinghouse Electric & Manufacturing CO Ltd v Underground Electric Railway Company of London Ltd) ○ The onus of proof is on the party in breach, ie. he must show that the claimant could have mitigated but did not do so The claimant’s damages can be reduced in accordance with (Law Reform (Contributory Negligence) Act 1945), if the only breach of contract is for a negligent breach Damages are assessed by reference to the time of the breach but more importantly should reflect the loss suffered, so although the assessment at the time of the breach would normally achieve this, it should not be applied where its not (Golden Strait Corporation v Nippon Yusen Kubishiki Kaisha (The Golden Victory))

Specified damages / penalty clause: 1. Specified damage: a genuine attempt to pre-estimate the loss which is likely to be caused by the breach a. Enforceable by the courts b. Sum specified is amount that will be paid regardless of the actual loss c. Usual rules of measure of damages, remoteness and mitigation do not apply 2. Penalty: an attempt to put pressure on a party to perform the contract a. Unenforceable b. Where clause is a penalty, court is free to assess damages in the usual way 3. How do courts decide?

a. Guidelines in (Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd) used when the legitimate interest of the party are purely financial: b. If the sum stated in the clause is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach, it will be a penalty i. Nb this is not established from the actual loss suffered, but from the loss that could have followed from the breach c. If the breach consists only in not paying a sum of money, then if the sum stated in the clause is greater than the amount that ought to have been paid then it will be a penalty d. If a single lump is payable on the happening of one or more of several events, some of which may cause serious and some minor damage, it is presumed to be a penalty e. The clause can be a specified damage clause even if it is difficult or impossible to pre-estimate exactly the loss which might be caused by the breach 4. Commercial considerations are also important eg. balancing the bargaining power between the parties (Azimut-Benetti SpA (Benetti Division) Certainty is important in commercial contracts, (Philips Hong Kong Ltd v Attorney General of Hong Kong); specified damages clauses can be valuable because they enable the parties to know the extent of their liability a. And commercial entities of fairly equal bargaining power must be taken to have been the best judges of what they were prepared to agree to 5. Reformulated test for a penalty: Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis): whether the clause imposed a detriment on the contractbreaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the contract a. First, look at the circumstances in which the rule was engaged i. A provision could not be a penalty unless it provided an exorbitant alternative to ordinary damages b. Second, look at whether the clause was penal or a pre-estimate of loss Where compensation for breach is the only legitimate interest, the guidelines in Dunlop would suffice But in a commercial context where compensation might not be the only legitimate interest of the innocent party and the contract was negotiated between properly advised parties of comparable negotiating power, the presumption had to be that the parties themselves where the best judges of their interests ACTION FOR AN AGREED SUM: the contract must provide for one party to pay a definite sum to the other and the duty to pay must have arisen, a simple debt action so the remoteness and mitigation rules do not apply TERMINATION OF THE CONTRACT: the innocent party may be able to terminate the future performance of the contract if: a. A condition is broken b. An innominate term is broken and the effects of the breach are major Remember if there has been a breach of contract, you must decide on the kind of term broken only if the innocent party wants to terminate the contract - if the innocent party wants

some other remedy, or termination of the contract is not possible, then it is immaterial whether the term broken is a condition, warranty or innominate term SPECIFIC PERFORMANCE: equitable and discretionary; can be combined with a claim for damages Specific performance may not be granted when: ● Damages are an adequate remedy ● Where the court would have to supervise the parties over a period of time because of the difficulty of continuous supervision ● If the contract involves services (because such contracts usually depend on a certain amount of trust and confidence, so may fail if the relationship between the parties has broken down) (Ruxley Electronics and Construction v Forsyth) ● If it is not just or equitable to do so INJUNCTION: Equitable remedy, available at the discretion of the court An injunction will not be granted if the effect would be to compel the defendant to act in a way he could not be ordered to by an order for Specific performance Prohibitory - forbids a person doing a particular act Mandatory - requires a person to put right a breach of contract (rare in practice) An injunction will not be granted if the effect would be to compel the defendant to act in a way he could not be ordered to by an order for Specific performance General rule: the court will not grant an injunction to force an employee to work for a particular employer ● A contract may contain a negative promise which can be enforced without directly compelling the employee to work for the employer, ie. not allowed to work for anyone else (Warner Brothers Pictures Incorporated v Nelson) ● The court will not enforce a promise in a contract if the injunction would result in the party remaining idle and detrimentally impacting their career (Page One Records v Britton); determined on the facts of the case RESTITUTION: General idea: to prevent one party being unjustly enriched Two scenarios where a restitution claim may arise: 1. Where money has been paid by one party to another under a contract and there has been a complete failure of the consideration a. The innocent party can bring an action to recover the money b. ‘Where the payee has not done any part of what he was supposed to do under the contract, or what has been done is completely useless’ 2. Where one party has done work for the other, or supplied goods to the other, and wants to be compensated for the work done or goods delivered a. Where the contract has been broken, you can bring a claim in restitution for a reasonable sum for work done or goods supplied, as an alternative to a claim for damages - quantum meruit b. If the contract was never formed, the supplier may be able to claim in restitution for a reasonable sum for work done or goods supplied (British Steel Corp v Cleveland Bridge and Engineering Co Ltd) Restitutionary damages may be awarded where the defendant’s breach is deliberate and for

their own reward, the claimant can’t show any loss and the claimant has legitimate interest to restrict the defendant’s own behaviour (Experience Hendrix LLC v PPX Enterprises Inc) Law is murky on whether it is compensatory or restitionary as it is viewed as a new and distinct means of determining damages ● Court awarded the claimant only 5% of profits made by the defendant; the majority of the judges said the damages were not compensatory (ie. they focused on the defendant’s gain, rather than the claimant’s loss) (Wrotham Park Estate Co Ltd v Parkside Homes Ltd) ● Court awarded full account of profits from a published book (Attorney General v Blake); NB this was a very exceptional factual circumstance ● The tone was restitutionary (Experience Hendrix LLC v PPX ENterprises Inc) ● The tone was compensatory (WWF v WWF)...