Remedies

Remedies

Common Law Equity

Damages 1) Specific Performance

2) Injunction

• The plaintiff must show a “direct causal link” - his loss was one which resulted from a breach of contract by the defendant

• An act of the defendant in a sequence of events leading to a loss might not be held to be the cause of the loss.

The Monarch SS Co Case [1949]• The voyage was delayed. The ship ran into a typhoon• The shipowner was held to be not liable to the charterer

because such catastrophe may occur anywhere

• If there are 2 causes to the event and both causes have equal effect, one will be sufficient to carry a judgment for damages.

Smith, Hogg & Co v Black Sea Insurance [1940]

DAMAGES(1) Causation

An intervening act of a 3rd party which itself causes the loss to the plaintiff, or aggravates the loss, caused by the defendant's breach, will not absolve the defendant from liability if the intervening act was reasonably foreseeable

Stansbie v Troman [1948] Weld-Blundell v Stephens [1920]

• Losses, to be recoverable, must have been within the reasonable contemplation of the parties.

• If the loss flowing from the breach of contract is too remote then it cannot be recovered.

Hadley v Baxendale (1849)

• The strict interpretation in the Harley case was relaxed in the subsequent case of

Victoria Laundry v Newman Industries [1949]

(2) Remoteness of Damage

Hadley v Baxendale (1854)

• P were a firm of millers who contracted with carriers D to take a broken mill-shaft to a foundry for repair.

• The shaft was delayed in transit through the D's negligence and the mill lost 5 days' production.

• P claimed damages for their lost profits.

HeldDamages allowable is for damage that 1) is fairly and reasonably be considered to arise naturally from

the breach of contract, or2) Such as might reasonably be in the contemplation of both parties at the

time of the contract as a probable result of the breach.

In this case, the total stoppage of production was NOT a natural consequence of delay - the mill might have a spare shaft in stock – and it is not reasonable to expect the carriers to be aware of the special circumstances.

Victoria Laundry v Newman Industries [1949] • P, a laundry operator, ordered a large boiler from D• The boiler was damaged by DD's contractors while being dismantled• As a result, delivery was delayed for about 5 months while the boiler was

repaired. • P claimed for lost of profits, arising from :1) the expected increase in business following their increased capacity (the

demand for laundry services at that time being particularly heavy), and2) a lucrative dyeing contract they would have been able to bid for.

Held• It was enough that D knew P were in the laundry business and knew in

general terms the state of the market. • P were entitled to recover the lost profits from the expected general

increase in trade (normal loss of profit), but • NOT those from the dyeing contract which would not have been in the

reasonable contemplation of the other party. • Conclusion : Damages can be recoverable for losses which were

reasonably foreseeable either from imputed knowledge or actual knowledge.

• The defendant's knowledge does not mean mere knowing (“reasonable contemplation”)

• There must be knowledge and acceptance by the defendant of the purpose and intention of the plaintiff.

Horne v Midland Railway (1873) Simpson v L & N Railway (1876) Heron II (1969)Damages were awarded to cover losses arising from the late delivery

of sugar to Basra. It was foreseeable that the price of sugar in Basra might fluctuate. For a loss to be foreseeable, there must be :

a) ‘a real danger’/ ‘a serious possibility’ or

b) the loss was ‘ not unlikely’/ ‘liable to result’.

• If the kind of damage is within reasonable contemplation, however, then it is immaterial that the resulting damage is far more serious than was anticipated.

Parsons v Uttley Ingham [1978]

• A higher degree of foreseeability is required in contract than in tort.

It is the duty of every plaintiff to mitigate his loss, that is, to do his best not to increase the amount of damage done.

Rules :(i)The plaintiff must minimize the loss resulting from the breach by taking all reasonable steps available to him. The plaintiff cannot recover for loss which he could have avoided by taking reasonable steps.Payzu v Saunders [1919]

(ii) The plaintiff cannot recover for any loss he has actually avoided, even though he took more steps than were necessary in compliance with the above rule.

(iii) the plaintiff is not expected to take risks in order to mitigate losses caused by the defendant's breach. The plaintiff may recover loss incurred in taking reasonable steps to mitigate his loss, even though he did not succeed.Pilkington v Wood [1953]

(3) Mitigation of Loss

• If the plaintiff obtains any benefits as a result of his mitigation, these must be taken into account.

British Westinghouse v Underground Electric Railway of London [1912] White & Carter v McGregor [1962]

• To put the injured party financially as near as possible, into the position he would have been in had the promise been fulfilled.

• In Addis v Gramaphone Co Ltd [1909], Lord Atkinson said: “…damages for breach of contract were in the nature of compensation, not punishment."

(4) Purpose of Damages

Plaintiff has a choice of more than one of type of damages. He can make a combine the claimsMillar's Machinery Co v David Way (1935)

(i) LOSS OF BARGAIN (incidental loss)Objective :To put the plaintiff, so far as money can do it, in the same situation as if the contract had been performed.

Example :In a contract for the sale of goods which are defective, the plaintiff will be entitled to damages reflecting the differences between the price paid and the actual value of the defective goods.

(5) Heads of Damage

(ii) RELIANCE LOSS (consequential loss)Objective :• To put the plaintiff in the position he would have

been, if the contract had never been made• Compensate him for expenses he has incurred in

his abortive performance. McRae v Commonwealth Disposals (1950) Anglia Television v Reed [1972]

(iii) RESTITUTION• Where a bargain is made and the price paid, but the

defendant fails to deliver the goods, then the plaintiff is entitled to recover the price paid plus interest.

• General rule – damages are to be assessed at the time of the breach.

• However, the court can postpone the date for assessment of damages to a more appropriate time.

Johnson v Agnew [1980]

(6) Time for Assessment of Loss

Assessment in 2 ways :(i)cost of cure (ii)difference in value. Peevyhouse v Garland Coal Co (1962) A coal company took a mining lease of farmland, covenanting to store the land to its original state at the end of the lease. The work at the end of the lease would have cost $29,000, while the result of not doing it would reduce the value of the land by only $300. It was held that damages for the company's failure to do the work should be assessed at $300.

(7) Calculation of Damages for Loss of Bargain

• It is the Court’s discretion to exercise the most appropriate basis.

(i) In sale of goods contracts• if the defect CAN be cured at a reasonable cost

= cost of cure will be awarded• if the defect CANNOT be cured at a reasonable cost

= the difference in value will be awarded.

(ii)In building contracts• if the defect CAN be cured at a reasonable cost= cost of cure will be awarded and the builder must put the

defects right• if the cost of cure is greater than the whole value of the

building= the difference in value will be awarded.

Ruxley Electronics & Construction v Forsyth [1995]

ACTUAL AND MARKET VALUES

If the damages are based on the difference in value principle, then market values have to be estimated in order to assess the plaintiff's loss.

Example :

If the defendant fails to deliver goods or render services, then the plaintiff can go into the market and obtain these goods or services at the prevailing price.

Therefore the plaintiff's damages will be the difference between the market price and the price of the goods or services in the contract.

Market price minus Contract Price

The plaintiff may be able to recover damages for injury to feelings in tort, but in contract such damages are not recoverable.

•Addis v Gramaphone Company [1909] •Bliss v South East Thames Regional Health Authority [1985]

(8) Damages which are Irrecoverable

(i) Discomfort, vexation and disappointment

• Jarvis v Swan Tours [1973] • Jackson v Horizon Holidays.Plaintiff obtain damages for “disappointment and

discomfort” that he has sustained

(9) Other types of Damages

This kind of damages is only available if the contract which has been broken, was itself a contract to provide peace of mind or freedom from distress (Dillon LJ in Bliss)

The Court is not prepared to extend the boundary of this damages Alexander v Rolls Royce Motor Cars [1995]

Alexander v Rolls Royce Motor Cars Ltd (1995)

• The plaintiff argued that the purchase of a Rolls Royce had been the culmination of a lifelong ambition, and that when the garage concerned had not repaired it properly or quickly enough he had suffered distress and inconvenience.

• The Court of Appeal, while accepting that there was a breach of contract to repair, were not prepared to award damages for the plaintiff's 'emotional anguish' while his Rolls Royce was being repaired.

ii) Inconvenience

Bailey v Bullock [1950]

A solicitor failed to take proceedings to recover his client's house for him

Held :

liable in damages for the inconvenience caused by reason of the client having to live with his wife's parents for two years.

(iii) Diminution of future prospects

Dunk v George Waller [1970] • The apprenticeship will enable the apprentice (upon

completion) to obtain a certificate to do certain job at a range of wages

• Without this certificate, his chances were lessened• The apprentice was wrongfully dismissed• He claimed damages for diminution of future prospects.

Held :He was entitled to damages on this basis as the object of his

apprenticeship was to enable him to get better employment.

(iv) Speculative damages

If the plaintiff's loss is the chance of doing something or benefiting from doing something, and this contingency is outside the control of the parties, then he is entitled to damages if the defendant's breach of contract denies him this chance.

Chaplin v Hicks [1911]

LIQUIDATED

DAMAGES

&

PENALTY

CLAUSES

The parties to the contract may make a genuine assessment of the losses which are likely to result in the event of a breach, and stipulate that such sum shall be payable in the event of a breach.

The plaintiff will not recover more than that sum.

No action will be allowed for unliquidated damages.

Liquidated Damages

• A clause that is intended to punish the contract-breaker

Void.

• The Court will ignore such clause – Plaintiff sue for actual loss Wall v Rederiaktiebolaget Luggude [1915]

• As long as the damages figure was not extravagant, it is often be considered as a true assessment of damages and not a penalty clause.

• The parties may often be in dispute over whether the clause was a penalty or a liquidated damages clause.

Dunlop Pneumatic Tyre Co v New Garage [1915]

Penalty Clause

Dunlop Pneumatic Tyre Co v New Garage (1915)

The defendant bought tyres from the plaintiff and agreed : a) Not to tamper with manufacturer's marksb) Not to sell below the list pricec) Not to sell to any person blacklisted by the plaintiffd) Not to exhibit or export tyres without the plaintiff's consent.

The defendant agreed to pay £5 for every tyre he sold or offered in breach of the agreement. In breach, the defendant sold to the public below the list price.

Held :• The provision for payment of £5 was held not to be penal. • Looking at the language of the contract itself, the character of the

transaction and the circumstances, it was clear that the provision was to prevent a price war and so protect the plaintiff's sales.

Attempt to identify penalty clauses

1. The use of the words 'penalty' or 'liquidated damages' may be prima facie evidence, yet the expression used is not conclusive.

2. The essence of a penalty is a payment of money as in terrorem of the offending party; The essence of liquidated damages is a genuine covenanted pre-estimate of damage.

3. Whether a sum stipulated is penalty or liquidated damages is a questions of construction to be decided upon the terms and inherent circumstances of each particular contract, judged as of the time of making the contract, not as at the time of breach.

Cellulose Acetate v Widnes Foundries (1933)

The defendant agreed to build a chemical plant for the plaintiff in 18 weeks. If it took longer than this, they agreed to pay 'by way of penalty £20 per working week'. The defendant completed 30 weeks late, and the plaintiff lost £5,850 as a result of the delay.

The defendant argued that they were only liable for £600 damages. The plaintiff was held only to be able to recover £600.

The clause was not a penalty clause although it was described as such, because its object was not to act in terrorem.

The parties must have known that the actual loss would be more than £20 per week, and the clause would, therefore, appear to have been an attempt to limit liability.

A clause is more likely to be considered as a Penalty Clause if :-

(a)the amount stipulated is extravagant and unconscionable, as compared to the greatest loss that could conceivably be proved to have followed from the breach;

(b) if the breach consists only in not paying a sum of payment, and the sum stipulated is a sum greater than the sum which ought to have been paid.

• Where the contract has underestimated damages in the event of a breach, either because of inflation or through bad bargaining, damages will be limited to the amount stipulated by the contract.

Cellulose Acetate v Widnes Foundries [1933]

EQUITABLE REMEDIES

Sometimes the remedy of damages will be inadequate compensation to the victim of a breach of contract.

Equity therefore developed a number of remedies, discretionary in nature, directed towards ensuring that a plaintiff was not unjustly treated by his being confined to the common law remedy of damages.

Two equity remedies :a)specific performanceb)injunctions

INTRODUCTION

s50, Supreme Court Act 1981

The Court has the discretion to award damages in lieu of,

or in addition to specific performance provided the

contract is of a type that is specifically enforceable.

DAMAGES IN LIEU (in addition)

•  An order for specific performance will compel the addressee to fulfill the terms of a contract.

• An action for specific performance is restricted to 3 circumstances :

a) Damages inadequateb) Judicial discretionc) Types of Contract

SPECIFIC PERFORMANCE

• If the plaintiff can show that damages are inadequate, then the court may grant his claim for specific performance.

• Damages is considered inadequate if :-

(i) the plaintiff cannot get a satisfactory substitute Nutbrown v Thornton (1804) Cohen v Roche [1927]

(ii)the award of damages would be unfair to the plaintiff Beswick v Beswick [1968]

(iii) the quantum of damages is difficult to assess.

(iv) S.52 SOGA 1979 – the seller refuses to deliver 'specific or ascertained' goods.

a) Damages inadequate

"Equity will only grant specific performance if, under all the circumstances, it is just and

equitable to do so" Stickney v Keeble [1915]

1)The court does not grant specific performance unless it can give full relief to both partiesBlackett v Bates (1865)

2) Specific performance will not be ordered if it is impossible for the defendant to comply with the order, Eg : a contract for the sale of land not owned by the vendorWatts v Spence [1976]

b) Judicial discretion

3) Plaintiff must come to equity with clean hands. Specific performance will be refused if the plaintiff has acted unfairly or dishonestly.

Walters v Morgan (1861)

4) Specific performance will be refused if the plaintiff fails to perform a promise which induced the defendant to contract.

Lamare v Dixon (1873)

5) Specific performance will be refused if it would cause severe hardship to the defendant.

Patel v Ali [1984]

Specific performance will not be granted for contracts

1)involving personal service

2)building contracts

3)contract is entire and cannot be severed

c) Types of Contract

s16, Trade Union and Labour Relations Act 1974 No court shall compel an employee to do any work by

ordering specific performance of a contract of employment, or by restraining the breach of such contract by injunction.

An employer cannot be forced to employ somebody against his wishes, and the general rule is that the court will not order re-engagement of an employee, but will instead award compensation.

(EXCEPTION : reinstatement or re-engagement ordered by the industrial tribunal under the Employment Protection (Consolidation) Act 1978)

1) Contract involving Personal service

It is inequitable to order specific performance of building contracts because the plaintiff can engage another builder.

It is also difficult for the Court to continually supervising the building work.

Ryan v Mutual Tontine Assoc [1893] Posner v Scott-Lewis [1987] Co-Op Insurance v Argyll Stores [1997]

2) Building contracts

A court order to restrain a party from committing a breach of contract by injunction.

3 types of injunction :-

a)Interlocutory injunctions - to regulate the position of the parties pending a hearing.

b)prohibitory injunction - orders a defendant not to do something in breach of contract.

c)mandatory injunction – requires a defendant to reverse the effects of an existing breach.

INJUNCTION

• The court will apply the 'balance of convenience' test – refusing relief if the hardship caused to the defendant by compliance with the order outweighs the consequential advantages to the plaintiff.

• The general rule is that an injunction will not be granted if the effect is to directly or indirectly compel the defendant to do acts for which the plaintiff could not have specific performance.

Page One Records v Britton [1968]

(i) A service contract may contain negative obligations which can be enforced by injunction without compelling positive performance of the whole contract.

Lumley v Wagner (1852)

(ii) A negative stipulation which is too wide can be severed and enforced in part.

Warner Bros v Nelson [1937]

…end…