Contract - Damages LGS 19-20

Question 1

Primary Remedies

Answer 1

Termination - Breach of condition or serious breach of innominate term.

Damages – Compensatory rather than punitive.

Question 2

Usual Damages for Breach

Answer 2

Compensatory Damages

Question 3

Liquidated Damages and Penalty Clauses

Dunlop LDC. Liquidated damages enforceable

Cellulose Acetate Silk Ltd. v Widnes Foundry

– Dunlop Pneumatic Tyre Co. Ltd

Answer 3

Usually Unliquidated damages assed by court, however contracts can provide for a particular sum, known as liquidated damages.

Liquidated damages msut be a genuine pre-estimate of the loss designed to compensate the party.

Claimant did not recieve actual loss that he claimed, but rather

Penalty is designed to force the offending party to perform the contract by setting an excessive sum to be paid on breach

Question 4

Dunlop Pneumatic Tyre Co. Ltd

Ford Motor Co. (England) Ltd. v Armstrong, [1915]

Answer 4

Liquidated as graduated estimate of loss.

Penalty too large a sum

Question 5

Penalty Clauses

Cellulose Acetate Silk Ltd. v Widnes Foundry (1925) Ltd (supra)).

Dunlop Pneumatic Tyre, and

Phillips (hong kong)

Answer 5

Irrelevant whether labelled as such.

if Extravagant

If a single lump sum is payable for a range of events, serious or triging.

Question 6

Unliquidated Damages

Points / Requirements

Answer 6

1. Establish the loss was caused by the breach of contract.
2. Show that the loss was not too remote
3. Quantify the amount (measure) of the loss
4. Ensure it is a type of loss that is recoverable
5. Take reasonable steps to minimise the loss (Mitigate)

Question 7

CAUSATION

County Ltd v Girozentrale Securities

Answer 7

County Ltd v Girozentrale Securities

Same as Tort; Must show that breach caused the claimants loss.
• Not necessarily the sole cause
• No break in the chain of causation.

Question 8

REMOTENESS OF DAMAGE

Answer 8

Designed to avoid a defendant paying a loss which is too improbable and not one he would assumed to have taken.

Question 9

Hadley v Baxendale [1854]

Normal Loss

Abnormal loss

Answer 9

i) Reasonable contemplation of Reasonable man
ii) Reasonable contemplation of special circumstances.

Question 10

Hadley Baxendale -

Test?

Answer 10

Reasonable contemplation test, used to determine whether knowledge of special circumstances exists beyond the usual or norm.

Claimant Failed because:

i) it was expected that the millers might have a spare crankshaft
ii) the defendant did not know of special cirumstances, or had nto been informed that there was no spare.

Question 11

Victoria Laundry (Windsor) Ltd. v Newman Industries Coulson & Co. Ltd., [1949]

Answer 11

Ordinary losses - D didnt know of lucrative contract

Question 12

Koufos v Czarnikow Ltd. (The Heron II),
[1967]

Answer 12

The owner of a ship chartered to carry sugar to Basrah that deviated was liable given that while the ship owner did not know that the sugar was to be sold at market price, if the owner ‘had thought about it, he must have realised that at least it was not unlikely that the sugar would be sold at the market price on arrival’ and therefore it would be in reasnable contemplation.

Question 13

Parsons (Livestock. v Uttley Ingham & Co Ltd.,
[1978]

Answer 13

did not need to contemplate the level of damage, just that illness / damage to the pigs could occur.

Question 14

Jackson v Royal Bank of Scotland, [2005]

Answer 14

Based on Contemplation at the time of the contract, not after the breach.

Question 15

Balfour Beatty Construction (Scotland) Ltd. v Scottish Power Plc [1994]

Answer 15

too special a business.

Question 16

Transfield Shipping Inc. v Mercator Shipping Inc., (The “Achilleas”),
[2008]

lord Rodger and Baroness Hale

Answer 16

ship owners had not made them aware of the specific consequences of any delay, HELD: Could only recover loss of profit for overlap period, Ie 9 days not entire period of new charter.

Question 17

MEASURE OF DAMAGES [QUANTUM]

There are three types to consider

Answer 17

• *Pecuniary Losses: Calculated from figures.**
  (i) Expectation loss / Loss of Bargain – to put the claimant back in the original position, loss of bargain and the expectations from that contract.
  (ii) Reliance Loss -
  (iii) Restitution

Question 18

(i) Expectation Loss (Loss of Bargain)

Difference in value

Cost of cure + Case

Answer 18

• go to the market and look at the cost of a replacement.

Cost of Cure - or Repair, if out of proportion, may not be awarded.

Ruxley Elextronics and Construction v Forsyth HoL stated award cost of cure would be disproportionate remedy to the loss suffered asa result of the breach. Loss of amenity award was made instead.

Question 19

Expectation Loss cont. . .

3. Loss of a chance/opportunity

Answer 19

Loss of a chance, used where there is less certainty that the profit would be made.

Chaplin v Hicks, [1911] - actress not invited to audition and had a 1/4 chance of gaining work - awarded £100 speculative sum.

Question 20

(ii) Reliance Loss

2 Points, 1 Case

Answer 20

Compensates for; instead of or in addition to compensation loss.

Puts back in position if contract not made - used if claimant can’t show loss of profit such as out of pocket expediture in reliance.

CCC Films v Impact Quadrant

Burden of proof rested on Defendants as the party in breach to show that the claimants would have wasted money on reliance regardless of the breach.

Question 21

(iii) Restitution

McRae v Commonwealth Disposals Commission [1951]

Answer 21

Return of money

Can be combined with other types of claim. If the defendant would have made a loss anyway, it is then up to the defendant to show the claimant has made such a bad bargain.

McRae: claimants were only entitled to recover their payment of £285 (restitution loss) plus £3,000 spent on their fruitless salvage expedition (reliance loss) - because they couldnt prove they would have profited under the contract.

Question 22

In Millar’s Machinery Co. Ltd. v David Way & Son, [1935]

Answer 22

Concerned a contract for the purchase of a machine which turned out to be faulty, the claimant recovered the price of the machine (restitution), the installation expenses of the machine (reliance loss), and the net profits lost resulting from the breach (expectation loss).

Question 23

Generally losses for stress, dissappointement or otherwise are not claimable.

Gross or net profits

Answer 23

Gross Profits - not reliance aswell, Net profits claimed, reliance too .

Question 24

Addis v Gramophone Co. Ltd., [1909]

Addis,

Malik v Bank of Credit

Answer 24

(HL) That the appellant was entitled to damages for loss of salary and commission, but not for the injury to his feelings (mental distress) caused by the manner of his dismissal.

Also authority for principle that there can be damages for loss of reputation from wrongful dismissal.

Terms of employment contain terms of mutual trust and confidence.

Addis also authority for the principle that damage to feelings etc cannot be recovered.

Question 25

(i) The “direct result” exception.

Watts v Morrow, [1991]

Answer 25

where mental distress is a direct result of physical inconvenience and discomfort caused by breach.

Question 26

(ii) The “object of the contract” exception:

Answer 26

Jackson v Horizon Holidays Ltd., [1975]

Question 27

Assessed at time of Breach

Golden Strait Corporation v Nippon Yusen Kubishka

,The “Golden Victory”, [2007]

Answer 27

Damages may also be reduced where events following the breach occur which reduce the actual loss suffered.

In the Golden Victory: the charterer only had to pay for 14 months’ rather than 4 years’ hire as the subsequent event could be taken into account.

Question 28

MITIGATION OF LOSS

Lord Haldane - British Westinghouse Electric.

Brace v Calder, [1895]

Pilkington v Wood, [1953]

Answer 28

Mitigation imposes a duty of taking all reasonable steps to mitigate the loss consequent on the breach; and debars him from claiming any part of the damage which is due to his neglect to take such steps.

refusing the offer of re-employment the claimant had failed to mitigate his loss and was, therefore, only entitled to nominal damages.

Only reasonable steps to mitigate

Question 29

Contributory negligence

Law Reform (Contributory Negligence) Act 1945

Answer 29

Permits apportionment where he suffers by his own fault as defined by the same act

Question 30

2. EQUITABLE REMEDIES
   a. Specific Performance

Harnett v Yielding, (1805)

Answer 30

order of the court compelling the party in breach to perform his contractual obligations.

Specific performance will not be granted if damages are adequate

usually must be something unique about the subject matter of the contract.

Question 31

b. Injunctions

Mandatory or

Prohibitionary

Answer 31

orders the defendant to take positive steps to put right what he has done wrong in breach of contract.

enforces a negative stipulation in the contract; the defendant will be ordered not to break the stipulation.

Question 32

RESTITUTION

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943]

Answer 32

The two principle situations in which this type of claim is appropriate are:
• Actions to recover money paid; and
• Actions to recover a payment for work done.

Therefore the common feature of restitution is that where money or property is transferred, if nothing is given in return it should be returned, and where a service is rendered it should be paid for because it would be unfair if it were not.

Question 33

Summary

Answer 33

Is there a breach ?

Does the contract deal with it specifically - Liquidated damages.
If there is no provision or its so great as to be too large then apply standard terms of loss.

Then look at measure – expectiation or reliance or restitution.

Is it the type you can revocer? Is there a loss for third parties? Mitigation, has the claimant taken steps to minimise loss?