CONTRACT - WEEK 3

Question 1

Robinson v Harman [Intrest]

Answer 1

FACTS: C agreed to a grant of a house valued at $110 a year (good bargain). However, the D was unauthorised to do this and as a result could not follow through on the agreement. The C claimed for damages on the falling through of the sale as well as extra for the ‘good bargain’

RATIO: The defendant was entitled to be put into as good a position as if the contract had been performed

Question 2

Radford v de Froberville [DAMAGES]

general rules - measure of damages

Answer 2

FACTS: C owned a house of flats which were split and rented. He subdivided the garden and sold it to the D who covenanted to build a house on part of the garden as to separate the 2 properties. The D failed to do this and sold the land to the 3rd party.

Debate as to the measure of damages
a) the cost of erecting the wall at the price it would have cost had it been done at the specified time
b) the cost of erected the wall at the price to which it would now cost the C to erect

RATIO: Held that the cost of the cure (the entire wall) was the appropriate measure

• This case indicates that the subjective value of the contract to the claimant and a genunine intention to carry out the work are factors which the court will take into account towards awarding damages for cost of reinstatement. This was confirmed in Ruxley (LawProf)

Was noted that the application of this rule also relied upon the Plaintiff/claimant ‘seeking compensation for genuine loss and not merely using a technical breach to secure an uncoveraged profit” (contrast with Ruxley!)

Question 3

Ruxley Electronics and Construction Ltd v Forsyth [DAMAGES]

general rules - measure of damages

Answer 3

FACTS: C agreed to build a swimming pool for the D in his garden. Agreed that the depth would be 7ft 6inch however when build was 1nch too short  this didn’t affect the value of the pool.

To increase the depth of the pool the estimates price was nearly $21,000 (nearly 1/3 of the total price of the pool).

RATIO: HOL held that the D was not entitled to the cost of the cure, taking into account the unreasonableness of effecting the cure and that he did not intend to cure.

1) Should compensation be paid out to include the cost of the damages where the cost is disproportionate (unreasonable) in context of the breach of damage done

• Lord Mustil emphasised that while “the test of reasonableness .. will be decisive in cases where recovery is wholly disproportionate” there was much emphasis but on the moral considerations of contract taking into consideration that finical and economic loss do not determine the value of contracted duties  example given about installing wrong coloured tiles that may have been objectively better but not to the perspective of the V.

2) Should damages be allowed if the C do not intent on using the $ to actually repair the pool (seeing as the pool is in perfectly serviceable condition)

• “intention of lack of it, to reinstate can have relevance only to reasonableness and hence to the extent of the loss which has been sustained. Once that loss has been established intention as to the subsequent use of the damages ceases to be relevant”

Points to note about Ruxley
* The plaintiffs did not benefit as a result of their breach of contract
* It was uncertain that the appellant actually intended on using the money to fix the defect in the pool

Question 4

Chaplain v Hicks [DAMAGES]

general rules - measure of damages

Answer 4

FACTS: D’s breach denied C the chance to participate in a beauty contest. D argued that nominal damages only should be awarded as any loss C suffered would be too remote and incalculable - it would be impossible to assess the chance of C winning.

RATIO: : C recovered £100 in damages for her loss of chance to win. The loss of winning a lucrative prize was a breach affording her the right to substantial, not nominal, damages. Uncertainty about whether C would have won or not does not mean C cannot recover damages, as the court can put a value on the loss of a chance (expectation damages).

Question 5

Golden Strait Corporation v Nippon Yusen Kubishika (The Golden Victory) [DAMAGES]

general rules - measure of damages

Answer 5

FACTS: A seven-year charterparty was made between the shipowners (C) and the charterers (D). D repudiated the charterparty by redelivering the ship after 3 years, which was accepted by C. 15 months later, a war broke out, and pursuant to a “war clause”, D would have been entitled to lawfully terminate due to the war had it not already been repudiated. C sued D for damages of breach of contract. Should damages be assessed at the date at which the contract ended (the acceptance of the repudiation) or should it be at the date of the trial?

RATIO: The general rule that damages should be assessed at the date of the breach is not absolute (it can be ignored where inconsistent with the compensatory principle).

Subsequent events (like wars) which affect how much money C would have made under the contract can be considered 1) When there is a contract for the supply of goods over a period. 2) When there is an anticipatory breach, which is where damages ought to be proportionately reduced where there is a real possibility for frustration in the future or if a terminating event occurred.

• Lord Bingham (dissenting) Damages should always be assessed at the date of the breach. There is a need for certainty and predictability, as people need to be able to make final settlements at an early stage rather than having an incentive to wait and speculate on future events.

Question 6

Bunge SA v Nidera BV [DAMAGES]

Answer 6

FACTS: A seller of wheat cancelled a sale contract because Russia had introduced an embargo on wheat exports. The buyer had to buy wheat from someone else at a higher price and argued the seller should compensate them for cancelling the contract prematurely

RATIO: The buyer could only recover nominal damages because the breach had not caused the loss (the contract would have been cancelled slightly later anyway, so the buyer would have suffered the same damage).

• The Golden Victory: Cannot be distinguished from this case (upheld the ruling). The principle that damages should be compensatory applied equally to a contract for a one-off sale and an instalment contract.
• “Commercial certainty is undoubtedly important, although its significance will inevitably vary from one contract to another. But it can rarely be thought to justify an award of substantial damages to someone who has not suffered any.”

Question 7

Anglia TV v Reed [RELIANCE INTREST]

recovery for precontractual expenditure /cannot prove fincial loss

Answer 7

FACTS: TV company went into contract with an actor. While they could not say the exact amount they would have got is the actor had performed, the incurred a number of prerequisite fees and claimed for wasted expenditure.

RATIO: Held (the decision of the previous court) that substantial damages should be awarded for the loss of chance

Can damages been claimed for loss of chance (when eh outcome that has been lost as a result of the breach is an opportunity to have achieved rather than any pure loss)?
* Vaughn LJ “my view is that under circumstances such as these, the assessment of damages was unquestionable for the jury … the D had lost something of monetary value

Question 8

C&P Haulage v Middleton [RELIANCE INTREST]

entered into a losing bargain

Answer 8

FACTS: C had a license with D saying he could use the D’s premises for his business but that any fixtures added to the premises could not be removed at the end of the 6 month licence. occupying premises who was unlawfully ejected but got a housing grant putting him in a better position. He claimed for expenses in making the premises suitable however was held was only entitled to nominal damages as he was in a better position that he would have been without the contract.

• If the law of contract were to move from compensating for the consequences of breach as opposed to consequences for entering into a contract, the law would run contrary to the expectations of the world of commerce
• This case is different from Anglia tv … in that while it is true that the expenditure could in a sense be said to be wasted, it was equally likely to be wasted if there had been no breach

Question 9

Omak Maritime Ltd v Mamola Challenger Shipping Co [RELIANCE INTREST]

entered into a losing bargain

Answer 9

FACTS: D repudiated a charterparty. C chose to terminate the contract, but this meant that the owners could arrange more profitable charterparties. C claimed for damages for lost expenses made in preparation for the charterparty, even though they had been entirely mitigated by the higher rate of the new charterparty

RATIO: Claim failed - only nominal, not reliance, damages could be awarded. Here, when C’s loss was entirely mitigated, there was no loss to be compensated - reliance damages would put C in a better position than he would have been in had the contract been performed. The owners have “more than recuperated” their loss here, and to “ignore the benefits” received by this mitigation would be contrary to British Westinghouse.

• How can you recover reliance damages?: C can frame his claim in terms of reliance damages, instead of expectation damages, but C’s reliance damages should only be recoverable where the likely gross profit would at least cover that expenditure. The burden is on D to show the likely profits would not at least equal C’s expenditure.

o If reliance damages were recoverable without regard to the expectation loss, D “would in effect underwrite” C’s decision to enter into the contract.

o If the contract was a bad bargain for C because his reliance expenditure was likely to exceed gross profit, D should not pay reliance damages, as his breach did not cause this loss.

What do they protect?: “The measure of loss thus compensates for the loss of bargain and in doing so takes account of the expenses the claimant would have incurred in reliance on the contract being performed.”

Question 10

Addis v Gramophone [NON PECUNIARY LOSS]

Answer 10

FACTS: C was employed as a manager by D but D fired him. C brought an action for breach of contract saying he should be compensated for the insulting manner in which he was fired.

RATIO: There are no recoverable damages for hurt feelings or emotional distress (damages for financial loss allowed). If this “objectionable” idea were allied, it would “breed barren controversies and increase costs” to allow claims for the “harsh and humiliating way in which he was dismissed”. In some cases, C could seek a tort remedy.

Question 11

Jarvis v Swan’s Tours [NON PECUNIARY LOSS]

Answer 11

FACTS: C booked a sports holiday with D, described as a “house-party” with lots of entertainment. The entertainment (and other features) were inferior compared to the brochure’s description

RATIO: J was entitled to damages including the amount he paid for the holiday and an additional sum of £60 to compensate for the disappointment he suffered. To not compensate C for this shows the judge “under-valued the loss” to C and “under-estimated the inconvenience” to him. C was compensated for “his loss of enjoyment” and “his disappointment” as his “expectations have been largely unfulfilled”.

• Lord Denning: The brochure’s statements were “representations or warranties”, so breach of them gives rise to damages.

The general rule that damages cannot be recovered for mental distress are “out of date” - nervous shock can be recovered in tort, so mental distress should be recoverable in contract.

• It is “difficult” to assess mental distress, but “it is no more difficult than the assessment in which the courts have to make every day in personal injury cases”.

Edmund Davies LJ: D did not limit themselves to providing a package holiday but “assured and undertook to provide a holiday of a certain quality”.

Question 12

Ruxley v Forsyth [NON PECUNIARY LOSS]

Answer 12

FACTS: C paid D £17,000 for a swimming pool to be 7’6 deep, but it was 6’9 deep. This was perfectly acceptable for diving. The cost of cure would have been £21,000. There was no difference in value so the diminution in value would have been £0. A question of “everyday practical importance”.

RATIO: Loss of amenity damages for non-financial were awarded for £2,500 (but they have to be restrained and modest). It suffices that the provision of peace of mind or the prevention of distress is an “important object” of the contract [but need not be the “predominant” object - less stringent than Watts].

• Loss of amenity damages: Damages awarded where “the value of the promise to the promisee exceeds the financial enhancement of his position which full performance will secure” - where there is “consumer surplus” which is incapable of “precise” monetary valuation as it is “a personal, subjective and non-monetary gain”. The pool served its “practical purpose” but C lost “amenity, convenience or aesthetic satisfaction”.

Why were they awarded here? –> Without them, D would “escape unscathed” as they would only have to show the “average potential buyer” was satisfied, which would “make part of the promise illusory, and unbalance the bargain”. “It would be equally unreasonable to deny all recovery for such a loss”.

Question 13

Watts v Morrow
[NON PECUNIARY LOSS]

Answer 13

FACTS: C instructed D to survey a house. D found the property to be in good condition. C purchased the property and had to spend £33,000 to fix its defects. C sued D for the cost of repair work and further damages for the distress of having to live on a building site.

RATIO: C recovered damages for the excess price paid in reliance on the report but not the cost of conducting the repairs as the proper measure of damages was to put C in the position he would have been in if the report had been correctly prepared - the loss suffered was the difference in value as presented and the actual value. Modest damages for physical discomfort awarded

• Damages for mental distress: “A contract breaker is not in general liable for any distress which his breach of contract may cause to the innocent party”

o Exception #1 (“the exceptional category”): “Where the very [“sole”] object of the contract is to provide pleasure, relaxation, peace of mind or freedom from molestation” and this is not met.

o Exception #2 (cases not within “the exceptional category”): Where “physical inconvenience and discomfort” is caused by the breach, with damages recoverable for “mental suffering directly related to that inconvenience and discomfort”.

The current case: Does not fall under exception #1 as there was no express or implied promise for the provision of peace of mind or freedom from distress (an ordinary surveyor’s contract does not fall under this). Damages recoverable under exception #2.

Question 14

Farley v Skinner [NON PECUNIARY LOSS]

Answer 14

FACTS: D, a surveyor employed by C, told C the property he wanted to buy would be unlikely to suffer from aircraft noise, after C specifically requested such a survey. C bought the house and spent money on improving it, but it was very noisy from aircraft. The breach did not cause a diminution in value of the house and C did not pay more than the property was worth initially.

RATIO: C was entitled to damages for loss of enjoyment caused by the noise. This was because C asked for a specific assurance. Three “alternative” lines of reasoning as to why damages were recoverable here to compensate C for the “real discomfort” he suffered. Damages for mental distress of £10,000 given.

1. Ruxley v Forsyth approach: C was deprived of the contractual benefit he was entitled to - to find out about the noise. The “information clearly had a value to him”, as he would not have bought otherwise. Damages awarded by placing a value on this deprived benefit.
2. Watts v Morrow (exception #2) approach: C suffered physical discomfort as consequential loss from the breach. D should have reasonably contemplated that C made his decision to buy based on the report about aircraft noise.
3. Watts v Morrow (exception #1) approach: “But it is possible to approach the case as one of the exceptional kind in which the claim would be for damages for disappointment”. C was entitled to damages for loss of enjoyment caused by the noise because a “major or important part of the contract” (in this case, it was the “raison d’être”) was to provide enjoyment or peace of mind [or to prevent mental distress] - “peace and tranquility”.

Question 15

Hamilton Jones v David & Snape [NON PECUNIARY LOSS]

Answer 15

FACTS: C hired D, a solicitor’s firm, to notify the passport agency that her children should be on her passport, to avoid her ex taking the children back to Tunisia. D failed to do so and the ex took the children. C sued D for the mental distress she suffered from losing her children.

RATIO: : Damages for mental distress awarded per Watts and Farley. Although “the sole purpose of the instruction” was not to stop the children being taken (/providing peace of mind), it was a “significant part” of C instructing D, and C “made it clear” she was “obsessed” with this happening.

• “The question of whether or not damages are recoverable for mental distress in favour of a claimant in professional negligence proceedings is, at least to a significant extent, a matter of policy”.

There has been a recent tendency to increase the number of exceptions to Addis.

Question 16

Hadley v Baxendale [RESTRICTIONS - REMOTENESS]

Answer 16

FACTS: C had a mill and it was bought to halt due to damage. C engaged D to transport part of the mill to get it fixed. D was delayed in breach of contract so that it was delivered several days too late, this resulted in the mill being kept idle for longer. C sought damages for loss of profits for those days.

RATIO: D had not reasonably foreseen the consequences of the delay as such a loss would not have “flowed naturally … [in] ordinary circumstances”

Est. new 2 point rule for remoteness of damage:

Limb #1: where 2 parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract “should be such as may fairly and reasonably considered either;

a) aspiring naturally (accordioning to the usual course of things)

b) or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach

Limb #2: If the special circumstances under which the contract was actually made were communicated (and was known by bother parties) the damages resulting from the breach of contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from the breach of such contract under these special circumstances so known and communicated

 now if the circumstances were wholly unknown this doesn’t apply (this is the case for majority)

Question 17

Victoria Laundry (Windsor) v Newman Industries [RESTRICTIONS - REMOTENESS]

Answer 17

FACTS: C’s (lauders and dryers) decided to expand business and contracted to buy a new boiler. The D knew that the boiler was needed for immediate use however delivered it 5 months late. C sought damages for loss of profit during the requisite months.

RATIO: To be recoverable, the loss must be “reasonably foreseeable as liable to result from the breach” at the time of the contract, “where it suffices that, if D had considered the question, he would as a reasonable man have concluded that the loss in question was liable to result”

2 alternative types of loss were claimed
a) Ordinary loss for profit –> for the new customers they could have taken on if they had been able to use the boiler
b) Exceptional loss for profit –> the highly lucrative dyeing contracts they could have taken on

Held to be liable for the general loss but not for the loss of the highly lucrative dryer. On application of Hadley v Baxendale the ordinary loss of profits was not too remote albeit that the exceptional loss of profits was. (a accepted, b rejected)

• It is not needed that a reasonable man must foresee “that a breach might necessarily

Question 18

C Czarnikow Ltd v Koufos (The Heron II) [RESTRICTIONS - REMOTENESS]

Answer 18

FACTS: C chartered sugar to Basrah where the sugar was to be sold. The sugar arrived late by 9 days and in the 9 days the price of sugar had sharply fallen. D did not know that C intended to sell the sugar immediately and only knew that there was a market for the sugar in Basrah.

• C sued D for breach of contract claiming damages that were inclusive of the loss of profits from the sale in Basrah

RATIO: The loss in profits was in this case sufficiently likely to be recoverable in damages: a reasonable person would have contemplated that loss due to fluctuations in the market price was likely to result from the breach.

• How likely must it be for a loss to result from the breach of contract to be recoverable  For loss to be recoverable, there must be a ‘serious possibility’ of it resulting from the breach
• Discrepancy as to what phrase to describe the threshold of reasonable foreseeability with terms like ‘not unlikely’, ‘serious possibility’ and ‘liable to result’ being used with varying degrees of agreement between the different judges however seems clear that ‘on the cards’ was rejected.

Question 19

Parsons (livestock) Ltd v Utley Inghams & Co Ltd [RESTRICTIONS - REMOTENESS]

Answer 19

FACTS: Farming company bought a container for storing pig feed from the D. When installing the container, D neglected to open the ventilator at the top. Due to lack of ventilation the feed grew mouldy and 200 pigs died from ingesting the feed.

C sued for breach of contract and loss for the profits, however D argued that the loss of the profits was too remote.

RATIO: Substantial damages were awarded: the loss of profits was not too remote. D “ought to have reasonably foreseen” the pigs becoming ill from eating mouldy food was a “serious possibility”. The fact the illness was “a far worse illness than could have been then been foreseen” was not relevant as “the type or kind of damage was foreseeable even though the extent of it was note”

1) The extend of loss need not be reasonably foreseeable, any extent of loss is recoverable if it is of the same type as what was reasonably foreseeable
2) The majority decided that there should be no distinction between the types of loss in contractual damages (Lord Denning dissenting on this point)

On Victoria Laundry: difficult to reconcile the distinction between loss in ordinary profits and loss in exceptional profits drawn in Victoria

• Wellesley v Withers contents that there was a difference: that the lucrative contracts of Victoria were fundamentally different from the higher risk type of contract and loss

Question 20

Transfeild Shipping Inc v Mercator Shipping (The Achilleas) [RESTRICTIONS - REMOTENESS]

Answer 20

FACTS: Chartered (D) was meant to redeliver the ship to C but was late. The owners (C) had entered into a follow-on time charter with a 3rd party beginning before the time when the boat was in actual fact returned. This had to be renegotiated to a lower price due to a fall in the market price.

C sued D for the difference ($8000) daily for the whole period which totalled to 1.3 million. D accepted liability only for the period of difference between the dates overrun which was only $158,000.

RATIO: C could only recover losses for the difference between the market and charter rates of hire for the nine-day delay.  Two different justifications were given as to why the losses couldn’t be recovered a) the (new) assumption of responsibility test and b) the orthodox test (Hadley)

Assumption of responsibility view (Lords Hoffmann and Hope):
 suggests no longer sufficient to simply show that the loss which has been suffered is a reasonably foreseeable consequence of the breach

Orthodox view (Lord Rodger and Baroness Hale):
Applying Hadley: The loss from the delay would have been within the parties’ reasonable contemplation, but neither party would “reasonably have contemplated” that the delay “in the ordinary course of things” would cause losses on the time-charter.

Commentary: Confliction as to how the law should ascertain remoteness of damage: if it should use the Hadley test “the ordinary course” etc or if it should base it on the extent to which the parties assumed responsibility.

Question 21

Sylvia Shipping Co Ltd V. Progress Bulk Carriers Ltd (The Sylvia) [RESTRICTIONS - REMOTENESS]

Answer 21

FACTS: S appealed against a decision of arbitrators awarding damages to P. S chartered its vessel to P. P had entered into a sub-voyage charter but the vessel was discovered as damaged, so the sub-charter was lost. P sued S for failing to keep the boat ship-shape and for their loss of profit

RATIO: The loss was not too remote. Using the orthodox approach, such a loss was within the first limb of Hadley.
* The ‘unique features’ of The Achilleas were not applicable in this case (distinguished). There were no general market expectations, no extreme volatility and disproportionate liability otherwise (a sub-charter could not be longer than a time charter itself).

Hamblen LJ tried to distinguish the ratio of the Achilleas from the orthodox approach of Hadley by saying that the Achilleas was only for ‘unusual cases’

Question 22

John Grimes Partnership Ltd v Gubbins [RESTRICTIONS - REMOTENESS]

Answer 22

FACTS: D was developing a property to be sold and was required by local authority to construct a road to be taken over by the local authority. C was contracted design road but failed to deliver resulting in D being unable to obtain permission from local authority to construct the property. When finally completed there was a fall in the market prices and D suffered a large loss as a result.

RATIO: C was liable for the loss from the fall in market price = the loss was reasonably foreseeable and there was no evidence that there had been no assumption of responsivity

• “If there is no express term dealing with liability for the types of losses from the breach , then the law in effect implies a term to determine the answer. Normally there is an implied term accepting the responsibility for type of losses which can reasonably be foreseen at the time of the to be not unlikely to result if the contract is broken. But if there is evidence that in a particular case that the nature of the contract and the commercial background, or indeed other relevant special circumstances, render that assumption inappropriate for that type of loss”

–> this attempted to rationalise both the orthodox and AoR approach on the basis that they are both ways of giving effect to the intentions of the parties: the default rule is the orthodox approach and parties can contract into AoR instead to either expand or restrict the liability

Question 23

Supersheild Ltd v Siemens Building Technologies [RESTRICTIONS - REMOTENESS]

Answer 23

FACTS: The contractor (D) installed a water take for a fire sprinkler system in C’s building. There was a fault in the valve and the water over flowed causing extensive damage. Further there was a clog in the drain which meant that extensive damage to the building occurred. C sued D for breach of contract and damages.

RATIO: As the D had assumed responsibility for the damage, so it was recoverable.

• The test of assumption of responsibility in Transfeild can extend the scope of loss recoverable beyond was is reasonably foreseeable  was the damage to the building a recoverable expense

Relationship between Hadley and Transfeild:
Hadley is the standard rule but maybe overridden if the necessitated by the contractual or commercial backgrounds and if the loss in question was without or outside the scope of the contractual duty.

Transfeild may override this stance rule by making
a) Loss that would be recoverable under Hadley too remote; or
b) Loss that would be nonrecoverable not too remote

 on proper analysis of the contract against ins commercial background, the loss within the scope of the contractual duty, the loss will not be too remote to be recovered even if the loss of that kind would not have occurred in ordinary circumstances

Question 24

Wellesley Partners Ltd v Withers LLP [RESTRICTIONS - REMOTENESS]

Answer 24

FACTS: The D a solicitors form were hired to draft a partnership agreement for W partners (c) a head-hunter for investment banks. D negligently drafted the agreement so it allowed investors to withdraw funds within the 1st 41 rather than 42 months. When an investor withdrew after 12 moths C lost opportunity to expand the business.

RATIO: The remoteness test should be applied to both claims (contract and tort and applying the test, the loss was not too remote: D can be taken to have assumed responsibility for the type of loss  the fact that the extend of loss cannot be predicted at the contract date does not lead to a contrary finding

• The assumption of responsibility test in Transfelild and SAAMCO re not the same ‘not least because the first depends on the individual circumstances surrounding the making of a contract and the second on the purpose of the rule imposing the tortious duty’
• It makes no sense for concurrent duty in tort to disturb the consensus of the parties as to the type of loss that they hold each other to be responsible for, particularly given that the tortious duty arises from the contract

Question 25

AG of the Virgin Islands V General Water Associates [RESTRICTIONS - REMOTENESS]

Answer 25

FACTS: C entered into 2 contracts with the gov (d) =
1) a design and build agreement for a water reclamation and treatment plant (DBA)
2) and a management, operation and maintenance agreement to run it for 12 years following the completion of the build (MOMA)

D failed to provide a prepared site which contrary to contract meant the build could not go ahead. C terminated the DBA and claimed damages for breach of contract, including the profit it would have earned under the MOMA.

RATIO: Both DBA and MOMA damages could be collected. In this case the MOMA profits were in contemplation and there was no express term in the DBA which limited gov liability in the case where the have to pay damages

• “The influence of this cases lies not in so much in the application of these principles but the facts of the case but in the emphasis given by the Privvy Council to the traditional tests laid out such as the Heron II and Victoria Laudnries in preference to the Achilles”

Question 26

British Westinghouse v Underground Electric Railways [RESTRICTIONS - MITIGATION]

Answer 26

FACTS: C were in breach of contract by supplying D with defective turbines. D replaced them with turbines that were even more efficient than the one’s lost, the savings from these exceeded an expenses from the defective turbines.
* C claimed for sums owed under contract and D counterclaimed for breach of contract

RATIO: C could not claim for the cost of the new turbines. In assessing damages, the loss sustained had to be balanced against any gain to them arising out of mitigation. C was not bound to buy the new machines, but as they did so, their consequential gain in profits had to be considered. The savings exceeded the cost of the machines. If the mitigation means the plaintiff does not actually suffer damage from the breach, they cannot recover. To say otherwise would be to divert from the compensatory principle.

• Mitigation “imposes on a plaintiff the 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”.

o This is only an obligation to take steps which a “reasonable and prudent man” would “ordinarily take in the course of business”.

Question 27

Gloablia Business Travel v Fulton Shipping [RESTRICTIONS - MITIGATION]

Answer 27

FACTS: Charters (D) redelivers the vessel to the owners (c) 2 years before the charterparty was to ended, a repudiation accepted by C. C then sold the vessel for $23.7 mil. C sued for breach of contract seeking the loss of profits from the remaining 2 years of charterparty. However had the vessel been sold at the end of the charterparty it would have only been worth 7 million.

RATIO: Damages should be awarded for the loss of profits D were not entitled to take into account the avoidance of the diminution in capital value of the vessel.

• The fall in the value of the vessel was irrelevant as it was not proven that the “benefit to be bought into account” was “caused by the breach of the charterparty or by a successful act of mitigation”. There was no causal link were as the ships sale was merely an exercise of proprietary rights enjoyed “independent of the charterparty and independent of its termination”

Question 28

Barclays Bank Plc v Fairclough Building Ltd [RESTRICTIONS - CONTRIBUTORY NEGLIGENCE]

Answer 28

FACTS: Building contract (D) failed to take proper precaution in cleaning the roofs of its hirer (Barclays). This caused an asbestos contamination which necessitated remedial work.

• When C sued for breach of contract, D alleged that C failed to supervise the work and thus damages should be reduced for contributory negligence

RATIO: Contributory negligence does not reduce contractual damages;

• Contributory negligence is not a defence for damages founded on a breach of strict contractual obligation  but where the breach of contract is the same and coextensive with an independent tort liability defence of contributory negligence would apply (however this was not the case)

Question 29

Primeo Fund v Bank of Bermuda
[RESTRICTIONS - CONTRIBUTORY NEGLIGENCE]

Answer 29

FACTS:

RATIO:

Question 30

AG v Blake [ACCOUNT OF PROFITS]

Answer 30

C recovered all profits made by D from breach of contract to not write about his spy experience. This was only in an “exceptional circumstances” and where i) the other contractual remedies are not “adequate” and ii) where C has a “legitimate interest in preventing D’s profit-making activity and, hence, in depriving him of profit”.

 Account of profits will only be available where all other contractual remedies are inadequate: the C must have legitimate interest in preventing the D from retaining the profits and a court must have regard to all the circumstances of the case

• Morris-Garner: Depriving D of profits made as a result of breach only occurs in “exceptional circumstances, following” Blake.
• Turf Club Auto [2018], CA of Singapore: Blake was “truly exceptional” because there was a public interest (national security) in recovering profits.

Question 31

One Step (Support) Ltd v Morris-Garner [NEGOTIATING DAMAGES]

Answer 31

Negotiating damages are assessed by reference to the amount which C might reasonably have demanded from D as a quid pro quo for permitting D to breach the bargain. Constructing a hypothetical bargain where both parties are assumed to act reasonably - objective assessment of loss.
* When will negotiating damages be awarded?: “Where the loss suffered by the claimant is appropriately measured by reference to the economic value of the right which has been breached, considered as an asset”, which may occur where the breach “results in the loss of a valuable asset”.

• Valuable asset (Lord Reed): Contractual rights to control the use of land, IP or confidential information. But why does a simple contractual breach not apply? Lord Reed said it would be “going too far” to say a simple contractual breach may never apply, even though it was “not easy” to envisage.

Question 32

Turf Club [2018], CA Singapore [NEGOTIATING DAMAGES]

Answer 32

Alternative approach to awarding negotiating damages: i) The court must be satisfied orthodox remedies are unavailable. ii) Generally, there must have been in substance and not in form a breach of a negative covenant. iii) The case must not be one where it is irrational to expect the parties to bargain (hypothetically) for the release of the covenant. Here, a non-compete covenant did not entitle C to negotiating damages.

• Criticisms of Morris-Garner: i) It is uncertain what counts as a “valuable asset. 2) It is strange to confine negotiating damages to cases “involving the abstraction or invasion of property and analogous rights”.

Question 33

Dunlop v Pneumatic Tyre [PENALTIES]

agreed damage clauses

Answer 33

FACTS: The contract between C and D contained a clause preventing D from selling the tyres below list price. D did so and C sought to enforce the specified sum in the contract.

RATIO: : The clause was a liquidated damages clause, not a penalty clause, so was enforceable. “The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage” - whether a party calls it a penalty or not is inconclusive. The clause was not “unreasonable, unconscionable or extravagant”.

Lord Dunedin’s four test:

1. The provision is penal if the sum is “extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach”.
2. The provision is penal if the breach consisted only in the non-payment of money and it provided for the payment of a larger sum.
3. There is a “presumption (but no more)” that a clause is penal if it was payable due to “the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage.”
4. A clause would not be treated as penal just because of the impossibility of precisely pre-estimating the true loss.

Question 34

Triple Point technology inc v PTT Public Co Ltd [PENALTIES]

Answer 34

What is a liquidated damages clause?: “A clause in a contract which stipulates what amount of money will be payable as damages for loss caused by a breach of the contract irrespective of what loss may actually be suffered if a breach of the relevant kind (typically, delay in performance of the contract) occurs.”

Purpose #1: It avoids disputes in figuring out what loss has been suffered.

–> Lady Arden: “Parties agree a liquidated damages clause so as to provide a remedy that is predictable and certain for a particular event”.

Purpose #2: It limits the contractor’s liability “of an otherwise unknown and open-ended kind, while at the same time giving the employer certainty about the amount that it will be entitled to recover as compensation”.

Question 35

ParkingEye Ltd v Beavis [PENALTIES]

Answer 35

FACTS: A operated a car park, where parking was free for two hours and overstayers were charged £85. A argued the clause was unenforceable as it was a penalty.

RATIO:
The penalty charge could not be characterised as consideration for parking (and therefore a primary obligation) because it was imposed for breaches other than overstaying.

• The £85 is not a genuine pre-estimate of damages and it was a deterrent (to people overstaying). There was a “legitimate interest” as they i) wanted to enable the efficient use of space in the car park and ii) have an income stream. Found it also to be a reasonable and fair sum, as many people used the car park despite the charge (and they could park elsewhere) [is this conclusive? How does it protect Cs with no practical alternative?]
  o However, they could not charge “a sum which would be out of all proportion to its interest”.

Question 36

Cavendish Square Holding BV v Talal El [PENALTIES]

Answer 36

Facts: A entered into an agreement to acquire shares in B. A agreed to refrain from competing with B’s business. If A defaulted, B could withhold payment of a significant chunk of consideration (c5.1) and exercise a call option forcing him to sell his shares at a fixed lower price (c5.6). A argued the clauses were unenforceable as they were penalties.

The difficulty in applying Lord Dunedin’s test led some judges to apply an alternative test of “commercially justifiable” 

Test to apply to decide if a clause is agreed damage or is penalty:
* It is penal NOT is it a pre-estimation of loss
* A deterrent provision in a contract is simply one species of provision designed to to influence the conduct of the party potentially affected. It is no different in this respect from a contractual inducement … the question of enforceability should depend on whether the means by which the contracting party’s conduct is to be influenced are ‘unconscionable’ or ‘extravagant’ by reference to some norm (Lord Neuberger/Sumpton)

 In judging what is extravagant, exorbitant or unsconciousable, I consider that the extent to which the parties were negotiating at arms length on the basis of legal advice and had every opportunity to appreciate what they were agreeing must at least be a relevant factor”