Damages & Specific Performance Flashcards
Definition
Purpose
What must be proved for it to succeed?
Remoteness of damages.
A sum of money paid by the defendant to the claimant once liability is established in compensation for the harm suffered as a result of the breach.
Damages are compensatory in nature not punitive. The purpose of damages is to put the claimant in the position he would have been in had the contract been performed.
In order for a claim of damages to succeed, the claimant must show the loss was caused by the action/inaction of the other party.
Remoteness of damage: Breach must result from something which may be reasonably considered as arising naturally from the breach and must have reasonably been in the contemplation of the parties at point of formation of the contract.
*Monarch Steamship Co. Ltd. v Karlshams:
K contracted M to deliver goods to a specific port and owing to the unseaworthiness of the vessel, it did not arrive at the port before the outbreak of WWII. The British Admiralty prohibited the vessel from continuing and K sued for breach.
M argued their obligation to fulfil the delivery was only valid if they were permitted passage by the British Gov and the delivery was prevented by Admiralty orders which they were obligated to obey. The war risk clause contained in the contract absolved them of liability if war broke out and the unseaworthiness of the vessel was not causative in the failed delivery. K argued the unseaworthiness of the vessel was causative in the failed delivery as M knew of the problems with the vessel and, but for the delay caused by repair work, the vessel would have fulfilled the delivery before war broke out. Further, they couldn’t rely on the war clause because the breach occurred before war broke out causing the delay and necessitating chartering a neutral ship to transport the cargo. The inclusion of the war clause proved both parties contemplated the possibility of war.
K succeeded because the effective cause of the delay was the condition of the vessel and in light of the international conditions at the material time, they should have foreseen that war may break out causing the loss or diversion of the ship. War did not break the chain of causation and K could recover the cost of chartering the neutral ship.
*Hadley v Baxendale:
A mill owner ordered a replacement crankshaft for his mill and contracted the carrier to deliver it. The mill was inoperative at the time and the carrier who was unaware of the importance of prompt delivery was late with delivery. The mill owner sued unsuccessfully as the carrier was unaware of his need for expediency.
The test for remoteness of damages was established in this case:
For damages to succeed, the loss must naturally arise from the breach.
Both parties must have it in their contemplation before entering into the contract.
If there exist circumstances that may result in loss, it must be communicated to the other party for damages to apply upon breach.
*Victoria Laundry Ltd v Newman Industries:
N who had been contracted to deliver a boiler to V was 5 months late with the delivery and V sued for loss of its usual profit of 16 pounds per week from the date of the breach. V also sued for profits lost from a gov contract that they would have secured had the boiler been delivered on time. They succeeded on the first point because this was a natural consequence of the late delivery. However, on the second point, they failed because N hadn’t any prior knowledge of the contract at the time the contract was formed.
Asquith LJ put forward the following points on the issue of remoteness:
It would be too harsh to give the claimant complex indemnity for any loss suffered no matter how remote.
As a result, loss recoverable should be measured against a test of reasonable foreseeability.
Foreseeability of loss itself is dependent on knowledge at the time of formation.
Knowledge can be of two types: common knowledge and actual knowledge.
Knowledge can be deduced also on the basis on what the reasonable man may have not must have contemplated in the circumstance.
*British West House Electric & Manufacturing Co. Ltd. v Underground Electric Railway Co. London Ltd:
*Duty to mitigate.
A contract for the supply of replacement turbines. The turbines supplied did not match specifications and the claimant had to source it from another supplier. The replacement turbine was so effective that it soon paid for the price difference. As a result the claimant could not claim damages for the price difference but was allowed to claim for losses sustained before the original was replaced. Lord Haldane LC said the claimant had a duty of taking all reasonable steps to mitigate the loss consequent on the breach which debars him from claiming in respect of any part of the damage which is due to his neglect to take such steps.
*Patrick Massquoi v The Bank of Sierra Leone: Mr. Massaquoi sued the bank for breach of employment contract and sought damages for all he would have gained had the contract been honoured. Since, had he maintained his employment he would have been entitled to: wardrobe allowance, leave allowance, salaries etc, the court ordered all these to be paid to him as if he was never terminated.
*Freetown Cold Storage v Bright Construction & Flower Garden Contractors: B had been hired to maintain the grounds of the FCS premises. Following termination by FCS halfway through performance, B sued for damages. CA held for B and ordered damages be paid to him.
*Patrick Massquoi v The Bank of Sierra Leone:
Mr. Massaquoi sued the bank for breach of employment contract and sought damages for all he would have gained had the contract been honoured. Since, had he maintained his employment he would have been entitled to: wardrobe allowance, leave allowance, salaries etc, the court ordered all these to be paid to him as if he was never terminated.
*Freetown Cold Storage v Bright Construction & Flower Garden Contractors
B had been hired to maintain the grounds of the FCS premises. Following termination by FCS halfway through performance, B sued for damages. CA held for B and ordered damages be paid to him.
Differences b/w Special & General Damages
General damage is a type where the amount claimed has not been quantified (also referred to as unliquidated damages) whereas special damages are of a type where the amount being sought has been quantified to a particular sum (liquidated damages).
An example of Liquidated damages is where the party sues for severe distress for which one cannot compute a specific amount.
The distinction is important because when a party sues for damages for breach, he can choose from either or both. If the claim relates to a specific sum that the party can prove, he will claim for special damages. If he cannot prove with specificity the damages suffered, he may leave it to the court to assess and determine the sum so he will claim general damages. Sometimes, the claim will be for both.
*Castrol v John Michael Motors Ltd:
C & J had been in business with each other for about 14 years with J being C’s distributor and sole agent in SL. In 1984, C informed J they would be using another agent Datsun Motors due to poor sales. Due to the length of time they’d been dealing with each other, J being the reason C was so well known and J had spent significant sums over the years on ads, J was going to be making a loss if C did not give them at least 12 months’ notice which would allow them to recoup some of the ads funds. C refused to extend the notice period because they had a poor share of the market.
J brought an action in the HC claiming that in the absence of an agreed notice period, the termination should come with a reasonable 12 months’ notice rather than the 3 months C was insisting on. They also claimed breach special damages amounting to 240,000 GBP.
The trial judge held in favour of J that indeed the 12 months’ notice was appropriate in the circumstances but refused the special damages claim instead altering it to 200,000 GBP for general damages. He also allowed J’s action against Datsun Motors. On appeal by C, the CA agreed with the trial judge.
At the SC, the rules in Hadley v Baxendale were applied, ruling that the loss or breach must’ve arisen as a natural consequence of the breach. The breach here was held to be C giving 3 months’ notice in terminating a 14 year agreement when they ought to give J 12 months.
Where a party claims for special damages, it must be specifically pleaded (itemising their losses by providing receipts, invoices etc) and strictly proven. J had adduced balance sheets for a range of years to support their claim. However, following the court’s assessment, it was held that J had not sufficiently proven that they were entitled to the 20,000 GBP and was instead awarded 1,000 Leones plus a 30% interest at the time of the claim to the time of the judgement as this was what the court believed they would have lost as result of the breach by C.
Definition of Specific Performance
How is it normally applied?
This is an equitable remedy meaning it is not available as of right and will only be granted where an award of damages is insufficient in the court’s view. It is completely at the court’s discretion and will only be applied where the court can supervise its order. It is an order for the defaulting party to perform his obligations under the agreement. As with all equitable remedies “he who comes to equity must come with clean hands” meaning the claimant must abide by the principles of equity: fairness, good conscience, you must not delay because delays defeat equity etc.
It is usually applied where the subject matter constitutes antiquated (very old) or ostentatious (luxury) goods or in the sale of land (as the innocent party may only want the land he contracted for and he cannot replicate its location or geography with proceeds from damages). These are types of goods that have gained so much value that even if damages are awarded it would not be sufficient for the claimant to recover.
*Cohen v Roche:
C owned a furniture shop and contracted with R to purchase Hepplewhite chairs which R refused to deliver. C sued for damages and specific performance for the delivery.
The court held that this was not a situation where it ought to exercise its discretionary powers of ordering SP and damages would suffice. The chairs were of such quality that it is possible for C to source the chairs from another supplier.
The courts are also unlikely to grant SP for contracts of personal services as the court cannot supervise the execution of the services.
