Performance, Breach and Remedies Flashcards
Hadley v Baxendale (1854)
Remoteness- reasonable foreseeability test
Not possible to recover lost profits – D could have expected the claimant to have had a replacement for use in the meantime
two limb test:
- loss foresseable in the ordinary course of things (imputed knowledge)
- loss foreseeable bc special cirmstances brought to the attention of the defendant ? (actual knowledge)
Alderson B:
“the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, 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 of it”
=> what losses could the defendant reasonably contemplate as likely to result from a breach of the contract?
Claimant owned a corn mill – shaft broke;
Manufacturer of new shaft needed the broken shaft to ensure that it would fit into the existing engine/mill;
Claimant engaged the defendant carrier to take the broken shaft to the manufacturer;
Defendant delivered late = caused the mill to be at a standstill for an additional 5 days => Loss of profits.
Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd [1949] 2 K.B 528
remoteness - reasonable foreseeability
Held: C could recover damages for losses flowing from the inability to run business as usually but not the loss linked to the impossibility to perfom a lucrative contract.
D agreed to deliver a boiler to C’s laundry business. However (in breach of contract) D delivered the boiler five months late.
C was unablle to run the business ant full capacity and consequently lost their profirs on ‘its ordinary business’
C lost pofits for a lucratiuve contract with the ministry of Supply
British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Rlys Co Ltd (no 2) [1912]
mitigation - limitations on compensatory damages
The standard of reasonableness that must be attained is relatively low: there should be a “tender approach to those who have been placed in a predicament by a breach of contract”(Tomlinson J in Britvic Soft Drinks Ltd v Messer UK Ltd [2002]) = The most that is expected is that you do what is reasonable in the circumstances rather than what is possible
= A claimant cannot recover damages for losses which he could have reasonably avoided
held: The losses from breach of contract had been entirely mitigated by the more efficient replacements
C were in breach of contract with D by supplying defective turbines
D replaced them with turbines which were more efficient than D’s turbines even if working
The savings from the new turbines had exceeded the losses from the defective turbines
C claimed for sums owed under contract and D counterclaimed for breach of contract
Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48
test for remoteness
This test was marginalised in Att-Gen of the Virgin Islands v Global Water Associates Ltd [2020]
The House of Lords suggested a refined version of the remoteness test to be used to determine what losses are recoverable in The Achilleas [2008] : Instead of asking what losses the defendant could reasonably have contemplated, Lords Hoffmann and Hope asked what losses the defendant (could reasonably be understood to have) assumed responsibility for. Lord Hoffmann thought this followed simply from the nature of contractual obligation:
the HoL found for D
Charterer (D) was bound to redeliver the ship to the ship owner (C) on 2 May, but delivered it late on 11 May
Owners had entered into a follow-on time charter with a third party beginning on 8 May, which due to the delay had to be renegotiated to a lower price due to fall in market price
Dispute
C sued for the difference in price of $8000 daily for the whole period of the new follow-on charter which comes up to $1.3m
D accepted liability only for the difference between price during the overrun period from 3 May to 11 May, amounting to $158,000
Arbitrators found for C on the basis that the loss was foreseeable under Hadley v Baxendale, although it was against the market expectations of the parties that D be liable for such loss
Attorney General v Blake [2001]
Gain-based damages - account of profit
. The HoL allowed disorgement of prfits but emphasied that an account of profits will only be appropriate in exceptional circumstances. That is circumstances where:
Ordinary remedies for breach are inadequate (on the facts injunction no longer available after publication + no loss, sensitive info does not have market value).
The injured party has a ‘legitimate interest in preventing D’s profit-making activity’
Blake was British double-agent for the Russian KGB. After being sentenced to prison, he escaped and fled to the Soviet Union. While in exile, Blake published his autobiography. The publisher paid Blake £60,000 under the deal, with an agreement to pay a further 90,000 pounds. Blake’s contract of employment with the government contained an express undertaking obliging him not to “divulge any official information”=> breach of contract
Government unable to prove any loss:
oToo late to stop publication
oBy the time of publication the secrets were no longer confidential
oThe interest of the Crown in preserving the confidentiality of sensitive information did not have a market value
Instead the government sought disgorgement of the £90,000 unpaid profits.
Wrotham Park Estate Co Ltd v Parkside Homes Ltd
Negotiating damages - gain based damages
Damages quantified as a reasonable sum that the promisee could have demanded for the relaxation of the covenant – 5% of profits
: houses built on a plot of land that was adjoining the land of the promisee in breach of restrictive covenant and made a profit
Demolishing houses: no, waste of useful properties
Morris Garner v One Step [2018]
availability of negotiating damages - restitutionary or compensatory
SC looks at availability of negotiating damages
When are negotiating damages available? Can they be claimed in the alternative to the standard compensatory damages?
ØWhen will a BoC result ‘in the loss of a valuable asset created or protected by the right which was infringed’?
Lord Reed at [92]: cases falling in this category are ‘the breach of a restrictive covenant over land, an intellectual property agreement or confidentiality agreement’
Held: C is not free to elect to receive negotiating damages in all cases of BoC (on the facts none awarded)
ØWhere the claimant’s interest in the performance of a contract is purely economic, and he cannot establish that any economic loss has resulted from its breach, the normal inference is that he has not suffered any loss. In that event, he cannot be awarded more than nominal damages
ØCommon law damages for breach of contract cannot be awarded merely for the purpose of depriving the defendant of profits made as a result of the breach, other than in exceptional circumstances, following Attorney General v Blake
=>No negotiating damages award on the facts
=> The substance of the claimant’s case is that it suffered financial loss in the form of lost profits and goodwill. Though difficult to quantify, this is a familiar type of loss, which can be quantified in a conventional manner. The claimants did not suffer the loss of a valuable asset created or protected by the right which was infringed.
Facts: Defendants used to own and run One Step, a company which provided living services to children leaving care and vulnerable adults. They entered into a contract to sell One Step to the claimants, which contained restrictive covenants not to compete with the business or solicit its clients/customers. Unbeknown to One Step, the defendants had already set up a rival business, called Positive Living, and had breached the covenants by operating in competition and poaching clients/customers. One step sought negotiating damages even though they could demonstrate loss of profits from the breaches – that’s because negotiating damages would have resulted in a larger sum. Defendants argued that negotiating damages should only be available where the defendant has suffered no conventional financial loss.
Hochster v De la Tour (1853) 2 E & B 678
breach of contract
Held:
Where one party communicates their intention not to perform the contract, the innocent party need not wait until the breach has occurred before bringing their claim.
=> Breach can occur at the time of the promised performance or before the due date for performance
The claimant agreed to be a courier for the defendant for 3 months starting on 1st June 1852. On the 11th May the defendant wrote to the claimant stating he no longer wanted his services and refused to pay compensation. The claimant obtained a service contract elsewhere but this was not to start until 4th July. The claimant brought an action on 22nd May for breach of contract. The defendant argued that there was no breach of contract on 22nd May as the contract was not due to start until 1st of June.
Anglia Television v Reed [1971] 3 All ER 690
expectation damages
Why/when would an injured party seek reliance damages as an alternative to expectation damages? (Anglia Television v Reed [1972])
- Where he cannot prove his loss of profit
- Where he has entered into a bad bargain! Expenses higher than the profits (but the courts do not allow this see C&P Haulage v Middleton [1983] )
“It is not the function of the courts where there is a breach of contract … to put a plaintiff in a better financial position than if the contract had been properly performed”
Held:
Whilst damages generally seek to put the parties in the position they would have been in had the contract been performed, the parties may elect to claim reliance loss and recover expenses incurred in an abortive transaction. Thus Anglia was able to recover their expenses from the defendant.
The claimant, Anglia Television, engaged Oliver Reed to play the leading role in a television play. Subsequently Reed pulled out and Anglia was unable to find a replacement. They abandoned the play but had incurred expenses amounting to £2,750.
Omak Maritimes Ltd v Mamola Challenger Shipping Co [2010]
expectation damages - forward-looking only
are expectation damages derivative in nature ?
claim failed => If a measure taken to reduce losses effectively eliminates the damage incurred, it nullifies any claim for damages that would have otherwise been valid.
Charterers (D) repudiated a charterparty even though the hire price was below market rate
The ship owner (C) elected to terminate and chartered out the ship at a higher rate
C claimed for damages for lost expenses made in preparation for the charterparty, although they had entirely been entirely mitigated by the higher rate of the new charterparty
Ruxley Electronics v Forsyth [1995]
compensatory damages - cost of cure v difference in value
Strong and diverse reactions. Could the HL have found a different balance between the parties? Note that the CA had taken a different view.
In most construction cases, the court will order the cost of cure compensatory damages. But in that case, the difference btw the 2 was such that the HoL held that the cost of cure was unreasonable:
oThe high cost of demolishing the pool and building a new pool was out of proportion to the benefit that would accrue to Mr. Forsyth
oThe breach was minor, the pool was safe for swimming and diving
oMr Forsyth did not intend to cure the breach (played a key role)
But he was still awarded damages of 2,500 pounds for loss of pleasure and amenity.
Facts
Contract to build swimming pool with max depth 7ft 6inch. Builders constructed pool with max depth 6ft 9 inch
The pool was safe for swimming and diving . The only way to make the pool compliant involved demolishing the work and starting again from scratch
There is a breach => compensatory damages
oDifference in value :£0
oCost of cure: over £21,000
Addis v Gramophone Co Ltd [1909] AC 488 (HL):
compensatory damages - non-pecuniary loss - GR
GR : non-compensation of non-pecuniary loss
the House of Lords declined to award damages for injury to feelings and a loss of reputation caused by the abrupt and oppressive way in which, in breach of contract, an employer terminated the employment contract of its employee
Farley v Skinner [2001] (HL)
compensatory damages - non-pecuniary loss - exception
broadened the objection in W v M, it suffices to show that it is one aim.
HoL held: it is enough that of the aim of the contract was to provide pleasure. upheld trial judge’s award of £10,000 for mental distress
= Damages for mental distress can be awarded where the claimant’s distress is directly consequential on physical inconvenience caused by the breach of contract
Facts: F wanted to buy a hious near an international airport. Was worried about the noise. Hied a surveyor to know whether the property can be affected that the noise. The surveyor concluded that it wouldn’t impact the property. The very object of the contract was not pleasure. Skinner negligently surveyed Farley’s house – failed to highlight aircraft noise from proximity to Gatwick flight path…No difference in value of property (because house still worth what Farley paid for it)
Watts v Morrow [1991] 1 WLR 1421
compensatory damage s- non-compensation of pecuniary loss - exception
= when the very object of the contract is pleasure you can claim damages.
Cs bought a second home in the country in reliance on a land survey prepared by D surveyor
The survey was negligently prepared and failed to mention substantial defects
C claimed for damages for breach of contract, including damages for mental distress
Cutter v Powell [1795] EWHC KB J13
breach of contract - conditional payment and part-performance -GR
Held: The wife’s action failed. Payment was on condition that he worked the ship to Liverpool, since he did not fulfil this condition the widow was entitled to nothing.
The claimant’s husband agreed by contract to act as a second mate on the ship the ‘Governor Parry’ on a return voyage to Jamaica. The voyage was to take eight weeks and he was to be paid on completion. A term in the contract stated:
“Ten days after the ship ‘Governor Parry,’ myself master, arrives at Liverpool, I promise to pay to Mr. T. Cutter the sum of thirty guineas, provided he proceeds, continues and does his duty as second mate in the said ship from hence to the port of Liverpool. Kingston, July 31st, 1793.”
Six weeks into the voyage the claimant’s husband died. The claimant sought to claim a sum to represent the six weeks work undertaken.
Sumpter v Hedges [1898] 1 QB 673
breach of contract - conditional payment and part-performance -GR
obiter: sometimes a “‘fresh contract’’ for the work done can be ‘inferred’ based on quantum meruit:
“Where, as in the case of work done on land, the circumstances give the defendant no option whether he will take the benefit of the work or not, then one must look to other facts than the mere taking the benefit of the work in order to ground the inference of a new contract. In this case I see no other facts on which such an inference can be grounded.”: p. 676
Held: the buildings on Hedges ‘land can’t be refused. It was held that S was entitled to recover the value of the materials left which H used, for H had the choice whether or not to use these to complete the building. But S could not recover for the work he had done, for H had no option but to accept the partly erected building which was on his land.
Facts: Sumpter is contracted to build two houses and a stable on Hedge’s Lands. S runs out of money and abandons the contract when the buildings are about half finished. H uses materials left by S to finish the buildings. S sues for payment.
Bettini v Gye (1875) 1 QB 183
breach of contract - repudiatory breach - termination
Held: the breach was not repudiatory as it did not go to the root of the contract. + because of the non-competition clause: the contract is bigger than the obligation breached. Therefore, the breach is a realtively less significant part of the K comparted to Poussard v Spiers.
Facts: Bettini to perform for Gye for fifteen weeks from March, and not compete for a year from January. “B agrees to be in London without fail at least six days before the commencement of his engagement, for the purpose of rehearsals”. B, ill, misses the first four days of rehearsals.
Poussard v Spiers (1876) 1 QBD 410
repudiatory breach
Held:
Madame Poussard was in breach of condition and Spiers were entitled to end the contract. She missed the opening night which was the most important performance as all the critics and publicity would be based on this night.
Facts: Poussard to perform for Spiers for three months, implied to include rehearsals. P falls ill, misses the last five days of rehearsals, and is still ill on opening night, since she has been replaced. P can perform six days later. Is the breach repudiatory?
Hong Kong Fir v Kawasaki Kisen Kaisha [1962] 2 QB 26 (Hong Kong Fir)
repudiatory breach test - innominate terms
The CA: not repudiatory breach
Diplovk LJ restates the Test for repudiatory breach: ‘ Does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings? ‘
= the consequences of the repudiatory breach goes to the root of the contract, or frustrates its purpose, or deprives the counterparty of substantially the whole benefit it was to receive as consideration ect.
Two-year charterparty, vessel to be seaworthy, needed thirty days ‘repair, then fifteen weeks more. K treated those as repudiation; H sues for rest of the two years fee.
The answer depends on how the shipping industry: scope of the contract as a whole; how important is the breach;
L Schuler AG v. Wickman Machine Tool Sales Ltd [1974] AC 235
innominate terms - construction
Held: Upon construction of the contract, it is clear that 7(b) did NOT mean that it was condition in the technical legal sense. Does not mean that writing condition can never mean ‘condition’. The contract was simply badly drafted.
Lord Reid concluded that breach of clause 7(b) did not confer upon Schuler an immediate right to terminate the contract, irrespective of the consequences of the breach. Rather, a breach of clause 7(b) was automatically a material breach for the purposes of clause 11 and thus gave Schuler the right to invoke the machinery of clause 11.
Facts: W sole seller of Schuler products in a certain region. The contract required Wickman to make ‘best endeavours to promote and extend the sale of Schuler products in the territory’. In particular, cl 7(b) required weekly visits by particular salespeople to six particular firms over several years, the same salespeople every week.
7(b) ‘it shall be a condition of this agreement that,…’
11(a) This agreement ‘shall continue in force [for a certain period]… PROVIDED that Schuler or W may by notice in writing to the other determine this Agreement forthwith if:
The other shall have committed a material breach of its obligations hereunder and shall have failed to remedy the same within 60 days of being required in writing to do so…”
