remedies 1 - reliance losses

Question 1

what are reliance losses?

Answer 1

• second key method of compensating claimant
• puts claimant in position that they were in immediately before the contract was made
• usually expectation losses will be sought by claimant as they are likely to be more lucrative
• expectation losses considered primary basis for compensating a breach of contract
• reliance losses generally claimed where it is hard to demonstrate what would have been payable if the contract had been performed properly, and injured party had incurred costs in good faith in preparation to fulfill their contractual obligations (eg buying materials, promoting a show)

Question 2

difficulties in proving benefit of the contract

Answer 2

• arises when value of contract is largely unknown
• claimant has entered contract knowing that some positive outcome is likely to arise
  contract does not specify the precise value of subject matter
• alternatively, contract might be fore future benefits that are unknown and unquantifiable at the time which the contract is made

Question 3

McRae v Commonwealth Disposals Commission 1951

Answer 3

• aussie case - CDC sold the rights to a wrecked oil tanker ‘lying on Jourmand Reef’
• M was a salvage company hoping to make money from wreck
• difficult to prove value of contract, unclear how much the wreck and cargo would ultimately be worth
• tanker did not ultimately exist and M incurred significant costs in searching for the wreck
• M awarded damages on a reliance basis, including price paid for the salvage rights and much of the expenditure made in conducting the futile salvage operation

Question 4

Anglia TV v Reed 1972

Answer 4

• robert reed = star of “The Brady Bunch” and a globally prominent actor
• R agreed to a contract to make a TV play
• R failed to appear and there was no time to find suitable alternatibe
• AT had to abandon the production and seek damages

Question 5

Basis for reliance losses

Answer 5

• ATV do not claim their profit
• they cannot say what their profit would have been on this contract if Mr Reed had come here and performed it
• claimed for waste of expenditure instead £2750

Question 5

What expenditure can be claimed?

Answer 5

• not limited to expenditure incurred after the contract was concluded
• can claim for expenditure incurred before contract provided it was reasonably in the contemplation of the parties

Question 5

Cuilliane v British Rema 1954

Answer 5

• C bought a clay pulverising machine from BR, warranty that the machine could process 6 tonnes of clay per hour
• untrue, machine could only process 2 tonnes of clay per hour and therefore useless to C’s business
• C sought both cost of machine and loss of profits over 3 year period
• CA: C is entitled to either the capital costs or loss of profits, but must choose which head of damages is required, C cannot claim both

Question 6

Expectation measure v Reliance measure

Answer 6

• expectation measure of damages considered to be more normal basis to claim damages, often viewed as primary measure of damages
• problems arise when the reliance measure might give rise to higher damages than the expectation measure
• NB: can be difficult to prove in practice

Question 7

CCC Films (London) Ltd v Impact Quadrant Films Ltd 1985

Answer 7

• C has a free choice to sue on an expectation or reliance basis
• Particularly helpful where D’s breach has prevented C from gaining from the contract and is therefore impossible to ascertain what the value of the contract would have been
• License to exploit 3 films - C paid D 12K in advance
• Contract stated films would be sent by insured, registered post
• Sent (and lost) in ordinary post, clear breach of contract
• Held: C entitled to choose, unless D can prove that C would not have recovered the sum claimed as reliance damages
• D argued that C would not have recouped its 12K, but was unable to prove this
• C able to claim wasted expenditure