Remedies I

Question 1

What is primary remedy for breach of contract?

Answer 1

Damages.

Damages are never award to punish the party in breach, not in Australia - Addis v Gramophone.

Question 2

What are the three ways to assess damages?

Answer 2

1. Expectation measure
2. Reliance measure
3. Restitutionary measure.

Question 3

Expectation measure Example

Answer 3

Where Anna enters into a contract with Bill. As a result of the contract she has an expectation that Bill will perform. If Bill fails to perform damages are designed to put Anna in the position that she would have occupied had the contract been performed.

Question 4

Reliance measure example

Answer 4

Anna enters into a contract with Bill. Bill fails to perform. As a result of the contract Anna has relied to her detriment. Damages are designed to put her in the position she would have been if the contract had not been entered into.
Damage is worked out about expenditure that the plaintiff has incurred in reliance.

Question 5

Restitutionary Measure example

Australia is less concerned with this measure.

Answer 5

Anna enters into a contract with Bill. Bill fails to perform. Damages here reflect a return of profit or gain made by Bill. It’s not about compensation, but getting the gain from Bill that he gets by not performing.

Question 6

Example of how to calculate.

Answer 6

Anna agrees to buy a car from Bill for $10,000. The market value of such a car is only $10,000. The value of the car delivered is $5,000 (because it’s faulty in some way). Anna receive the car but it is worth less than the car she was promised.

Expectation measure is worked out on the basis that the contract was performed according to it’s term namely the delivery of a car worth $10,000.
Damages are calculated by deducting the value of what was received (the market value) from the value of what was actually delivered i.e. 10,000 - 5,000 = 5,000.
Reliance measure is worked out on the basis that the contract was never entered into. Anna would never have parted with 10,000 and never received a car worth 5,000. Damages are calculated by deducting what was actually received from what was paid i.e. 10,000 - 5,000 - 5,000.

Question 7

For when the market price and contract price are different.

Answer 7

Anna agrees to buy a car from Bill for 10,000. A car of the sort promise costs of 8,000 in the market. The car delivered is worth 5,000.

Expectation measure: 8,000 - 5,000 = 3,000.
Look at market value of the thing at time of contract and deduct the value of the thing actually received.

Reliance measure: 10,000 (sum paid) - 5,000 (what it was worth) = 5,000.

Question 8

Another example

Answer 8

The car is worth 12,000 and Anna has paid 10,000. Car delivered is worth 5,000.

Expectation measure: 12,000 - 5,000 = 7,000
Reliance measure: 10,000 - 5,000 = 5,000.

Question 9

When do you calculate damages for expectation measure?

Answer 9

For the market value of the thing in an expectation measure, the market value of the thing contracted for at the time of BREACH.

Question 10

When is the date for assessing damages?

Answer 10

Almost always, assessing the damages is at the date of breach.

Burden of proof is on plaintiff to prove loss on the balance of probabilities. - Commonwealth v Amann

Question 11

What is the rule for Expectation Damages?

Answer 11

As in Robison v Harman - “where a party sustains a loss by reason of a breach of a contract, he is so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.”
This statement has been approved in Australia in Commonwealth v Amann Aviation.

Most straightforward case is where market price is stable. E.g. If Anna buys wheat from bill for 100,000 and the market value at time of breach is 100,000. Then her losses are zero.
Suppose market value at time of breach rises to 200,000. THen her losses are 100,000.
Suppose market price drops to 80,000 and Anna refuses to pay. then BILL can recover 20,000 for loss of profit.

Question 12

Limitations to expectation measure.

Answer 12

Not all losses can be recovered. Limitations include:

1. Causation
2. Remoteness
3. Mitigation
4. Contributory Negligence

Question 13

Special category of damage where special rules apply. What is the problem of cost of cure damages?

Answer 13

For example, the problem where a house is built 30cm too shore. Technically, the house is still worth 100,000 but is not worth less so expectation loss is very low or even 0.
Ruxley v Forsyth - case for Qld
P entered into contract with D to build a swimming pool. Specifications under contract that pool be 7 foot 6 inches. Pool was only 6 foot 9 inches at deep end. He hadn’t gotten the pool he contracted for. But there was no difference between market value and actual value, so damages would be 0 for expectation measure.
He argued he should be entitled to recover the cost of digging up the whole pool and starting again. Damages of this sort are known as COST OF CURE DAMAGES.
You’re asking for damages to in essence, allow you to rectify the breach.
Held: HOL say no. They say such an award would be unreasonable, but also accept that sometimes you can recover in some cases. In this case however, such an award would be disproportionate to any benefit that would result.

Question 14

What is the position in Australia regarding Cost of Cure damages?
1

Answer 14

HC says you can recover damages to rectify the damage, but it can’t be disproportionate to the benefit.
Bellgrove v Eldridge - House foundations were built very badly and weren’t in accord with the contract. P argued to claim cost of cure damages. He wanted cost of cure damages for destroying the house and rebuilding which would have cost 500% more than just fixing the remedy which was only 3500.
Nevertheless Courts allowed cost of cure damages.
They said they would only award cost of cure damages in exceptional circumstances which are:
1. Reasonable; and
2. Necessary to award cost of cure damages.
Courts also said whether the money was spent to repair it was irrelevant.

Courts have suggested some personal preference is allowed. But not unreasonable. E.g. painting a house yellow, when you wanted purple is allowed. But building a house using second hand bricks in order to get my house looking old, but get’s built using new bricks, not allowed.

Question 15

What is the position in Australia regarding Cost of Cure damages?
2

Answer 15

Westpoint Management v Chocolate Factory Apartments
Said test for cost of cure damages is:
1. Reasonable
2. Necessary
They also said a consideration is whether the work was ever to be carried out, which is opposite to Bellgrove.

Usually where you won’t get cost of cure damages is where the innocent party is using a ‘technical breach’ to get an enormous sum of money. Ruxley was one such case.

Tepko has made cost of cure damages fundamental. Before Tepko, it was merely an exception.

Question 16

Cost of Cure damages are also in the Sale of Goods Act s54 (2)-(3)

Answer 16

(2) The measure of damages for breach of warranty is the estimate loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty.

Question 17

What are damages for loss of chance?

Answer 17

Damages are calculated on a chance of a particular outcome rather than a particular outcome occurring

For example: Chaplin v Hicks

Question 18

Chaplin v Hicks

Answer 18

D ran a beauty contest. The prize was that 12 highest placed contestants to be engaged at theatre.
P was selected for final 50. D was to interview the final 50 in order to get the top 12. D failed to notify them of the time of interview, so participants never went to the interview.
P sued D for breach of contract.
They argued D had deprived P of an opportunity of winning the competition. It wasn’t certain that P would be in the top 12, but argued the loss of that chance.

Held: Argument accepted.

Question 19

What are damages for Mental Distress?

Answer 19

The general rule is that one is not able to recover damages for mental distress suffered as a breach of contract. However, there are some exceptions in Baltic Shipping v Dillon

Question 20

Baltic Shipping v Dillon

Answer 20

Ms Dillon was on a crew ship, she’d taken a cruise. Unfortunately ship sank half way through. Question of damages for distress was argued.
Mason CJ lays down the exceptions to the general of no damages for mental distress:
1. Where the purpose of the contract has been to provide pleasure, relaxation or freedom from molestation then P can recover damage for distress in the case of breach. - Jarvis Case

2. Where the breach of contract causes physical injury or physical inconvenience then damages can also be given for mental distress.

Question 21

What are reliance damages?

Answer 21

Damages calculated on the basis of damage resulting from part performance or preparing to perform a contract that is breached. Basically on the cost you incur.
McRae v Commonwealth Disposals Commission
Commonwealth v Amann Aviation

Question 22

McRae v Commonwealth Disposals Comission

Answer 22

P contracted with D to salvage an oil tanker said to be in the reef somewhere. The spent alot of money equipping the vessel. Turns out there was no tanker.
Breach? Implied term in the contract that the tanker existed.
But damages? They didn’t get anything, so really no expectation loss. Even if the ship had been there, it would be difficult to calculate whether the project would recover their costs.
HC said: P could recover for cost of fitting ship out for the expedition. Though reliance damages are narrow.
They only arise in situations where you can’t show or it’s not discernible whether there would be a profit made.

Question 23

Commonwealth v Amann Aviation

Answer 23

Man entered into contract with Commonwealth to conduct coastal surveillance. Under Clause 2.2.4, Commonwealth were entitled to terminate. However Commonwealth didn’t terminate in accordance with that clause and were in breach.
P had invested a great deal of equipment in order to carry out contract. Claim for damages.
Difficulty here is that all the evidence shows that if the contract had been performed, P would not have made a profit. In the expectation measurer, they had suffered no loss.
They could have covered for expenditure, but were blocked by McRae (where it’s only where you can’t show whether the project would cover your costs. In this case you could).

HC held: Allow damages because they’re within the Robison case in that there is an expectation in the sense that the parties recover for their expenditure and would do so upon performance of the contract.
HC got to this via presumption that where two parties have a contractual relationship, there is a presumption at the very least, their expenditure will be recovered. The D has the burden of displacing this presumption. D has to show expenditure would have been wasted.
On the facts, in the receipt under the contract that is money that they were paid by commonwealth within the 3 years, was less than the money they spent. They had entered what seemed like a bad bargain.
However the presumption wasn’t rebutted as there was a strong prospect that such a contract would be renewed. If contract had been renewed, expenditure wouldn’t have been wasted and they would be in profit.

Question 24

What are gain based damages?

Answer 24

Gain based damages are not assessed on the basis of loss. They are assessed on the basis that the D, by the breach, makes a gain. So P would aim to get back what D gains.
This has not been endorsed in Australia, but have been discussed in cases.
Attorney General v Blake.

Question 25

Attorney General v Blake

Answer 25

Spy for Soviet Union, Fled to russia. In his old age, wrote a memoir, got a publish contract.
British gov not happy, they argued Blake was in breach of contract. Blake had signed the some secret act, and by writing a book, had revealed information he wasn’t allowed to under the act.
Problem for gov is that they hadn’t suffered any loss.
He had however made a financial gain.

Majority says: Can recover profits. It’s a public policy decision. They can only be used when the other methods don’t allow recovery. You can’t CHOOSE to get this remedy.