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BCL Law Notes Commercial Remedies BCL Notes

Omak Maritime V. Challenger Shipping Notes

Updated Omak Maritime V. Challenger Shipping Notes

Commercial Remedies BCL Notes

Commercial Remedies BCL

Approximately 497 pages

These are detailed case summaries (excerpts from cases - not paraphrased) I made during the Oxford BCL for the Commercial Remedies course....

The following is a more accessible plain text extract of the PDF sample above, taken from our Commercial Remedies BCL Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Omak Maritime v. Challenger Shipping (The Mamola Challenger)

Facts

The charterers agreed to charter the owner's vessel Mamola Challenger for five years. Under the charterparty the owners were required to make certain modifications to the vessel prior to delivery which included the installation of a new crane. (ii) The owners incurred various expenses in preparation for these modifications, including the cost of removing from another vessel the crane which owners intended to install on Mamola Challenger .

Ultimately the owners accepted the charterers' conduct as bringing the charter to an end (on 29 January 2007). The expenses which the owners had incurred were wasted; they had no residual value or benefit for the owners. (iv) After the repudiation of the charterparty the owners concluded a number of short-term fixtures. (The vessel arrived at Luanda, Angola, on 5 February 2007 where she was delivered into the first of such fixtures.) The tribunal has held that, over the five-year term for which the charterparty would have run, the owners have earned, or will earn, more from these fixtures than they would have earned under the charterparty, and the excess is greater than the amount of the wasted expenditure.

Holding

General Principles of damages

A corollary of that principle is that an award of damages for breach of contract should not put the claimant in a better position than he would have been in had the contract been performed: see Wertheim v Chicoutimi Pulp Co [1911] AC 301, 308.

British Westinghouse v. Underground Railway, Viscount Haldane:

“the duty of taking all reasonable steps to mitigate the loss consequent on the breach … when in the course of his business he has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act.”

Reliance interest and performance interest

The law of damages permits a claimant to seek damages on the reliance basis rather than upon the expectancy basis. He may “elect” to claim damages by reference to the expenses incurred by him in reliance on the contract being performed: see Cullinane v. British “Rema” Manufacturing Co Ltd [1954] 1 QB 292.

Does the principle in Robinson v. Harman apply to Reliance losses?

In the present case the claimant, having abandoned his claim to damages on the expectancy basis, claimed damages in the sum of the expenses incurred by him in reliance on the contract being performed. There is no dispute that damages may be claimed on that basis but the question raised by Mr Brenton's submission is whether and if so how the principle in Robinson v Harman 1 Exch 850 applies so as ensure that the claimant is not put in a better position than he would have been in had the contract been performed.

Learned Hand in L Albert & Son v. Armstrong Rubber Co (1949) 178 F 2d 182:

… recovery of the promisee's outlay in necessary preparation for the performance, subject to several limitations, of which one was that the promisor may deduct whatever he can prove the promisee would have lost if the contract had been fully performed. He further noted, at p 191, with obvious approval the “very simple formula” suggested by Professor Fuller in an article written in 1936 in the Yale Law Journal, “The Reliance Interest in Contract Damages” 46 YLJ 52, 79: We will not in a suit for reimbursement for losses incurred in reliance on a contract knowingly put the plaintiff in a better position than he would have occupied had the contract been fully performed.”

Thus the effect of the decision was that the claimant was not entitled to claim damages on a basis which would place him in a better position than he would have been in had the contract been performed.

I consider that the weight of authority strongly suggests that reliance losses are a species of expectation losses and that they are neither, to use Mr Brenton's phrase, “fundamentally different” nor awarded...

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