Remedies In Contract Notes

BREACH OF CONTRACT

LIABILITY

Performance

• general rule

  • failure to perform = breach

• concurrent obligations

  • each party's right to other's performance depends on readiness, willingness and ability to perform:

1. entire contract - one party bound to complete performance before other under obligation to perform at all

2. part performance - one party substantially performs; other party's obligations NOT discharged, but counterclaim for discrepancies can be made

3. quantum meruit

   • infer fresh agreement that payment will be made for part performed if:

1. benefit conferred by part performance; AND

2. possible for benefit to be accepted OR rejected; AND

3. one party preventing other from performing

• cases where NO actionable breach

1. parties agree

2. contract frustrated

3. contract provides for situation that has occurred (i.e. valid limitation / exclusion clause)

4. limitation period expired

Breach

• definition of repudiatory breach

  • guilty party expressly or impliedly:

1. communicates intention to renounce obligations; OR

2. absolutely refuses to perform

   • time of refusal

1. anticipatory breach: before performance falls due

2. whilst contract remains part performed

• the right of election

  • under common law innocent party can:

1. terminate (rescind / discharge) contract

   • innocent party informs breaching party via unequivocal act that it:

1. accepts repudiatory breach; AND

2. NO longer wants to continue with contract

   • effect: brings to end any unperformed future obligations under contract

   • right to terminate lost if innocent party affirms contract

-------OR-------

2. affirm contract

   • guilty party can complete performance as agreed

   • innocent party can claim damages for remaining loss

   • if contract remains unperformed, innocent party can claim damages for failure when performance falls due

ISSUES PRELIMINARY TO OBTAINING A REMEDY

Breach must cause loss

• effective OR dominant cause of loss (but for breach, no loss)

• NOT just an opportunity to sustain loss

• multiple causes

  • 1 of several equal causes

  • breach partly causes loss AND loss otherwise due to actions of 3rd party only if acts of 3rd party contemplated by D

Standard of proof

• general rule

  • C must prove:

1. fact of damage; AND

2. amount (difficulty in assessment NOT bar)

• standard

  • = reasonable certainty unless absolute certainty possible

  • speculative cases

    • e.g. loss of profit

    • = substantial chance / probability

DAMAGES IN CONTRACT

Purpose of damages

• compensate C for loss

• if loss CANNOT be proved, nominal damages only

• D's gain rarely considered (except restitution)

• loss =

1. PI

2. property damage

3. diminution in C's assets

Methods of calculating loss

1. expectation loss - put C in position would've been in had contract been properly performed

   • includes:

1. loss of promised performance; AND

2. loss of profit from NOT being able to use performance

   • quantification (common sense which is best)

1. cost of cure (reinstatement)

   • = extra cost C will have to incur to put self in position would've been in if had received benefit of contract

   • awarded if:

     • C has mitigated; OR

     • C genuinely intends to use damages to mitigate (i.e. cure)

2. difference in value (diminution in value)

   • = advantage C lost by being deprived of benefit of contract

   • awarded if:

     • court does NOT believe C genuinely intends to use damages to mitigate

     • claim for negligent performance of contract against surveyor (usually)

   • loss of profit

     • = delayed / lost performance prevents C making anticipated profit

     • sometimes in addition to other methods

     • problems

       • too speculative, remoteness, evidential proof

       • e.g. bonus

     • no difference between market price + contract price

       • can only claim loss of profit if can prove = available market:

         • actual sale - available buyer prepared to pay fair price on that day

         • hypothetical sale - enough traders in contact with each other to evidence market in which goods could've been sold

       • otherwise, nominal damages

   • consequential loss

     • PI caused by breach

     • expenses incurred as a result of breach e.g. cost of redecorating wall caused by defective boiler

2. reliance loss - put C in position would've been in had contract been properly performed

   • = money C wasted in preparation for OR in partial performance of the contract

   • awarded if expectation loss to speculative (usually loss of profit)

   • pre-contractual expenses recoverable

   • bad bargain

     • court will NOT compensate C if contract would've made loss regardless of breach

     • burden on D to prove bad bargain

3. restitution (unjust enrichment) - put C in position as if never contracted in first place

   • = C can claim back valuable benefit C's performance of contract has conferred on D

   • awarded if:

     • total failure of consideration e.g. complete failure to deliver goods C has already paid for

     • legitimate interest in depriving D of profits (account of profits)

     • money paid under mistake

Which method?

• common sense

• client has choice

• more than 1 method

  • possible, provided NO double recovery

  • e.g. C pays for product in advance; after paying for installation, found to be defective

    • restitution - money paid for product; AND

    • reliance - installation costs; AND

    • expectation (loss of profit) - expected profits lost by not being able to use breach

Damages for loss of reputation

• loss of reputation caused by wrongful dismissal OR inability to get alternative employment (unless employment contract has implied term of trust + confidence which is breached)

• if main purpose of contract is publicity - lost chance of enhancing reputation

• dishonouring trader's cheque in breach of contract

• defective goods delivered directly to C's customers

Damages for distress and disappointment

• generally

• major object of contract = pleasure, relaxation + peace of mind modest damages

  • 10k loss of amenity - surveyor's failure to report aircraft noise, not affecting value of land (Farley v Skinner 2001)

  • ~4k loss of amenity - ruined holiday (Milner v Carnival 2010)

  • mental distress for damaged sperm in fertility clinic (Yearwoth v Bristol NHS Trust)

  ...

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