#10330 - Remedies In Contract - BPC Civil Litigation

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)

• companies CANNOT claim for distress + disappointment

Exemplary / punitive damages

• NOT available for breach of contract

When are damages assessed i.e. when is the market value of goods assessed?

• general rule

  • at time of breach (because immediate obligation to mitigate)

• departure from general rule

  • probable D may make good default when probability ceases

  • if GR would give rise to injustice (due to inflation, currency fluctuation)

    • contract price already paid (unreasonable to replace goods) at time of judgment

    • land: damages awarded instead of specific performance at time of judgment

    • foreign currency liability: sum in = exchange rate on date of payment

    • anticipatory breach:

1. C accepts breach time of breach (GR)

2. C presses for performance date when performance due

Taxation of damages

• general rule: where loss compensated by damages = income, taxed as if earned as income

Limitations on compensatory damages

• remoteness

  • loss must have:

1. arisen naturally; OR

2. been in the reasonable contemplation of parties when they entered the contract (need very substantial degree of probability that the loss would occur)

   • possibly need to have an assumption of responsibility too

• C's duty to mitigate

  • C must take reasonable steps within his financial means to:

1. reduce the loss; AND

2. avoid taking action which may increase the loss

   • if mitigation wipes out loss nominal damages

   • N.B. NO duty to mitigate in misrep

• other deductions

  • if C saves costs of performance of result of breach - savings

  • wrongful dismissal - earned from new employment deducted

• contributory negligence

1. co-extensive liability in tort + contract i.e. s13 SGSA

2. liability arises from express contractual obligation to take case (strict liability) which does NOT correspond to duty existing independently of contract

3. breach of contract tort

EQUITABLE REMEDIES IN CONTRACT

Key principles

1. equitable remedies are discretionary

2. damages must be INadequate

3. maxims of equity apply

Specific performance - puts parties in position as if contract properly performed

• definition

  • = equitable equivalent of expectation loss

  • requires party to perform / complete performance of contractual obligations

• bars to specific performance ( = SP NOT available / = SP available)

1. adequacy of damages

   • uniqueness

     • money, shares (unless unavailable on market)

     • goods (unless rare quality OR substitute unavailable on market)

     • land

   • financial ineffectiveness

     • difficulty of assessment irrelevant

     • D's obligation (and C's loss) continues after date of judgment

2. contracts requiring supervision

   • constant supervision (unless important to protect C's interest)

3. contracts for personal services / services personal in nature

   • generally, including employment contracts

   • express negative covenants

4. contract too vague for order to state exactly what D must do

5. building contracts

   • only if: contract precisely defines work AND D in possession of building site

6. contracts to carry on a business

7. contract on only partly specifically enforceable

   • (unless contract can be divided into several separate agreements)

8. maxims of equity

   • equity will not act in vain

   • clean hands

     • if C in breach (unless trivial)

     • C must:

       • have performed all contractual obligations to date; AND

       • be willing to perform in future (must plead + prove)

   • delay

   • severe hardship to D, leading to injustice

• equitable damages

  • regardless of whether available under common law, can get:

    • damages in lieu of specific performance; OR

    • specific performance AND damages

Rescission - parties restored to position as if never...