#3108 - Remedies - GDL Contract Law

1. Parties

2. Valid Contract?: valid offer, valid acceptance, ICLR/capacity, consideration.

3. Terms

4. Breach

5. Condition / Warranty / Innominate Term?

- Condition: ‘goes to root of the contract’ (Poussard v Spiers & Pond: actress obliged to play in operetta from 1^st night).

• effect of breach: innocent party can –

  • 1. treat contract as repudiated (i.e. terminate) parties released from future obligations (i.e. contract price).

    • OR can affirm: both parties remain bound to perform obligations can sue for damages for breach.

  • 2. claim damages.

• ss12-15 Sale of Goods Act 1979 implied terms:

  • s12(1): seller has right to sell goods. s12(5A): condition.

  • s13(1): goods correspond with description s13(1A): condition.

  • s14: quality/fitness

    • s14(2): goods of satisfactory quality (when sold in course of business).

      • s14(2A): standard – what RP would regard as satisfactory taking a/c of description, price etc.

      • s14(2B): inc. (a) fitness for all purposes for which goods of that kind commonly supplied; (b) appearance/finish; (c) no minor defects; (d) safety; (e) durability.

      • s14(2c): unless brought to buyer’s attention / examines.

    • s14(3): fitness for particular purpose made known by buyer to seller (unless buyer did not rely / unreasonable to rely on skill/judgment of seller).

    • s14(6): s14(2) + s14(3) conditions.

  • s15: samples – bulk will correspond with quality.

  • exception: breach so slight that unreasonable to reject + buyer not dealing as consumer warranties (s15A).

- Warranty: does NOT ‘go to root of contract’ (Bettini v Gye: singer obliged to take part in 6 days of rehearsals before 1^st show).

• effect of breach: innocent part can claim damages only.

- Innominate term: dep. on seriousness of effect of breach (Hong Kong Fir Shipping Co v Kawasaki Kisen Kaishi Ltd).

• ss13-15 Supply of Goods and Services Act 1982 implied terms (not specified [Treitel]: innominate).

  • s13: supplier will carry out service with reasonable care + skill (when acting in course of business).

  • s14: supplier will carry out in reasonable time (when acting in course of business).

  • s15: party contracting with supplier will pay reasonable charge (when not determined by contract).

6. Valid Liquidated Damages Clause?

- Structure: requirements for valid clause –

• Incorporation?

  • 1. notice at time/before contract (Olley v Marlborough Court).

  • 2. document has legal effect: a. signature (L’Estrange v Graucob); or b. reasonable notice.

• Construction?: valid LDC or penalty clause (see Dunlop Pneumatic Tyre Co v New Garage Motor Co test).

• Unfair Contract Terms Act 1977 (UCTA): only applies to exemption clauses.

• Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR): only apply to ‘consumers’ – Reg 3 (consumer: natural person acting for purposes outside business – Reg 2).

- Liquidated damages clause vs. penalty clause.

• LDC: genuine pre-assessment of loss flowing from breach valid + binding.

• penalty clause: disproportionate compensation, intended as punishment, not connected to loss unenforceable.

  • Sch 2 para 1(e) UTCCRs 1999: any requirement of customer to pay disproportionate compensation unfair term – struck out.

- Test: Dunlop Pneumatic Tyre Co v New Garage and Motor Co, [Ld Dunedin]:

• 1. label inconclusive.

• 2. penalty: payment in terrorem (to intimidate); LDC: genuine pre-estimate of loss.

• 3. judged at time of making contract, NOT breach.

• penalty clause if: does not take a/c of severity of breach…

  • extravagant/unconscionable compared with greatest conceivable loss penalty.

  • where breach non-payment: if sum stipulated greater penalty.

  • single lump sum payable on any of several possible breaches penalty.

• but: slight overestimation can be LDC (loss cannot always be accurately predicted).

7. Unliquidated Damages? determined by court – measure: expectation/reliance/restitution etc.

- Unliquidated damages: consider when no LDC or LDC struck out as penalty clause.

• measures: expectation, reliance, restitution, mental distress, loss of reputation, loss of chance.

- Expectation Interest: damages for loss of gains which they have been deprived of by breach (Robinson v Harman).

• aim: to put c. in position they would have been if contract had been performed (Robinson v Harman).

  • The Golden Victory: wrongful termination, but then war so would have terminated anyway no damages.

• 3 mechanisms (Ruxley Electronics & Construction Ltd v Forsyth: swimming pool built 6’9” instead of 7’6” deep):

  • 1. diminution in value: difference in value between what promised + what received.

    • e.g. Ruxley v Forsyth: nothing – still suitable for diving + no effect on market value.

  • 2. cost of cure: cost of substitute work to put c. in position of full performance.

    • NOT awarded where UNREASONABLE: out of proportion to benefit obtained

      • Ruxley v Forsyth: 21k to rebuild pool unreasonable (+ no intention to rebuild).

      • McGlinn v Waltham Contractors: aesthetic problems unreasonable to demolish building.

  • 3. loss of amenity: where no diminution + cost of cure unreasonable.

    • e.g. Ruxley v Forsyth: 2.5k to compensate for slightly shallow pool.

    • commercial setting: unusual but not impossible (Regus Ltd v Epcot Solutions Ltd).

    • c’s intention relevant (Birse Construction v Eastern Telegraph: close to sale no lost amenity).

  • (N.B. most situations: diminution + cost of cure identical just ask what position would c. have been in if contract properly performed – Robinson v Harman).

• calculation: (position c. would have been in if contract fulfilled) – (position c. is in).

- Reliance Interest: damages for expenses incurred BEFORE breach (Anglia Television Ltd v Reed).

• aim: to put c. in position they would have been in had they never contracted.

• apply when expectation losses too speculative: courts will not award expectation loss.

  • McRae v Commonwealth Disposals Commission: salvage expedition, speculative only reliance loss.

  • CCC Films v Quadrant Films: c. hired 3 films to distribute, never arrived so profit speculative claimed cost of hire (reliance interest).

  • if both available, c. has choice over which to claim (Anglia Television v Reed, [Ld Denning]) expectation usually better.

• pre-contactual expenses may be awarded (Anglia Television Ltd v Reed: actor pulled out of film at last moment).

• c. must prove loss flows from breach, not bad bargain: would have recouped losses (i.e. break even) if contract fulfilled (C&P Haulage v Middleton: d. made improvements to garage, then ejected early no claim: would still have lost if ejected legally later).

  • but: if nature of breach means c. cannot prove d. must prove c. would NOT have recouped (CCC v Quadrant).

[Other measures (to be considered, but less common)]:

- Restitutionary Interest: account of d’s profit from breach in EXCEPTIONAL circs (A-G v Blake: memoirs in breach of OSA).

• no other remedy: no loss to c.

• ‘legitimate interest’ of c. in preventing: now restricted to claims by Crown for breach of confidentiality.

  • (despite earlier Esso v Niad: not undermining Esso’s ‘pricewatch’ scheme = legit. interest).

  • The Sine Nomine: breach of charterparty damages adequate.

  • Experience Hendrix v PPX: d. issuing Hendrix licences in breach no a/c of profits ([Mance LJ]: national security exceptional).

  • World Wildlife Fund v World Wrestling Federation: breach of agreement not use initials no a/c of profits.

- Mental Distress:

• generally: NOT recoverable (Addis v Gramphone Co Ltd: harsh + humiliating method of sacking; Johnson v Unisys).

• exception: major object of contract provision of pleasure/relaxation/peace of mind (Jarviv v Swan Tours; Farley v Skinner: survey of house re: aircraft noise).

- Loss of Reputation:

• generally: not recoverable.

• exception: breach of implied term of business to act honestly (Malik v BCCI: former employee of corrupt bank).

- Loss of Chance: recoverable if quantifiable in money terms + real/substantial chance lost (Chaplin v Hicks: c. informed late of beauty competition win, could not attend final).

[Miscellaneous remedies (not damages)]:

- Quantum Meruit: reasonable sum for valuable benefit conferred on d. + not paid for.

- Recovery of reasonable price for goods: buyer wrongfully refuses to pay for goods (s49 SGA 1979).

- Quantum valebat: like quantum meruit for supply of services.

- Deposit: can be recovered if unreasonable (Workers Trust and Merchant Bank v Dojap Investments).

- Specific Performance (equitable remedy – discretionary).

• not where damages appropriate: i.e. property must be unique (Cohen v White: not Hepplewhite chairs).

• c. must have clean hands (Coatsworth v Johnson).

• delay defeats the equities (Eads v WIlliams).

• now if undue hardship on d. (Patel v Ali).

• not for breach of contract of personal services (De Francesco v Barnum).

• not if constant supervision of court required (Co-Operative Instance v Argyll Stores: store opening hours).

- Injunction (equitable remedy – discretionary): court can restrain breach of negative term even if no SP for positive part.

• Evening Standard v Henderson: injunction to prevent employee working for rival during notice period.

8. Limiting Factors: Causation, Remoteness, Mitigation, Contib. Negligence

- Causation: breach must be ‘a dominant or effective cause’ of loss (not necc. only cause) (Galoo Ltd v Bright Grahame Murray).

• NAI: will break chain if not ‘likely to happen’ (Monarch Steamship Co v A/B Karlshamns).

  • Monarch Steamship Co v A/B Karlshamns: outbreak of war in 1939 not unlikely not NAI.

  • Lambert v Lewis: c. knowingly kept using defective trailer coupling NAI.

- Remoteness of Damage: what loss is recoverable? (Hadley v Baxendale, ...