#13887 - Remedies - Commercial Law

Remedies

Divided into two categories:

1. Buyer’s remedies

2. Seller’s remedies

1) Buyer’s rights

The buyer may have 2 rights:

Repudiation (condition, consequence of innominate term)

• The first is related to the sellers breach of condition, warranty or the breach of some other innominate term.

• If the innominate term is to be treated as a condition then this will lead to repudiation.

• Certain terms implied term into the contract by statute are to be treated as conditions. So this is a situation where the goods do not conform to contract…ex cetera.

Rejection (separate, ‘mere’ termination of contract; not repudiation ab initio – as in misrepresentation)

• The right of rejection is a separate right. This stops the contract and leads to a mere termination of contract

• It is not repudiation ab initio as we see in misrepresentation

There may be situations where the right of repudiation and the right of rejection come together.

Damages

Hadley v Baxendale (1854)

• Simply saying that on the question of whether damages should include profits, the response to that is no.

• We look at things that are consequential…consequential losses. The loss that is linked to the breach.

• Damages should not include profits, should only be that, which ought to be foreseeable from the breaching parties perspective.

• Idea of foreseeable loss.

Parsons v Uttley Ingham [1978]

• Pigs owned by the buyer, died when they ate some mouldy nuts

• Question was whether the manufacturer of the machine which distributed these mouldy nuts, could be held liable for the pigs death

  • Of course pigs are property so the question is whether one should be able to claim for damages caused by the breach

  • And there was a breach

• The courts said that it could extend damages to property. Even for the veterinarian fees (for the pigs illness). But not extend so far to cover profits

• Because the profits would be economic loss

Cullinane v British Rema Manufacturing [1954]

• The courts effectively said that you have to choose between wasted expenditure as loss, and profit, expected profit (wasted expenditure versus expected profit

• The problem with expected profit is that it is quite difficult to prove

• Profits are always fluctuating according to the market conditions

• So the courts find that there isn’t enough certainty in that. So the courts are seeking certainty, and what is quantifiable. The affected party can produce receipts, and show the wasted expenditure. So you can claim for that, but you cannot claim for both. So the expenditure must be leaked to the breach of contract as well

Golden Strait Corp v Nippon Yusen Kubishika Kaisha [2007]

• The general principle coming out of this case is that damages are assessed at the time of breach or when the loss at suffered (typically this is at the breach) or may be at some later stage.

• For instance the seller may breach and the performance may become due at some later stage, delivery may be for a later date, and the seller already says “I will not deliver”. So we have an anticipatory breach, which happens much earlier than when performance is due. So the courts will say that when performance becomes due this is when we will assess the damages. That’s quite important because of the fluctuation of market prices since it is at the moment when performance becomes due that the buyer must then go out (or at the later stage) in the open market and procures the goods that he needs to replace the goods - clearly he his likely to suffer loss there.

• Links back to a much earlier case Johnson v Agnew. The principle there was the earliest moment at which the buyer can mitigate his loss so when he learns of the breach, when performance becomes due. At whichever moment is earliest, for him to be able to mitigate his loss. So that is where we see the duty to mitigate loss arising.

Repudiation (from the buyer’s standpoint)

• In the event that the seller does not deliver, then the buyer will maintain an action for breach of contract, under s.51, in event of non-delivery. In order for s.51 to stick the seller must:

  • Wrongfully neglect or refuse to deliver the goods to the Buyer

    • Buyer’s action is in damages for non-delivery

    • s51(2): Measure = ‘estimated loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract’

    • Consult market price if available: s51(3)

(Only) late delivery?

Victoria Laundry v Newman [1949

• Launderers who purchased a large boiler for use in the dying their dying and laundry business. There was a delay in the boiler being delivered. That delay led to breach of contract.

• But the problem for Victoria Laundry was that they lost a very lucrative contract with the ministry of supply.

• So they argued that they lost a lot of expected profit which would have been a significant profit. The profit they would have made had the boiler not been delayed

• Court said that this looked like a particularly lucrative contract, in the standpoint of the seller. Is it foreseeable that the buyer without any knowledge of what the buyer is up, that the buyer would be engaging into such lucrative contracts. And therefore the seller has a duty with respect to that.

• The courts here said that the claimants could only recover the losses, which were in the reasonable contemplation of the parties, for this boiler. This included loss of profit, which could be expected from the lack of the use of the boiler b/c it was delayed. But the claimant could not recover so far as to recover for the loss of this lucrative contract; this is seen as an excessive profit in the eyes of the seller.

• So in other words, it was said in the CoA, the seller only has to compensate the ordinary and not extraordinary loss of profit. So we are distinguishing there, particularly lucrative contracts as unusual and therefore exceptional in terms of the profits would have been won under them and limiting the damages to the profits in the reasonable contemplation of the parties.

• Asquith LJ (CA):

  • Distinguish ‘particularly lucrative dyeing contracts’ as unordinary

  • Profits in reasonable contemplation of Seller

Mode of rejection – rightful

• s36: Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right to do so, he is not bound to return them to the seller, but it is sufficient if he intimates to the seller that he refuses to accept them.

  • The duty of the buyer is to put the goods at the seller’s disposal (make them available to the buyer). Duty on the seller is to collect the goods in the absence of any other agreement

  • The buyer may arrange to return goods (shipment) to the seller, but the seller in any case must accept the costs to that.

Defective goods

• s53 SGA: Buyer may reject goods PLUS treat (this breach) as breach of warranty to either reduce/extinguish price (1A) or bring an action against Seller for breach of warranty (1B)

• S53(5): breach of warranty of quality

  • Value at delivery versus value would have been if it had fulfilled the warranty

  • So the measure is if there are two qualities, the actual quality when delivered and the quality it ought to have been, then what is the difference between that? This will be the measure of damages for a breach of warranty of quality.

Godley v Perry [1960]

• A 6 year buys a plastic catapult

• Although he used the catapult properly it broke in his hands and injured his eyes

• Two actions one is for the injury in tort and the other is in contract (return the catapult and get the money back)

• Goods were held not to comply with the sample in breach of s.15 – so of course the buyer was the shop owner, the buyer had bought the goods as sale by sample from the manufacturer who was the catapult manufacturer

• He looked and inspected a catapult sample and the bulk came in, and one from the bulk was sold to the boy.

• Seller (manufacturer ? Buyer 1 (Shop-owner) Buyer 2 (boy and end consumer)

• Held that there was a reasonable inspection by buyer 1 and that examination had not shown any defects. But in the end the catapult still broke, so clearly there was a defect.

• It was held that the use of the catapult was implied and as the catapult was not fit for the purpose for which it was supplied, then the boy could recover damages

Limitation on rights

• s15A SGA limits rejection

  • With respect to non-consumer buyers by saying that non-consumer buyers does not have the automatic right of rejection for breach’s of the implied terms of ss13-15 SGA. The implied terms are treated as conditions. Of course there is freedom to contract out of those…subject to UCTA.

  • In the context of non-consumer buyers where there is a slight breach the courts will allow the rejection by a non-consumer buyer if it is reasonable to do so. There is no automatic right, it is within the courts power to determine whether it is reasonable to do so. Really about weighing up how slight it is how de-minimis are we talking here.

• s30(2A-2E)

  • Effectively limiting rejection again where it is so slight that it would be unreasonable for the non-consumer buyer to reject, in the case of wrong quantity. This is in the case of a:

    • A shortfall (can accept the shortfall and pay at contract rate, or reject all)

An excess (reject all of the goods, keep all of the goods and pay for the excess at contract rate, or he can keep the goods he contracted for and reject the excess)

• Consumer?

  • s.61(5)(A) SGA adopts same definition as s12 UCTA

Mode of rejection – wrongful

• s37: Buyer has liability for not taking delivery of goods

  • s37(1):‘When the seller is ready and willing to deliver the goods, and requests the...