Breach of Contract Remedies

Remedies for Breach of Contract

• Aims to explain remedies when a contract term has been broken
• Covers application of damages for breach of contract
• Identifies available remedies with governing legal and equitable principles

Damages

• In Chapter 3, the rules relating to the contract terms were studied  

Installation Example

• A firm starts fitting kitchen units, the workmanship is sub-standard and the client wants to know what can be done
• The first action must establish that a term of the contract has been broken
• Consumer Rights Act 2015 s.49, applies to contracts for work and materials with a term of reasonable care and skill implied
• Available remedies involve halting work, employing someone else, or obtaining damages
• The main remedy for breach of contract is damages  

Additional remedies

• Action for an agreed sum
• Termination of a contract
• Specific performance and injunctions
• Restitution

General Damages

• An innocent party has the right to claim damages for each contract term breached; nominal damages will result if the claimant suffered little loss
• To recover damages, there must be proof that loss occurred from the breach and that the damage or loss is not a remote breach consequence

Compensation

• Damages should compensate for loss and not seek to punish the defendant
• Punitive/exemplary damages are not awarded in contractual claims, but can be awarded in certain torts
• Damages relate to claimant's loss, not defendant's gain
• Nominal damages of £5-£10 is awarded to the claimant if no loss was actually suffered  

Negligence Example

• A decorator breaches a contract to paint a house for £1,000 by taking a higher paying job somewhere else
• If an alternative decorator does the job for £800, there is no value is pursuing the first decorator for breach of contract as that party suffered no loss
• Obagi v Stanborough (Developments) Ltd [1993] TLR 646 showed that a party must pay the cost of proceedings when making a claim that results in no considerable monetary damages
• Nominal damages of £5 were awarded by the court, which was upheld by the Court of Appeal

Assessing Damages

• The object of awarding damages in contract is to compensate for breach related losses
• Per Robinson v Harman (1848) 1 Exch 850, common law dictates that the party who sustains loss as a result of a contract breach has the right to be compensated with money to be placed in the same monetary situation as if the contract was performed as agreed  

Expectation Loss

• A claimant can reclaim loss of benefit which would have been generally obtained had a contract been properly executed
• Expectation loss compensates a claimant for their lost expectation

Ming Vase Example

• Ayesha sells Barbara a Ming vase for £50,000, believing it to be authentic
• If the vase is a copy only worth £1,000, the court is likely to award Barbara £59,000 - A genuine Ming vase would have been worth £60,000, and she has a copy, so needs £59,000 for an equivalent vase

Carol and David Example

• Carol agreed to buy goods from David for £1,000; payment on delivery
• David refuses to deliver the goods and Carol could buy similar goods elsewhere but must pay £1,200
• As a result, the court is likely to award damages of £200
• The fact that David makes a profit out of the breach is not relevant as the court compensates Carol, not punish David  

Esher & Co Example

• Esher & Co orders goods from Fields plc for £8,000; payment on delivery
• Fields plc attempts to deliver goods, but Esher & Co refuses
• As Fields plc can sell elsewhere for only £2,500, the court is likely to award £5,500  

Jason and Carol Example

• Jason agrees to cut down a tree in Carol's garden and remove all timber for £250
• Jason is told he is not required on April 26th, but he cannot find alternative work and tells Carol that he would have made a net profit of £220(after expenses)
• The court is likely to award £220  

Smith and Jones Example

• Before buying a machine from Jones, Smith manufacturer made £10,000 of cable a week with £5,000 costs with £5,000 a week profit
• The new Jones machine should have been able to:make £10,000 worth of cables per week, with £4,000 costs with £6,000 a week profit
• For the machine's first three weeks, Smith could only make £7,000 worth of cables costing £3,000 per week due to a fault since rectified
• Smith was £3,000 worse off using his new machine, and the complaint is that this machine did not work as well as agreed
• Compensation finds how much Smith lost compared to if this new machine had been working properly
• Do not add £9,000. As over three weeks, he did make £9,000 less cables than before, but incurred savings of £3,000
• £6,000 should be awarded, as Smith was £6,000 worse off
• Smith gets what he bargained for

Defective Goods/Services

• In these cases, the court will measure damages to put claimant in a position as though the contract was properly performed
• Award includes difference in value, or 'cost of cure'
• For damages awards with defective good, award difference between actual value and what value would have been if not defective
• Award 'cost of cure’ to contracts for services, cost of fixing, to defective goods
• Cost of cure awarded only if reasonable

Ruxley v Forsyth Example

• If the loss was the true result of breach of contract, there is an alternative measure the court can award
• Ruxley built a pool, stipulated to be 7’6” deep, but the court built a pool that was 6’9” deep
• There was no value difference, but rectifying the issue would cost £21,560
• House of Lords asked if Mr Forsyth should be awarded nothing, or £21,560, or a sum in between
• Trial judge awarded £2,500
• The House of Lords did not consider it right to use the £21,560 cost of cure figure, as it was unreasonable for the benefit to obtain
• The original trial judge award was reinstated which accounted for Mr Forsyth’s personal preference to have a more deeper pool: consumer surplus

Reliance Loss

• A claimant may seek damages to cover expenses incurred when expectations are too speculative due to loss of profits, as damages for benefits are normally requested by the claimant
• Damage assessments are based on reliance loss  

Anglia Television v Reed

• Anglia hired Reed to play the leading role for a TV play production, but he refused to carry on with this contract, abandoning the production
• Anglia claimed all production expenditures wasted, including director's, designer's and stage manager's fees
• Anglia TV did not claim damages on expectation loss as they did not know the profit of a valid contract
• The defendant's counsel argued that Anglia TV could not recover expenditures incurred before the contract, as this loss was too remote, but this was rejected by The Court of Appeal
• Denning felt that pre-contract expenditure wasn't too remote; Reed should have known that previous expenditure with the Anglia TV contract would have been invested and wasted when Reed broke the contract

Reliance Loss cont.

• In Anglia TV v Reed, the damages claim was based on reliance loss, since the company was not aware of the profits from this valid contract
• The reliance loss basis may be required if the claim for damages in speculative contracts is too high

Omak Maritime Ltd v Mamola Challenger Shipping Co (The Mamola Challenger)

• Omak agreed to charter a vessel from the owners for five years and breached conditions, and the contract was terminated
• Expenses had been wasted because the owners made vessel changes, and there was no benefit, so they claimed damages
• The High Court held that owners had to mitigate their loss and had not suffered any loss, and so wasted expenditures could not be claimed

Types of Loss

• This can include economic position, harm to the person/property of the claimant, damage to property
• The claimant can recover economic profit, injury, property damage and also restrictions on claiming damages for economic loss as it does not apply to contracts
• If a claimant purchased a business machine, damages can arise from breakdown-related costs
• Damaged property, personal injuries and losses can all be recovered
• Seller has broken the implied term of satisfactory quality under Sales of Goods Act 1979, s.14

Chaplin v Hicks [1911] 2 KB 786

• The Daily Express ran a talent contest where 50 contestants had to attend in order to be 1 of 12 winners; the court awarded damages
•  The winners were offered three-year theatrical engagements
• The organizers failed to provide the claimant the time and location of the audition
• Court of Appeal decided the claimant was entitled to be compensated for the loss of opportunity  

Blackpool and Fylde Aero Club v Blackpool Borough Council [1990] 1 WLR 1195, CA.

• Here the Court of Appeal held that the Council had a duty to consider all properly submitted tensions
• In this case the club’s tender was not chosen for consideration, therefore the airport tender lost the chance to run pleasure flights services

Damages for mental distress

• Damages are not rewarded for a disappointing or distressed party because it is usually felt when any breach of contract occurs
• To be awarded, the courts must see that the distressed and humiliating manner of dismissal has affected their distress

Jarvis v Swans Tours [1973] 1 QB 233, CA.

• Lord Justice Denning finds in favour after the defendant had advertised a false holiday party
• Mr. Jarvis booked a two week holiday with the travel agents who’s advertisement was that they were putting on a Houseparty in Switzerland
• On arrival this party was a catastrophe
• It was meant to be a house party yet they only had about 13 people during the 1st week and it declined to only Mr Jarvis in the second week
• In the booklet in advertised the details and descriptions yet none existed, not only that on he first occasion the skis provided were broken as not of the right dimension and Mr Jarvis injured his feet

Farley v Skinner

• HL, the House of Lords found in favour as the sole object of the contract need not provide peace of mind. Just that providing peace of mind is an attribute of its most important effects
• In order to save on Gatwick Airport taxes they told buyers of the estate that the house surveyor said non of its effects suffered aircraft noise which turned out to be untrue
• On appeal The House of Lords rested that and the awarded damages of £10,000 for non pecuniary losses incurred

Types of loss summary

• A claimant can make a damages claim as to losses being incurred such as:
• Damages to Property
• Physical Injuries
• Loss of Opportunity; and In limited situations mental distress

The Remoteness rule

• A party will not be awarded certain losses which include remote losses at large in order to find someone responsible for any that follows the breach
• The contract rule is to make sure to have a reasonable outcome for all parties and to avoid unfair settlements

Alderson B - Hadley v Baxendale (1854)

• A shaft broke and claimed contract with the defendants as to deliver such shaft and replace it to Greenwich 
• In order to deliver there was a default and claim of a late delivery
• While delayed the mill was affected as there was no standby with the defendants
• Alderson B stated the innocent party be treated as if he did occur in a reasonable standing

Remoteness

• This rule states that the parties that will be party to the breach will be in the eyes of reason to be put on the table as stated as a certain probable in the breach

Parson’s Case

• It must be clear that if the court doesn’t accept that damages as as serious, then the damages could be affected

Stuart vs Smith- the case

• The CA had stated that the process must determine the extent in where someone was to undergo their own losses during financial reasons
• The CA stated it isn’t impossible to be financially categorized to provide the best solution

Summary of remoteness

• The main focus points such damages have caused the breaching parties will be looked together to conclude the outcome
• It can be seen that a breach of contract and remote consequences happen if a reasonable consensus is had during an unlikely result

Halifax vs Mericati LTD

• The defendant charted and claimed after taking the ship if this measure is not the actual ordinary circumstance

Mitigation

• If there comes to a point as one claims the damages that could result from the cause is not always remote
• It’s mandatory that they must have had been mitigated by Viscount Haldane

Contracting negligence

If there are terms that the service if rendered by reasonable care, damages may be done to the claimant

Time assessment damages

The key here to provide is that by the time of the breach, that the claimant could make reasonable mitigation steps in order to quickly act and replace instead risk making prices worse .

Golden victory - rule

• The key here is to make sure the damages have reflected the overall loss, damages may need to be given if not achieved
• We just showed that they just take the next step when having a breach of contract in today 's discussion.

Specified Damages and penalty clauses.

• There may be a provision in contract of terms what will need to be provided to get compensations over what all has come with such issues
• It depends on how to cause is drafted as a good measure to take before.

Specified (liquidated, agreed damages)

– This is a contract that shows the difference between a specific sum and a genuine amount due for payments by the plaintiff

• A contract shows it was the real damages in why so high and whether so low, such cause may need to be settled in court

How will the court decide for specific damages

• From Dunlop, there should be guidelines to how a clause is to be a specification and a penalty
• If the cause will result for extravagant amounts the penalties will continue on till its settled
• On many accounts one will pay or not

Philips vs Hong Kong

The PC showed its certain as they thought that what clauses were agreed about can keep all parties with ability and safety in what they will face

CAVENDISH CASE

• It must be noted that the the clauses must still be considered at that time to be valid

Remedies for Damages

The most notable remedy one can be awarded for a breach of contract is that of a damage assessment claim

Action for an Agreed sum

We can note what may need to happen so to claim the duties are all taken care of or what can be used otherwise.

termination of contract

A contract can be terminated or amended but the actions can see what goes from there, such as is that person able make correct decisions.

Election of the innocent party

• If so then the parties can seek to find and decide

Effect of Affirmation with its proper parties

• If there any parties such are entitled to have themselves involved, they are capable to still claim damages over losses suffered

Special and final contracts

• If the seller breaches or other contract can see both actions may be refunded

Summary

The party might think of what’s going on at the moment and decide or look again to see what will need to happen