Contract Law Remedies

Remedies in Contract Law

• The basic principle of contract law is "ubi jus ibi remedium," meaning where there is a right, there is a remedy.
• The purpose of a remedy is to put the contracting parties in the position as if the contract had been completed.

Common Law Remedies and Equitable Remedies

• Common law remedies include compensation, unascertained damages, and ascertained damages.
• Equitable remedies include specific performance, injunction, and restitution.

Compensation

• Damages for breach of contract aim to provide compensation to the aggrieved party (compensatory in nature).
• Damages are not punitive in nature (Addis v Gramophone Co. Ltd.).
• The basic purpose of damages is to restore the injured party to the position they would have been in if the contract had been performed (restitutio in integrum).
• The injured party is entitled to the benefit of their bargain (Farley v Skinner).

Knowledge Possessed by the Party Who Breaches the Contract

• Imputed knowledge refers to the knowledge of the ordinary course of things and the likely loss.
• Actual knowledge refers to the knowledge of special circumstances and the likely loss.

Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd.

• The case established the principle that knowledge possessed by the party who breaches the contract includes imputed knowledge and actual knowledge.
• The breach of contract must be considered in the context of the ordinary course of things and special circumstances.

Hadley v Baxendale (1854)

• The case established the principle that damages for breach of contract should be such as may fairly and reasonably be considered arising naturally or in the contemplation of the parties at the time of the contract.
• The test is divided into two:
  1. Losses arising naturally or the usual consequences arising from the breach of contract.
  2. Losses that do not exist naturally but can reasonably be in the contemplation of the contracting parties to occur as a result of the breach of the contract.

Application of Hadley v Baxendale's First Test

• Bee Chuan Rubber Factory Sdn. Bhd. v. Loo Sam Moi: The Federal Court agreed with the award of RM100 per month for the relevant period due to the delay in completing the respondent's house.

Application of Hadley v Baxendale's Second Test

• Tham Cheow Toh v. Associated Metal Smelters Ltd.: The case falls within the second rule, where the appellant would not be liable for payment of damages for loss of profit unless there is evidence that the special object of the furnace had been drawn to their attention and that they contracted on the basis that delay in delivery would affect the business profits.

Application of Hadley v Baxendale's First and Second Test

• Bank Bumiputra Malaysia Bhd. Kuala Terengganu v. Mae Perkayuan Sdn. Bhd. & Ors.: The case illustrates the application of both the first and second principles of Hadley v Baxendale.

Reasonable Contemplation

• Reasonable contemplation is measured by considering what was reasonably foreseeable by the parties at the time of the contract.
• Asquith, LJ in Victoria Laundry v. Newman Industries Ltd. stated that the knowledge possessed by the party who breaches the contract is essential in determining reasonable contemplation.