7.7 Equitable remedies S02Y24.pptx

Principles of Business Law Semester 2 2024 TOPIC 7: REMEDIES FOR BREACH EQUITABLE REMEDIES Equitable remedies: Overview  The Courts of Equity developed remedies that could be awarded where common law remedies of damages or termination would be inadequate.  Example:  A sells...

Principles of Business Law Semester 2 2024 TOPIC 7: REMEDIES FOR BREACH EQUITABLE REMEDIES Equitable remedies: Overview  The Courts of Equity developed remedies that could be awarded where common law remedies of damages or termination would be inadequate.  Example:  A sells B a one-of-a-kind vase.  A breaches the contract and does not deliver the vase.  B would like the contract performed, that is, for A to hand over the vase.  Why are damages and termination inadequate remedies?  B wants the vase. B does not want to terminate the contract.  Monetary compensation (damages) could not be used to purchase an equivalent good – the vase is one-of-a-kind. Equitable remedies: Overview (ctd)  Equitable remedies are not available ‘as of right’ – they are only available, at the discretion of the court, where the common law remedies are inadequate.  There are two relevant equitable remedies: 1. Specific performance; 2. Injunctions. Equitable remedies: Specific performance  An order of specific performance requires the party in breach to perform their contractual obligation(s).  Returning to our example: it would require A to hand over the vase.  Specific performance will not be ordered if:  damages provide adequate relief; or  Dougan v Ley  performance of the contractual obligation involves the maintenance of a close personal relationship, goodwill or cooperation; or  JC Williamson v Lukey & Mulholland  continuous supervision by the courts would be necessary.  JC Williamson v Lukey & Mulholland Specific performance Do damages give adequate relief? Dougan v Ley FPBCL p 346 Facts  D sold a taxi, together with its operating licence, to L.  D had a change of mind and refused to perform the contract. Issue  Was specific performance an available remedy? Do damages give adequate relief? Dougan v Ley (ctd) Decision  L was entitled to an order of specific performance. Reason  Damages are an adequate remedy where ordinary goods are involved as ordinary goods can be purchased elsewhere.  Damages are unlikely to be an adequate remedy if the goods are unique or have a special or particular value.  Only a limited number of taxi licences are issued, and they were not readily available on the market –  thus, the award of damages would be inadequate – specific performance ordered. Specific performance: Other discretionary factors JC Williamson v Lukey FPBCL p 371 Facts  W operated three theatres in Melbourne.  W leased the confectionary shop next to one of the theatres to L for 5 years and granted L the exclusive right to sell sweets in the theatre itself.  Three years into the five-year arrangement, W allowed another person to sell sweets in the theatre.  L sued for breach of contract. Issue  Was specific performance an available remedy? Other discretionary factors JC Williamson v Lukey (ctd) Decision  Specific performance was not an available remedy. Reason  Specific performance will not be ordered if the contract requires performance of services that will continue over an extended period of time.  This would require the parties to remain in an ongoing relationship.  As the parties’ relationship had soured, continuous supervision of the courts would be necessary. Equitable remedies: Injunctions  Injunctions are court orders requiring a person to do (or not do) something.  They can be used to prevent a threatened breach of contract (or stop a continuing breach).  Injunctions are an equitable remedy and will not be ordered if damages are an adequate remedy.  An injunction will not be granted if it has the indirect effect of enforcing a contractual promise that a court would not enforce by way of an order of specific performance.  Buckenara v Hawthorn Football Club Ltd  Lumley v Wagner Injunction: Indirect enforcement Buckenara v Hawthorn Football Club FPBCL p 324 Facts  B was contracted to play football for HFC.  B’s contract with HFC included a promise made by B that he would not play for other clubs while contracted to HFC.  When it seemed that B intended to play for another team, HFC sought an injunction preventing him from doing so. Issue  Is an injunction preventing breach of the promise not to play for another team an available remedy? Indirect enforcement: Buckenara v Hawthorn Football Club (ctd) Decision  The injunction was issued. Reason  An injunction will not be granted if it has the indirect effect of enforcing a contractual promise that a court would not enforce by way of an order of specific performance (that is, if it forces B to honour his positive promise to play for HFC).  An injunction preventing B from playing for other teams would not force him to play for HFC – B could earn a living in other ways.  Is this reasoning outdated? Injunction: Indirect enforcement Lumley v Wagner FPBCL p 382 Facts  W contracted to sing in L’s theatre (positive promise).  The contract between W and L included a term that prevented W from performing elsewhere (negative promise).  W breached the positive promise and threatened to breach the negative promise. Issue  Would an injunction be granted to restrain breach of the negative promise? Indirect enforcement: Lumley v Wagner (ctd) Decision  The court issued an injunction which prevented W from breaching the negative promise. Reason  An injunction will not be granted if it has the indirect effect of enforcing a positive contractual promise that a court would not enforce by way of an order of specific performance.  On these facts the granting of the injunction would not have this effect as W could make a living in other ways.  Again, is this reasoning outdated?