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Remedies for Breach of Contract

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Remedies for Breach of Contract Remedies for Breach of Contract Damages are always available as of right for breach of contract (where C has suffered loss); they are virtually always compensatory, which means: v C can only claim for own loss, not third party (Panatown) v Only C’s net loss is recoverable (eg price C owed D must be deducted from damages – net profit) v Requirement of mitigation by C may sometimes wipe out loss v Damages for breach of contract are never punitive - Addis v Gramophone Ltd (1909) (employee fired in breach; HOL said no damages for humiliating firing, damages not punitive) - Mcbride (1995) argues for some punitive aspects, but O’Sullivan says you need safeguards of CJS for punishment and this would pose threat to certainty v Damages assessed on basis that D would have performed the minimum obligation of contract - Laverack v Woods of Colchester (1967) (employee fired in breach; contract gave E salary + discretionary bonus – bonus ≠ damages, even though probably would have received) - Durham Tees Valley Airport Ltd v Bmibaby Ltd (2010) (required operation of 2 aircraft; CA rejected application of Laverack – discretion as to how, but not whether to do at all) Quantification of Damages C’s Performance/expectation interest (basic principle) The basic rule is “where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed” (Parke, Robinson v Harman (1848)). (Cf. tort damages, misrep damages) C might obtain damages even if they are no worse off as result of breach, but have lost expected profits. There are several means of converting ‘loss of bargain’ into monetary terms: v Difference in value measure – difference between the value of what was performed/provided/ the subject matter and the market value of what should have been performed under contract - Charter v Sullivan (1957) (car had higher demand than supply; purchaser breached, seller sold to another at same price; no loss, only nominal damages) Eg. If tenant breaches covenant to keep premises in good repair, L’s damage will not be the cost of repair but the difference in value of the property This measure works where substitute performance can be obtained in market and C’s reason for contracting is commercial (to make profit); however, where work is done defectively and must be redone (not just replaced in market), or where C desired something under contract which reduced value of property, harder to apply. Market value is used prima facie throughout SGA 1979, but displaced in some circumstances - s 53: (2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty. § (3) In the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had fulfilled the warranty. - s 50: (2) Measure of damages [buyer’s non-acceptance] is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's breach of contract. § (3) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or (if no time was fixed for acceptance) at the time of the refusal to accept. - WL Thompson v Robinson (Gunmakers) Ltd (1955) (‘available market’ means demand which can absorb the goods; if insufficient demand, C can claim loss of value on the contract) - v Cost of cure measure – where difference measure inadequate, C might be awarded damages representing cost of ‘curing’ defective performance - Radford v De Froberville (1977) (P covenanted to build wall, failed; C entitled to cost of building, regardless of impact on C’s property value – C wanted for privacy not profit) Cost of cure can’t be claimed where wholly unreasonable (eg greatly exceed added value) - Tito v Waddell (No 2) (1977) (islanders left, mining company promised to replant land but did not; value difference between land as is and land re-planted negligible b/c land devastated by WWII; cost of cure $73k AUS/acre, difference in value 0 – judge said cost of cure not appropriate, no intent to plant/go back) § Uncomfortable – what parties do with damages usually irrelevant? Probably right decision on a disproportionality basis (which was not ratio) - Jacob & Young v Kent (1921) (US!) (house built; O wanted specific type of plumbing, B used identical pipes from different manufacturer; O wanted cost of cure, but this = cost of rebuilding house, judge refused – disproportionate) Cases also seem to indicate cost of cure depends on intention to actually cure – Ruxley, Tito. v Loss of amenity/consumer surplus? Where difference in value fails to acknowledge failure in performance and cost of cure is disproportionate, appears court grants a middle ground remedy for loss of amenity, representing the consumer surplus (value of performance specific to individual, distinct from market valuation) - Ruxley Electronics & Constructions Ltd v Forsyth (1996) (pool built too shallow; difference in market value 0 (acc. to judge), cost of cure £21,600; judge ≠ believe C would use to cure; first instance awarded loss of amenity £2,500; CA tried cost of cure; HOL confirmed £2,500 middle ground) § Lloyd presented as damages for distress (contract for pleasure which is denied); but L recognised this would not work for other kinds of defect) § Mustill drew on consumer surplus – should give C value which reflects subjective personal motivations not shared by objective market valuation - Freeman v Niroomand (1997) (C wanted specific porch built, builder inadequate; got award based on subjective preference for £130; loss of amenity b/c not to specification) v Non-pecuniary loss (esp contracts for non-profit reasons) issues (see consumer surplus loss above – where value of performance to specific C exceeds market) Damage for distress/inconvenience/disappointment used to be regarded as not recoverable for breach (Addis v Gramophone Co Ltd (1909). Burton (Dunnachie v Kindston-upon-Hull CC (2003)) said “anger, anguish, anxiety, damage to family life, damage to reputation, depression, disappointment, frustration, grief, humiliation, hurt, impact on family life, inconvenience, injury to feelings loss of congenial employment, loss of self-confidence, loss of esteem, mental distress, mental suffering, stress, upset and worry” could not be recovered. Cooke (Johnson v Gore Wood & Co) – contract-breaking is “an incident of commercial life which [parties] are expected to meet with mental fortitude.” Two exceptions to this general rule as per Watts v Morrow (1991): 1. “Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation” (this will never apply in commercial contract) 2. “For physical inconvenience and discomfort caused by the breach and mental suffering directly related to that inconvenience” - Watts v Morrow (1991) (country home; surveyor failed to notice defects; market value difference from surveyor, claimed extra £8000 for distress and upset (so stressful couple broke up) – awarded smaller amount for this measure) - Jarvis v Swan Tours (1973) (singles holiday in alps; second week, only person there, entertainment not as promised; J awarded more than holiday cost by CA to reflect disappointment – holiday contract more than material provision, made for enjoyment) § Dicta in case that if someone has ticket for event and car hire doesn’t show up, can sue for disappointment/loss of entertainment from car company – too far? - Heywood v Wellers (1976) (solicitor failed to injunct, restrain X from molesting C; purpose to protect from harassment, solicitor liable for distress) - Cook v Swinfen (1967) (Denning obiter – negligent solicitor would be liable for resulting health breakdown if reasonably foreseeable; in this case, not foreseeable) - Jackson v Horizon Holidays (1975) (if C contracts for family holiday, damages should include distress of wife and children – Denning said C recovering on their behalf) In Farley v Skinner, HOL extended first exception to cases where pleasure was major (not necessarily sole) object of contract - Farley v Skinner (2001) (country house, survey failed to note aircraft noise; F sued surveyor; judge said no difference in market value, since noise already taken into account of market price, but awarded £10,000 non-pecuniary loss) § CA said gets nothing, not within Watts § HOL approved claim, extended Watts; Scott (radical) argued could claim both Watts arms, noise impact on eardrums physically operating on F, cause distress - Hamilton Jones v David & Snape (2004) (solicitor, divorce, forgot to notify passport authorities; H took kids to Tunisia – mental distress awarded, major object to give W peace of mind that kids kept in country) - Haysman v Mrs Rogers Films Ltd (2008) (first instance; film company left C’s property in bad state, distress flowed from physical manifestation of breach; second limb applied) Other methods for quantification v Reliance measure – putting C back in position if contract had not been made; unusual, since C will normally make profitable contract, stand to gain more from expectation measure C can’t claim expectation and reliance measures – only one, can generally choose. Same underlying principle – assuming C did not make bad bargain, reliance claim will go some way towards expectation loss (Teare, Omak Maritime Ltd v Mamola Challenger Shipping Co (2010)). The advantage in choosing the reliance loss is that the burden falls on D to show expenditure would not have been recouped (Yam Sang Pte, Leggatt; eg McRae v CDC).
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