Remedies In Contract

Objectives:

• Describe the types of common law remedies that can be awarded
• Explain the types of equitable remedies that can be awarded, including specific performance and injunctions
• Evaluate the limitations on the awarding of remedies under the law of contract

Common Law Remedies

Damages:

All common law remedies are available as of right if a contract is breached

The purpose of damages in contract law is to put the victim, so far as it is possible and so far as the law allows, in the same position he would have been in had the contract not been broken but had been performed in the manner and at the time intended by the parties

Pecuniary Losses - these are the financial losses that result from a breach of contract

Non-Pecuniary Losses - these are other losses, such as mental distress, disappointment, hurt feelings or humiliation. Traditionally, these are not compensated but this rule has been relaxed for contracts, which are specifically for pleasure, relaxation and peace of mind

Key cases:

• Jarvis v Swans Tours Ltd (1973):
• Jarvis booked a holiday
• The holiday wasn't as advertised (it was shit)
• Brought a claim for breach of contract based on disappointment
• At first no luck, he appealed
• Held: Where a contract is entered for the specific purpose of the provision of enjoyment or entertainment, damaged may be awarded for the disappointment, distress, upset and frustration caused by said breach
• Basically - loss of enjoyment counts
• Farley v Skinner (2001)
• Farley got Skinner to do a survey on a property
• It was near an airport and Skinner was meant to ascertain whether it would be affected by aircraft noise
• He said it was fine so Farley bought it
• Turns out there was a lot of noise
• Farley had asked specifically for Skinner to check for noise, and so argued the report was sub-standard and in breach of contract
• Sought damages for the diminution in enjoyment of his property
• He won £10,000
• Ruxley Electronics v Forsyth (1995)!
• The claimant was able to recover a sum, not just to reflect that the swimming pool he had contracted to have built was not of the depth contracted for, but also that he felt 'unsafe' when diving into the pool as a result of the more shallow depth of the final construction

Limitations on the awarding of damages

Before a court can award damages, it must decide three things:

1. Who or what caused the loss/damage? (Principle of causation)
2. Could the person blamed for the losses 'reasonably' have foreseen them if they broke a contract? (Forseeability)
3. Did the person claiming compensation do all they could to keep the loss/damage to a minimum? (Principle of mitigation of loss - a duty on claimants)

• Causation - a person will only be liable for losses caused by their breach of contract:
• Quinn v Burch Bros (Builders) Ltd (1966)
• Burch Bros breached the contract by failing to supply a step ladder requested by Quinn
• To prevent delay, Quinn used a trestle (improperly, as it was not footed by anyone), and injured himself
• It was held that Burch Bros were not liable as the injury was caused by Quinn's own voluntary act
• Basically it has to be a direct cause and effect
• County Limited v Girozentrale Securities (1996)!
• Investment advice led to a financial loss, which was made worse by other events, such as an economic downturn as well as the drop in value of the shares concerned
• Remoteness - a defendant will only be liable for such losses as were "reasonably foreseeable" as arising from the breach:
• Hadley v Baxendale (1854) 
• Crankshaft broke in claimant's mill
• Defendant hired to deliver crankshaft to and from the place of repair
• Crankshaft a week late (def's fault)
• Claimant unable to use mill and so claimed for loss of profit
• Defendant had no idea it was the only crankshaft - so the loss of profit was deemed to be too remote
• Held - Damages available for breach of contract include:
• Those which may fairly and reasonably be considered arising naturally from the breach OR
• Such damages as may reasonably be supposed to have been in the contemplation of both the parties at the time the contract was made
• Transfield Shipping v Mercator Shipping (2008)
• Man hires ship for fixed period of time
• Needs ship longer so extension agreed
• During which, owner entered contract with someone else
• Ship not returned on time so breach of contract
• Owners sue for loss of second lease income and loss of profit
• Court said lol no - yes to actual losses but loss of profit too remote
• Wiseman v Virgin Atlantic Airways Ltd (2006)
• Claimant tried to return home from Nigeria
• Someone demanded a bribe at the airport
• He was like ummmmmm
• Then gets told ticket is invalid and passport out of date (funny that)
• Travel is delayed so he claims for travel and accommodation expenses
• Gets robbed and dumped whilst out there
• Claims for emotional upset and robbery
• Yes to expenses, no to robbery and emotional upset because not foreseeable
• Illustration of Hadley v Baxendale
• Mitigation - claimants are under a duty to mitigate their loss, on other words they cannot recover damages for losses which could have been avoided if they had taken reasonable steps:
• Pilkington v Wood (1953)
• Claimant bought house with defective title
• Turns out someone else living there with share in property
• Sale fell through
• Claimant suddenly had to move far away for work
• Claimant sues solicitor for difference in value and for moving expenses
• Yes to difference in value but no for expenses - no one knew he would have to move so not forseeable
• Brace v Calder (1895)!
• The claimant was a partner in a business that was dissolved. Two remaining partners offered to re-employ the claimant on the same terms as before, but the claimant refused, and sued on the basis that the original dissolution of the partnership had rendered him unemployed
• HELD - This was an unreasonable refusal to mitigate losses by refusing an offer of employment from the defendants
• British Westinghouse Electric Co Ltd v Underground Electric (1912)!
• A contract for the purchase of turbines was broken when the equipment supplied proved to be inefficient. The defendants then replaced these with better ones that helped to save the claimants costs over a time, but they still sued for the original breach of contract
• HELD - There were no real losses to recover here, except for the period of time that it took for the defendants to replace the faulty turbines

Calculating Loss

• Loss of expectation - the courts will aim to put claimants in the position they would have been in had the breach not occurred - i.e the claimant would have expected a certain result from the contract so the damages will compensate for the loss of this expectation:
• Golden Victory case (2007)
• Relating to the lease of a boat
• Contract allowed either side to terminate in the event of war
• Gulf War broke out, justifying termination
• Held - The claimant could only sue for actual losses, not potential
• The 'potential' losses on the facts were too 'remote'
• Modahl v British Athletic Federation Ltd (1999)
• Athlete suspended for doping
• Panel found her guilty
• Turns out lab was unaccredited
• Ban lifted
• Claimed for breach in failing to appoint a panel in accordance with rules
• No breach as no actual contractual responsibility for individual panel members
• Reliance Loss - where this is the basis for calculating damages. The courts will seek to put the claimant in the position they were in before the contract was made
• Anglia Television Ltd v Reed (1972)
• TV company contractually agreed with Reed that he would act in a play they were televising
• Reed backed out and claimants sued for wasted costs incurred up to that point, rather than loss of future profits
• Held - fair enough - correct under Hadley v Baxendale as the losses were foreseeable

A claimant can choose whether to base a claim on a loss of expectation or a loss of reliance. A claimant cannot claim for both. Loss of expectations is the most common

Loss of expectation

• The idea here is to put the claimant in the same financial position as if the contract had been performed. This may be:
• The difference in value between the goods or services of the quality indicated in the contract and those actually delivered where they are of inferior value
• The difference between the contract price and the price obtained in an 'available market' 
• Charter v Sullivan (1957)
• Defendant bought car from claimant but refused to accept it
• Claimant got the money for loss of profit but also tried to claim for sales he could've made if he was not busy with the case 
• Yes to the agreed price of the car, no to the money he could've made from other cars as too remote
• Loss of profit
• Caparo!
• Loss of a chance
• Chaplin v Hicks
• Actress entered beauty contest that could have led to employment
• Didn't receive her invitation until it was too late
• Brought action for loss of chance of employment
• Awarded £100
• Hicks appealed saying the damages were speculative and incapable of assessment
• Appeal dismissed - no matter if she would've got the job or not, she still missed the opportunity

Restitution

• This is a repayment to the claimant of any money or benefits passed to the defendant in advance of the contract. Restitution in theory, is available where there is no contract, which could be for the following reasons:
• a contract has not been made
• the contract has been discharged, or
• the contract was void (e.g because of illegality)
• Key cases:
• Fibrosa Spolka Akcyjna v Fairbarn Lawson (1943)
• English company had contract with Polish company
• Polish company part paid £1000 upfront
• War broke out, Poland becomes enemy territory
• Contract frustrated - no longer possible due to illegality
• Hunt v Silk (1804)
• Total failure of consideration and restitution
• Lease agreement stated tenant would pay £10 and move in immediately
• Landlord meant to do repairs a few days later; he didn't
• Tenant left and sued for his £10 (restitution)
• Failed because he had received a benefit
• If the party has received anything under the contract, restitution is impossible
• Law Commission: Pecuniary Restitution on Breach of Contract (No.65) and later No.121

Quantum Meruit

This is recovery of an unqualified sum in respect of services already rendered. There are three common circumstances where such an award is made:

1. Where there is a contract for services that is silent on the issue of remuneration
• Upton RDC v Powell (1942)
• Fire broke out on Powell's farm
• Powell called Upton fire brigade
• Turns out he was in the Pershore district so wasn't entitled to free Upton services
• Had to pay for services, as there was an implied contract
2. Where the circumstances of the case show that a fresh agreement can be implied in place of the original one
• Stevens v Bromley (1919)
• Shipowners agreed charter fee for transportation of steel billets
• Charterers loaded general merchandise, breaching the agreement
• Nominal damages only? Or inferred contract?
• Held - beyond nominal damages and shipowners entitled to general rate for the "breaching cargo" that was loaded
3. Where a party has been elected to consider the contract discharged by the other's breach, or where a party has been prevented from performing by the other party, in either case they might claim for work they have already done 
• De Barnady v Harding (1853)
• Claimant was an agent of the defendant
• Contract stated payment of a price and expenses for the agency work
• Defendant ended contract wrongly and tried to pay expenses only
• Held - No - it's literally in the contract
• Price not specified therefore Quantum Meruit applies

Equitable Remedies
These are solutions to breach of contract situations that aren't awards of money.

Specific Performance
An order of Specific Performance is an order compelling one side of the contract to perform their obligations under a contract
For Specific Performance to apply:

• Damages must be inadequate:
• Beswick v Beswick (1968)
• Claimant's husband left his business to their nephew on the condition that the nephew pay his aunt (Claimant's wife) £5 a week
• Nephew didn't pay
• She wanted to enforce the contract but couldn't because she wasn't a party in the contract
• It must not cause any hardship to the defendant:
• Patel v Ali (1984)
• Mr and Mrs Patel contracted to sell their house
• Completion was delayed, Mrs Patel got sick and reliant on neighbours
• Buyer sought specific performance
• Specific performance denies because it would "cause hardship amounting to injustice" - even though it wasn't the buyer's fault, it would be cruel to force the contract
• The contract must be made fairly:
• Walters v Morgan (1861)
• Defendant purchased land
• Claimant wanted to mine it and pressured the defendant into signing a draft lease
• Defendant realised the value and refused to allow the claimant to mine
• Claimant sued for breach
• Defendant wanted contract rescinded for misrepresentation
• Held - no misrepresentation, only silence. However, specific performance refused because the claimant was taking advantage

Exceptions:

• Contracts involving personal services
• Contracts which involve continuous duties
• Contracts which are vague as to the performance required

Injunctions

An injunction will usually compel the defendant to do a particular thing

Key cases:

• Warner Bros Pictures v Nelson (1937)
• Actress agreed to only work for Warner Bros, taking no other job
• She moved to England and breached contract by contracting to act for another
• Warner Bros sought injunction
• Injunction granted, but only for acting, she was allowed other jobs
• Page One Records Ltd v Britton (1968)
• Pop group wanted to end contract with manager
• Manager sought injunction
• Held - injunction refused because the group would have had to work for the same manager, or not at all - it would be like ordering specific performance for a contract involving personal services
• Warren v Mendy (1989)
• Professional boxer wished to split with manager for new manager
• Old manager wanted injunction against new manager
• Held - No. Boxers need managers and courts will not force working relationships
• Lauritzencool AB v Lady Navigation (2005)
• Ship hire
• Defendants broke the terms of the lease and claimants sought injunction to prevent them continuing to breach the lease
• Held that injunctions don't exist to enforce general performance of a service, only to prevent a specific breach of contract