Remedies II - limiting factors (Other remedies (Specific performance -…
Remedies II - limiting factors
Must be a causal link between the breach and the loss
Galoo v Bright Grahame Murray (1994) - "dominant" or "effective" cause - interpreted broadly, advocating a "common sense approach"
Novus actus interveniens - likely to happen?
Lambert v Lewis (1982) - intervening act not deemed "likely to happen" - dealer sold defective trailer coupling - customer went on using it when obviously broken - accident caused by use when knew it was broken rather than by fact it was defective when sold
Monarch Steamship v A/B Karlshamms (1949) - if intervening event "likely to happen" then generally will not be held to break the chain of causation
Hadley v Baxendale (1854) - "Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach contract should be as such as may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probably result of the breach of it."
Two limb test
Damage arising naturally... in the usual course of things - inevitably in the contemplation of the parties
Imputed knowledge - objective
Damages resulting from the special circumstances require actual knowledge by the defendant to be in reasonable contemplation of both parties
Actual knowledge - subjective - abnormal losses
Note - Jackson v Royal Bank (2005) - confirmed that what was in contemplation or knowledge of parties to be judged at time of contracting, not breach
Application of the test
Victoria Laundry v Newman Industries (1949) CL - late delivery of new boiler - allowed claim for usual profit would have earned in between scheduled and actual delivery based on first limb - claim for loss of lucrative contract failed because to unusual and far reaching for first limb and defendant had no special knowledge for second
Koufos v C Czarnikow (The Heron II) (1968) HL - "was the loss 'not likely' to occur" - ship-owner made deviations en route to Basrah - carrying sugar - did not know of charterer's intention but was aware there was a market for sugar at Basrah - on knowledge available when contract made, sale of sugar on arrival was something of which there was such probability that should be regarded by court as arising in usual course of things
Confirmed test for remoteness narrow in contract than tort - in contract must appear to defendant as "not unlikely" or as having a "very substantial degree of probability"
Balfour Beatty (Scotland) v Scottish Power (1994) - question of whether demolition and reconstruction of the aqueduct consequent upon power failure was within SP's contemplation as like to occur with a "very substantial degree of probability" - no reason should be expected to know technical details of concrete construction
Traditional approach - test of remoteness in Hadley v Baxendale as reformulated in the Heron II is still generally valid
Traditional view may not apply where industry norm dictates that certain losses, however reasonably foreseeable, are not intended to be recovered
"It must in principle be wrong to hold someone liable for risks for which the people entering into such a contract in their particular market would not reasonably be considered to have undertaken" - per Lord Hoffman, The Achilleas (2009)
Supershield Ltd v Siemen Building Technologies (2010)
John Grimes Partnership Ltd v Gubbins (2013)
Hadley v Baxendale - mill owner contracted with defendant to take broken mill-shaft to makers as pattern for new one - carrier's neglect led to delay in transport - considerable losses for mill owner because no spare shaft available - in most cases a spare shaft would have been available - also defendant wasn't aware at time of contract of circumstances meaning mill wouldn't be able to function without it - losses could not "reasonable be supposed to have been in the contemplation of both parties"
No obligation to mitigate - BUT losses from failure to mitigate are not recoverable
What is required?
Reasonable steps to minimise effect of the breach - British Westinghouse v Underground Electric (1912)
Must give credit for the benefits caused by the act of mitigation - Iobalia Business Travel SAU (formerly TravelPlan SAU) of Spain v Fulton Shipping Inc ("The New Flamenco") (2017)
Mitigating party not expected to "embark on litigation" - Pilkington v Wood (1952) - aka question of what steps are reasonable is one of fact - not expected to embar on complicated and difficult piece of litigation to minimise effects of breach
May have to accept D's substitute performance if cost-effective - Payzu v Saunders (1919) - counts as a reasonable step to mitigate - accepting performance offered by defendant under new contract even when amounts to a breach of original
Mitigation not "weighed in nice scales" - Banco de Portugal v Waterlow & Sons (1932) - here expenditure deemed to be reasonable
No duty to mitigate claim for payment of debt as amount is payable as contractual right rather than damages
Law Reform (Contributory Negligence) Act 1945
Forsikringsaktieselskapet Vesta v Butcher (1989) - per Hobhouse J - three categories of obligation
i) Breach of a strict contractual duty, and
iii) A tort
ii) Contractual obligation expressed in terms of taking care, but does not correspond to a common law duty which would exist in the given case independent of contract
Held that only operates as defence in third category - Law Commission has recommend (1993) that can be available as defence in second category also, but not in one
Barclay's Bank v Fairclough (1995) - "The very imposition of a strict liability on the defendant is to my mind inconsistent with the apportionment of loss" - per Lord Simon
Specific performance - obliged to carry out his undertaking exactly according to terms of contract
Discretionary - damages or liquidated demand must not be an adequate remedy - Adderley v Dixon (1824)
Never for contracts of personal service - De Francesco v Barnum (1890)
Court reluctant to supervise performance - Cooperative Insurance Society Ltd v Argyll Stores (Holdings) Ltd (1998)
Court will take into account conduct of claimant - clean hands - Coatsworth v Johnson (1886)
Reasonable promptness of action - delay defeats equity - Eads v Williams (1854)
Not where undue hardship on defendant - Patel v Ali (1984)
Not available where contract is wanting in mutuality aka not binding on both parties where voidable at option of one - particularly important with minors
Negative injunction - enforcement of a negative stipulation - Evening Standard v Henderson (1987)