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Topic 18- Remedies Damages (Mitigation (P must take reasonable steps to…
Topic 18- Remedies
Damages
Introduction
Most common remedy= award for damages
Damages in contract aim to put the injured party in the position he/she would have been in had the contract been performed
Can include loss of profit, which could have been made had the contract been performed
Court must be satisfied the party in breach of contract has
caused
the loss in question
Courts must identify the consequences that have flowed from the breach and the extent to which they must be compensated
= remoteness of damages
at some point court will decide certain consequences too far removed from breach complained of and claimant will not succeed
Courts must determine the measure of the loss
The courts will inquire into whether or not the claimant did anything to mitigate that loss
Causation
Injured party must prove that the party in breach wholly or partially caused the loss being claimed
s2 Civil Liability Act 1961: Amount of damages to be awarded may be reduced in cases where the person claiming the damages contributed in some way to the loss
Reduction in damages will be proportionate to his/her level of responsibility for the loss
Remoteness of Damages
Contract will not compensate for all losses that flow from a breach of contract
Losses that are considered to be too far removed from the breach will not be compensated
TEST:
HADLEY V BAXENDALE
Facts: P owned mill, D employed to carry the shaft when it broke and had to be dispatched for replacement or repair
Ds delayed in transporting the shaft
P's mill was out of business for long period of time
Issue; P sued D for loss of profits
Held: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive is respect of such breach of contract should be:
As may fairly and reasonably be considered as 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 probable result of the breach of it
TWO LIMBS:
THE NORMAL DAMAGE THAT MAY REASONABLY BE EXPECTED
SPECIAL DAMAGES OF WHICH BOTH PARTIES WOULD HAVE BEEN AWARE SHOULD A BREACH OCCUR
Victoria Laundry v Newman Industries
: Asquith reformulated test
P only entitled to recover that part of the loss that occured and that, at the time the parties into the contract, was reasonably forseeable
Foreseeability depends on knowledge possessed by the party in breach
Knowledge may be of two kinds
Knowledge
2, Specialist knowledge
Requires the ordinary reasonable man, having being possessed of such specialist knowledge at the time of contracting, would foresee the loss that would result from breach of contract
Not satisfied in
Waller v Great Western Railway
Facts: Railway co failed to provide horse box to transport P's horses to a sale in Dublin
Horses had to be ridden to dublin
Upon arrival horses sold for much lower price than anticipated
Also discovered due to diet change, horses' condition had deteriorated to an even greater extent than normally would be anticipated after such a journey
Held: Rejected P's claim on basis the Ds were not aware of the vulnerable state of the horses as result of a change of diet
They could only recover for expense of hiring people to ride the horses as well as any fatigue or inconvenience suffered
Victoria Laundries
Facts: Ds contracted to deliver a boiler to Ps on a certain date
Failed to do this until five months later despite aware Ps were intended to use it immediately in their boiler business
Issue: Ps sued for loss of profits resulting directly from breach
As well as lucrative government contracts
Held: Ds liable for loss of profits that flowed directly from breach
Failed re government contracts: Ds were unaware of the existence of these government contracts and as a result, could not be said to possess the specialist knowledge required for second limb
Loss will be recoverable if it can be said to flow naturally from certain breaches of contract
the state of mind of the parties i.e. their knowledge or expectation= irrelevant
Wilson and Dunville
: natural consequences of feeding animals animal fodder containing lead pelles was that the aninals would be injured as a result
IRRELEVANT THAT THE LOSS OUTSIDE D'S REASONABLE CONTEMPLATION
Lee and Donoghue v Rowan
: Builders refused to complete a drying shed in breach of contract
Farmer for whom the shed being built held to be able to recover the cost of completing the shed
The Heron II
Facts: Shipowner undertook to transport sugar to port of Basrah, where large sugar market existed
Arrived with sugar cargo 9 days late= loss of £4,000 profit for the owner of the sugar, who had intended to sell it straight away upon arrival
Shipowner unaware of owner's intentions
Held: Profits recoverable on basis it was a strng possibility the sugar would be sold upon arrival
Possibility prevented as result of delay
Kemp v Intasun Holidays Ltd
Facts: P wife booked package holiday in spain
On arrival hotel they were supposed to be staying in was fully booked
No alternative but to stay in staff quarters of another hotel
room in which they stayed= unhygenic and dusty- aggravated P's asthma
Issue: Travel agents unaware of this condition upon P's wife booking the holiday
Held; While P's award of 400 considered acceptable by court of appeal
award of 800, awarded for P's asthma attack should not have been awarded (D did not possess specialist knowledge)
Transfield Shipping Inc v Mercator Shipping Inc
Facts: Charterers hired ship for 7 months on daily rate of 16,700
Shortly before return the ship was on a voyage and its return to owners delayed 9 days
If market rental rate applied damages the owners entitled to = 158,301
however, the owners had, without charterer's knowledge, agreed a new daily charter at a rate of 39,500 with a follow on party
Issue: Over the cost of his new charter that represented 1.3 million to the owners which they sought from Ds
Held: The potential loss of teh lucrative subsequent charter was not something that should have been within the natural contemplation of the parties
Decided breach= innocent and relatively minor
could not be said that it was within common intenion of parties that in such circumstances it would impose extraordinary losses on the shoulders of the Ds for a relatively short delay in returning ship
Mitigation
P must take reasonable steps to mitigate or reduce her damages
Applies only where the loss has been sustained
Does not apply to cases where loss anticipated
Brace v Calder
:
Facts: Manager was wrongfully dismissed from his position upon dissolution of partnership
Refused an offer of reemployment by two of the partners
Held: Failed in action for damages for wrongful dismissal on basis that he failed to mitigate his losses
Cullen v Horgan
:
Held: In a situation where the D fails to deliver he goods, the purchase must at some point accept the contract has ended and should make reasonable attempt to source the goods from elsewhere
If P fails to do so, this could result in no damages awarded for consequence of loss
Payzy v Saunders
:
Facts: P initially contracted to buy silk from D on credit terms
After a time, P failed to keep up w payments and D withdrew credit facility
He was willing to contract w P if he made cash payments
P refused to continue dealing with D, despite fact no alternative silk supplier available
Held; By failing to negotiate with D on basis of cash payments, P failed to mitigate loss
Lennon v Talbot
: Keane J asserted that if the terms presented in the new offer are prejudicial and differ to a great extent from those in the contract that has been breached, the decision of
Payzy
= not applicable
Cited
Banco de Portugal v Waterlow and Sons
:
The law is satisfied if the party placed in a difficult position by reason of breach of duty owed to him has acted reasonably in the adoption of remedial measures and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken
Friel- Payzu perhaps better confined to its facts