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Performance & Breach, Remedies upon Breach - Coggle Diagram

- - - - Breach:
        
        Party has breached the term of the contract
- - - - Exceptions
        
        Courts may allow recovery where the party who's in breach has substantially performed the contract
        
        Hoenig v Isaacs (1952)
        
        Where the innocent party accepts the partial performance
        
        Sumpter v Hedges
        
        Courts may interpret the contract as not being an entire obligation but rather a contract made up of a "Series of 'Entire Obligations'"
- - - - Actual Breach
        
        Determine if the performance is:
        
        (a) Strict Liability.
        The Contract demands a standard and the performance either measures up to it or it does not. This does not need fault.
        Section 14(2) SOGA 1979 - Satisfactory quality
        
        (b) Standard of Reasonable Care and Skill
        Imposes on the party the duty to exercise reasonable care and skill when performing the contract.
        Section 13 of the Supply of Goods and Services Act 1982
        
        (c) What can an Injured Party do:
        
        A breach does not automatically terminate the contract.
        
        Depends on the term breached
        
        Depends on the decision of the innocent party - Decro - Wall SA v International Practitioners in Marketing
      - Anticipatory Breach
        
        One of the parties informs the other, before the date of the performance of the contract they are NOT going to perform the contract.
        
        Innocent party can terminate the contract and claim damages immediately. He does not need to wait until the actual date of performance to terminate and claim damages.
        
        Hochester v De La Tour (1853) - claiming damages immediately
        
        Innocent party can also choose to affirm the contract and still continue with it - White & Carter v Mc Gregor
  - - - Injured Party can:
        
        Terminate the contract & claim damages OR
        
        If he wants to continue/affirm the contract and just claim damages, he has the choice/option too
        
        Thus the courts will have to decide if its a repudiatory breach - a breach that gives the innocent party the right to terminate the contract.
        
        The innocent party must communicate his intention to repudiate. - Vitol SA v Norelf
        
        The party electing to terminate the contract does not need to provide a 'real reason' for his decision to terminate. - Arcos v Ronaansen
        
        If the innocent party terminates the contract upon breach, its effect is prospective in nature - it is only future obligations that need not be performed. Heyman v Darwins Ltd
    - - Injured Party can:
        
        Claim damages only. Contract continues. Not allowed to terminate the contract.
- - - - An order that compels a party in breach to perform the contract. Its a positive order
        
        Generally deals with enforcing a Positive Obligation
        
        When is a Specific Performance granted?
        
        When damages are an inadequate remedy
        
        Courts will consider whether or not a specific performance order is just
        
        Specific performance was granted when the ship that was sold was of "peculiar and practical unique value [to C] - [Behnke v Bede (1927)]
        
        Specific performance was refused in respect that contract to build a complex piece of manufacturing machinery that weighted 220 tons and took 9-12 months to complete
        
        Although there will be inevitable delay,, damages would be the adequate remedy as they allowed the injured party to purchase replacement goods in the market - [Societe des Industries Metallurgiques SA v The Bronx Engineering Co Ltd (1975)]:
        
        Damages for a breach of contract to sell land are viewed as inadequate and the usual remedy in such cases is an order for specific performance. - [Johnson v Agnew (1979)]
        
        Recent cases on specific performance of obligations where if an order is not made immediately the possibility of ever doing it will be gone.
        
        Sky Petroleum v VIP Petroleum (1974):
        
        Effective specific performance was granted to force D to maintain fuel supplies to C. Fuel market was chaotic. If the order was refused C had no realistic prospect of getting a substitute supply
        
        Thames Valley Power Ltd v Total Gas & Power Ltd (2005):
        
        It was said, obiter that specific performance will be ordered to enforce a long term contract to supply gas to an airport's power facility when the delays involved a claim for damages will result in the insolvency of the business
        
        Consideration for awarding specific performance in some cases is extremely diffiucult as it is impossible to quantify C's loss - [Decro-Wall International SA v Practitioners in Marketing Ltd (1971)]
        
        Courts will also consider whether or not D is able to pay for an award of damages. If there are signs that its unlikely, an order of specific performance is made - [Evans Marshall & Co Ltd v Bertola SA (1973)]
        
        Restrictions to Specific Performance
        
        Since an order of specific performance is a equitable remedy = discretionary remedy. Its not a matter of right. The courts will decide whether to give you this award
        
        Courts won't exercise this discretion in an arbitrary manner but according to strict rules and practice - Co-operative Insurance Ltd v Argyll Stores (Holdings) Ltd (1998)
        
        Grounds where orders an order of specific performance is refused is:
        
        When the order require the "constant supervision of the courts":
        
        Problems not because of the constant physical supervision by the courts, but the continual appearances for further orders for a contempt of court will have to be made per Lord Hoffman
        
        One time performance vs constant performance
        
        Zinc Cobham 1 Ltd (In Administration) v Adda Hotels (2018) EWHC:
        
        Specific performance was refused against occupiers of 10 hotels who undertook to trade according to certain standards, partly because any such order will need the recurrent supervision of the court.
        
        When it will result in severe hardship to D:
        
        Also includes where costs to D will substantially outweigh any benefit to C: Tito v Waddell (No.2) (1977)
        
        When it is impossible for D to comply with the order:
        
        If D had contracted to sell land that he doesn't own, court won't make an order to compel him to sell the land
        
        There must be a mutuality of remedy:
        
        Courts will sometimes refuse to order specific performance of a contract at the request of 1 party if they cannot order it at the request of the other party
        
        Courts won't order specific performances on certain kinds of contracts, especially for personal services (or employment):
        
        Contracts involving performances of personal services are NOT SUBJECT to an order of specific performance
        
        Courts are strongly reluctant (for no reason) to decree specific performance of an employment contract.
        
        There is also the difficulty of determining whether or not there has been proper performance by the parties
        
        Per Megarry J in Giles v Morris:
        
        Reason why the court is reluctant to decree specific performance of a contract for personal services is that it is more complex and more firmly bottomed on human nature... who could say whether the imperfections of performance were natural or self-induced?!
    - - Deals with negative obligations - where a party promises not to do something or to refrain from doing something
        
        Equity offers possibility of a injunction by the courts prohibiting some form of conduct.
        
        Generally enforcing a Negative Stipulation
        
        It is a discretionary remedy and the courts will only order it where it is just to do so. Courts won't order it where it will cause particular hardship to D as to be oppressive to him. - [Insurance Co v Lloyd's Syndicate (1995)]
        
        Its important to consider that a court won't grant an injunction where to do so would be to indirectly order specific performance - Page One Records V Britton (1968)
- - - - PECUNIARY / FINANCIAL LOSS
        
        The Process:
        
        1. General
        
        Any breach of any term that gives rise to the right of damages
        
        The Aim: To compensate the injured party for his loss - compensatory - Bunge SA v Nidera (2015)
        
        Not to punish the wrongdoer
        
        The motive of breach is irrelevant - even if it can be proven that D purposely calculated his benefits from his breach
        
        Punitive damages not allowed even if the party purposely breached the contract - Kuddus v Chief Constable of Leichestershire Constabulary (2001)
        
        2. Methods of Assessment
        
        A) Expectation Loss / Interest
        
        Disapointed expectations - C's expectations have not been fulfilled
        
        Aim: Put C in a position he would have been if D had performed the promise. If contract had been performed according to the terms
        
        Per Parke B in Robinson v Harman (1848):
        
        "The rule of the common law is, that where the party sustains 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 the damages, as if the contract had been performed".
        
        A binding promise creates an expectation of performance = the remedy is to protect that expectation
        
        Identification of the Loss:
        
        The Robinson v Harman case assumed that the breach has injured C's financial position. If he cannot show that it has, he will only recover nominal damages.
        
        The Measurement of Damages:
        2 possible measures:
        
        (a) Diminutive Value - The difference in the value of what C has received and what he expected to receive (sometimes, D performs his part of the bargain, but is still not up to the C's expectations)
        
        (b) Cost of Cure - The cost of putting C in the position he would have been had the contract been fully and properly performed
        
        Ruxley v Forsyth (1996):
        
        C (builders) agreed to build a swimming pool for D. Specifications were that the pool must be 7' 6' deep. In breach of contract as the pool's depth was 6'. D refused payment and C sued for the contract price.
        
        How should damages be assessed?
        
        Trial Judge
        
        Diminution Value = 0
        
        Cost of Cure = $21,560
        
        1 more item...
        
        B) Reliance Loss / Interest
        
        C acted to his detriment in reliance to promise made by D
        
        Aim: Put C in the position that he was before the promise was made (put him in the original position had he not entered into the contract)
        
        To restore C to his pre-contract position
        
        McRae v CDC: C will be confined to only claiming reliance loss as cannot prove what the expectation loss would have been. Its difficult to quantify as too speculative
        
        C) Restitutionary Interest
        
        Not to compensate the C for his loss but to deny/deprive the D of his profits that he got at the C's expenses
        
        Purpose is to remove the D of the profits that obtained on the grounds of:
        
        Unjust Enrichment:
        
        C must prove that D was enriched/profited at C's expense and that it will be unjust to allow D to retain his profits
        
        3. Remoteness of Damages
        
        C can only recover losses that is within reasonable contemplation of the parties at the time of entry of the contract
        
        If the damages are too remote, the C won't be able to claim them
        
        To limit what C can claim from D
        
        Law cares for both C and D
        
        Hadley v Baxendale (1854):
        
        Facts: C's shaft was broken, they were owners of a mill. D agreed to take the shaft to Greenwich to make a new shaft. D delayed in bringing back the shaft where production halted in the C's mill. C sued for the loss of profits
        
        Held per Alderson B: Where 2 parties have made a contract where one of them has broken, the damages which the party ought to receive with respect the contract should be fairly and reasonably considered as:
        
        Either arising naturally, according to the usual sort of things from such breach itself OR
        
        May reasonably be supposed to have been in contemplation of both parties, at the time they made the contract, as the probable result of the breach of it (Special losses)
        
        Victoria Laundry v Newman Industries (1949)
        
        Facts: D contracted to sell and deliver a boiler to C. D knew that C was going to use it immediately for his laundry business. Boiler delivered 5 months late, C sued D for loss of profits.
        
        Held: Can use for the loss of profits that flowed naturally but not the loss of profits for the lucrative contract with the ministry of supply. Due to D not knowing this - not within reasonable contemplation of parties. This is done to push parties to disclose facts to each other. The moment losses are disclosed, the Special Losses is claimable.
        
        4. Causation
        
        Must be established there is a causal link between C's loss and D's breach.
        
        D's action does not have to be the sole cause but must be a cause of the loss
        
        Situations where the causal link can be broken:
        
        (a) Natural Events
        
        (b) An act of the C which is so unreasonable:
        
        Lambert v Lewis (1982):
        
        Facts: Farmer uses trailer coupling after it was broken. Coupling gave way and accident occurred and people were injured. Farmer sought to recover damages from supplier of the coupling.
        
        Held: Farmer could not recover from the supplier of the coupling as he continued to use coupling with the knowledge that it was damaged. His actions broke the chain of causation between the supplier's breach of contract and loss suffered by farmer in needing to pay damages to to the victims.
        
        (c) Claimant being negligent (contributory negligence)
        
        Barclays Bank plc v Fairclough Building Ltd (1994):
        
        There must be a concurrent liability in tort to claim contributory negligence in a claim for damages.
        
        D must show C was at fault and the fault is a factual cause of the loss C sustained (the "but for" test).
        
        Courts will reduce the damages "to such an extent the courts think its just and equitable with regard to C's share in the responsibility for the damage" - S1(1) of the Law Reform (Contributory Negligence) Act 1945
        
        5. Mitigation
        
        C must take all reasonable steps to try and reduce / minimise his losses - British Westinghouse v Underground Electric Railway (1912)
        
        C must not reasonably incur expenses subsequent to the breach of contract
        
        If he does not mitigate his losses, C won't be able to recover the portion that is attributable to his failure to mitigate
        
        Aim of mitigation is to prevent avoidable waste of resources. Thus act reasonably to reduce the losses.
      - NON-FINANCIAL / NON-PECUNIARY LOSS
        
        Damages are usually assessed by reference to the Market Value of the promised contractual performance. Thus the loss is Objectively assessed.
        
        But this assessment may not reflect the true losses suffered by C. AKA "consumer surplus". This kind of loss is recognised the HoL by Lord Mustill in Ruxley v Forsyth
        
        They are losses that DO NOT HAVE a quantifiable monetary value
        
        Traditionally:
        Addis v Gramophone (1909) HL:
        C is not entitled to be compensated for the injury to his feelings
        
        Exceptions:
        
        1. Holiday contracts:
        
        Predominant object of the contract is mental satisfaction
        
        Jackson v Horizon Holidays Ltd (1975):
        
        Contract was for a holiday, the consumer surplus being the value C put on the relaxation on holiday.
        
        2. Mental distress no longer the main aspect of the contract
        
        Where mental distress was an important aspect but now longer the predominant test
        
        3. C suffered 'physical inconvenience and distress'
        Per Lord Steyn and Lord Scott in Farley v Skinner (2001):
        
        "If there is only disappointment that the contractual obligation has been broken, damages are not recoverable if disappointment led to complete mental breakdown (general rule). But if the cause of inconvenience/discomfort is sensory (sight/touch/hearing etc) experience, damages can, subjected to remoteness rules can be recovered". (exception)
        
        Loss of Amenity:
        
        Ruxley v Forsythe
        
        Damage to Commercial Reputation
    - - As C has the burden of proving the amount of his loss, its easier if the contract simply already state the sum that will be payable by D in the event of breach and C can then sue for said sum.
        
        But this system can be open to abuse if the sum is set at a level far higher than the loss actually suffered
        
        Cavendish Square Holdings BV v Makdessi & Parking Eye Ltd v Beavis (2015):
        
        Facts: A combined appeal heard by a 7 person Supreme Court where origins and practice of stipulated damages was extensively reviewed and significant changes introduced.
        
        Held: Nether the contractual provision is a penalty. SC recognised that a stipulated damages clause which provided that for the payment of a sum greater than compensation may nonetheless be regarded as protecting a legitimate interest of the innocent party.
        
        although the amount is excessive, it won't mean its a penalty. As long as it is to protect the innocent party, it can still be regarded as a valid LDC.
        
        Cavendish case:
        
        Facts: Involved the sale by its founder of a major stake in a big Middle Eastern advertising and communications group under which the founder seller undertook not to compete with the business he sold.
        
        Contract further said that if he breached the non-competitions provisions will lose any entitlement to outstanding installments and will need to sell his retained holding without compensation
        
        When he breached the provisions the combined effect of the clauses is that he will only get $44 million less for his shares.
        
        Parking eye case:
        
        The manager of a car park located in a retail park. Notices at the site stated that any car overstaying the 2 hour free parking will become liable to pay a parking charge of $85
        
        The test for a penalty now:
        
        A clause that provides that a payment (or other obligation) is to be made upon an event other than the payer's breach of contract will no fall within the 'penalty jurisdiction'. - in deciding whether a clause is a LDC or a penalty, it is purely at the discretion of the judge (depends on the vibe of the courts)