remedies Flashcards
what is the most common remedy for breach of contract
damages (monetary remedy) - primary remedy for breach of contract in English based systems
what is the basic principles for awarding damages for breaches of contract
compensation for loss (purpose of damages) caused by the breach
what is the approach for compensation for loss as in Robinson v Harman 1848
They had an agreement to grant a lease of a house, with a rent of £110 a year for 21 years. Harman breached and did not grant the lease in favour of Robinson, amounting to a breach of contract. Robinson had expended some money in preparing the agreement and the court held he was clearly entitled to recover that amount.
The more complicated issue was that the rental was less than the market rent. When working out what compensation the victim of a breach is entitled to, look to put that person in the position they would have been in had the contract been performed. the victim is entitled to recover for the loss of the bargain in the agreement represented.
here, Robinson was entitled to be put in the position he would have been in hand the lease been granted so got £200 to reflect that loss.
what is the focus of contract damages
pecuinary loss - difference between the market value and the contract price
are exemplary/punitive damages allowed in nz and what are they
exemplary damages - to punish the party who is in breach for their conduct/breach
Paper Reclaim v Aotearoa International - the weight of international opinion was against such damages being awarded in contract and said NZ should follow that approach
how does interest on damages work in nz
Interest on Money Claims Act 2016, came into force 1 Jan 2018 with a website with an interest calculator. This is to do with interest on judgment debt, in respect to damages available for breach. This system is much simpler than the previous statutory mixed with common law approach.
S 9 - begins wither day of the breach or the day the court says it is
s 10 - award of interest is mandatory
s 22 - if the contract makes provision for specific interest or that there is no interest payable the court follows that
what ideas does Williams v Kirk illustrate
here there was an agreement to purchase a farm for $330,000. the purchaser repudiated the contract and the vendor sold to someone else for $290,000 and sued the original purchaser for the difference.
this case illustrates:
1. the idea that when the sale of something doesn’t go ahead, damages can be measured by the difference between the contract price and the market value
- when the purchaser breaches the contract, and the vendor then sells it to someone else, that resale price will normally be taken to represent the market value
what happened in WL Thompson v Robinson that shows applying approaches to real world problems isn’t as easy as it may seem
there was an agreement to purchase a Vanguard car from a dealer. the defendant refused to accept delivery and the car dealer returned the car to its supplier.
measure for damages would seem to be difference between market value and contract price - which was nothing as the market value is the contract price for a car (they aren’t unique at all like land is)
the vendor sued for loss of profit - the difference between the contract price and the cost of the car to the dealer and it was awarded.
they looked to the industry at that time - goods could be freely sold and there was sufficient demand to absorb readily all goods thrust onto the market
what are the 3 ways to typically measure damages in cases where the subject matter of the contract for sale is actually transferred to the purchaser
- cost of cure - the cost to the victim of actually fixing/curing the breach
- loss of value (diminution in value) - the difference between the value of what was promised and the value of what was actually supplied/performed
- loss of amenity - represents use/desirability value in the performance of the contract, typically only applied where the other two methods don’t work
what happened in Ruxley Electronics v Forsyth
a swimming pool was to be built to a maximum depth of 7 foot 6 inches, but was only built to 6 feet. this was a clear breach of contract by the construction company.
the loss in value was 0 - there was no difference in value between a 6 foot deep and a 7’6” deep pool. the cost of cure was £21,560 to dig out the pool and put in a new one. if the full cost of cure was inappropriate, the court would award a loss of amenity of a couple thousand.
evidence: pool could still be used for diving at a depth of 6 feet, the plaintiff had no intention of using the pool for diving himself and just wanted one that could be used for diving. If he were awarded the full cost of cure, he likely wouldn’t have fixed the breach.
outcome: award of £2,500 for loss of amenity - full cost of cure would have overcompensated him
what happened in Marlborough DC v Altimarlock JV
The purchaser of a Marlborough property intended to develop a vineyard on the property. The purchaser was told by the vendor’s lawyer, the real estate agent and the council that the property had certain water rights that the section didn’t actually have. They all made the same mistake because when it was subdivided previously they thought the rights went with that property but they went with the other property. without those water rights, a vineyard was not viable on the property. when the purchaser realised the problem, after having started planting vines, they sued the vendor, real estate agent, lawyers and council.
to run a vineyard, the building of a dam was required = $1.06M to run a vineyard (cost of cure). the loss amount is the difference between the value of what was promised (the property with water rights) and what was actually provided (the value of the property without rights)
3-2 majority awarded the cost of cure of $1.06M because the breach completely destroyed the purpose of the contract for the victim
what is the minimum performance rule
if you are measuring the loss related to the breach of one party, you measure with respect to the minimum that the breaching party could have done to not be in breach
what happened in Paper Reclaim v Aotearoa International
there was an arrangement between the parties in the mid 1980’s in which Aotearoa International would export paper reclaim’s waste paper in exchange for 10% of their sales. In Feb 2001, paper reclaim wrote to aotearoa international refusing to carry on the agreement, saying that is believed no contract existed.
the supreme court held there was a contract between the parties and that paper reclaim were in breach of that oral contract. the parties did not expressly say how the arrangement could be brought to an end, so the court held the contract could be terminated on reasonable notice. they held 12 month’s notice would be reasonable in the circumstances so damages were calculated based only on 12 months of further transacting - the minimum they must do to satisfy the contract
what happened in Stirling v Poulgrain
Mrs Stirling decided to put the farms she owned into trust in order to limit the gift and death duties that would be payable in the future by her estate. Her solicitor, Poulgrain, was negligent in delaying in executing her instructions. during the time of the delay, the value of the farms increased by $90,000 and she and her estate would have to pay an extra $24,000 in duties.
after the breach, but before the trial, the duties rate was decreased, so her and her estate would not have to pay that amount.
question: when to measure damages from?
general rule: damages are assessed at the date of breach, unless justice requires something different.
damages in this case were assessed at the date of trial rather than breach because the losses were going to be a lesser amount so it is only fair on the facts that its that amount that should be awarded as damages
what happened in Marlborough District Council v Altimarlock JV relating to date for measurement of damages
this is the misrepresentation about water rights for property to be used as a vineyard case.
issue with date - the cost of constructing the dam rose massively between the date of breach and the date of the final appeal.
the SC repeated the rule from Stirling.
ultimately court measured breach from the date of trial because the vendors disputed and continued to dispute, taking the risk in doing so that the cost of cure would increase over that time
what happened in Chaplin v Hicks
a famous actor, Hicks, started a competition to find a new actress.
Initial competition: entrant send a photo, pay 1 shilling. committee would go through the photos and choose 24. public would vote 12 who would be employed by Mr Hicks for 3 years.
more applicants applied than expected, terms changed: the committee would choose a few hundred, they would be separated into 10 districts, public would vote for the candidates in their district, Mr Hicks would meet the top 5 voted candidates from each district, out of those 50 candidates he would choose 12.
Miss Chaplain entered and did not object when the terms of the competition changed. Hicks wrote to Chaplin naming the time for an interview, but she was in Scotland and by the time the letter reached her it was too late to attend the interview. she attempted to reschedule and tried to see him on a number of occasions but he refused to meet with her. she bought suit. clearly there was a contract.
court held Mr Hicks breached the contract by failing to give her a reasonable opportunity to attend such a meeting.
she could recover, just taking into account that it was a chance that was lost. here quantification would be by jury, though typically not the case anymore in civil trials.
despite the issue, the courts were willing to have damages awarded, but adjusted to take the chance into account
what happened in Strack v Gray
they had an agreement to purchase a property for $1.2M, conditional on a written building report and finance. the building inspector orally identified to Grey that the building had retrofitted insulation. Grey became concerned and purported to withdraw from the contract.
Grey was in breach of contract, particularly because he did not obtain a written building report so his actions were held to be an illegitimate repudiation.
the vendor cancelled the contract, sold the property to someone else. the second sale was for $150,000 less so Strack sued Grey for that amount.
Grey’s response was that he would have failed to obtain finance anyways and because of that the vendor’s had suffered no loss because the sale wasn’t going to go ahead.
court held:
1. when the contract is for a chance, could be the chance of an economic benefit etc, you can recover in relation to loss of a chance
- where the outcome depends upon the decision of an independent party, if the decision was unknowable, you could recover for loss of a chance
here, it was a decision of third parties but the court said it was knowable because third parties operating in lending markets will loan money if it makes sense for them to do so within the context of their normal approaches, procedures, operations etc at that time. the court could work this out by hearing evidence so it was not appropriate to award damages for loss of a chance.
however, the court had to determine on the balance of probabilities whether Grey would be able to obtain suitable finance and they held that he was liable for that loss because Grey was not able to prove he would not have obtained suitable finance
what does remoteness refer to
a matter of degree, loss is recoverable when there is close proximity between the breach and the loss
what happened in Hadley v Baxendale
Hadley owned a flour mill and Baxendale were carriers. Hadley sent a broken mill shaft to Baxendale to be carried for repair. Baxendale’s clerk was told it was a broken shaft from a mill. Baxendale delayed in delivering the shaft, which was a breach of the contract, which caused the mill to be idle for a number of days.
Hadley sued Baxendale for lost profit. Two alternatives test:
1. did the damages arise naturally (in the usual course of things) from the breach?
- did the parties reasonably contemplate that the damages would be a probable result of the breach
Ultimately neither limb of the test was met here. Baxendale knew it was a broken mill shaft and the court said no to the question of whether you could imagine as baxendale that there was a mill sitting idle somewhere and loosing profit
so the carrier was not liable for lost profits
what happened in Koufous v C Czarnikow
Koufous chartered a ship from C to deliver sugar by 22 November to be sold. the ship was delayed and arrived 2 December, during which time the price of sugar decreased significantly in that market.
Koufous sued with respect to that loss. If you put yourself in the shoes of the breaching party, if you were delivering sugar to a port that you probably know is going to be sold upon arrival, would it be natural or within your reasonable contemplation that a delay could cause loss?
The House of Lords held that it is generally known that market prices fluctuate so it was within their reasonable contemplation that the price could drop in that time so the loss was sufficiently proximate and it didn’t matter that the loss was not certain
what happened in McElroy Milne v Commercial Electronic 1993
CE were developing a commercial property and MM were their solicitors who wrote up a commercial lease document, which was signed by CE and a lessee. the lease purported to oblige the lessee to obtain the guarantee of a third party, if they stopped paying the rent, this related third party had guaranteed the debt. however, the intended guarantor was not itself a party to the agreement to lease - if the lessee breached the contract, the lessor could say they were under an agreement to get the party to guarantee but if they didn’t they would just be in breach in two ways, the guarantor just wasn’t bound to do anything.
CE intended to sell the development once completed. Before they did, the lessee repudiated the agreement so the property became worth less.
breach - negligence of solicitors in preparation and execution of agreement to lease
this case uses a multi-factorial approach - these things (reasonable foresight, directness, naturalness, magnitude of the claim, degree of defendants culpability) are factors which you weight up in reaching your decision, based on achieving a just balance between the parties.
court held solicitors knew the development was going to be sold and must have known the lease would increase the value of the development. this was enough for the loss to be sufficiently proximate to the breach and the difference in value was awarded in damages
