Chapter 12: Performance and Breach Flashcards

Question

**Mc Rae v CDC** ## Footnote reliance loss

Answer 1

Facts 1. CDC (D) told C that there was a tanker that had oil in a reef 2. C hired a ship and crew to go to Jourman Reef 3. Oil tanker could not be found 4. There had no oil tanker to begin with (did not exist) 5. C sued Held 1. Can only rely on reliance loss 2. On grounds that there is no expectational loss, as it would be silly to prove/say that he expected & quantified the amount of oil in the tanker ship Takeaway * C would be confined to Reliance Loss as **cannot prove Expectation Loss** would have been Note * Judges would consider how the contract was worded

Answer 2

Introduction * Not to compensate the Claimant for his loss but to **deny/deprive** the **Defendant of his profits** which he got at the Claimants expenses (unjust enrichment) Aim/purpose * To **disgorge D’s profits** that he unjustly obtained 2 grounds - 1) Total failure of consideration * C must prove that he got no benefit due to D breaching the contract. **C received nothing** he bargained for 2) Unjust enrichment * C must prove that the **D was enriched at the C’s expense**, which allowed D to retain the profits

Answer 3

C must prove that he got **no benefit** due to D breaching the contract. C received nothing he bargained for * **Whincup v Hughes (1871)** * **White Arrow Express Ltd v Lamey’s Distribution Ltd (1996)**

Answer 4

**AG v Blake**

Answer 5

Facts 1. Blake was a British spy and signed a contract with the Crown to not spill/disclose any confidential information 2. He fled to Russia 3. After many years decided to write an autobiography 4. In this he had mentioned some of the confidential information 5. He profited from this Held 1. Court held this was a restitutionary interest 2. On grounds that he had **unjustly enriched** by the expense of the C 3. Because it was a matter of national security, there was a breach of fiduciary duty, making exceptional profits, there was no other adequate remedy Takeaway * Because the D had benefited off the C’s expenses

Answer 6

The rule of the common law is, that where a party sustains loss 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**” - Parke B in **Robinson v Harman (1848)** * A contract creates legal expectations - remedies protect those expectations

Answer 7

1. Identification of loss 2. Measurement of damages

Answer 8

2 possible losses suffered 1. Financial loss 2. Non-financial losses Tradtionally * **Robinson v Harman** believes that breach of contract only causes **financial loss** * If cannot show that there was financial loss, then can only recover nominal damages However * Contract could also be to enhance **leisure time** or **service/benefit for a 3rd party** * Lord Mustill in **Ruxley v Forsyth**: “The law must cater for those occasions where the value of the promise to the promise **exceeds the financial enhancement** of his position which full performance will secure” 1. Consumer Surplus - A broader perspective that there are other purposes to enter into contracts

Answer 9

Diminutive value * Difference between what the C **received** and what he **expected to receive** Cost of cure * The cost of putting the C in the position **if the contract was performed**

Answer 10

* **Ruxley v Forsyth (1996)** * **CCC Films (London) Ltd v Impact Quadrant Films Ltd (1985)** * **C & P Haulage v Middleton (1983)**

Answer 11

Facts 1. Builders (C) agreed to build swimming pool for D 2. Specifications were that pool be 7’ 6’ deep 3. Builders bult 6’ 4. D refused to pay and C sued for contract price Issue * Trial judge had to consider whether to award the full amount (£21,560) to the house owner (cost of cure) * Or to not award anything (£0) and release the builders (diminutive value) Held 1. Judges held that the actual loss suffered by the homeowner was the **loss of amenity** (the disappointment of not getting the specifications he desired) 2. Courts held that the builders had to pay £2,500 Note * Here, the courts failed to protect the **performance interest** of the houseowner * On the facts of the case, all the academics agree that it was correctly decided * But the principle they came up with has been debated upon

Answer 12

C can only claim losses that were in **reasonable contemplation** of both parties **at the time of entry** * (if the breach was not thought possible - no recovery)

Answer 13

* **Hadley v Baxendale (1854)** * **Victoria Laundry v Newman Industries (1949)** * Achilleas (2009) * The Sylvia (2010)

Answer 14

Facts 1. C’s shaft was broken, they were owners of a Mill 2. Hired Baxendale (D), which they agreed to take shaft to Greenwich to make a new shaft 3. D delayed in bringing back the shaft 4. C shutdown/halted the production of the mill to wait for the shaft 5. C sued to loss of profits Held - Alderson B 1. Can only claim **natural losses** and **special losses** 2. Natural losses - losses that arise from the normal causes of things Takeaway * Can only claim if the losses were normal (not remote) Note * Must be given notice **at the time of entry** of the contract ## Footnote note the timeline of cases

Answer 15

Facts 1. D contracted to sell and deliver a boiler to C 2. D knew that C was going to use it immediately for his laundry business 3. Boiler was delivered 5 months late 4. C sued for the loss of profits that the business would have had Held * Can claim for the losses that were specifically stated * Can only recover **natural loss** of profits, not for loss of profits for the lucrative contract * On grounds that D did not know - did not have **reasonable contemplation** of the parties ## Footnote note the timeline of cases

Answer 16

Facts 1. Achilleas was chartered for a voyage 2. Specified that the ship should be returned on 2 May 3. Ship was delivered late by 9 days 4. Owners sued charterer, and claim £1,364,584 5. Loss from the delay was actually £158,000 6. D argued that they would only pay for the loss from the delay caused Held * 5 judges unanimously stated that they can only claim £158,000 Note * Lord Hoffman & Lord Hope didn’t want to use the Hedley v Baxendale test for remoteness, they came up with a new test **Test of assumed responsibility** - looking at it **objectively** (facts of each case), what are the losses that the contract breaker should have assumed responsibility for? * **Lord Roger** & **Baroness Hale** affirmed, and stated they were satisfied with the old test in Baxendale * **Lord Walker** (5th judge) was the tie breaker, but seemed to agree on both sides ## Footnote note the timeline of cases

Answer 17

Context * Solution for The Achilleas for which test to use Held * To use to old test from **Hedley v Baxendale**, where specific lost can only be claimed if given notice **at the time of entry** of the contract * However, they stated that if there is not a clear cut answer, then they can use the **Test for Assumed Responsibility** Takeaway * For specifics use Baxendale test * For vague then use Achilleas test ## Footnote This was the last case for remoteness

Answer 18

Introduction * Must have a **causal link** between C’s loss and D’s breach Note * D’s action doesn’t have to be the sole cause but must be a **cause of the loss**

Answer 19

1) Natural events * **Monarch Steamship Co. v Karlshamns Oljefabriker** 2) Where claimant acted so unreasonably * **Lambert v Lewis (1982)** 3) Claimant's own negligence * **Law Reform (Contributory Negligence) Act 1945**

Answer 20

Facts 1. Farmer used trailer coupling (device to link machine) after it was broken 2. Coupling gave way and accident happened causing injury to people 3. Farmer sought to recover damages from supplier of coupling Held * Farmer could not recover from supplier * On grounds that he continued to use the coupling with the **knowledge it was damaged** * His actions **broke the chain in causation** for the suppliers breach and loss suffered

Answer 21

C must take **all reasonable steps** to try to **reduce/minimize** his losses - **British Westinghouse v Underground Electric Railway (1912)** * On grounds that the C **must not unreasonably incur expenses** subsequent to the breach (should not deliberately cause the expenses) * If C does not mitigate his losses, C won’t be able to recover portion which attributed his failure to mitigate Aim/purpose * To prevent avoidable waste of resources * Thus, the C should act reasonably to reduce as much losses as possible

Answer 22

Feelings of emotion - this is called the ‘**consumer surplus**’ (recognised by HOL in Ruxley v Forsyth) * As loss is objectively assessed (for damages), it may not be able to reflect the true losses suffered that are subjective Example - Caused by mental anguish - Anxiety - Mental distress, anguish - Annoyance - Hurt feelings - Emotional harm - Psychological harm - Pain and suffering - Loss of quality of life - Sentimental value

Answer 23

Introduction * C is **not entitled** to be compensated for injury to his feelings GR cases * **Addis v Gramophone (1909) HL**

Answer 24

1. Watts v Morrow (1991) 2. **Ruxley v Forsyth (1995)** 3. **Farley v Skinner [2001]**

Answer 25

Facts 1. Contract had been entered into for construction of a swimming pool for £70,000 2. C specified for pool to be 7’6’ deep 3. Builder made it 6’9’ deep Held 1. Mr Forysth contracted a swimming pool for **reasons of pleasure**, and in this sense his expectation had not been fulfilled 2. Trial judge awarded D £2,500 for loss of amenity and pleasure

Answer 26

Facts 1. Farley (C) was thinking of buying a house in the Sussex countryside where he would spend his retirement 2. Paid chartered surveyor, Skinner, to look at the property 3. He specifically instructed him to assess the impact of aircraft noise on the property 4. House was 15 miles from Gatwick airport 5. Surveyor was negligent in carrying out his word and advised Farley that it was ‘unlikely the property will suffer greatly from such noise’ 6. After moving in, the house was badly affected by aircraft noises 7. Sued for difference in the value of the house, between what he paid and what it was worth 8. This part of his claim was unsuccessful as the price was the correct market price, even taking into account the aircraft noises 9. Additionally, he included a claim for non-pecuniary damages for the loss of amenity caused by aircraft noises Held 1. C was awarded £10,000 for **distress and inconvenience** 2. HOL upheld the award Note * It didn’t matter that the contract was not entirely for pleasure/relaxation/peace of mind, since this was nonetheless a **major & specific** object of the contract Takeaway * The C had specifically stated how he wanted the contract to be performed

Answer 27

1) Holiday contracts - mental satisfaction * **Jarvis v Swan Tours (1973)** * Jackson v Horizon Holidays * Milner v Carnival plc (2010) 2) **Mental distress** was an important but not sole aspect of the contract * No longer the predominant test 3) C suffered “**physical inconvenience** and distress” * **Watts v Morrow [1991]** * **Farley v Skinner (2001)** * **Hamilton Jones v David & Snape (2003)** 4) Loss of Amenity * **Ruxley v Forsyth (1995)** 5) Damage to **commercial reputation** * **Malik v BCCI [1998]**

Answer 28

Facts 1. Provision of damages for non-pecuniary loss was breached 2. C, a solicitor booked a 2 week tripped, stated in the brochure 3. Brochure stated there would be a welcoming party and afternoon tea 4. Holiday costed £63 Held 1. COA raised damages to £125 2. On the basis that merely giving him back the cost of the holiday would be **insufficient to compensate his loss** **Lord Denning** explained * Similarly with a case with to go to an opera performance * If the C hired a company for a car, and it breaks down * The C can claim extra damages, not only for the cost of the ticket, but also for **disappointment for missing the concert**

Answer 29

Facts 1. C worked for BCCI, which was a fraudulent bank and whose collapse was disastrous 2. They sued for compensation claiming that they couldn’t get work and their future prospects were worsened due to the knowing of D’s bank 3. They argued that their contracts contained an implied term of ‘mutual trust and confidence’ 4. And that D breached this term by running a fraudulent company Held 1. **Lord Nicholls** stated - Addis only applied to “injured feelings”. Whereas Malik was a case of **financial loss** caused by the company 2. **Lord steyn** - distinguished Addis, on grounds that her situation was in the “**manner**” in which an employee is sacked cannot give rise to damages 3. Loss of reputation is generally compensable where it is **caused by breach** (not by manner of the breach) Takeaway * Must have **actual breach** to claim compensation * Can’t be by what the other extremities caused by the beach

Answer 30

1. Specific performance 2. Injunction

Answer 31

Order which **compels** the contract breaker to perform a certain task to perform the contract (positive obligation) * Recent cases stated that a SP obligation sometimes need be made **immediately**, or the possibility of ever doing so might be lost

Answer 32

Merely courts’ discretion to consider whether it is just 1) **Behnke v Bede (1927)** * SP granted when ship was sold was **‘of peculiar and practically unique value’** to the C 2) **The Bronx case (1975)** * Refused due to a contract to build a complicated piece of machinery weighed 220 tons and took 9-12 months to complete 3) **Johnson v Agnew (1979)** * Damages for breach of contract to sell land is usually an order for SP 4) **Sky Petroleum v VIP Petroleum [1974]** * Granted, force D to maintain fuel supplies to C * Fuel market was really bad so if the order was refused the C could not get a substitute

Answer 33

Limitations 1. If the order requires ‘**constant supervision**’ of the courts (**Argyll’s case**) 2. If the party claiming the order performed the contract in an **unfair manner** 3. If the order for SP would result in **severe hardship** for the D 4. If the SP is **impossible for D to comply** with the order 5. Courts won't give SP for important contracts like **personal services** (or employment) (**Giles v Morris (1972)**) Requirements 1. C’s conduct has to be pure and in real need for the SP, ‘**he who comes to equity must come with clean hands**’ 2. There must be a **mutuality of remedy** - if one party could not order it at the request of the other party

Answer 34

Introduction * Order which **prohibits** a party from doing certain actions (negative obligation) Note * Also discretionary and only ordered where just to do so Limitations * Where it would cause a **particular hardship** to a defendant as to be oppressive to him - **Insurance Co v Lloyd’s Syndicate [1995]** * Where to order an injunction would be to **indirectly order a SP** (**Page One Records v Britton (1968)**)

Answer 35

Introduction * an **exact amount** of money, or a set formula to calculate the amount of money, a party will owe if it breaches a contract, in order to compensate the injured party for its losses Note * Because the C bares the burden to **prove the amount of his loss**, it is convenient to allow them to state the sum when suing them * However, this might be **abused** as the amount sued for might be higher than the actual loss suffered

Answer 36

**Dunlop Pneumatic Tyre v New Garage and Motor (1915)** Held * HOL argued that liquidated damages are **enforceable**, as long as the pre-estimated amount is **genuine** and **not unconscionable**

Answer 37

**Cavendish Square Holdings BV v Makdessi and Parking Eye Ltd v Beavis [2015]**

Answer 38

Facts 1. A combined case heard by 7 persons in the UKSC 2. The origins and practice was extensively review and significant changes were made 3. In **Cavendish case** - concerned two clauses in a commercial contract which if enforced, would reduce the consideration payable by more than $44 million 3. **Parking Eye** - concerning the enforceability of a $85 charged for ‘overstaying’ at a car park Held 1. **Neither contractual provision was a penalty** 2. In Cavendish’s appeal stated that the stipulated damages clause was regarded as protecting a 'legitimate interest' of the innocent party Obiter * UKSC chose to **restate the penalty rule** * Where a contract between ‘properly advised parties of comparable bargaining power’ should have a ‘**strong initial presumption**’ of enforceability * The definition of penalty in **Dunlop** that was greater than ‘genuine pre-estimate of loss’ no longer applies New penalty test * ‘Whether the impugned provision is a **secondary obligation** which imposes a **detriment on the contract-breaker** out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation’. How the test applies * UKSC confirmed that it continues to apply to clauses requiring a party to **transfer assets at undervalue**

Answer 39

1. Penalty clause rule doesn’t apply to clauses that **accelerate an existing liability** 2. As the penalty only applies to breach of contract, the parties can **stipulate** the amount thats payable which isn't a breach 3. Parties can stipulate that a term is a **condition** with the effect of breaching it allows the injured party to terminate the contract and claim damages

Chapter 12: Performance and Breach Flashcards

(63 cards)