Contract Law - Remedies For Breach of Contract Part 1

welcome to Los seconds I am Jennifer Heusen in this law session we will consider remedies in contract law and what occurs in situations where there's been a breach for example and to what the innocent party is entitled now there are various remedies which exist in contract law and these remedies of course can range from damages to one party repudiate in the contract to rescinding the contract seeking specific performance or an injunction or indeed obtained in some sort of restitutionary award now damages is of course the common law remedy and if we start first with damages because it is quite likely that this is a starting point in any kind of breach as it relates to the parties relationship now you can consider damages from two standpoints unliquidated damages which is damages which the court assesses or liquidated damages which is damages which the parties have agreed between them now the purpose of unliquidated damages of course is to compensate the plaintiff for the losses suffered as a result of a breach of contract whereas when you consider liquidated damages this is where the parties have stipulated that a particular sum must be paid if there is a breach of contract now if the sum represents a genuine calculation from a pre estimate point of view then the courts will of course ensure that it is enforced as liquidated damages but if the amount which are seeing subsequent or clause between the parties is not genuine but appears simply to be a clause which seeks to put the other party in fear in order to perform and therefore it is a clause which says in the event of breach you're going to pay me a set amount so for example let's say the contract is a hundred thousand pounds and you say well in the event of breach you have to give me one hundred and fifty thousand pounds well it's not referable even to the value of the contract but seems more to do with frightening the other party into ensuring that he performs if that is the case then it will amount to a penalty and the courts will of course not enforce a penalty what you need to consider then when you're looking at circumstances like this is does it fall or is the figure that the parties agreed between them does it fall on the side of a liquidated damages clause or does it fall on the side of a penalty clause now the distinction can be grass if you take the time to look at the case of Dunlop pneumatic tire and you gara Jan Motor Company it does give you some indication of the one against the other we do mention this case shortly it to do with something else but certainly in the context of contract and the difference it is a case that you may wish to look at now just because penalties are not applicable as it relates to a breach of contract it does not mean that the courts will not enforce it and the courts will certainly apply it in circumstances where for example there's an acceleration clause so it says you know it in circumstances where something happens you can of course accelerate what is old or accelerate payments and whatnot that's not a problem where for example there are deposits or monies paid and you're looking at a clause which is other than a breach of contract clause then even if you're looking at a clause which declares it a term these are situations where the courts will enforce a penalty clause and it will be perfectly legitimate it's just that a penalty clause which is a penalty clause for breach will not be upheld by the courts now then let's look up damages in some depth when you look at damages this is your legal remedy which is available for a breach of contract meaning it's your common law remedy now it isn't a word of money and the idea is to compensate the innocent party so damages is there to compensate the injured party it is not there to punish punish the breaching party and the case of course which stands out our proposition is rocks leaks electronics and construction and foresight in 1995 the principle then is that the primary purpose of damages is to place the injured party in the position they would have been had the contract been performed contracts are made to be performed so the idea is that if there is a breach then the contract has not reached the point where it has been performed as such the innocent party is placed in a position as if it had do not confuse this which with tort which says that the purpose of damages there is to put the injured party in the position he would have been had that ought not been committed so it is never to put it in the position here would have been if the contract had not been performed no it must be to put him as if the contract had been performed case in point of course it is Alice and gramaphone in 1909 it is House of Lords case now the claimant was employed as a manager by the defendant and the defendant in breach of the contract dispensed with the claimants services and got a new manager to replace him now the claimants action which was brought for breach of contract he claimed that the level of damages should reflect the circumstances in which he was dismissed because he said the way that they dismissed him damaged his reputation and also it impacted on his ability to find subsequent suitable employment now the courts held that contract law seeks to put the party in the position they would have been in had the contract been perform he was therefore limited to claim in wages and loss of commission which would have been his during the contractual period and indeed for the period when the defendant ought to have given him notice the court said that there was no right to exemplary damages or damages to reputation in contract claims of course you can draw a parallel to this with the United States for example where they have punitive damages and we see sometimes you get a situation where the value of the contract probably is about $50,000 but the punitive damages runs into tens of millions and that sort of thing that's not the way it is in English law it just seeks as far as contract law damages are concerned to put the parties in a position as if the contract had been performed the court said that when you are trying to seek things like exemplary damages or damages for reputation then you should seek to couch your action in terms of the law of tort now law Atkins in the case said one of the least consequences is that the plaintiff is to be paid so one of the consequences of looking at a breach of contract is that the plaintiff is to be paid adequate compensation in money for the loss of that which he would have received had his contract been kept and no more is what law Atkinson said so if we look at the four broad methods of compensating the plaintiff they tend to be expectation loss on a reliance lost basis on a restitution basis and certainly any sort of consequential loss now expectation loss which is loss of a bargain you'll also see call that this is the traditional basis for assessing contractual damages now reliance loss is where you're looking at your out-of-pocket basis and this is the is generally the norm for assessing damages in tort but because expectation damages would be difficult for example to assess then damages on a reliance basis could be awarded for breach of contract well known case of course is McCray and Commonwealth this McCray and Commonwealth disposals commissioned in 1951 this was the case with the salvage ship which where they said that I believe there was a they said there was a ship that Commonwealth disposals Commission said there was a ship of the coast of Papua New Guinea and that they agreed that you know McCray or persons there could get the salvage but they came to this contract the problem was there was no such ship now it's an interesting decision simply because if you go back to what we have previously discussed in a previous law session if we had looked at it from a mistake point of view which is pre contract for which is contractual the problem with mistake of course is that you're saying that the parties were mistaken as to this subject matter in McCray they did not go down the route of mistake rather they looked on how the damages should fall and with McCray they said that the calculation of damages would be on a reliance loss because money's had been expended to do with all this expensive diving gear and all this so the court said reliance loss because expectation loss they could have got nothing from the salvage they could have gotten some from the salvage they wouldn't have known the best calculation there of course would have been on the basis of their alliance losses they've spent money out relying on what was told to them second of course a case that shows this is anglia television and read which is in 1972 case and they're the courts again considered this whole point of how damages ought to be calculated now plaintiff may freely choose between expectation and reliance damages unless he has made a bad bargain in which case damages on reliance basis will not be awarded in the case so that is CMP haulage and Middleton the point is the court is not there to fix a bad bargain and you will hear that the point is that if parties are breaching a contract which they have legitimately made the courts will step in but the courts job is not for you to have entered into something made an error and then seek to result from it and then rely on the courts it's not there to support a bad bargain so CMP says it is for the defendants to prove that they that they have not sorry for the plaintiff to prove that he has not entered into a bad bargain another important case as well in that regard is CC C films on the limited and impact quadrant films Limited which also again looks at the proof of the proof that is required when you're looking at a situation in respect of a bad bargain now restitution is also available which is the return of the property which was transferred by the plaintiff to the defendant now this is available where there's been a total failure of consideration and in discussing frustration we've seen how this operates now consequential losses are also recoverable and consequential losses are we're where you're seeing a situation where if it is not too remote the courts will allow you to recover them now as we pause to go in to part two we will come back and look at how damages may be limited in so far as the quantum of damages been claimed by a party straight after this short break

Channel: Law Sessions

Views: 128,853

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Keywords: Law Sessions, Law, Lecture, Jennifer Housen, LLB, University of London, Contract Law, Remedies for Breach

Id: p7nH3k-Yxoo

Length: 13min 40sec (820 seconds)

Published: Thu Dec 13 2012