Breach of Contract & Remedies Essay

A discover of narrow down occurs where a ships company to a get down fails to perform, precisely and exactly, his obligations under the centralise. This cornerstone take various forms for example, the failure to supply goods or perform a service as agreed. Breach of contract may be either actual or anticipatory.Actual breach occurs where one political party refuses to form his font of the bargain on the due date or performs incompletely.For example Poussard v Spiers and Bettini v Gye.Anticipatory breach occurs where one party announces, in advance of the due date for transaction, that he intends not to perform his side of the bargain. The innocent party may sue for redress immediately the breach is announced. Hochster v De La Tour is an example.Effects of breachA breach of contract, no matter what form it may take, always entitles the innocent party to maintain an action for insurance, but the rule established by a long grapevine of authorities is that the right of a par ty to treat a contract as discharged arises still in three situations.The breaches which give the innocent party the option of terminating the contract atomic number 18(a) RenunciationRenunciation occurs where a party refuses to perform his obligations under the contract. It may be either express or implied. Hochster v De La Tour is a case law example of express renunciation.Renunciation is implied where the reasonable inference from the defendants conduct is that he no longer intends to perform his side of the contract. For example Omnium DEnterprises v Sutherland.(b) Breach of conditionThe act repudiatory breach occurs where the party in default has committed a breach of condition. Thus, for example, in Poussard v Spiers the employer had a right to terminate the sopranos employment when she failed to arrive for surgical operations.(c) Fundamental breachThe third repudiatory breach is where the party in breach has committed a serious (or fundamental) breach of an innominate te rm or totally fails to perform the contract.A repudiatory breach does not automatically chip in the contract to an end. The innocent party has two optionsHe may treat the contract as discharged and bring an action for restitution for breach of contract immediately. This is what occurred in, for example, Hochster v De La Tour.He may elect to treat the contract as still valid, complete his side of the bargain and then sue for fee by the other side. For example, White and Carter Ltd v McGregor.Introduction to remediesDamages is the basic let off available for a breach of contract. It is a common law remedy that can be claimed as of right by the innocent party. The object of restitution is usually to put the injured party into the same financial slope he would catch been in had the contract been properly performed. Sometimes damages are not an adequate remedy and this is where the equitable remedies (such as specific performance and injunction) may be awarded.Damages3.1 NatureThe major remedy available at common law for breach of contract is an award of damages. This is a financial sum fixed by the court to compensate the injured party.In order to recover substantial damages the innocent party must designate that he has suffered actual bolshie if there is no actual release he leave alone only be entitled to nominal damages in recognition of the fact that he has a valid cause of action.In making an award of damages, the court has two major considerationsRemoteness for what consequences of the breach is the defendant legally responsible?The measure of damages the principles upon which the loss or damage is evaluated or quantified in monetary terms.The second consideration is quite distinct from the premiere, and can be decided by the court only after the first has been determined.3.2 Remoteness of lossThe rule governing remoteness of loss in contract was established in Hadley v Baxendale. The court established the principle that where one party is in breach of contract, the other should receive damages which can pretty and reasonably be considered to arise naturally from the breach of contract itself (in the normal course of things), or which may reasonably be assumed to have been within the contemplation of the parties at the time they made the contract as cosmos the probable result of a breach.Thus, there are two types of loss for which damages may be recovered 1. what arises naturally and2. what the parties could foresee when the contract was made as the likely result of breach.As a consequence of the first limb of the rule in Hadley v Baxendale, the party in breach is deemed to expect the normal consequences of the breach, whether he actually expected them or not.Under the second limb of the rule, the party in breach can only be held liable for abnormal consequences where he has actual knowledge that the abnormal consequences might comprise or where he reasonably ought to know that the abnormal consequences might follow Victoria Laundry v Newman Industries.3.3 The measure (or quantum) of damagesIn assessing the amount of damages payable, the courts use the following principlesThe amount of damages is to compensate the claimant for his loss not to punish the defendant.Damages are compensatory not restitutionary.The most usual basis of compensatory damages is to put the innocent party into the same financial position he would have been in had the contract been properly performed. This is sometimes called the expectation loss basis. In Victoria Laundry v Newman Industries, for example, Victoria Laundry were claiming for the profits they would have made had the boiler been installed on the contractually agreed date.Sometimes a claimant may prefer to frame his claim in the alternative on the reliance loss basis and thereby recover expenses incurred in anticipation of performance and use as a result of the breach Anglia Television v Reed. In a contract for the sale of goods, the statutory (Sale of Goo ds Act 1979) measure of damages is the deviance between the market price at the date of the breach and the contract price, so that only nominal damages will be awarded to a claimant buyer or claimant seller if the price at the date of breach was respectively less or more than the contract price.In fixing the amount of damages, the courts will usually deduct the tax (if any) which would have been payable by the claimant if the contract had not been broken. Thus if damages are awarded for loss of earnings, they will commonly be by reference to net, not gross, pay. Difficulty in assessing the amount of damages does not pr howevert the injured party from receiving themChaplin v Hicks.In general, damages are not awarded for non-pecuniary loss such as mental distress and loss of enjoyment. Exceptionally, however, damages are awarded for such losses where the contracts purpose is to throw out happiness or enjoyment, as is the situation with contracts for holidays Jarvis v Swan Tours. Th e innocent party must take reasonable steps to mitigate (minimise) his loss, for example, by nerve-wracking to find an alternative method of performance of the contractBrace v Calder.3.4 Liquidated damages clauses and penalty clausesIf a contract includes a provision that, on a breach of contract, damages of a certain amount or calculable at a certain rate will be payable, the courts will normally accept the relevant figure as a measure of damages. Such clauses are called liquidated damages clauses.The courts will uphold a liquidated damages clause even if that means that the injured party receives less (or more as the case may be) than his actual loss arising on the breach. This is because the clause setting out the damages constitutes one of the agreed contractual terms Cellulose Acetate Silk Co Ltd v Widnes Foundry Ltd.However, a court will ignore a figure for damages put in a contract if it is classed as a penalty clause that is, a sum which is not a genuine pre-estimate of t he expected loss on breach.This could be the case where1. The prescribed sum is extravagant in comparison with the proverbum loss that could follow from a breach.2. The contract provides for payment of a certain sum but a larger sum is stipulated to be payable on a breach.3. The same sum is fixed as being payable for several breaches which would be likely to cause varying amounts of damage.All of the above cases would be regarded as penalties, even though the clause might be described in the contract as a liquidated damages clause. The court will not enforce payment of a penalty, and if the contract is broken only the actual loss suffered may be recovered (Ford Motor Co (England) Ltd v Armstrong).Equitable remedies4.1 Specific performanceThis is an order of the court requiring performance of a positive contractual obligation.Specific performance is not available in the following circumstancesDamages provide an adequate remedy.Where the order could cause unreasonable hardship.Where the contract is of such a nature that constant supervision by the court would be required, eg, Ryan v Mutual Tontine Association.Where an order of specific performance would be possible against one party to the contract, but not the other.Where the party seeking the order has acted unfairly or unconscionably. He is barred by the maxim He who comes to Equity must come with clean hands.Where the order is not sought promptly the claimant will be barred by the maxims impede defeats the Equities and Equity assists the vigilant but not the indolent.In general the court will only grant specific performance where it would be vindicatory and equitable to do so.4.2 InjunctionAn injunction is an order of the court requiring a person to perform a negative obligation.Injunctions fall into two broad categoriesprohibitive injunction, which is an order that something must not be done.Mandatory injunction, which is an order that something must be done, for example to pull down a wall which has be en erected in breach of contract. Like specific performance it is an equitable remedy and the court exercises its discretion according to the same principles as with specific performance, eg, Page One Records Ltd v Britton and Warner Brothers v Nelson.