Chapter 21 - Remedies

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Chapter 21 - Remedies
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Underlying Principles - Damages Recovery in
Tort v Contract

• Tort
• Principle is to put the victim back in the
  position he was prior to the Tort
• Contract
• Principle is to provide compensation / damages
  measured on the loss suffered by reason of the
  contract not being performed i.e. what would
  have got had the contract been performed

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Example

• I sell you a coin saying its worth 500 for 200.
  Its really worth 100.
• In Tort
• The tort (misrep) made me part with 200. But I
  got 100hence my loss is 100
• This returns me to pre-tort position I havent
  gained, I havent lost)

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• In Contract
• My loss is the figure I could expect had the
  contract been performed i.e. 400.
• I have a coin worth 100, but because of the
  promise I thought I had one worth 500
• Had the contract been performed (i.e. had I got a
  coin worth 500) I would have just thatI dontI
  have one worth 100, so 400 is the measure of
  damages!

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Heads of Loss

• Expectation Loss that which I expected to get
  from K
• Reliance Loss that which I spent in reliance on
  K
• Restitutionary Loss that which I handed over to
  D on foot of contract

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Cannot Double Claim Usually

• Hire U2 for concern in Lansdowne Road.
• You hire stadium (reliance) you expect profit
  (expectation) and you paid them up front
  (restitution)
• Cant double dip
• E.g. Profit of whole venture is the net gain
  minus the net outlay
• Outlay includes hiring of U2 and stadium
• So cant sue for the 1m profit you would have
  made, and the cost of hiring the stadium if they
  overlap need to claim for net loss

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• Booking Fee 200K
• Stadium Hire 400K
• Income expected 1million
• Expectation had contract been performed?
• 400K
• Reliance Expense 400K
• Restitutionary 200K

8

• Sometimes you cant really calculate what you
  estimated you would make.
• So you may make a decision to claim reliance
  based loss only

9
Anglia Television v Reed

• Oliver Reed pulls out of movie K P obviously
  incurred expense before and after K
• Problem was that P was not able to say what
  profits were lost so claimed for reliance.

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Denning MR

• It seems to me that a plaintiff in such a case as
  this has an election he can either claim for
  loss of profits or for his wasted expenditure.
  But he must elect between them. He cannot claim
  both. If he has not suffered any loss of profits
  - or if he cannot prove what his profits would
  have been - he can claim in the alternative the
  expenditure which has been thrown away, that is,
  wasted, by reason of the breach

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Second limb of H v B in application (In Reed)

• He can claim also the expenditure incurred before
  the contract, provided that it was such as would
  reasonably be in the contemplation of the parties
  as likely to be wasted if the contract was
  broken.
• Applying that principle here, it is plain that,
  when Mr. Reed entered into this contract, he must
  have known perfectly well that much expenditure
  had already been incurred on director's fees and
  the like.
• He must have contemplated - or, at any rate, it
  is reasonably to be imputed to him - that if he
  broke his contract, all that expenditure would be
  wasted, whether or not it was incurred before or
  after the contract

12
Bowlay Logging v Domtar

• If I would have lost out anyway
• Here D failed provide sufficient trucks to
  logging mill
• But P would not have made a profit in any event
  actually would have made a greater loss had
  contract been performed properly
• So, no loss no case
• P did try and get money for the expenditure it
  incurred under expectation that trucks would
  arrive but would have ended up putting them in
  better position than if the K had been peformed!

13
C P Haulage v Middleton

• Tenant evicted and sought compensation for
  improvements
• He actually ended up setting up his business
  elsewhere at less expense
• Ct was not interested in putting him in a better
  financial position than he would have been had
  the K been performed

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Remoteness in Contract

• Hadley v Baxendale
• Ds breached K by late delivery of mill shaft
  mill lost profits
• Principles damages are recoverable if they are
• (a) that which flow naturally from breach of
  contract
• (b) such as may reasonably be supposed to have
  been in contemplation of parties at the time of
  making the contract s as being probable
  consequences of the breach
• Here, P not liable shutting down mill not a
  natural consequence says court could expect
  them to have replacement shaft
• Shutting down in event of late delivery not in
  contemplation of parties at the time

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• Think about the two principles
• (a) that which flow naturally from breach of
  contract
• (b) such as may reasonably be supposed to have
  been in contemplation of parties at the time of
  making the contract s as being probable
  consequences of the breach
• Argument that its all about foresight i.e. you
  pay damages for r.foreseeable consequences of
  breach
• (a) everyone is deemed to know what would flow
  naturally from breach
• (b) if the parties have special knowledge or
  foresight, then so be it.

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Victoria Laundry v Newman Industries

• Boiler delivered to P late had to turn away
  work and lost profits D was experienced in
  trade knew P needed it to expand
• Held loss of profit was foreseeable
• But loss of particularly lucrative contracts
  not foreseeable

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Asquith LJ

• Reformulated both steps in terms of r.f.
• Main principle can only recover that which is
  r.f. to result from breach
• All depends on knowledge possessed by parties
• Deem parties to have certain degree i.e. that
  they know what which naturally flows is r.f.- 1st
  rule in H v B
• May be added particular knowledge which they
  possess covers the second rule in H v B

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Irish Adoption

• McGrath v Kiely (1965)
• Lee v Rowan (1981)
• Waterford Harbour Commissioners v British Rail
  Board (1981)
• Lennon v Talbot (Ireland) Ltd (1985)
• The plaintiffs are entitled to the damages
  which might fairly and reasonably be considered
  as arising naturally from the breach or might
  reasonably be supposed to have been in the
  contemplation of both parties at the time of the
  agreements as a probable result of the breach.

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Part 1 The Ordinary Course of ThingsStoney v
Foley

• Animals sold turned out to be diseased (breach of
  contract)
• Natural consequence was that the land upon which
  they grazed would be unsafe for particular
  agricultural purposes

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Wilson v Dunville

• P bought grain from D for cattle feeding
• Actually had lead in it poisoned cattle
• D argued that as the product may not match its
  description in many ways, the death of the cattle
  could not have been contemplated by the parties
• Rejected!
• Palles CB-
• Ordinary consequences is what we are talking
  about here
• Dont need to show specific knowledge for this
  kind of breach
• Harm resulted solely from the act in question

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Stock v Urey

• Car was smuggled into the North from the Republic
  of Ireland, unbeknownst to the buyer.
• The UK authorities seized the car and 68 had to
  be paid by the plaintiff to get it back.
• This was a breach of s.12 of the 1893 Sale of
  Goods Act and natural result of that breach.

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Maye v Merriman

• D agreed to sell land to P
• P claimed breach for not completing on time
• Claimed Damages related to extra amount it would
  now cost him to stock land with cattle
• Price had risen
• Hamilton J noted that price could have risen as
  well as fallen and so the loss did not arise in
  the usual course of things i.e. not a natural
  consequence of breach

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Part 2 Special Circumstances

• Victoria Laundry
• Obvious that late delivery would result in loss
  of business
• But not obvious that some of that business were
  government contracts Defs would have had to
  know the precise details of same for recovery to
  be possible for loss of those contracts

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• Waller v Great Western Ry (1879)
• Defendant failed to supply horse boxes on its
  train to transport horses to a sale in Dublin and
  so the horses had to be transported by road.
• The horses arrived in a deteriorated condition.
• However, this deterioration was linked to their
  recent change in diet but for this change the
  journey would not have been so demanding.
• D knew nothing of this no recovery

25
Lee v Rowan

• Just another example

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Kemp v Intasun

• Mrs. Kemp and Husband go to Thomas Cook she
  mentioned his asthma and they got special health
  insurance
• Holiday was disaster at start hotel booked into
  was full and went to much worse one room in
  staff quarters dirty and dusty his asthma
  flares up
• 800 for consequences of flare up awarded against
  D
• CA held that conversation with Thomas Cook was
  purely casual at that point and anyway, at the
  time Thomas Cook was not the agent for Intasun!!!

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• Fitzpatrick v Frank McGivern
• P said she contracted to buy a house of high
  quality house provided had defects
• Claimed she planned to rent out house and claimed
  for lost rent
• Parke J
• Although it was her intention, there was no
  evidence that she communicated it to D to put him
  on notice of consequences of default

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Intangible Loss

• Loss of Chance
• Where particular event may have occurred
• Hawkins v Rodgers
• P D partnership split up animosity
• D arranged that Ps horses be struck out from
  races so could not win
• Wrongful act but what did he lose? The chance
  of winning
• Principle was that damages would be awarded
  related to the possibility of loss which may
  arise
• Hickey v Roches Stores
• Loss of profits assessed without much science
• Cronin v Eircom Ltd 2006 IEHC 380
• Loss of chance logic applied in promotion context

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• Emotional Distress and Related Situations
• Old view was that distress associated with breach
  of contract was not recoverable
• Hobbs v London SW Ry Co
• Family took train supposed to go to Hampton court
  did not
• Had to walk on wet night for an extra 3 miles
• Awarded damages for physical inconvenience of
  walking but not for the purely sentimental
  distress
• Law taken different path where purpose of K is to
  provide enjoyment etc

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Jarvis v Swan Tours

• P was solicitor poor quality holiday in
  Switzerland was a breach of contract (see n4, p
  142)
• On appeal, he was awarded sum for loss of
  enjoyment (i.e. since that is what the K here was
  supposed to provide)
• Denning held Hobbs to be out of date
• Although in general in breach of contract no
  damages can be recovered for mental distress,
  where the purpose of the contract is to give
  pleasure or alleviate distress, damages may be
  awarded for the failure of the contract to
  achieve its purpose.

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Phelan Holdings v Poe Kiely Hogan

• D sought land to develop solicitors were
  Negligent all fell through
• P predisposed to mental illness sued solicitors
• Barron J held no recovery for psychiatric injury
• Kelly v Hennessey need to apprehend or suffer
  physical injury

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Penalty Clauses and Liquidated Damages

• In the event of breach, A pays B 1000
• Test is it a penalty or a genuine estimated of
  the damage due for such breach.
• A penalty is unenforceable

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Dunlop Pneumatic Tyre v New Garage Motor Co

• Resale price maintenance agreement
• If sold in breach of it - 5 per item
• Test Lord Dunedin
• Ask if whether amount is out of all proportion to
  the possible consequence of breach
• Ask if the amount similar for different breaches
  which may vary in severity
• One rule higher amount for failure to pay a
  smaller amount is necessarily a penalty
  (querywhere does this leave high interest?)
• Here the 5 was not a penalty precise harm
  could not be quantified and even though severity
  differed - 5 was a genuine pre-estimateso
  enforceable.

34
Ford Motor Co v Armstrong

• D agreed not to sell below listed price or sell
  Fords to other retailers etc
• Each breach - 250 as agreed damages
• Held to be arbitrary and payable for number of
  breaches which were not uniform hence penalty

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Idea

• If you have a uniform sum payable for breaches
  which range in severity, that sum cant really be
  a genuine pre-estimate of loss

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Jobson v Johnson

• K for sale of shares in football club 350K
  upfront with installments of 40K if installment
  missed had to re-sell shares for 40K to the
  Vendor!
• Penalty clause amount of undervalue wholly
  unrelated to loss suffered

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• Lordsville Finance plc v Bank of Zambia (1996)
  and Phillips Hong Kong Ltd v AG of Hong Kong
  (1993). These would seem to support the
  following-
• The main question is to ask whether the clause is
  a deterrent to stop someone breaching a contract
  or whether it is supposed to compensate one party
  in the event of breach.
• Even if clauses may appear to be deterrents (i.e.
  those which increase the consideration payable
  upon breach) will not be struck down if the
  increase can be explained as commercially
  justifiable provided its dominant purpose was
  not to deter any party from breach
• Overall, the Courts should respect the notion
  that what the parties have agreed should normally
  be upheld.

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Acceleration Clauses

• E.g. Hire purchase agreement / loan agreement
  sum payable immediately, but instalments accepted
  miss instalment and the whole sum is payable
• Classified as accelerating an existing liability
  Proctor Loan v Grice

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• In contracts which provide for payment by
  instalments, a clause requiring all future
  payments to be payable immediately on default of
  paying one instalment are generally enforceable
  on the grounds that they do not increase the
  defaulting partys overall obligation (The
  Angelic Star (1988) 1 Lloyds Rep 122).
• Irish case ODonnell v Truck and Machinery
  Sales (1998) Barron J (SC) held that this is
  because the higher sum is the sum originally
  payableso nothing more than accelerating a
  liability occurs
• However, such clauses might be treated as a
  penalty if they also require payment of future
  interest that has not yet become duethis gets
  complex

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• UDT v Patterson
• Loan of 900 with interest over 36 instalments
• Default meant it all would be owing
• D defaulted after paying 1
• P sued for the interest inclusive sum minus 1
  payment
• Ct held, if he had paid early, would not be
  liable to interest on the whole

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10,000 over 4 years, at 10 principal interest
per year (simple interest) Repayable sum
14,000 payable in 4 instalments
(2005-2008) Terms usually say once when you pay
it off, you pay the balance without interest
2004
2005
2006
2007
2008
Paid off early in 2006 So, Ive paid out roughly
2000 in interest by this point, and half the
principalLogic is that I can pay off the balance
without future interest So, if I defaulted on
the first instalment in 2005 and if I was made
liable for interest on the whole, the argument is
that I may not have had to pay the whole since in
the future I could have paid it off early and
avoided interest on the whole (i.e. the 4000)
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Duty to Mitigate Loss

• Person must mitigate loss only to extent which
  is reasonable
• Lennon Ors v Talbot
• Ps were motor dealers dealerships wrongfully
  terminated by D
• Offered new deals mostly refused were quite
  different
• Claimed Damages should be reduced
• Keane J court would not do so if satisfied that
  Ps acted reasonably in the circs as they
  appeared to be at the time
• Even though, perhaps with benefit of hindsight,
  they could have reduced their loss by taking
  measures

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Restitutionary Relief
44

• Some small sub-headings
• Quasi contract

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• Mistake
• Where monies are paid over on foot of a contract
  which is vitiated by mistake, it is generally the
  case that the party who would not have handed
  over such monies if not for the mistake, can get
  it back. There are limits on this though (which
  are controversial). Generally, it has to be a
  mistake of fact not law.

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• Tax
• As there is debate over the fact/law issue, there
  was a special rule created in the early nineties
  in England to do with tax i.e. where an lawful
  demand for tax had been made and met, the
  taxpayer may get recovery even though revenue
  made a mistake of law.

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• Total Failure of Consideration
• We have examined this in relation to frustration.
  It has a wider application though there are
  Irish cases which allow one to argue that anytime
  a total failure of consideration has occurred,
  monies paid out should be handed back. So in
  Hayes v Stirling (1863)1 monies paid over for
  shares in a company which was never set up was
  re-payable.

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• Money Paid On Foot of an Illegal Contract
• Remember the in pari delicto principle? We have
  already looked at this in illegality i.e. sums
  payable under an illegal contract may be
  recoverable.

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• Money Paid on Foot of a Conditional Contract
• Sometimes parties agree that a contract is
  conditional on an event. If monies passes and
  the event does not occur and hence the contract
  never kicks in, that money is usually
  recoverable.

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• On Foot of Wrongdoing
• A misrepresentor may have to provide restitution
  i.e. he misrepresents ownership over a car, and
  sells you the car. If you so elect, you could
  seek restitution of the purchase price and not
  just damages etc. It is also suggested in the
  duress case law that a valid economic duress plea
  entitles one to the money back on the contract
  which was procured by duress.

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