Remedies (Sweeney

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• Remedies(Sweeney OReilly 2nd Ed. Chapter 9
  pp 245 257 and pp 279 - 283)

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• Types of Remedy
• Termination
• Rescission
• Recovery of Contract Price
• Damages
• Equitable Remedies
• Specific Performance
• Injunction
• Rectification
• Restitution

3

• Termination of a contract
• A contract can be brought to an end by
• Performance
• Agreement
• A Term of the Contract
• Frustration
• Breach
• Operation of Law

4

• Termination by Performance
• Where the parties wholly or substantially perform
  their obligations under the contract, the
  contract is discharged
• Hoenig v Isaacs (SOR p269)

5

• Termination by Agreement
• Parties to the contract agree to discharge their
  obligations to one another
• This latter agreement will only be binding if
• There is consideration or
• Promissory estoppel arises
• The contract to terminate the earlier contract is
  subject to usual contractual rules e.g. economic
  duress

6

• Termination by a Term of the Contract
• Parties may have agreed that the contract would
  be terminated upon the happening or non-happening
  of a certain event
• The term may be automatic or merely provide an
  option to terminate
• Term may give only one party the option to
  terminate

7

• Termination by Frustration
• Where
• An intervening event
• Not contemplated by the parties
• Makes performance
• impossible or
• Radically different to that originally
  contemplated.

8

• Termination by Frustration (Cont.)
• Examples (SOR p246)
• Taylor v Caldwell (SOR p247)
• Davis v Fareham United District Council (SOR
  p247) compare with Codelfa Constructions v
  State Rail (SOR p247)

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• Termination by Frustration (Cont.)
• Frustration does not apply where
• Contract makes specific provision for the event
• The party seeking to rely on frustration foresaw
  the event
• The event was caused by the party seeking to rely
  on the frustration

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• Termination by Frustration (Cont.)
• Frustrated Contracts Act 1959 (Vic)
• Court may order
• a refund of monies paid under a frustrated
  contract
• Compensation for any performance that occurred
  prior to frustration

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• Termination for Breach of Contract
• Cannot terminate for any breach no matter how
  slight
• Can only terminate for breach of a condition
• Other terms are called warranties
• Breach of conditions allows the innocent party to
  terminate the agreement and sue for damages
• Breach of a warranty only entitles the innocent
  party to seek damages

12

• Conditions and Warranties
• Not all terms carry the same importance
• A condition is a core term of the contract
• Goes to the essence of the contract
• Tramways Advertising v Luna Park (SOR p248)
• Associated Newspapers v Bancks (SOR p249)
• Warranties are non-core terms of the contract

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• Conditions and Warranties (cont)
• Intermediate terms will be conditions or
  warranties depending on the seriousness of the
  breach
• A breach so serious as to deprive the innocent
  party of substantially the whole benefit of the
  contract
• Hong Kong Fir Shipping Co v Kawasaki (SOR p252)

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• Termination by Breach
• Breach of a condition, or a serious breach of an
  intermediate term, will allow termination

Condition
Intermediate Term
Warranty
If Serious
Not Serious
Damages and\or Termination
Damages Only
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• Conditions and Warranties (cont)
• To determine if a condition, courts will examine
• The way in which the term is expressed
• The likely consequences of a breach
• The objective importance of the term to the
  overall contract
• Whether damages are likely to be an adequate
  remedy (see Shevill v Builders Licensing Board
  SO p252)
• The use of the word condition is not conclusive
• Wickman Machine Tool Sales v L Schuler AG (SOR
  p250)
• Parties can expressly state that it is an
  essential term

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• Conditions and Warranties (cont)
• Terms implied by statute are often expressly
  stated to be conditions or warranties
• Time
• In a mercantile contract the presumption is that
  it is a condition
• Bunge Corp of NY v Tradax Export SA Panama (SOR
  p250)
• In other contracts it is usually a warranty
• Bettini v Gye (SOR p251)
• Often made a condition by express words time is
  of the essence

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• Termination for Repudiation
• Repudiation
• One party indicates that they will not perform
  the contract
• Must be substantial repudiation to entitle other
  party to terminate the contract
• Anticipatory breach is a form of repudiation
  Examples SO p 254
• If other party elects not to terminate contract
  then must remain able to perform contract

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• Termination by Operation of Law
• Bankruptcy
• Cooling Off Periods (e.g. Sale of Land)

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• Procedure for Termination
• Terminating party must not affirm contract
• Once terminated, terminating party cannot change
  mind
• Termination means that the parties are relieved
  from all future obligations.
• Termination does not affect rights and
  obligations that have already accrued
• If not terminated, other party must continue to
  be able to perform contract

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• Rescission
• Available for
• Misrepresentation
• Undue influence
• Unconscionable conduct
• Duress

21

• Rescission (cont.)
• Effect
• Contract is terminated ab initio (i.e. it is as
  though there never was a contract)
• Compared to Termination (e.g. for breach)
• Termination only cancels the contract from the
  point of termination
• Procedure
• Innocent party rescinds by giving notice to the
  other party

22

• Rescission (cont.)
• Not possible if
• Contract has been affirmed by innocent party
• parties cannot be restored to substantially the
  same position they were in prior to the contract
  (restitution)

23

• Recovery of Contract Price
• Available where price, or mechanism for fixing
  price, is stated in the contract
• Preferable to damages because there are no
  problems with establishing the amount claimed
• Can claim if there has been substantial
  performance of the contract unless there is a
  term in the contract to the contrary
• If cannot sue for a contract price (e.g. because
  work substantially incomplete) must rely on
  Quantum Meruit

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• Damages
• Every breach of a contract gives a right to
  damages
• The object of damages is to compensate for loss
  actually suffered not to punish
• Addis v Gramaphone Co Ltd (SOR p270)
• The losses must be caused by the breach of
  contract
• Reg Glass v Rivers Locking Systems (SOR p271)

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• Agreed Damages
• The contract may provide for agreed damages
• Saves an expensive assessment of damages by a
  court
• Agreed damages must be a genuine pre-estimate of
  damages
• Courts will not enforce a penalty

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• Mitigation of Damages
• Plaintiff has a duty to mitigate losses
• Cannot claim losses which could have been reduced
  or avoided by the taking of reasonable steps

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• Remoteness of Damage
• Damages must not be too remote
• Such losses as may fairly and reasonably be
  considered either arising naturally, i.e.
  according to the usual course of things, from
  such breach of contract itself, or such as may
  reasonably be supposed to have been in the
  contemplation of both parties at the time the
  contract was made, as the probable result of the
  breach of it - Hadley v Baxendale (SOR p272)

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• Remoteness of Damage (cont.)
• A two part test
• Losses that flow according to the usual course
  of things from the breach
• Koufos c C Czarnikow Ltd (SOR p273)
• Hadley v Baxendale (SOR p273)
• Losses within the actual contemplation of the
  parties at the time the contract was made
• Victoria Laundry v Newman Industries (SOR p274)

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• Calculating Damages
• The amount of damages should place the innocent
  party in the same position that he would have
  been in had the contract been properly performed
• The court cannot refuse to award damages just
  because they are difficult to calculate
• Damages can include
• Expectation loses
• Personal injuries
• Disappointment, distress and discomfort

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• Expectation Losses
• If there is a market for the goods then the
  expectation losses will be the difference between
  the market price and the contract price
• If there is no market then specific performance
  is a better option

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• Expectation Losses (cont.)
• Expectation losses include loss of profits
• Loss of a promised chance or commercial
  opportunity may be claimed
• Damages will be awarded by reference to the
  degree of probabilities, or possibilities,
  inherent in the plaintiffs succeeding had the
  plaintiff been given the chance which the
  contract promised Sellars v Adelaide Petroleum
  (SO p275)

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• Expectation Losses (cont.)
• If loss of a bargain cannot be calculated then
  plaintiff can claim reliance expenditure
• McRae v Commonwealth Disposals Commission (SOR
  p275)
• Commonwealth v Amann Aviation (SOR p276)

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• Damages for Disappointment etc
• Courts have been reluctant to award damages for
  disappointment, distress and injured feelings
• Not awarded for breach of most commercial
  contracts

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• Damages for Disappointment (cont.)
• Two cases where may be awarded
• Distress flows from physical inconvenience
• Where enjoyment or entertainment or freedom from
  molestation is an essential feature of the
  bargain
• Cases
• Jarvis v Swann Tours (SOR p277)
• Baltic Shipping v Dillon (SOR p277)

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• Equitable Remedies
• Specific Performance
• Court orders a party to carry out their
  contractual obligations
• Only available if an order for damages would not
  be an adequate remedy
• Usually restricted to sale of land
• Never awarded to enforce a contract for the
  provision of personal services

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• Equitable Remedies (cont.)
• Injunction
• Court orders a party to a contract to refrain
  from breaching their contractual duty
• Only granted if necessary
• There must be evidence that the breach will
  continue or will occur again