Contract- Discharge Of Contract

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Treitel

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a breach of contract as when “a party without lawful excuse fails or refuses to perform what is due from him under the contract, or peforms defectively or incapacitates himself from performing”. This is subject to the caveat that the breach is “without lawful excuse”.

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Alfred C Toepfer International GmbH v Itex Hagrani Export SA.

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Where the party has acted so as to “put it out of his power to perform his obligations”, there will be a breach.

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Photo Production Ltd v Securicor Transport Ltd

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Even the most serious, fundamental breach does not of itself terminate the contract.

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On termination, primary obligation to perform replaced by secondary obligation to pay damages

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Cutter v Powell

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Taylor v Webb

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Where the obligations are independent of each other there will still be an obligation despite the breach. EG, even if rent is withheld, the landlord must still repair the property

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Sumpter v Hedges

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The claimant could receive the cost of tools he left on site but nothing for the partial building work he did. The obligations were entire. But see Hoenig.

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Hoenig v Isaacs

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P had substantially performed the contract and therefore could recover the price less the cost of correcting the defects.

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Bolton v Mahadeva

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No Substantial Performance

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SGA s.31(2)

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Where there is a contract for the sale of goods to be delivered by instalments which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each case depending on the terms of the contract and the circumstances of the case whether the breach of contract is a repudiation of the whole contract or whether it is a severable breach giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated.”

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Stocznia Gdanska SA v Latvian Shipping Co

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He need not make up his mind immediately but he must do so in a reasonable period of time

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Johnson v Agnew

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Once he has made a decision, he cannot rescind that decision and change it.

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Vitol SA v Norelf Ltd

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The innocent party must communicate his decision to the party in breach.

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Arcos v Ronaason

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The party may repudiate no matter the reasoning behind it. He may declare a false reason or no reason at all. The breach of a condition is sufficient in and of itself to justify termination.

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Hochster v De la Tour

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The novel factor here is that the acceptance of this entitles the innocent party to claim damages immediately rather than waiting for the contractual obligation to come into force before cancelling the contract. This is beneficial because of the duty to mitigate.

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Millar’s Karri and Jarrah Co v Weddel, Turner and Co.

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Where there is anticipatory breach for a contract involving instalments, the questions is whether “the breach is of such a kind or takes place in such circumstances as reasonably to lead to the inference that similar breaches will be committed in relation to subsequent deliverties”-

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White and Carter v McGregor

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The claim was allowable. There was no obligation to accept the defendant’s breach. The claim was for the contract price rather than damages so the mitigation rules simply ahd no application.

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Hounslow LBC v Twickenham Garden Developments Ltd

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Where co-operation is necessary between the parties, the innocent party will have to accept the breach and terminate the contract

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The Alaskan Trader

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It was said that “there comes a point where the court will cease to allow the innocent party to enforce his contract. There must be a legitimate interest in continuing the contract.

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Avery v Bowden

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If the contract is frustrated between the unaccepted anticipatory breach and the date fixed for performance, there will lie no claim in damages.

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The Simona

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An innocent party who affirms the contract but then subsequently breaches it himself will not latterly be able to claim for the breach of contract and can in fact find himself liable to pay damages for breach of contract

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Couchman v Hill

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The Term must go to the root of the contract.

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State Trading Corp of India Ltd v M Golodetz Ltd

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The courts here are making a value judgement as to the commercial significance of the term.

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Poussard v Spiers

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Madame Poussard was in breach of condition and Spiers were entitled to end the contract. She missed the opening night which was the most important performance as all the critics and publicity would be based on this night.

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Bettini v Gye

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Bettini was in breach of warranty and therefore the employer was not entitled to end the contract. Missing the rehearsals did not go to the root of the contract.

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Bunge Corp v Tradax Export SA

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It need not be the case that the “breachee” is denied the full benefit of every term of the contract

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Bunge v Tradax

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Unless the contract makes it clear, either by express provision or by necessary implication arising from its nature, purpose, and circumstances (“the factual matrix” that a particular stipulation is a condition or only a warranty, it is an innominate term, the remedy for a breach of which depends upon the nature, consequences, and effect of the breach.

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Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

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Has the innocent party been deprived of substantially the whole of the benefit which he had contracted to receive? If yes, then can repudiate. If no, then just damages available.

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Carter made the following criteria to help ascertain the type of term:

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1.       What detriment was caused or is liked to be caused?

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2.       Has the party previously breached or is he likely to do so again?

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3.       Will damages provide adequate compensation?

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The Hansa Nord

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The Court of Appeal held that rejection was not justified. The term as to shipment in good condition was an intermediate term; and there was no finding that the effect of its breach was sufficiently serious to justify rejection.

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They were entitled to the difference in value between damaged and sound goods at the agreed destination.

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Bunge v Tradax

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Court held that mercantile contracts, terms will readily be construed as conditions where the circumstances make such certainty necessary. Time conditions in shipping contracts are such terms.

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The Mihalis Angelos

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The expected ready to load clause was a condition despite the fact it had caused no loss to the defendant. The classification as a condition was said to be because of the need for commercial certainty in shipping contracts.

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Hartley v Hymans

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Time of essence for delivery of goods. Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not of the essence of a contract of sale.

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Sale of Goods Act 1979, s.10(1)

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Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not of the essence of a contract of sale.

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Lombard North Central v Butterworth

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The parties can declare a term to be a condition of the contract and this is usually conclusive.

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Schuler AG v Wickman Machine Tool Sales Ltd

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The court ruled that the use of the word condition was not intended to be its technical use. In the case, the court ruled that the use of the word “condition” was a “strong indication” but not a conclusive one.

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Sale of Goods Act 13,14 and 15 declare some things as conditions and others as warranties.

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Addis v Gramophone Ltd

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Punitive damages are not available in a contract action

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Robinson v Harman

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The general rule of an award of damages in contract is that the claimant’s “expectation interest” must be protected- ie he must be put in the same situation, as if the contract had been performed.

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“if the C cannot show damage to his financial position, he will receive nominal damages only.”

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Where the expectation interest is unprovable, one cannot try and make a claim for it.

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Anglia Television v Reed

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Culllinane v British ‘Rema’ Manufacturing Co Ltd

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You cannot claim both expectation damages and reliance damages where it would mean double compensation.

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Alfred McAlpine v Panatown

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Damage to a 3rd party cannot be recovered by the contracting party. (subject to rights of 3rd parties Act)

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Ruxley Electronics and Construction v Forsyth

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Cost of Cure v Difference in value was the issue

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The courts do not have to choose “binary style” between the two options. In the case, they awarded “loss of amenity” damages of £2000 for the difference in pool depth.

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They can do what is reasonable in the circumstances.

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They awarded “loss of amenity damages”, according to Lord Mustill, this was due to the “consumer surplus”.

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This may seriously undercut the expectation interest. If a painter put up wrong colour wallpaper, is there a diminution in value? Could a person claim for loss of amenity?

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Addis v Gramophone Co Ltd

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It used to be the case that this case was authority for the principle that no damages were possible for non-pecuniary losses”.

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Jarvis v Swans Tours Ltd

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Denning ruled that he was able to claim for the “lack of the facilities” and the loss of his enjoyment because the enjoyment was the “direct object” of the holiday.

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Farley v Skinner

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This dispensed with the direct object test. Following Farley, it need only be the case that both parties know that the term in question is important.

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The distinction is important. In Jarvis, the whole point of the contract was to provide enjoyment whereas in Farley it was only of subsidiary importance (the real importance was to provide surveying services).

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Also, the threshold was lowered. “the intrusion into the quiet, reflective breakfast” was enough to claim damages. Inconvenience is enough to claim damages, disappointment is not.

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British Westinghouse Co v Underground Electric Ry Co

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The injured party must take all reasonable steps to minimise his loss. He need not take any step which a reasonable person would not take in the course of business.

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No duty to mitigate by buying new turbines, but since he had done so, the financial advantages of so doing had to be taken into account.

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Section 50 and 51- Sale of Goods Act

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Essentially a statutory form of mitigation. A buyer/seller must go to the market to buy/sell their goods.

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Banco de Portugal v Waterlow & Sons ltd

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The second element of the mitigation doctrine is that the claimant must not unreasonably incur expense subsequent to the breach of the contract

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Hadley v Baxendale

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There is liability for:

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1.       events which are a natural effect of the breach in question (ie an occurrence which was “according to the usual course of things”.

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2.       For events which may reasonably have been in the contemplation of both parties, at the time they made the contract, as the probably result of the breach of it.

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Koufos v C Czarnikow Ltd (The Heron 2)

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For the first limb, it is sufficient that the loss which occurred “naturally” had been a “serious possibility”, “real danger” or “very substantial possibility”

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This is narrower than in tort because of the fact that the parties have had the opportunity to negotiate terms and allocate risk.

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Victoria Laundry (Windsor Ltd) v Newman Industries

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The Ds were not aware of this lucrative alternative use and so they could not claim damages for it. They could only claim damages for the “very substantial possibility” of loss (ie the normal contract).

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The Achilleas

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The Ds won the case and the difference was only payable on the difference between the 9 days they had the ship.

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The reasoning from the majority was that there was no assumption of responsibility for this additional loss. It was significant that the follow on charter was for a period and cost which was unknown to the defendants. How could they be said to have assumed responsibility for a loss they could not quantify?

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The Sylvia

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The orthodox approach of Hadley v Baxendale is to be used first. If that produces an anomalous result then we look at the “assumption of responsibility test”.

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Essentially, some losses which are foreseeable are nevertheless not claimable because responsibility for them was not assumed.

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London Joint Stock Bank v Macmillan

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The act of a 3rd party may break the chain (unless the prevention of the 3rd party act was what the contract was to provide)

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Monarch Steamship Co v Karshamns Oliefabrieker

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Causation where Act foreseeable.

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Lambert v Lewis

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He was refused it as it was held his act broke the chain of causation between the supplier’s breach and his loss.

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Omak Maritime Ltd v Mamola Challenger Shipping Co

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Reliance damages are recoverable only to the extent that they would have been recovered had the contract been fulfilled. The burden is on the defendant to prove that part was non-recoverable.

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C and P Haulage Co Ltd v Middleton

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It was held he could not claim this money as even if the contract had been lawfully terminated he would not have been able to claim these extra improvements or remove them from the property.

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Anglia Television v Reed

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The actor was liable for all expenditure incurred even before he signed the contract as long as “it was in the reasonable contemplation of the parties that it would be likely to be wasted as aresult of the defendant’s breach”.

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McRae v Commonwealth Disposals Commission

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The speculative nature of the expectation losses is such that the reliance measure is the one which must be used. It should be noted that it is only in a very extreme case where the claimant’s expectations will be vague and difficult to measure that the courts will make them unrecoverable.

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CCC Films (London) Ltd v Impact Quadrant Films

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The general rule is that the C has an unfettered right to choose whether to claim for loss of bargain damages or for wasted expenditure.

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Barclays Bank Ltd v W J Simms Ltd

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1.       If the defendant was enriched;

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2.       At the claimant’s expense; and

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3.       It is unjust that the defendant retain the benefit without recompensing the claimant.

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Fibrosa

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Where the C has conferred a benefit on the D and the D has given nothing in return, there is a total failure of consideration. In this situation alone is the C allowed to make a restitution claim.

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Contract must be terminated before this I

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Whitcup v Hughes

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If however, a poor quality watch is delivered, then it will not be a “total” lack of consideration and the restitution claim will not be allowed

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A-G v Blake

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Full account of profits possible but exceptional. The following circumstances are important:

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1.       The court will have full regard to all circumstances.

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2.       Is there a legitimate interest in preventing the defendant’s profit making activity?

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Esso v Niad

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Full damages because:

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1.       Compensatory damages inadequate.

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2.       The obligation to implement pump prices was fundamental to the agreement.

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3.       Complaint was made several times and the D said he would comply.

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4.       Esso had a legitimate interest in preventing the D from profiting.

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The Sine Nomine

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As it was a marketable commodity, the usual rules of mitigation applied. The Cs could get another boat at market rate and so claim the fee from the Ds.

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Experience Hendrix LLc v PPX

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In this case, the judge awarded a figure which represented a reasonable price for what would have been negotiated between the parties. This was a fiction as it was contingent on the fact that the parties definitely would have negotiated.

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Wrotham Park

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It need not be full profits. A partial account of profits is also allowable.

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White and Carter v McGregor

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Where this is allowable (ie where there is a legitimate interest and where cooperation not required), the full amount will be payable not subject to mitigation

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S.49 of the Sale of Goods Act

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Where the property in the goods has passed to the buyer an action can be started.

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Where, under a contract of sale, the price payable on a day irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price.

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Falke v Gray

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The Court will order specific performance where damages are inadequate relief.

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Société des Industries Metallurgiques SA v Bronx

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It was held that no specific performance could be given as though they would be unable to complete work at the factory for 6-9 months, there was nothing to suggest this could not be reflected in monetary damages.

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Sky Petroleum Ltd v VIP Petroleum

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Unique situation of market meant specific performance granted. Ordinarily, not specific, non-unique goods would not give rise to specific performance.

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Evans Marshall & Co v Bertola

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“is it just, in all the circumstances, that a plaintiff should be confined to a remedy in damages”.

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Cooperative Insurance Society Ltd v Argyll Stores (Holdings) Ltd

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Specific performance was denied because:

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1.       There could be no order to make somebody continue a business

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2.       Enormous losses would result from so doing.

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3.       How would the order be framed and how would the court enforce it?

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4.       Compensation was a plausible alternative.

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These are not capable of specific performance as you would essentially be forcing somebody to do something they don’t want to do.

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Warner Bros v Nelson

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It was held that the defendant could be restrained by injunction from breaking the second undertaking. She would not be forced to act for the plaintiff because she could earn a living by doing other work.

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Diestal v Stevenson

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One cannot claim more than what is stipulated in the clause even if the actual losses are greater.

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Panatown

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The courts substituted the word “reasonable” in place of “genuine”.

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So, if a loss was a genuine estimate but was nevertheless unreasonable it will be invalid.

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There must be a significant discrepancy so as to make the estimation “unreasonable”

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Dunlop Pneumatic Tyre Company v New Garage & Motor Co ltd

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To aid construction and differentiate between a penalty clause and liquidated damages the following presumptuions are in place:

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1.       Where the sum stipulated is extravagant and unconscionable in comparison with the greatest conceivable loss it will be a penalty.

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2.       Where the sum stipulated is greater than the sum which ought to have been paid if the contract were fulfilled.

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3.       Where there is one penalty clause which provides the same figure for significant and insignificant breaches of contract. The contract should distinguish between the two or the clause will be invalid.

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4.       The fact that the estimate was based on guesswork is not problematic as this is the whole point of the exercise; to create certainty in the face of uncertainty of damages owed.

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Phillips v Hong Kong Ltd v A-G of Hong Kong

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The jurisdiction of penalty clauses is narrow. They should only be used sparingly as it impedes the right of the parties to negotiate the contract.

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Protector Loan Co v Grice

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This was held to be allowable. Accelerations of existing liability do not fall within the rule.

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Alder v Moore

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It was held this could not be a penalty clause because it was not payable on breach of contract.

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This si an odd scenario as it means that a person who breaks his contract can claim relief whereas a person who does not cannot do so.

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Dies v British and International Mining and Finance Co

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Part-payments are recoverable, deposits are not. Where a contract is neutral then a payment will generally be interpreted as a part payment.

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Howe v Smith

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Deposits are not recoverable.

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Workers Trust and Merchant Bank v Dojap Investments

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A deposit must be a “reasonable” estimation of what will be lost following a breach. Otherwise, the full deposit will be recoverable.