La1106 – Exam Notes

Lecture 5

Remedies

Equitable remedies

• 
  Specific performance or injunctions
  
• 
  Requires the party to perform what was originally agreed
  

Right to terminate

• 
  Right to terminate can be exercised by the aggrieved party
  
• 
  Generally the court is not involved
  

Right to damages

• 
  It is up to the court to award the appropriate remedy for the breach
  
• 
  To place the aggrieved party in a position as if the contract had been performed
  

Damages as compensation

• 
  Compensation only for actual loss
  
• 
  Plaintiff has onus to prove damages
  
• 
  Assessed once and for all
  
  • 
    Contrary to certainty and finality otherwise
    
• 
  Sometimes nominal
  
  • 
    E.g. Tramways v Luna Park
    
• 
  Exemplary damages – no
  
  • 
    Hospitality Group Ltd v Australian Rugby League Union Ltd
    

Expectation Damages

• 
  Most common form of compensation
  
• 
  Awarded for the lost performance of the contract
  
• 
  Equal to the monetary value of the loss
  
• 
  Compensation for the benefit they expected to gain from the contract and has been lost due to the breach
  
• 
  Based on the facts that the situation allowed you to claim
  

Loss of profit/Loss of bargain

• 
  Includes
  
  • 
    Direct loss of profit
    
  • 
    Cost of alternative performance
    
    • 
      Seller’s breach
      
    • 
      Buyer’s breach
      
  • 
    Consequential losses
    

Damages for loss of profit on basis of termination clause

• 
  Shevill v Builders Licensing Board
  
• 
  No common law right to terminate unless breach of an essential term
  
• 
  If terminate contract for lesser breach on basis of termination clause, plaintiff restricted to recover arrears but not damages for lost bargain
  

Loss of chance/opportunity

• 
  Plaintiff can recover damages for loss of chance/opportunity
  
• 
  Calculation
  
  • 
    What is loss?
    
  • 
    What is the chance? On the balance of probabilities
    
    • 
      Chaplin v Hicks
      
    • 
      Howe v Teefy
      

Disappointment

• 
  General rule: damages are not recoverable
  
• 
  Generally only concerning economic loss
  
• 
  Damages meant to compensate not punish
  
• 
  Three exceptions to general rule
  
  • 
    Plaintiff suffered personal injury
    
    • 
      Baltic Shipping v Dillon
      
  • 
    Plaintiff suffered actual physical discomfort and inconvenience
    
    • 
      Bailey v Bullock
      
    • 
      Heywook v Wellers
      
  • 
    Object of the contract was the provision of pleasure and enjoyment
    
    • 
      Baltic Shipping v Dillon
      

Loss of reputation

• 
  General rule: damages are not recoverable
  
• 
  Exception: If contract provides for enhancement of reputation
  
  • 
    Flamingo Park v Dolly Dolly Creation
    

Loss of use of money

• 
  Hungerfords v Walker
  

Payment of Interest

• 
  At common law, interest is not payable as compensation on late payment of damages
  
• 
  However, interest is payable under statute
  
  • 
    Civil Proceedings Act 2011 (Qld) s58
    

Reliance Damages

• 
  To recover the cost of relying on a promise where
  
  • 
    There is no way of quantifying expectation loss
    
  • 
    No profit will be made on the contract
    
    • 
      McRae v Cth Disposals Commission
      
  • 
    They will at least recover expenditure had the contract been fully performed
    
• 
  For a losing contract, plaintiff can recover only partial costs.
  
• 
  Reliance damages only for reasonable expenditure
  
• 
  Plaintiff cannot recover both expectation and reliance fosts for same expenditure
  
• 
  Plaintiff cannot elect
  

Damages under statute

• 
  Australian Consumer Law: s236
  
• 
  Plaintiff may recover damages for loss – compensation applied under terms of statute, not with reference to common law analogies
  
  • 
    Sellars v Adelaide Petroleum
    

Pre-estimated damages clauses

• 
  Pre-estimated or liquidated damages
  
• 
  Parties can agree in advance on amount of damages for breach
  
• 
  Compensation must be reasonable, otherwise it may be considered not to be a genuine estimate and is invalid, and common law principles will apply
  

Lecture 6

Limitations on the award of damages

• 
  The defendant is liable for damages only if the breach actually caused the plaintiff’s loss
  
• 
  The plaintiff bears the onus of proof
  

‘But for’ test

• 
  Apply the ‘but for’ test. Would the plaintiff have suffered the loss but for the breach?
  
  • 
    Reg Glass v Rivers Locking Systems
    
• 
  But for test is only a guide
  
  • 
    Consider larger scenario and policy applicable
    
  • 
    Alexander v Cambridge Credit
    
    • 
      Common sense test must prevail
      
    • 
      Losses were affected by other various economic factors
      
• 
  Was the relevant act or omission the actual cause of loss
  
  • 
    Were there external factors?
    
  • 
    How much did these external factors affect it?
    

Should have considered this particular loss from this particular breach

At the time of or before contract formation, not after

Remoteness

• 
  The defendant can only liable for damages if the loss is not too remote
  
• 
  Must be immediately connected with the event
  

The two limbs of breach

• 
  The first limb is a loss that is ordinarily or naturally occurring
  
• 
  The second limb is about special knowledge
  
  • 
    Should have considered this particular loss from this particular breach
    
  • 
    Must have knowledge at the time of or before contract formation, not after
    
• 
  Hadley v Baxendell
  
  • 
    He didn’t have any knowledge that he could have contemplated the result of his breach
    
  • 
    He was not held responsible for special damages as his breach did not then fall under any of the particular limbs
    
• 
  Victoria Laundry v Newman Industry
  
  • 
    Was successful for loss of profit
    
    • 
      Falls under both limbs
      
  • 
    Was unsuccessful for special contracts
    
    • 
      Should have had special knowledge that they boilers were going to be used immediately
      
    • 
      Defendant had no knowledge of specific special contracts, therefore, it could not be claimed under limb two
      
    • 
      Not ordinary loss, therefore not under first limb
      

• 
  Two types of knowledge
  
  • 
    Imputed
    
    • 
      Knowledge that anyone would be expected to have
      
    • 
      Not necessary that the defendant actually has it
      
  • 
    Actual
    
    • 
      Knowledge that the defendant actually has
      
    • 
      May be special knowledge
      
• 
  Stuart v Condor Commercial Insulation Properties Ltd.
  
  • 
    Does not fall under either limb
    
  • 
    Outside factor that Stuart was responsible for the subcontractors work in any event
    
• 
  Damages should be such that could be reasonably supposed at the time they made the contract that could probably be resolved at the time of the breach
  

Koufos v Czarnikow

• 
  The defaulting party should reasonable have contemplated what would flow from their breach
  
• 
  The ship owner should have realised that if they deviated from their voyage then the merchants would lose value from their goods
  
• 
  The court said they were liable for the variation of the market price
  

Extent of loss contemplated

• 
  It’s not necessary for the defendant to consider exactly the loss suffered or specific details, it is enough for the defendant to have considered the general kind of damage
  
  • 
    H Parsons (Livestock) Ltd v Uttley Ingram & Co
    

Mitigation

• 
  Refers to actions taken by the plaintiff after the breach
  
• 
  The plaintiff is not able to recover any part of the loss that is attributed to his/her own failure to mitigate the impact of the breach
  
• 
  Plaintiff should minimize the loss if possible and reasonable into the circumstances – the plaintiff should not contribute to his or her own loss
  
• 
  If the loss is caused by the plaintiff then the defendant would not have been able to contemplate this loss
  
• 
  Onus of proof
  
  • 
    The plaintiff bears the onus of proving the loss suffered was caused by the defendant’s breach
    
  • 
    The defendant bears the onus of proving the loss could have been avoided if the plaintiff had taken reasonable steps
    
• 
  Principles of mitigation
  
  • 
    The plaintiff cannot recover for loss that was avoidable
    
  • 
    The plaintiff cannot recover for loss that was avoided
    
    • 
      British Westinghouse v Underground Electric Railways
      
  • 
    The plaintiff can recover for loss incurred in reasonable steps to avoid loss or attempt to avoid the loss
    
    • 
      Simonius Vischer & Co v Holt & Thompson
      
• 
  Plaintiff is not expected to do anything out of the ordinary
  
  • 
    They are only expected to act reasonably
    
• 
  If the plaintiff cannot afford to take steps, then this will not be taken as a failure to mitigate
  
  • 
    Burns v MAN Automotive (Aust) Pty Ltd
    
    • 
      Also, cannot recover from avoidable losses – he should have stopped running the business at a loss once he had that knowledge