Notesale: Turn your study into money

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BUSINESS LAW – KEY ELEMENTS (lecture 4) REMEDIES
MEASURES

NATURE OF COMPENSATION

LIQUIDATED DAMAGES
(fixed sum): planning for
breach – certainty (liquidated),
privacy, cost effective,
amicable (commercial
relationship preserved)
...


Expectation (placed in the same situation
as if the contract had been performed)–
Robinson v Harman

The Test for a Penalty Clause
– Dunlop Pneumatic Tyre v
New Garage
*Terminology inconclusive
*Penalty clause is ‘in terrorem’
*Based on construction of
particular contract, judged at
time of contracting
Valid LDC = genuine preestimate of loss set at the time
of contracting
...
Stipulated sum is
extravagantly greater than the
greatest possible loss
conceivable on breach
...
Breach is non-payment of
money and stipulated sum is
greater
...
A single lump sum is payable
on any of several possible
breaches were some are serious
but others trivial
...
Even though loss impossible
to precisely pre-estimate, sum
stipulated may still be a
genuine pre-estimate
...

Not a Penalty Clause
*Estimate does not coincide
with actual loss – McAlpine
Capital Porjects v Tilebox
*Acceleration of payment
clause – The Angelic Star
*Deposits generally norecoverable – Workers Trust v
Dojap Investments

*3 alternative measures:
1
...
Cost of cure (defective performance has
taken place)
3
...
The burden of proof is on party
paying to prove otherwise
...
It prevents unjust
enrichment, but there is no loss to c)– AG
v Blake
...

*Damages assessed by the
court
*Compensation NOT
punishment – The Golden
Victory

*Loss of reputation (Malik v BCCI) and
loss of chance (Chaplin v Hicks) both fall
within expectation loss
*Quantum meruit – Sumpter v Hedges

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

LIMITING FACTORS
CAUSATION – must be a causal link between breach and
loss
...
Is there a novus actus interveniens?
(Lambert v Lewis) OR is it likely to happen? (Monarch
Steamship Co v AB Karlshamms)
REMOTENESS – Hadley v Baxendale
Damages must be either:
1
...

OR
2
...

Confirmed in Jackson v Royal - must discuss repercussions of
breach at time of contracting
...

What is required for mitigation?
*Reasonable steps – British Westinghouse v Underground
Electric
*Mitigation party not expected to embark on litigation –
Pilkington v Wood
*May have to accept breach if cost effective – Payzu v
Saunders
*Mitigating party’s conduct not weighed in’nice scales’ –
Bank of Portugal v Waterlow & Sons
...
Also Barclay’s Bank plc v
Fairclough
EQUITABLE REMEDIES
*Specific performance is an order of a court which requires a
party to perform a specific act, but ct wont do this if damages
are adequate or where there is a continuing obligation–
cooperative insurance society ltd v Argyll stores (holdings) ltd
*Injunction (requires a party to do or refrain from doing
something)– Evening Standard v Henderson; Warner Bros v
Nelson; Page One Records v Britton
*Rescission (bringing parties back to position in which they
were before entering into the contract, if possible)
*Rectification (ct corders change in a written doc to reflect
what it ought to have said in the first place)
...
Most common way to discharge a contract is by ‘performance’
...
Breach occurs in a small percentage of cases
...
By a new contract ie
...


Entire obligations rule – complete
performance ie entire or ‘lump sum’
contracts – Cutter v Powell
...

If wholly executory then
bilateral/mutual waiver of rights is
consideration – The Hannah
Blumenthal
...
The waiver of
rights constitutes consideration for the
release of their obligations – ie
requirement to perform
...
WHERE one party has performed
but other has not, the party who has not
can be released from their performance
if the other is happy to have something
different instead = accord (new
agreement) & satisfaction (new
consideration)
...
By operation of a term in the
contract itself – a condition precedent
or subsequent
...

3
...


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1
...

Anticipatory breach - Before the time of performance of a
contractual obligation one party may inform the other that they
no longer intend to perform – Hochster v De La Tour
...


*A ‘quantum meruit’ payment then owed
(how much the thing deserves)– Sumpter v
Hedges

*Breach of innominate term – innocent party’s rights depend
upon “seriousness of the consequences of the breach” – Hong
Kong Fir v Kawasaki Kisen Kaisha

2
...
Divisible contracts
...


*Where contract itself allows for
performance of one or more obligations
separately from others – Rose & Frank v
Crompton Bros
...

4
...
2)
*Must be clear and unequivocal commitment – Yukong Line v
Rendersburg Investments
...
Innocent party must not need cooperation of party in breach –
Hounslow v Twickenham & Garden Development
2
...
An unaccepted repudiation is a thing ‘writ in water’ –
Howard v Pickford Tool
...

*If the breach is anticipatory, the innocent party gains an
immediate right of action – Hochster v De La Tour
...

*C must mitigate loss
...
If there is any ambiguity, there can be no agreement – Gibson v Manchester CC
...
A term is a
contractual promise
...
There are ‘express terms’ (both parties are
aware of them), including pre-contractual statements made during negotiations, and agreed terms written into the contract
...

EXPRESS TERMS

IMPLIED TERMS

Terms that are specifically
agreed between the parties
either orally or in writing are
said to be express
...


1
...
The court decided that it
was a term of the contract that the
hops had not been treated with
sulphur
...
Timing (just before or at the
point of contracting in order for it
to be a term)– Routledge v McKay

TERMS IMPLIED IN FACT

3
...

However, in Photolibrary Ltd v
Burda Senator Verlag, there was a
course of dealing
...
Specialist knowledge – Oscar
Chess v Williams; Bentley v
Harold smith (motors)
2
...

However, in Hopkins v
Tanqueray, the delay was too long
i
...


PAROL EVIDENCE RULE
Extrinsic evidence may not be
adduced to vary an express written
contract – Jacobs v Batavia

Test: parties’ intentions –
reasonable man with the business
knowledge and context of the
contract – AG of Belize v Belize
Telecom Ltd
Business efficacy: The Moorcock
...
Contrast:
Ultraframe (uk) ltd v tailored roofing
systems with equitable life assurance
society v hyman
IMPLIED BY STATUTE

1
...

Ct decided it was a part contract
...
Where terms ‘onerous’ –
Interfoto v Stiletto
...


The breach of a term gives rise to
two possible options:
If a term is a CONDITION, the
innocent has a right to either
terminate the contract and claim
damages OR affirm and claim for
damages
...

CONDITION or WARRANTY?

Avoiding the Rule

2
...
v
East Crown ltd

S13 – with due care and skill
S14 – within reasonable time
S15 – pay reasonable consideration

Poussard v Spiers – held it was a
condition as it “went to the root of
the contract”
...
However, in Bettini v Gye
– held it was a warranty
...


Judiciary
‘Use of the word ‘condition’ is
an indication of the parties
intentions, but it is by no means
conclusive’ – Schuler v
Wickman
Generally: Judiciary – Hong
Kong Fir v Kawasaki Kisen
Kaishi “goes to the root of the
problem”
...

Specific terms: Judiciary –
precedents which have
established certain terms as
conditions: expected ready to
load (The Mihalis Angelos);
time of performance (Bunge v
Tradex)

CONDITION

INNOMINATE TERMS

Promissory conditions ie promises
that are fundamental to contract
...
Court looks ‘to
seriousness of the
consequences of the breach’ –
Hong Kong Fir v Kawasaki;
Aerial Advertising Co v
Batchelor Peas

Contingent conditions ie clause in
the contract by which the contract
hangs
...

HOW IS A CONDITION
CLASSIFIED? - Statute, parties
intentions, judiciary
...
All conditions unless
s15(A) applies ie if business buying
from another business and breach if
so slight as to make termination so
unreasonable S13-15 (the breach)
might be treated as a warranty
...

Classification by the parties
Courts usually give effect to parties
intention – Lombard North Central v
Butterworths, BUT not always –
Schuker v Wickman

Note: S13 SGSA 1982
“reasonable & skill” is always
an innominate term
...


 
 
 



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