Remedies - LAWS202 Law of Contract

Remedies Monday, 11 October 2010 8:48 p.m. 1. Is there a contract? No Yes No damages No 2. Was k breached? Yes 3. What measure of damages available, how much? Expectation Reliance Restitution Amenity Nominal Exemplary 4. Right to elect? 5. Any limit on damages you can elect? 6. Can the party prove loss? (Assessment, when, what for) 7. Has the plaintiff adequately mitigated the loss? Damages Damages are the primary remedy for breaches (over performance remedies) because: 1. Damages are usually adequate to compensate for any loss caused by breach i. Presumes that the point of remedies is to compensate loss. 2. Party suffering loss is usually satisfied with monetary remedy i. May have come as a result of preferring giving damages for remedy. 3. Damages limit court's involvement in supervising the outcome i. Easier than forcing breaching party from performing, or performing poorly. 4. Damages allow for efficient breaches i. Economically efficient = good. Measuring loss: * Expectation measure ? Putting innocent party into position he expected to be in had the contract been performed and not breached. ? Cost to complete contract # e.g. Amount to finish buying a house if I get someone else to do it ? And loss of profits and other expectations. # e.g. Both parties knew the purchaser was going to onsell the house for a certain amount of money. * Reliance measure ? Putting innocent party into position he would have been in had the contract never been entered into in the first place. ? e.g. Expenditure incurred, diminution in value between price paid and real market value, lost opportunities. # e.g. If buying orchard, promised to yield a certain amount of fruit, expected from misrep to get $100 000 pa profit, but in fact $70 000 pa, and paid $1000000, but real market value based on actual expected profits = $800 000. ? Reliance lost = $200 000, diminution in value between what was paid, and what land is worth. * Restitutionary measure ? Making the breaching party give up any profit it made from the breach to the innocent party # Not plaintiff's loss, but defendant's gain. ? Very new measure. How to measure: Basic Principle: "where a party sustains a loss by reason of a breach of contract, he is, so far as money can do so, to be placed in the same situation with respect to damages, as if the contract had been performed." - Baron Parke, Robinson v Harman (1848) "compensation for pecuniary loss flowing from the breach." - Viscount Haldane LC in British Westinghouse. The expectation measure Barry v Davies Auction with no reserve, plaintiff bid PS400 for two tractors, actual cost was PS28000. Auctioneer refused to sell, bid was unreasonably low - breach of process contract. Remedy: plaintiff put in position as if no breach: PS28000 - PS400 = PS27600. Limitations Unreasonableness Ruxley Electronics v Forsyth [1995] Forsyth hired Ruxley to build a swimming pool, but Ruxley built the pool 45cm too shallow. Property's value not decreased by breach. But Forsyth sued for expectation measure - to fix defect in pool, PS21000 (demolishing and rebuilding the pool). The Court will not allow an unreasonable sum of damages for reinstatement. What constitutes unreasonableness? Damages are unreasonable when rather than truly compensating for los they are giving a gratuitous benefit. Contract Page 56 Damages are unreasonable when rather than truly compensating for los they are giving a gratuitous benefit. "Personal preference may be a factor in reasonableness, but is not determinative". Whether plaintiff intends to use damages to fix loss may indicate whether the damages are reasonably equal to the actual loss . If 'proportional' (La Grouw) 'Amenity damages' of PS2500 given. Proportionality La Grouw v Cairns (HC NZ) Are the expectation damages claimed totally disproportionate from the benefit obtained? Leaky house sold based on misrepresentation. O'Regan J held giving expectation damages for reinstatement was not unreasonable, as they are not disproportionate to the benefit obtained. The reliance measure Reliance measure can be used to claim damages for reasonably foreseeable loss incurred before the contract was signed. Anglia TV v Reed Actor contracted to play a role in a TV show, just before filming the actor repudiated. Couldn't use expectation measure, as couldn't prove on balance of probabilities what profit would be made from contract. So r eliance. Awarded damages for cost of scripting, casting, etc. preparing for filming, past expenditure now wasted due to breach which w as reasonably foreseeable. Used where there is a total failure of consideration McRae v CDC (cited in Bloxham v Robinson) Contract for sale of wrecked oil tanker said to contain oil, which did not in fact exist. Impossible to give expectation damages (can't value what does not exist), so was given pre -contractual wasted expenditure. Limit: bad bargain Ti Leaf Productions v Baikie A claim for wasted expenditure fails where, notwithstanding a breach, the return earned by the contract would not be sufficie nt to recoup the expenditure. Onus is on the defendant to show that there has been a 'bad bargain' to the balance of probabilities. Ti Leaf producing film on Baikie's property, Baikie slandered the company's reputation, caused investors to pull out and film project to be lost. Claimed $2m expenditure wasted. Because no expectation or reliance loss could be proved, nominal damages given: $25 000. The restitutionary measure Attorney General v Blake [2001] HL Blake = MI6 agent, also double agent. Had signed a confidentiality agreement with MoD, then published book breaching this ag reement. No expectation loss (information no longer confidential, unquantifiable), reliance (wages were not just for confidentiality), specific performance (2 late) "no reason in principle" why we should rule out an 'account of profits' When an exceptional, just response to a breach requires, court should have discretion to award restitutionary damages (despite no loss). Due to confidentiality, this contract was similar to a fiduciary relationship. Elements: Just response Exceptional circumstances (subject matter, purpose, relationship) Plaintiff has legitimate interest in preventing the defendant's profit -making activity (depriving profit). Incorporated into NZ law in Attorney General (England and Wales) v R [2007] CA Arguments against: Efficiency argument - prevents 'efficient breaches' in order to better sanctity of contract. The people who want goods the most won't get them, les s e. 'Corrective justice' is the focus of private law, should be focused on fixing loss, restoring contractual balance. Shouldn't have to pay over profits not based on the relationship between plaintiff and defendant - that is a penalty. Uncertainty, don't know in advance what damages a breach will lead to. Defence of the expectation measure 1. Expectation measure seems to give parties more than just what is lost - gives contract something he didn't have before (unlike reliance). 2. Justifications: i. Practical problems of assessing the reliance interest 1) Incurred expenses and lost opportunities are hard to calculate. 2) Best way to measure lost opportunity is to find value of contract actually lost. ii. Protects and fosters reliance interest 1) In particular cases - e.g. A doctor whose appointment contract is breached can get damages for lost opportunity (what he expected) 2) In society generally - if you can be sure of being given the performance you expect from a contract, you can rely on contracts. iii. Reliance measure only appropriate if it enforces the expectation interest. 1) Need to look at what has been breached giving a right to be remedied: a duty not to breach (i.e. A duty to perform). 2) To enforce a duty to perform, the remedy must be performance (or its equivalent) - i.e. Expectation measure. a) If wrong was a misrep, determine loss as though wrong never occurred, put plaintiff in position of wrong not having occurred. Plaintiff would *not* be getting expected profits, instead would have paid a different amount for contract - so put in that position. 3) If contract breached, then it is the duty to perform that is breached - so put plaintiff in position as if there was no breach (expectation measure) iv. Expectation measure protects performance interest 1) Performance per se is valuable. 2) St Martins Property Corporation v Sir Robert McAlpine [1994] a) Plaintiff hadn't lost anything, so couldn't get any damages b) But dissenting, Lord Griffiths: "the party who contracted ... Has suffered loss because he did not receive the performance he bargained for, remedy requires the defects to be put right by another builder." 3) Alfred McAlpine Constuction v Panatown a) Plaintiff contracted defendant to build property on third party's property, but building wasn't built properly (breach). b) Defendant claimed plaintiff hadn't lost anything. c) Followed dissenting judgment in St Martins 4) Maori Trustee v Rogross Farms [1994] Contract Page 57