The Question of Determining the Measure of Compensation for Damage - Essay Example

1(i). Losses resulting from a breach of contract can include personal injury, damages to property or economic loss Since contracts typically involve economic exchanges, economic losses are typically the result of a breach of contract.2 By telling Mrs. Tsang that they intend to sell the vase at a better price to Mr. Rich, TV Antiques LLP is putting Mrs. Tsang on notice that they intend to breach the contract. This kind of conduct is known as anticipatory breach which occurs when the vendor indicates prior to the time for delivery of goods that delivery will not take place.3 Mrs. Tsang is therefore entitled to treat the contract as breached by TV Antiques and may seek damages. If she does so, she will have a duty to mitigate her losses.4 For instance, she will be advised to attempt to find a similar antique Chinese Vase at a comparable price and damages will be awarded on the basis of the difference in the price she actually pays for the vase and the price at which she could have paid for the vase had TV Antiques actually honoured the contract. The general purpose of damages for breach of contract is restitution. The idea is to place the injured party in the position they would have been in had the contract been executed.5 In the event, Mrs. Tsang decides not to treat the contract as repudiated, she can wait for the time fixed for delivery of the vase and upon TV Antiques failure to deliver the vase, she may seek an application via the court for specific performance. Specific performance is awarded in cases where compensatory damages may not be adequate.6 In cases where the subject matter of the contract is unique, the court will typically take the position that compensatory damages are insufficient and order specific performance.7 It would appear by the description of the vase and the monetary value attached to it that it is a unique article and compensatory damages for breach of the contract will not be adequate damages. It is unlikely that Mrs. Tsang will find a comparable vase, and if she did, she would most likely have to pay considerably more. While she may claim the difference in the price as actual damages, its a risk nonetheless. In all the circumstances she will be better off suing TV Antiques for specific performance. 1 (ii). Damages for Charlie’s breach of contract is similar to the breach encountered by Mrs. Tsang. It would appear on the facts of the case, that compensatory damages may not be an adequate remedy. In this case, the Lancashire club had an expectation that Charlie would play on its rugby team. The difficulty for assessing damages is quantifying the loss of expectancy. In other words, it may be difficult to assess the “cost of cure.”8 However, specific performance may not be in Lancashire’s best interest as they would end up with a team player who is reluctant to play on the team. Lancashire may also sue Charlie for any actual losses incurred in preparing for Charlie’s addition to the team.9 Lancashire would be better off suing Charlie for reliance or expectancy damages. In other words, they could sue Charlie for the actual cost of having to find and sign a replacement player as well as the difference in the actual sum paid for the replacement player and the sum offered to Charlie. 1(iii) Sarah’s situation draws attention to Lord Jauncey’s statement that: “Damages are designed to compensate for an established loss and not to provide a gratuitous benefit to the aggrieved party from which it follows that the reasonableness of an award of damages is to be linked directly to the loss sustained....”10 The question then for determining the measure of damages for Sarah, is what is it that she actually lost? Sarah lost a bargain in that the contract was for a substantially under-priced Rover and that contract was breached by Phoenix Cars. However, as Lord Jauncey’s puts it, Sarah is not entitled to a gratuitous benefit. She can in fact claim her actual losses which would be no more than the cost she incurred in furtherance of the contract for the Rover. In other words, Sarah may seek consequential losses provided they are not remote.11 1(iv). Specific performance is an equitable remedy and will depend entirely on the court’s discretion.12 In ascertaining whether or not the Hughes are entitled to specific performance the courts will consider whether or not damages is an adequate remedy. In determining whether or not damages is adequate the courts will look at the subject matter of the contract and if the subject matter is unique, specific performance will be ordered. In contracts for the sale of land, specific performance is generally awarded because land is almost always regarded as unique.13 2. Initially, the courts took the approach that a contractual obligation could not be discharged as a result of a frustrating event since parties could typically provide for such eventualities in the contract.14 The courts eventually came to the realization that this approach was too strict and the modern law developed from the approach taken in Taylor v Caldwell[1863] 122 ER 309. This case introduced the doctrine of frustration based on the imposition of implied terms into the contract. The implied term follows from the ruling in the Taylor v Caldwell in which it was held that a contract is based on the understanding that a particular thing would continue to exist. It therefore followed that contracts would be interpreted: “...as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without the fault of the contractor.”15 Implicitly, courts have always been at liberty to imply terms into a contract for the specific purpose of giving the parties intentions validity. In this regard, the courts came to the conclusion that it was impossible to imagine how parties to a contract could have made provision for something that they could not have foreseen or expected at the time of contracting.16 It is this aspect of the implied terms’ ideology that made it possible for the courts to develop the doctrine of frustration. 3. Previously the measure of damages recoverable in tort was for all damages that were a direct consequence of the negligent act.17 However, largely considered unfair, the rule was altered by the introduction of the remoteness of damages test in the Wagon Mound (No.1) [1961] 1 AC 617. Viscount Simonds explained the remoteness of damages rationale as follows: “It does not seem consonant with current ideas of justice or morality, that for an act of negligence, however slight or venial, which results in some trivial foreseeable damage, the actor should be liable for all the consequences, however unforeseeable and however grave, so long as they can be said to be direct.”18 Following this decision, the remoteness of damages test developed. In Hughes v Lord Advocate [1963] AC 837 the House of Lords clarified the remoteness rule by adding that it was not necessary that the defendant foresaw the exact type of damages that would flow from his negligence. It was only necessary that the type of damages were foreseeable in a broad sense. In this case, a prank involving the dropping of a lamp caused an explosion which resulted in the plaintiff sustaining severe burns. The House of Lords ruled that while an explosion may not have been expected or reasonably foreseeable, damages of the type sustained could have since a fire could have been a reasonable result of dropping a lantern.19 Essentially, the courts have adopted an approach to remoteness of damage that takes account of the actual conduct and the harm that flows from it. If the damages that actually occur fall into the category of reasonably foreseen consequences of the conduct, then it would be difficult to conclude that the damages were remote.20 Bibliography Anglia Television Ltd. v Reed [1972] 1 QB 60. Chen-Wishart, M. (2008) Contract Law. Oxford University Press. Davis Contractors Ltd. v Fareham UDC [1956] 2 All ER 145. Fothergill v Rowland [1873] 17 LR EQ. 132. Hughes v Lord Advocate [1963] AC 837. Melachrino v Nicholl and Knight & Co. Ltd [1920] 1 KB 693. Oughton, D. and Davis, M. (2000) Sourcebook on Contract Law. Routledge. Paradine v Jane [1647] 82 ER 897. Pearce, D. and Halson, R. (2008) “Damages for Breach of Contract: Compensation, Restitution and Vindication.” Oxford Journal of Legal Studies Vol. 28(1), 73-98. Re Polemis and Furness, Withy & Co. [1921] 3 KB 560. Ruxley Electronics and Construction Ltd. v Forsyth [1996] 1 AC 344. Stone, R. (2000) The Modern Law of Contract. Routledge. Taylor v Caldwell[1863] 122 ER 309. Tremain v Pike [1969] 3 All ER 1303. Wagon Mound (No.1) [1961] 1 AC 617. Read More