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Presentation on theme: "REMEDIES FOR BREACH OF CONTRACT"— Presentation transcript:

A party may apply to the court for a number of remedies when the other party is in breach of party contract (A) Damages - as compensation for loss caused by the breach. (B) Action for the price - here the breach is failure to pay. (C) Quantum meruit - payment for the value of what he has done. (D) Specific performance - a court order to the defendant to perform the contract. (E) Injunction - a court order for the other party to observe negative restrictions. (F) Rescission - cancellation of the contract A) DAMAGES . i) Damages are primarily intended to restore the party who has suffered loss to the same position he would have been in if the contract had been performed.  ii) In a claim for damages the first issue is remoteness of damage. Secondly, the court must decide how much money (measure of damages) to award in respect of the breach and its relevant consequences. 1) Remoteness of damage under the rules damages may only be awarded in respect of loss as follows : (a)( i)The loss must arise naturally, according to the usual course of things, from the breach; or (ii) the loss must arise in a manner which the parties may reasonably be supposed to have contemplated, in making the contract, as the probable result of the breach of it. (b) A loss outside the natural course of events will only be ‘compensated if the exceptional circumstances which -cause-the loss ‘are within the defendant's knowledge, actual or constructive, when he made the contract.

2 2) Measure of damages As a general rule the amount awarded as damages is what is needed to put the plaintiff in the position ,he would have achieved if the contract had been performed. It is necessary to consider the following points in relation to how damages are measured : (a) Non-financial loss - how far this can be recovered (b) Mitigation of loss - the court will look at whether the plaintiff took reasonable measures to reduce a foreseeable loss, although it is not required to take discreditable or risky measures to reduce his loss since these are not `reasonable'. (c) Liquidated damages and penalty clauses-To avoid complicated calculations of loss or disputes over the amount the parties may include in their contract a formula (liquidated damages) for determining the damages payable for breach. B) ACTION FOR THE PRICE If the breach of contract arises out of one party's failure to pay the contractually agreed price due under the contract, the creditor should bring an action to recover that sum. This is a fairly straightforward procedure but is subject to two specific limitations. The first is that an action for the price under a contract for the sale of goods may only be brought if property has passed to the buyer, unless the price has been agreed to be payable on a specific date. Secondly, whilst the injured party may recover an agreed sum due at the time of an anticipatory breach whether or not he continues the contract then, sums which become due after the anticipatory breach may not be recovered unless he affirms the contract - that is, he carries on with his side of the bargain.

3 C) QUANTUM MERUIT A claim may be made on a quantum meruit basis as an alternative to an action for damages for breach of contract. The phrase 'quantum meruit' literally means ‘how much it is worth'. It is a measure of the value' of contractual work which has been performed. The aim of such an award is to restore the plaintiff to the position he would have been in if the contract had never been made. Quantum meruit is likely to be sought where one party has already performed part of his obligations and the other party then repudiates the contract (anticipatory breach). Provided the injured party elects to treat the contract as terminated, he may claim a reasonable amount for the work done. In most cases, a quantum meruit claim is needed because the other party has unjustifiably prevented performance. D) SPECIFIC PERFORMANCE The court may in its discretion order the defendant to perform his part of the contract instead of letting him buy himself out of it by paying damages for breach. Specific performance (which is an equitable remedy) will only be ordered in a case where the common law remedy of damages is inadequate An order will be made for specific performance of a contract for the sale of land since the plaintiff may need the land for a particular purpose and would not be adequately compensated by damages for the loss of his bargain. He could not obtain another piece of land which is identical. For this reason specific performance of a contract for sale of goods is unlikely to be ordered unless the goods are unique and therefore no substitute could be obtained.

4 The order will not be made if it would require performance over a period of time and the court could not ensure that the defendant did comply fully with the order. There are specific performance is not ordered for contracts of employment or personal service nor usually for building contracts. By contrast, a contract for the sale of land requires only that the vendor should execute and deliver a transfer and other documents - the order is readily enforceable Only contracts where consideration has passed may be remedied by an order for specific performance. Specific performance will be refused unless the plaintiff on his side has behaved fairly and the principle of mutuality is satisfied. E) INJUNCTION An injunction is (in this context) also a discretionary court order, requiring the defendant to observe a negative restriction of a contract. An injunction may be made even to enforce a contract of personal service for which specific performance would be refused. An injunction would not be made merely to restrain the defendant from acts inconsistent with his positive obligations. The plaintiff may not be ultimately successful in the case, he must give an undertaking to pay damages to the defendant if he fails. This is to compensate the defendant for the prejudice caused by an interlocutory injunction.

5 1) Mareva injunctions A development in this field is the Mareva injunction. A successful plaintiff may be frustrated from enforcing judgement if the defendant's assets have been transferred outside jurisdiction of the court or otherwise dissipated. If the plaintiff can convince the court that he has a good case and that there is a danger of the defendant's assets being exported dissipated, he may be awarded an injunction which restricts the defendant's dealings with assets. The injunction is designed to prevent the defendant's assets from being exported or dissipated; it does not attempt to give the plaintiff any charge over the assets or to place the plaintiff in a preferential position compared with other creditors who may have claims on the assets. The court will not grant a Mareva injunction unless: (a) there is a 'good arguable case' on the part of- the plaintiff; (b) the court has jurisdiction over the case, and the defendant has available assets within that jurisdiction; (c) there exists a genuine risk that if the injunction is not granted then (i) the assets will be removed or dissipated; or (ii) the defendant will not satisfy the plaintiff's claim; and (d) the balance of convenience is in favour of the injunction

6 F) RESCISSION Strictly speaking the equitable right to rescind an agreement is not a remedy for breach of contract, it is a right which exists in certain circumstances, such as where a contract is voidable due to misrepresentation, duress and undue influence. Rescinding a contract means that it is cancelled or rejected and the parties are restored to their pre-contract condition, as if it had never been entered into. For this order to be made therefore, the following conditions must be met. (a)It must be possible for each party to be returned to the pre-contract condition (restitutio in integrum). If the situation has altered so much that either or both parties are prevented front going back, equity will not allow rescission. (b)An innocent third party who has acquired rights in the subject-matter of the contract will prevent the original transaction being rescinded (e.g. an innocent purchaser of property acquired following a misrepresentation). (c) The right to rescission must be exercised within a reasonable time of it arising otherwise the equitable doctrine of `laches' comes into effect. (d)Where a person affirms a contract expressly or by conduct it may not then be rescinded LIMITATION TO ACTION FOR BREACH The right to sue for breach of contract becomes statute-barred after six years from the date which the cause of action accrued, which is usually the date of the breach- not the date on which damage is suffered: s5. The period is, twelve years-if the contract is by deed: s8. both time periods are set by the Limitation Act The plaintiff's rights merely cease to enforceable at law.


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