AB1301 Session 9 BUSINESS LAW 2023aug
The 7th group of students will present today: Thu 19 Oct 2023 (Week
10. Do Worksheet for Week 10/Session 9)
Law of Contract: Remedies for Breach of Contract
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REMEDIES: Introduction
• Common Law Damages: Legal entitlement when
contract breached:
• Unliquidated damages
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Compensatory/ Punitive? (PH Hydraulics v Airtrust)
Pecuniary
Nominal
Difficulty in Assessment no bar (JES v Yang Shushan)
• Liquidated damages
Equitable Remedies: Not entitlement. Up to court’s
discretion :
• Specific Performance
• Injunction: Prohibitory/Mandatory
Refund of Money Paid
Limitation of Actions:
Limitation Act, s 6: Generally, must commence legal
action within 6 years from time of breach of contract.
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Unliquidated Damages
Causation in fact
“but-for” test
Causation at law
Remoteness
Was the breach the
effective/dominant cause
of the loss?
Monarch v Karlshamns: Cause of
delay was Unseaworthiness not War.
Asia Hotel v Starwood: Balance
of Probabilities. Real & substantial
Loss of chance
Are the losses
too far removed?
Have reasonable steps
been taken to
minimise the loss?
British Westinghouse v
Underground Electric Railways
Hadley v Baxendale
1st limb
Losses that arise naturally
in the usual course of
things from the breach
Actual or imputed
knowledge
Mitigation
2nd limb
Assessment
Rule:
To put injured
party
in position as
if Contract had
been properly
performed.
Robinson v Harman
Losses reasonably
If not (D to prove),
contemplated by parties
Plaintiff cannot
when contract made
claim sum
that could
be avoided.
Actual knowledge only
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Hadley v Baxendale
• Alderson B:
• “Where two parties have made a contract which one of them has
broken, the damages which the other party ought to receive in
respect of such a breach of contract should be such as may fairly
and reasonably be considered either arising naturally i.e.,
according to the usual course of things, from such breach of
contract itself, or such as may reasonably be supposed to have
been in the contemplation of both parties, at the time they made
the contract, as the probable result of the breach of it.”
• Held: Circumstances communicated to D did not show that a delay
in delivery would result in loss of profits of the mill (neither limb 1
or 2) thus loss of profits not recoverable because too remote. D
needs special knowledge of loss.
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Remoteness: Interplay of 4 factors
A. Usual Course of Things/ Ordinary Business Practices
B. Knowledge. Actual/ Imputed. Of A/D.
• Victoria Laundry Ltd v Newman Industries
P bought new boiler from D. Boiler delivered late. Because of delay, P suffered:
(1) Loss of profits for the period;
(2) Loss of highly lucrative profits which they could have received from Ministry of
Supply contract.
Held: D knew P were launderers and that boiler was required for immediate use. D
ought to know P would suffer usual Loss (1).
Loss (2) not recoverable because loss is not reasonably contemplated as there was
no special knowledge.
C. Probability of Occurrence. Of D.
Serious possibility. Not unlikely. Quite likely. Reasonable contemplation.
Robertson Quay v Steen
D. Knowledge of Type of Damage. Not exact damage.
• Parsons v Uttley Ingham
Defective hopper caused nuts to become mouldy. Pigs became sick. 254 died.
Held: Loss of dead pigs was within limb 2. Reasonable contemplation of loss due to
pigs being adversely affected due to breach. Just the type is enough. No need to
contemplate exact nature or amount/extent.
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Assessment: Types of Losses
Peter buys French wine from Joe for $30K. No $ paid. He needs to store it.
Spends $7.5k to insulate room. Peter sells wine to Tim at $50K, with $12K
LDC in contract. Italian wine delivered. Peter spends $2k to return the wine.
• Loss of Gross Profits ~ $20,000
($50,000 - $30,000)
Gross Expectation Loss
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Costs of installing insulation ~ $7,500
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Liquidated Damages to Tim ~ $12,000
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Transportation expenses ~ $2,000
Reliance Loss
Indemnity Loss
Incidental Loss
• Expectation Loss =Loss of Profits= [Value contracted for] – [Value actually received]
• Innocent party can claim Reliance loss (Wasted expenditure):
• As well as NET expectation loss (no double recovery)
• Instead of Expectation Loss, when Expectation Loss is too
speculative (Anglia Television v Reed)
• Reliance loss cannot be claimed when the innocent party has made a
bad bargain. Innocent party can only claim Expectation Loss.
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Assessment: Expectation Loss & Reliance Loss
P paid D $900 for a TV. D failed to deliver. P bought
same model from Courts at $1,200. What can P claim?
• Expectation loss ~ $1,200
• Reliance loss ~ $900
Test: To put P in the position as if the contract
had been properly performed?
P would claim $1,200 (Expectation Loss) as this would satisfy his
expectation of owning the TV at expense of $900 only. Not logical to claim
Reliance Loss of $900 (which is lower than expectation loss)
Suppose P paid Courts $850 for the TV? Can P claim the Reliance
Loss of $900 from D?
Here, P made a bad bargain with D. P cannot claim the Reliance loss of
$900 but can only claim the Expectation loss of $850 which will put him in a
position as if the contract had been properly performed.
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Assessment: Non-Pecuniary Losses
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For example:
• Emotional distress, hurt feelings, frustration, upsets,
anger, embarrassment, disappointment, inconvenience,
anxiety, shame, loss of reputation etc
General Rule: Such losses are NOT RECOVERABLE due to Policy
reasons. E.g. Haron v Singapore Amateur Athletic Assoc.
Reputation: Generally No. Addis v Gramophone
Some Exceptions:
• Jarvis v Swan Tours – Can claim if very aim of contract is to
provide enjoyment, and breach causes distress or disappointment.
• Farley v Skinner -Can claim for distress if important (not sole)
object of contract is pleasure/relaxation/peace of mind.
• Perry v Sidney Phillips – Can claim for distress arising from
physical discomfort & inconvenience caused by breach of contract.
(Distress, anxiety due to smell from defective septic water tank.)
• Ruxley Electronics v Forsyth - Can claim for “loss of amenity”:
6 ft v 7.5ft deep pool.
• ACB v Thomson Medical- Can claim for “genetic affinity”. IVF
baby not husband’s.
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Liquidated Damages
A Liquidated Damages Clause (LDC) is put in contract when the
parties predetermine specified damages amount in event of a breach.
• TEST: Is the LDC
• (1) a genuine pre-estimate of loss or is it
• (2) a penalty to compel performance?
• If (1), LDC is enforceable.
• If (2), LDC not enforceable. (But if LDC amount is lower than
actual loss, then can prove actual loss or claim as in LDC: Bulsing
Ltd v Joon Seng & Co.(1972 Singapore High Court)])
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How to determine if LDC is (1) or (2) as a matter of construction?
Dunlop Pneumatic Tyre v New Garage (Guidelines only):
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Likely Penalty if amount is extravagant & unconscionable in comparison with
greatest conceivable loss.
Likely Penalty if single lump sum is payable on occurrence of any (serious or
trifling) breach.
Labels relevant BUT not conclusive.
Likely Penalty if Contractual obligation is to pay fixed sum, but LDC provides for
payment of larger sum.
LDC can be genuine pre-estimate even if loss is difficult to estimate.
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Equitable Discretionary Remedies
Specific
Performance
Court Order to Perform
Act D contractually
agreed to do.
Ordered only if:
▪ Damages (mere $) Not Adequate
remedy e.g., rare antique/unique
painting/land. ( Not usual, not a rt)
▪ Not force unwilling D in contract for
personal service eg employment
▪ Not need constant supervision by Ct
▪There is mutuality. Not minor..
▪ Not cause severe hardship.
▪Not for money lent.
Injunction
Prohibitory
Mandatory
Court Order to
Restrain D from
Performing an act he
contractually agreed
not to do. (Negative
Covenant)
Court Order to
Restore when D has
already performed act
he contractually
agreed not to do.
E.g., not to
construct a
building on leased
land.
E.g., to demolish a
building already
constructed on
leased land.
Prohibitory Injunction
•Equitable remedy
•Court order directing D not to do something (prohibitory)
•Lumley v Wagner (1852)
• D agreed to sing at P’s theatre, and during a certain
period to sing nowhere else.
• Afterwards she made a Contract with another person to sing
at another theatre and refused to perform her contract.
• P applied to court for SP &/or Injunction
•Held:
• Application for SP failed (K for personal services)
• But injunction granted to restrain the breach of her
promise not to sing elsewhere
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Injunction cannot be used to Indirectly enforce SP
•Warner Bros v Nelson [1937]
•An actress contracted with P that she would act only for P for a
certain period and
•also agreed not to engage in any similar services with any other
person or
• “engage in any other occupation.”
•In breach of contract, she contracted with another film company.
•P went to court to get an injunction to restrain her.
•Held:
• Injunction granted only for first part, not to work for anyone
else during the period
• But injunction not granted to restrain her from engaging in
any other Occupation.
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Refund of Money Paid
• P can only sue for a refund of any money
paid provided that there is a Total Failure
of Consideration.
• P must show that he has not received any
part of the benefit bargained for under the
contract.
• Rover International v Cannon Film (1989)
• Fibrosa Spolka v Fairbairn (1943)
• If P cannot show Total Failure of
Consideration, then he can still claim in
damages.
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*The 8th Group of students will do their
presentations during the second part of
class NEXT WEEK.