REMEDIES FOR BREACH OF CONTRACT
1. Consequences of Breach
Photo Production Ltd. v Securicor Transport Ltd [1980] AC 827:
“Every failure to perform a primary obligation is a breach of contract. The
secondary obligation on the part of the contract breaker to which it gives rise by
implication of the common law is to pay monetary compensation to the other
party for the loss sustained by him in consequence of the breach” [Lord Diplock
at 849]
George Mitchell v Finney Lock Seeds [1983] QB 284: This case concerned an
exclusion clause which tried to remove responsibility for a breach of contract.
Oliver LJ took the view that an exclusion clause that tries to limit the secondary
obligation ought to be interested narrowly:
“I find the analysis adopted by Lord Diplock in the Photo Production case [1980]
A.C. 827 , 849, a helpful one, so long as it is borne in mind that the purpose of a
contract is performance and not the grant of an option to pay damages….” (Oliver
LJ, 304).
Marshall (Thomas) v Guinle [1978] Ch 227: The resignation of a managing director
was not accepted by the company with the result that the contract continued in
force. Only acceptance of a breach by the innocent party can give rise to
termination.
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26: Diplock LJ set
out the concept that came to be known as the innominate term. This restricts the
classification of terms as conditions. An innocent party can choose to terminate a
contract for breach of condition. Breach of an innominate term will only give rise
to a right to terminate of the consequences of the breach deprive the innocent
party of substantially the whole benefit of the contract.
2. Anticipatory Breach
Hochster v De La Tour (1853) ER 922: established the right to sue for damages
immediately an anticipatory breach occurs – there is no need to wait for the date
of performance.
White and Carter (Councils) Ltd v McGregor [1961] 3 All ER 1178: Lord Reid (alone)
referred to a need for a legitimate interest in continuing to perform in the face of
a repudiatory anticipatory breach.
Clea Shipping v Bulk Oil (The Alaskan Trader) [1984] 1 All ER 129: no legitimate
interest found on the facts in this case.
1
, If there is a restriction on the right of the innocent party to elect to treat the
contract as still alive in the case of anticipatory breach (there needs to be a
legitimate interest) should there be a similar restriction whenever the breach
occurs?
MSC Mediterranean Shipping Company S.A. v Cottonex Anstalt [2015] EWHC 283
(Comm): The claimant carrier brought a claim against the defendant shipper for
container charges in relation to a shipment of raw cotton sold by the shipper to a
buyer. The buyer never collected the goods, which remained at the port inside
the containers in which they had been shipped. Held: The carrier's right to
maintain the contract and claim charges, notwithstanding the shipper's
repudiation, depended on whether it had any legitimate interest in doing so.
Once it was clear that there was no prospect of the shipper redelivering the
containers, the carrier had no reason to keep the contracts open in the hope of
future performance and it was wholly unreasonable for it to keep the contracts
alive.
This case is not an anticipatory breach it is an actual breach but the High Court
applies the White & Carter Councils idea to this.
3. Damages
Function of an award of damages -
For breach of contract: the aim is to put the innocent party into the position
they would have been in had the contract been carried out (forwards):
The Albezero [1977] AC 774: “Their function is to put the person whose right has
been invaded in the same position as if it had been respected so far as the award
of a sum of money can do so….” Lord Diplock
CIS v Argyll Stores [1998] A.C. 1, “…the purpose of the law of contract is not to
punish wrongdoing but to satisfy the expectations of the party entitled to
performance. A remedy which enables him to secure, in money terms, more than
the performance due to him is unjust.”
Lord Hofmann, 15
This is known as “expectation loss” – i.e. the innocent party had an expectation
which has not been achieved. This is the usual breach of contract loss (see also
“reliance loss” below).
For misrepresentation the aim is to put the innocent party into the position
they would have been in had no misrepresentation been made (backwards)
Royscot Trust Ltd v Rogerson [1991] 3 All ER 294: – tort measure for
misrepresentation. A lender advanced £6400 to a car dealer on the basis of a
misrepresentation over the sale of a car. The purchaser of the car had paid back
only £2775 when he then dishonestly sold it. Held: lender could recover £3625 –
2
1. Consequences of Breach
Photo Production Ltd. v Securicor Transport Ltd [1980] AC 827:
“Every failure to perform a primary obligation is a breach of contract. The
secondary obligation on the part of the contract breaker to which it gives rise by
implication of the common law is to pay monetary compensation to the other
party for the loss sustained by him in consequence of the breach” [Lord Diplock
at 849]
George Mitchell v Finney Lock Seeds [1983] QB 284: This case concerned an
exclusion clause which tried to remove responsibility for a breach of contract.
Oliver LJ took the view that an exclusion clause that tries to limit the secondary
obligation ought to be interested narrowly:
“I find the analysis adopted by Lord Diplock in the Photo Production case [1980]
A.C. 827 , 849, a helpful one, so long as it is borne in mind that the purpose of a
contract is performance and not the grant of an option to pay damages….” (Oliver
LJ, 304).
Marshall (Thomas) v Guinle [1978] Ch 227: The resignation of a managing director
was not accepted by the company with the result that the contract continued in
force. Only acceptance of a breach by the innocent party can give rise to
termination.
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26: Diplock LJ set
out the concept that came to be known as the innominate term. This restricts the
classification of terms as conditions. An innocent party can choose to terminate a
contract for breach of condition. Breach of an innominate term will only give rise
to a right to terminate of the consequences of the breach deprive the innocent
party of substantially the whole benefit of the contract.
2. Anticipatory Breach
Hochster v De La Tour (1853) ER 922: established the right to sue for damages
immediately an anticipatory breach occurs – there is no need to wait for the date
of performance.
White and Carter (Councils) Ltd v McGregor [1961] 3 All ER 1178: Lord Reid (alone)
referred to a need for a legitimate interest in continuing to perform in the face of
a repudiatory anticipatory breach.
Clea Shipping v Bulk Oil (The Alaskan Trader) [1984] 1 All ER 129: no legitimate
interest found on the facts in this case.
1
, If there is a restriction on the right of the innocent party to elect to treat the
contract as still alive in the case of anticipatory breach (there needs to be a
legitimate interest) should there be a similar restriction whenever the breach
occurs?
MSC Mediterranean Shipping Company S.A. v Cottonex Anstalt [2015] EWHC 283
(Comm): The claimant carrier brought a claim against the defendant shipper for
container charges in relation to a shipment of raw cotton sold by the shipper to a
buyer. The buyer never collected the goods, which remained at the port inside
the containers in which they had been shipped. Held: The carrier's right to
maintain the contract and claim charges, notwithstanding the shipper's
repudiation, depended on whether it had any legitimate interest in doing so.
Once it was clear that there was no prospect of the shipper redelivering the
containers, the carrier had no reason to keep the contracts open in the hope of
future performance and it was wholly unreasonable for it to keep the contracts
alive.
This case is not an anticipatory breach it is an actual breach but the High Court
applies the White & Carter Councils idea to this.
3. Damages
Function of an award of damages -
For breach of contract: the aim is to put the innocent party into the position
they would have been in had the contract been carried out (forwards):
The Albezero [1977] AC 774: “Their function is to put the person whose right has
been invaded in the same position as if it had been respected so far as the award
of a sum of money can do so….” Lord Diplock
CIS v Argyll Stores [1998] A.C. 1, “…the purpose of the law of contract is not to
punish wrongdoing but to satisfy the expectations of the party entitled to
performance. A remedy which enables him to secure, in money terms, more than
the performance due to him is unjust.”
Lord Hofmann, 15
This is known as “expectation loss” – i.e. the innocent party had an expectation
which has not been achieved. This is the usual breach of contract loss (see also
“reliance loss” below).
For misrepresentation the aim is to put the innocent party into the position
they would have been in had no misrepresentation been made (backwards)
Royscot Trust Ltd v Rogerson [1991] 3 All ER 294: – tort measure for
misrepresentation. A lender advanced £6400 to a car dealer on the basis of a
misrepresentation over the sale of a car. The purchaser of the car had paid back
only £2775 when he then dishonestly sold it. Held: lender could recover £3625 –
2
