2.7 Remedies of Contract

2.7 REMEDIES OF CONTRACT

 Remedies is the method by which an injured party enforces a right or corrects a loss due to the other party has breach a contract.  The remedies available to the injured party will depend on the nature of the breach and the results will differ between the parties.  The usual remedy for a breach of contract is an award of damages, which is a common law remedy.  However, if a monetary remedy is not satisfactory, the court may exercise its discretion and order any one of several equitable remedies.  The remedies available for breach of contract are: o Damages o Rescission of contract o Restitution o Specific performance o Injunction o Quantum Meruit o Anton Piller Order

Damages

 Damages in contract law can be defined as a sum of money paid to the innocent party in compensation for a breach of contract.  The main purpose of damages is to enable the innocent party to receive monetary compensation from the party responsible for the breach of contract.  Section 74 of the Contracts Act 1950 provides that “damages are granted to a party as compensation for the damage, loss injury he has suffered through a breach of contract”.  The party may recover damages as follow: i. Expenses incurred as a result of the breach, ii. Loss of profits arising as a result of the breach; and iii. Difference between the price of goods as contracted for and the actual price the goods were sold as a result of the breach.

Hadley v. Baxendale

Facts: Plaintiff operated a mill, which they were forced to shut down when their steam engine broke. Then, plaintiff makes a contract with defendant to replace the broken engine. Due to defendant’s neglect, the delivery of the new engine was delayed, and plaintiff had to suffer losses.

Held: The court held that the defendant is liable for damages suffered by plaintiff due to loss of profits.

Rescission of Contract

 If a contract is rescinded, then it is as if it had never existed, and the parties are restored to their original positions.  A party discovering a relevant mistake, or the victim of a misrepresentation, may affirm or rescind the contract, explicitly or by his conduct, but this decision one made irrevocable.

Restitution

 Restitution (or restoration) is sometimes referred to as quasi-contract.  It is not contractual and does not rely on the plaintiff suffering loss or damage.  Its basis is unjust enrichment: those situations where it would be very unfair if the defendant was to be allowed to retain the money, or the goods or services, without payment.

Specific Performance

 Specific performance is a discretionary order granted by the courts directing a person to carry out their obligations under the contract.  It is not generally used in breach of contract actions unless damages prove to be inadequate or damages cannot be ascertained.  Where the court cannot supervise the implementation of a contract, it will not generally grant specific performance.  The court will also refuse to grant specific performance where the contract would require constant supervision by the court.  The court has a discretion to refuse specific performance where the granting of it would cause undue hardship to the defendant.

Ryan v Mutual Tontine Westminster Chambers Association [1893]

Facts: The lessor of a block of flats agreed to provide a porter who would be ‘constantly in attendance’ and would perform certain specified duties. The person appointed by the lessor also worked as a chef in a nearby club, and in his absence while he worked as a chef, other person were employed to perform his duties. The issues was whether a tenant could seek an order for specific performance against the porter that he carries out his obligations.

Held: The court was not prepared to order specific performance because it would have to constantly supervise the porter’s attendance.

Injunction

 An injunction is a discretionary court order.

 Unlike specific performance, this is a court order restraining a party from breaking their contract or from committing a wrongful act (an order prohibiting performance) and will not be awarded if damages are an adequate remedy.  An injunction may be: i. Prohibitory – preventing the breach of contract;  E.g.: When a contractor had decided to sign a contract with hotel A, but on the other hand, the same contractor also wants to sign a contract with hotel B. As a result, hotel A can request to apply prohibitory injunction to the contractor from signing contract with hotel B. ii. Mandatory – requiring a person to perform some contractual obligation;  E.g.: When a contractor refuses to finish building a new bungalow on the date given, the owner of the bungalow can request the court to apply mandatory injunction to the contractor to finish the work. iii. Interlocutory – it freezes the status quo between the parties until the dispute can be heard by the court.  E.g.: When there is two people are fighting for the ownership of a land, interlocutory injunction is applied to this case. It means, neither party cannot do anything to the land.

Neoh Siew Eng & Anor Vs Too Chee Kwang [1963]

Facts: The landlord had cut the water supply for his house rented by the tenant.

Held: The court held that injunction was granted requiring the landlord to keep all communication pipes in proper repair so that water supply to the premises would not be disconnected.

Quantum Meruit

 Quantum meruit means ‘as much as he has earned’ and only arises in cases of part performance.  Quantum meruit can arise where: i. A defendant has prevented a plaintiff from carrying out the remainder of the contractual duties; ii. The parties cannot agree on payment; and iii. The parties agree on payment for partial performance but not the actual amount.  If a person sues for payment for services in such circumstances, the court will calculate the amount due based on time and usual rate of pay or the customary charge, based on quantum meruit by implying a contract existed.

Sumpter v Hedges [1898]

Facts: The plaintiff, a builder, entered into a contract to build 2 houses on the defendant’s land. After the plaintiff had done a little more than half of the work, he ran out of money and told the defendant that he could not complete the job. The defendant then completed the houses himself.

Held: The contract was entire, not divisible; and so the plaintiff could not recover under it. Furthermore, the fact that the plaintiff was unable to complete the job was not the fault of the defendant and so there was no entitlement to a quantum meruit. While the defendant obtained a benefit, it did not constitute acceptance of partial performance in this case.

Anton Piller Order

 A court order which requires the defendant in proceedings to permit the plaintiff or his or her legal representatives to enter the defendant's premises in order to obtain evidence essential to the plaintiff's case.  It is a court order that provides the right to search premises and seize evidence without prior warning. This is intended to prevent the destruction of relevant evidence, particularly in cases of alleged trademark, copyright or patent infringements.

Anton Piller v Manufacturing Processes Ltd. [1976]

Facts: The Anton Piller company was under the belief that one of its agent was supplying confidential information to one of its competitors. They believed that the agent had documentation in their possession that would prove their breach. However, they are concerned that a subpoena would give the agent advance warning of their intentions and that any relevant documents would then be destroyed. The issue was whether the company could obtain an order enabling them to enter the agent’s premises to inspect the documents and remove or copy the relevant ones.

Held: As there was a strong prima facie case of infringement which could cause damage to the applicant, and clear evidence that the defendants had incriminating material in their possession which they would destroy, the order is granted.