Contract Law workshop 9A - PERFORMANCE, BREACH OF

CONTRACT AND REMEDIES

This week we will look at performance, breach of contract and the remedies available for
such breaches.

A party breaches a contract when they fail to perform, without a lawful excuse, their
contractual obligations as required under the contract. If a party breaches their contract
then the other may be entitled to pursue remedies either at common law or as prescribed
under their contract.

Intended learning outcomes

By the end of this workshop, we want you to show that you can:

· Understand the legal principles relating to breach of contract

· Identify the different classifications of terms in a contract and the consequences of
breach of each type
· Understand and explain the legal principles relating to the different remedies for
breach of contract
· Apply the above principles to problem scenarios

Skills
· Analysing legal problems
· Application and problem solving

What to do

Reading
Review your lecture handout and bring it with you to the workshop.

Read: Murray, Fundamentals of Contract Law (6 th ed, Sweet and Maxwell): sections
6-022 to 6-032, 12-012 to 12-013 and all of chapter 14. For clarity, 6-022 to 6-032
are parts of chapter 6 and sections 12-012 to 12-013 are parts of chapter 12 in
Murray.
 The following is not compulsory reading but it is recommended that you read these
sections to broaden your understanding of the topics if you have time. Murray,
Fundamentals of Contract Law, sections 6-011 to 6-021, 12-001 to 12-011 and
chapter 15.

Preparation

Complete the preparatory exercises ahead of the workshop. You should not attempt the
Class Exercises as time will be given during the class to complete them.

What will happen in the workshop?

Bring the following materials with you: this workshop outline, your answers to the
preparatory questions, your lecture handout and the notes that you make from the reading.

Preparatory Tasks____________________________________________________

Answer the following questions – we will discuss your answers in the workshop.

1. Define each of the following types of term. Explain the effect of a breach of each
type:-

a) A Condition. It may help to explain the case of Poussard v Spiers

A condition is a crucial term in a contract, the fulfillment of which is
fundamental to the performance of the contract. Breach of a condition
allows the innocent party to terminate the contract and claim damages. In
the case of *Poussard v Spiers*, Madame Poussard, an opera singer, was
engaged to perform in a play but fell ill before the opening night and
couldn't perform. The court ruled that her absence constituted a breach of a
condition of the contract, and the theater company was entitled to terminate
the contract and claim damages.

b) A Warranty. It may help to explain the case of Bettini v Gye.

A warranty is a less crucial term compared to a condition, but its breach still
entitles the innocent party to claim damages. However, it does not give the
innocent party the right to terminate the contract. In *Bettini v Gye*, Mr.
Bettini was engaged to perform as an opera singer for a specific period. He
arrived late for rehearsals, which was considered a breach of warranty. The
 theater manager, Mr. Gye, couldn't terminate the contract but was entitled to
claim damages for the inconvenience caused by the late arrival.

c) An Innominate Term. It may help to explain the case of Hong Kong Fir Shipping v
Kawasaki Kisen Kaisha.
An innominate term is a hybrid term that doesn't fall clearly into the
categories of condition or warranty. The effects of a breach of an
innominate term depend on the seriousness of the breach and its
consequences. In *Hong Kong Fir Shipping v Kawasaki Kisen Kaisha*, the
court held that the failure of the ship to be seaworthy was not an automatic
breach of a condition or warranty. Instead, the court examined the
consequences of the breach to determine whether it deprived the innocent
party of substantially the whole benefit of the contract. If it did, the
innocent party could terminate the contract and claim damages. If not, the
innocent party could only claim damages for the loss suffered due to the
breach.

2. How does the court determine the classification of a term in a contract, i.e. whether
it is a condition, warranty or an innominate term?
The court determines the classification of a term in a contract based on the
intention of the parties, the importance of the term to the contract, and the
consequences of its breach. Factors such as the language used in the contract,
industry practice, and the relative bargaining power of the parties are also
considered.

3. What is an anticipatory, repudiatory breach of contract and what options does it

open up for the innocent party? It may help to explain the case of Hochster v De La
Tour.
An anticipatory, repudiatory breach of contract occurs when one party clearly
indicates, either through words or actions, that they do not intend to fulfill their
obligations under the contract before the time for performance arrives. In
*Hochster v De La Tour*, Mr. Hochster was hired by Mr. De La Tour as a
courier to start work on a specified date. However, before the start date, Mr. De
La Tour informed Mr. Hochster that his services would not be required. This
constituted an anticipatory, repudiatory breach, allowing Mr. Hochster to
immediately sue for damages or wait until the specified start date and then sue
for breach of contract.

4. What is the basic aim of recovery of compensation in breach of contract cases?

The basic aim of recovery of compensation in breach of contract cases is to put

the innocent party in the position they would have been in if the contract had
 been performed as agreed. This is done by awarding damages to compensate
for any loss suffered as a result of the breach.

5. There are different ways to calculate damages for breach of contract. Define the
following ways to measure damages for breach of contract and identify which
method is most commonly used in contract law:

expectation loss- This method calculates damages based on the financial position the
innocent party would have been in if the contract had been performed as agreed.

reliance loss- This method calculates damages based on the expenses incurred or the
reliance placed on the contract by the innocent party.

6. Explain the two different ways to calculate expectation loss.

Direct loss- This calculates damages by assessing the difference between the
value of the performance the innocent party was entitled to receive under the
contract and the value of the performance they actually received.
Comsequential loss- This includes any additional loss that is a foreseeable
consequence of the breach but not directly caused by it. It encompasses indirect losses
such as lost profits or other consequential damages.

7. Recoverable damages cannot be too remote from the breach of contract. Explain the
rule of remoteness of damage in Hadley v Baxendale.

In Hadley v Baxendale the court established the rule of remoteness of damage,

which states that damages can only be recovered for losses that arise naturally
from the breach or that were within the contemplation of both parties at the
time the contract was made. If the loss is too remote or unforeseeable, it cannot
be recovered.
 8. Why was the claimant unable to recover compensation for the exceptionally
lucrative cleaning contract that they had entered into in Victoria Laundries v
Newman Industries?

In Victoria Laundries v Newman Industries the claimant was unable to recover

compensation for the exceptionally lucrative cleaning contract they had entered
into because the defendant was unaware of the special circumstances
surrounding the contract at the time it was made. Therefore, the exceptional
profit from the contract was deemed too remote to be recoverable as damages.

9. Explain what is meant by the “duty to mitigate”.

The "duty to mitigate" requires the innocent party to take reasonable steps to
minimize their losses resulting from the breach of contract. Failure to mitigate
may limit the damages recoverable by the innocent party.

10. Is it generally possible to recover for upset, distress and disappointment for breach
of contract?

Generally, it is not possible to recover for upset, distress, and disappointment

for breach of contract unless these damages were specifically contemplated by
the parties at the time the contract was made or are considered a natural
consequence of the breach. Courts typically focus on compensating the
innocent party for actual financial loss rather than emotional distress.

You will be given time to complete the following exercises in class

CLASS EXERCISE A

1. Bridget has been planning her 50th Birthday Party, which is due to take place in a
week’s time. A few weeks ago she booked Exquisite Cuisine Ltd to cater for the party
at £30 per head, but today she has received a call from them informing her that they
are double-booked and will not be able to cater for her party.

a) Explain to Bridget what her options are at this time.

 b) She rings around other caterers, who advise her that they would charge
£50 per head to cater at such short notice, or there is a more renowned local
Michelin-starred chef she would prefer who would cater for £80 per head.

Advise Bridget.

Given the circumstances, here's some advice for Bridget:

- Consider the Costs: Bridget should weigh the cost of hiring a replacement caterer at
short notice. If other caterers are charging significantly higher prices, she needs to
consider her budget and whether she can afford the increased cost.

- Quality vs. Budget: Bridget should consider whether she wants to prioritize quality
or stick to her budget. If she prefers the renowned Michelin-starred chef who charges
£80 per head, she needs to assess whether it's worth the extra expense for the quality
of service and food.

- Availability: Bridget should also consider the availability of other caterers. If the
renowned chef is available and she can afford the higher cost, it might be worth
booking them to ensure a memorable and enjoyable experience for her 50th birthday
party.

2. Following on from question 1, Bridget tells Exquisite Cuisine that she does not accept
their cancellation and expects them to show up to cater for the party. On the day of
the party Exquisite Cuisine do show up ready to do the catering, but Bridget tells
them they are no longer required as she and her friends have done all the food
themselves instead. Advise Exquisite Cuisine.

1. Claim for Breach of Contract: Exquisite Cuisine can claim for breach of contract
against Bridget for repudiating the contract. They may be entitled to damages for the
loss of income they suffered as a result of Bridget's repudiation.

2. Mitigation of Damages: Exquisite Cuisine should take reasonable steps to mitigate

their losses by attempting to find another catering opportunity for the time slot they
had reserved for Bridget's party. This could potentially reduce the damages they are
entitled to claim.

3. Seek Legal Advice: Exquisite Cuisine may consider seeking legal advice to
understand their rights and options for pursuing a claim against Bridget for breach of
contract.

CLASS EXERCISE B
Bridget is the land-lady and major shareholder of The Wentworth Arms Ltd gastro- pub. A
few weeks ago, she bought a small second-hand Renault van for the trips that she makes to
the wholesalers to buy ingredients for the food that they cook and sell in the pub. Bridget
told the second-hand car dealer, Derek Allen, that she only wanted a low mileage vehicle
that must be in good condition. Derek recommended a van for £4,000, the odometer was
showing it as having done 60,000 miles. Last week, when she was driving back from the
wholesalers, the van broke down and she had to be rescued by the AA, who drove her home
and took the van to the local garage. The garage owner then informed Bridget that the van
needed a new engine and had definitely done at least 100,000 miles, contrary to what the
odometer was showing. Bridget got the AA to do an independent inspection of the van and
they agreed with the garage owner’s findings.

Advise Bridget on the type of term that is breached and what her options might be

. In this scenario, it seems that there has been a breach of a condition in the contract
for the purchase of the van. Bridget explicitly stated to the second-hand car dealer,
Derek Allen, that she required a low mileage vehicle in good condition. Derek
recommended a van with an odometer showing 60,000 miles, implying that it met
Bridget's requirement for low mileage and good condition. However, it was later
discovered that the van actually had at least 100,000 miles, indicating a breach of the
condition regarding the mileage and the condition of the vehicle.

Bridget's options might include:

1. Rejecting the Van: Bridget could reject the van and demand a full refund from the
second-hand car dealer, Derek Allen, based on the breach of the condition regarding
the mileage and condition of the vehicle.

2. Seeking Damages: Bridget could also seek damages for any losses she incurred as a
result of the breach, such as the cost of repairs, the inconvenience of the breakdown,
and any loss of profits or business opportunities due to being without transportation.

3. Rescinding the Contract: Bridget may have the option to rescind the contract
altogether if the breach of condition is serious enough to undermine the entire purpose
of the contract.

It's advisable for Bridget to gather evidence to support her claims, such as the findings
of the AA inspection and any documentation related to the purchase of the van. She
may also consider seeking legal advice to understand her rights and options for
pursuing a claim against the second-hand car dealer.
CLASS EXERCISE C

Bridget employs Gary, a general builder, to replace the garden wall which surrounds her pub.
She instructs him to build it out of Yorkshire stone to match the pub. They agree a price of
£8,000. Gary uses Yorkshire stone which is 2 shades darker than that used on the pub. Bridget
asks Gary to take it down and start again but Gary refuses.

a) Is Bridget entitled to treat the contract as repudiated?

b) Would the court order him to return to rectify the defects?
c) If not, what alternative remedies are available to Bridget and how would any
damages be calculated?
d) Is she likely to be awarded any damages for mental distress and anguish?