LLB300 Chapter Notes - Chapter 5-6; 8-9: Judiciary Of Australia, Charter-Party, Shire Of Albert
WEEK 2 – COMPENSATORY REMEDIES – ASSESSMENT IN PARTICULAR
SITUATIONS
Chapter 5: p 101-122; Chapter 6: p 131-144; Chapter 8: p 193-200; Chapter 9: p 206-211;
Additional readings on Moodle
Chapter 5 – Compensation for Breach of Contract:
Assessment of Compensation:
oProtection of the Plaintiff’s Expectation Interest:
Measure of compensation depends on the interest being protected
EXPECTATION DAMAGES – primary measure
Obligation to pay expectation damages as a pecuniary substitute for primary right
to performance
Court attempts to put P in the position they would have been in if the contract
was performed
Assessed by reference to the market price of goods or services at the time of the
breach
Sometimes contract law has to adopt other measures
THREE elements protected by contractual damages – Fuller and Perdue:
‘Restitution interest’ – P conferred some value on D in reliance on D performing
‘Reliance interest’ – P has changed position in reliance on D
oProtected by placing P in the position they would be if they did not enter the
contract
‘Expectation interest’ – (always present) protected by placing P in the financial
position they would be in if the contract was performed
Fuller and Perdue – argued that ‘ordinary standards of justice’ would believe the need
for judicial intervention is strongest in restitution interest, and the weakest as
expectation interest
Courts have not adopted this preference
Expectation damages are the usual objective
High court has approved the statement from Robinson v Harman:
‘where a party sustains a loss by reason of a breach of contract, he is, so far as
money can do it, to be placed in the same situation, with respect to damages, as if
the contract had been performed.’
Expectation damages – LIMITATIONS:
Proscription of damages for non-pecuniary loss
P bears the onus of proving loss
oIf loss cannot be proven – only nominal damages
oCourts accept that P will not always be able to produce strong evidence
Mere difficulty in estimating damages does not relieve a court of its responsibility
to do so
Reliance loss – ‘proxy’ for expectation loss:
D must pay P if the contract has been terminated & total failure of consideration
oMeasure of Expectation Loss in Particular Contexts:
Commonly based on P’s loss of profit – Mason CJ & Dawson J, Commonwealth v
Amann Aviation Pty Ltd:
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o‘Damages recoverable as lost profits are constituted by the combination of
expenses justifiably incurred by a plaintiff in the discharge of contractual
obligations and any amount by which gross receipts would have exceeded
those expenses. This second amount is net profit.’
Cost of acquiring substitute performance – measured according to market value
oMeasured according to loss of market value – more likely to be adequate
where claimant seeks to gain financial advantage (Commonwelath v Amann)
oAdequate measure as claimant is likely to purchase a substitute with those
damages
Expectation loss is the difference between the actual value of goods and the value
they would have been if they complied with the contract
Failure to Deliver Goods as Promised:
Late delivery, delivery of faulty goods, or a failure to deliver – BREACH of contract
Assessment of damages is regulated by Sale of Goods Act 1923 (NSW)
NON-DELIVERY –
oIncludes – loss directly and naturally arising from the seller’s breach (s 53(2))
Enshrines the first limb from Hadley v Baxendale
o‘Special Damages’ – acts to stop exclusion of the second limb of Hadley
Relates to unusual loss resulting from special circumstances known to D
oAVAILABLE MARKET –
Measure of damages is (prima facie) difference between the contract
price, and market price of goods (at time they were meant to be
delivered – if not agreed upon, at refusal)
Rule assumes that buyer has not paid
Must be adjusted where payment has been given (mitigation
principle)
Where market price is the same at the time of the beach (or lower than)
the contract price (and there are no other recoverable damages)
nominal damages may be awarded – Frances v Lyon (1907)
Method must give way if another method provides a more accurate
assessment of loss
Buyer who resells goods at a lower price, is entitled to damages
measured by the difference between the contract price and the
market price at the time of breach
Buyer obtains substitute goods at lower price than the market price,
damages are the difference between the contract price and the
price actually paid
oNO AVAILABLE MARKET –
Court determines the value of goods at the time and place of failure to
deliver (Frances v Lyon (1907))
Evidence – cost of the nearest equivalent (Hindle v Liddell (1875)) or the
price at which the buyer resold the goods (The Arpad)
Foreseeable resale – damages are the difference between the contract
price and the resale price
Where seller must compensate the buyers loss, they must also
compensate the loss the buyer occurred by being liable towards the sub-
buyer
DEFECT IN GOODS –
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oMeasured on the basis of NON-DELIVERY
oIncludes loss directly and naturally arising from the seller’s breach, and
preserves the buyers right to claim ‘special damages’
oDifference between the value of goods at the time of delivery, and value they
would have had if they complied with the contract (prima facie)
Diminution in value, rather than cost of rectifying the defect
Where substitutes cannot be obtained, cost of rectifying may constitute
the loss (Minister Trust Ltd v Traps Tractors Ltd)
oFurther loss caused by the defective condition –
RECOVERABLE if it was in parties contemplation at the time of entering
the contract
Defective condition has caused further deterioration of goods
themselves;
Damage to other goods – Rolfe v Katunga Lucerne Mill Pty Ltd
Personal injury to the buyer – Grant v Australia Knitting Mills Ltd
Loss of profit – TC Industrial Plant Pty Ltd v Robert’s Queensland Pty
Ltd
Damage to third parties property
Personal injury of third parties
Seller must indemnify the buyer is it was foreseeable the buyer would
resell
RESALE – may only lead to HIGHER damages
Buyer can claim damages for diminution in value, even where the
sub-buyer has paid more to cover the cost or has accepted the
goods (Clark v Macourt)
DELAY IN DELIVERY –
oEntitles the buyer to reject the goods (and buyer does so) –
Damages are measured on the basis of NON-DELIVERY (Almare Seconda)
oWhere buyer has no right of reject or accepts –
Damages are measured by the difference in the value of goods at the
time and place of organised delivery, and their value at the time and
place of actual delivery (Borries v Hutchinson)
oMARKET FOR GOODS –
Value is generally the market value
Measure of damages – difference between market value at the time of
contractual delivery, and the price obtained by the buyer (Wertheim v
Chicoutimi Pulp Co)
oCan recover extra expenses (Smeed v Foord), loss of profit (Borries v
Hutchinson) and loss incurred being liable towards a sub-buyer (Contrigroup
Companies Inc. v Glencore AG)
Failure to Convey Land as Promised:
Conveying the land later than promised, failing to provide good title or failure to
convey land at all – may be a breach of contract
Measure of damages is generally the same as that which applies to sale of goods
oEXCEPTION – Bain v Fothergill:
Innocent vendor’s liability for failing to provide good title is limited to
compensating the purchases for expenses incurred in investigating
ABOLISHED in NSW – Conveyancing Act s 54B
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Document Summary
Week 2 compensatory remedies assessment in particular. Chapter 5: p 101-122; chapter 6: p 131-144; chapter 8: p 193-200; chapter 9: p 206-211; Chapter 5 compensation for breach of contract: Assessment of compensation: protection of the plaintiff"s expectation interest: Measure of compensation depends on the interest being protected. Obligation to pay expectation damages as a pecuniary substitute for primary right to performance. Court attempts to put p in the position they would have been in if the contract was performed. Assessed by reference to the market price of goods or services at the time of the breach. Sometimes contract law has to adopt other measures. Three elements protected by contractual damages fuller and perdue: Restitution interest" p conferred some value on d in reliance on d performing. Reliance interest" p has changed position in reliance on d: protected by placing p in the position they would be if they did not enter the contract.
