Breach of Contract - Business Law - Lecture Slides, Slides for Commercial Law. Aligarh Muslim University
addi29 December 2012

Breach of Contract - Business Law - Lecture Slides, Slides for Commercial Law. Aligarh Muslim University

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Breach of Contract, Remedies for Breach, Restitution, Commonwealth Bank, Mistake of Law, Usual Remedy, Common Law Remedy, Loss or Injury, Commonwealth of Australia, Amann Aviation are key points from this lecture of Busi...
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Remedies for Breach of Contract

Remedies for Breach



Recission Restitution Specific Performance

Injunction Quantum meruit

Anton Piller order

Common law Equitable remedies

Remedies for breach - rescission

• Rescission: – Does not require the intervention of the court. – Entitles the injured party to set the contract aside and is only

available for breach of a condition. – Substantial restoration must be possible as the injured party is

restored to their pre-contractual position. – The right to rescission is lost if the injured party:

• continues with the transaction; • fails to act or act within a reasonable time; or • if an innocent third party acquires an interest in the subject


Remedies for breach - restitution

• Restitution: – Is based on the concept of unjust enrichment

and sometimes referred to as quasi-contract. – The plaintiff must establish:

• the defendant must obtain a benefit or enrichment; • the benefit was at the plaintiff’s expense; • it would be unjust to allow the defendant to keep that benefit

or enrichment (Pavey & Matthews Pty Ltd v. Paul (1987)); and

• the defendant has no defences to rely upon.

Remedies for breach - restitution

• Restitution can be used if: – the defendant has received a sum of money from the plaintiff

and there has been a total failure of consideration or a mistake of fact (McCormack v. Commonwealth (1984));

– under a mistake of law (David Securities Pty Ltd v. Commonwealth bank (1992));

– under duress or compulsion. • Restitution makes use of the doctrine of quantum meruit

(Pavey & Matthews Pty Ltd v. Paul (1987)); Planche v. Colburn (1831); but cf Sumpter v. Hedges [1898]).

Remedies for breach - damages


Nominal (No actual loss suffered)

Ordinary (Usual remedy)

Exemplary (punitive)

General Special

Remedies for breach - damages

• Damages are a common law remedy and awarded as of right.

• They are calculated on the basis of looking at what the position of the plaintiff would have been if the contract had been properly performed.

• They are assessed on a once and for all basis at the date of breach.

Remedies for breach - damages • Step 1 - Has there been a breach?

• Step 2 - Has loss or injury occurred from the breach? This is a question of


• Step 3 - Is the loss or injury too remote?

• Step 4 - What is the amount of damages?

• Step 5 - What steps has the plaintiff taken to minimise the damage?

No award of damages

No award of damages

No award of damages unless 2nd rule in Hadley v Baxendale satisfied


Yes Yes




Remedies for breach - damages

• Causation: – Is there a causal connection between the breach and the loss

suffered? – The plaintiff must show that the breach of contract by the

defendant was the cause of the loss. – The general test used by the courts is the same as that used in

assessing damages in general – the ‘but for’ test (Alexander v. Cambridge Credit Corporation Ltd (in rec) (1987)).

– Note the ‘but for’ test is not an exclusive test, e.g. there is the ‘common sense’ test (approved in Chappel v. Hart (1998))

Remedies for breach - damages

• Remoteness: – The loss or injury must not be too remote, i.e., losses must be

reasonably related to the contract. – Hadley v. Baxendale (1854) indicates two types of loss are

recoverable: • loss arising from the breach in the usual or normal course of

things; and • loss arising from special or exceptional circumstances where

it can be shown that the defendant had actual knowledge of the plaintiff’s needs (Victoria Laundry v. Newman Industries [1949); Commonwealth of Australia v. Amann Aviation Pty Ltd (1991)).

Remedies for breach -damages • Damages:

– The aim of damages is to put the injured party back as close to the position they would have been in had the breach never occurred.

– Damages are recoverable for provable or economic loss as well as:

• expectation losses; • reliance losses (Commonwealth of Australia v. Amann

Aviation Pty L:td (1991)); • distress and disappointment (Jarvis v. Swan Tours [1972];

Jackson v. Horizon Holidays [1975];Baltic Shipping Co Ltd v. Dillon (1993))

• physical injury (Grant v. Australian Knitting Mills Ltd [1936]).

– Difficulty in calculation is not a ground for disallowing a claim (Howe v. Teefy (1927)).

Remedies for breach -damages

• Mitigation: – The plaintiff must take reasonable steps to

minimise or mitigate their loss. Failure to do so can result in a reduction of damages (Paysu v. Saunders [1919]).

– Mitigations is a question of fact and the onus of proof is on the defendant.

Types of damages

Normal damages (No actual loss suffered

General Special

Ordinary damages (Uusual remedy)

Exemplary damages (Punitive)

Damages Type title here

Types of damages

• The type of damages that will be awarded will be determined by the seriousness of the breach and whether the contract has specified the amount of damages to be paid in the event of breach: – nominal damages – plaintiff’s legal rights have been infringed but they

have suffered no actual loss (Charter v. Sullivan [1957]); – ordinary damages – loss suffered by the plaintiff as a result of the

breach and can be either general or special damages; – exemplary damages – punitive and may be awarded for non-economic

loss (Jackson v. Horizon Holidays [1975].

Types of damages

• Liquidated damages: – Awarded where a plaintiff is able to sue for a specified sum,

which must be a genuine or bona fide pre-estimate of the actual loss that will flow from the breach.

• Unliquidated damages: – Awarded where an injured party has no fixed sum in mind and

leaves the court to decide the amount. • Penalty:

– A threat to ensure performance and not enforceable because they are not a genuine pre-estimate of the damage that will result from the breach (Dunlop Pneumatic Tyre Co v. New Garage and Motor Co Ltd [1915]).

Equitable remedies

Equitable remedies

Recission Restitution Specific performance

Injunction Quantum meruit

Anton Piller Order

Discretionary remedies at equity and only granted where damages are not an adequate remedy.

Equitable remedies

• Specific performance: – A remedy compelling performance. – It is only granted at the court’s discretion where

the court can supervise the implementation of the contract.

– It is not available in contracts involving personal services because the court is unable to adequately supervise the task (Ryan v. Mutual Tontine Westminster Chambers Assoc [1893]).

Equitable remedies

• Injunction: – It is a restraining order which prevents a person

from breaking a contract. – It is a discretionary remedy and aims at enforcing

negative promises. – It normally cannot be used where it would achieve

the same result as specific performance (Lumley v. Wagner (1852)).

Equitable remedies

• Mareva injunction: – Prevents the defendant from removing assets from the

court’s jurisdiction (Mareva Compania Naviera SA v. International Bulk Carriers SA, The Mareva [1975]).

• Anton Piller order: – Prevents a defendant from disposing of any evidence before

trial (Anton Piller KG v. Manufacturing Processes Ltd [1976]). • Quantum meruit:

– Arises where there has been part-performance, and only where it can be implied that payment would be made.

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