LL202 Commercial Contracts

1. LL202 Commercial Contracts Chris von Csefalvay

2. Agenda for today • Session 3: Remedies for breach • Recap of lecture • Aims of remedies • Debt • Damages • Specific performance, injunctions and other remedies

3. When a contract goes wrong • Discuss: • You have contracted for the construction of a luxury home for you and your family, worth £1,000,000. You have promised your kids and spouse that you’ll move in for Christmas. It’s July, and the contractor still hasn’t done anything. What’s your first priority?

4. Why remedies? • Encouraging keeping promises and deterring breach • Ensuring that breaches don’t cause loss (‘insurance principle’) • Encourage settlement of disputes

5. Debt • Debt is a claim for an agreed amount of money owed • S49(1) SGA 1979: seller of goods may bring an action for price the goods if the buyer does not pay

6. Debt • Procedurally simple: • get court order, • seize debtor’s assets, • sell them, • get money! • But only available once the debt is due: • not if it has been already paid, and • not if it not due yet!

7. Debt • Is entire performance required? • Hoenig v Isaacs [1952] 2 All ER 176 (CA), per Denning LJ: where a contract provides for a specific sum upon work, courts will not support interpretations that will lead to no payment unless the performance is 100% perfect – unless parties have agreed so expressly.

8. Debt • Is entire performance required? • Bolton v Mahadeva [1972] 1 WLR 1009, per Sachs LJ: as long as there is substantial performance, the contractor is entitled to the price subject to a cross-action.

9. Termination and repudiation • Technically, this is not a judicial remedy. • Availability: Hong Kong Fir v Kawasaki [1962] 2 QB 26, per Diplock LJ: available where the breach deprives the party who has further undertakings still to perform of substantially the whole benefit of the bargain

10. Termination and repudiation • Repudiation: aka anticipatory breach – the party treats the bargain as non-existent • Express termination clauses • Breach of condition

11. Termination and repudiation • Loss of right to terminate: • Affirmation • Waiver of breach

12. Agreed remedies • Freedom of choice of remedy under contract: • liquidated damages • security • limitation clauses • guarantees and indemnities • dispute settlement clauses

13. Agreed remedies • Limits on agreed remedies: • UCTA 1997 and UTCCR 1999 on exclusion of liability • prohibition of penalty clauses (in terrorem): Dunlop Pneumatic Tyre Co v New Garage and Motor Co Ltd [1915] AC 79 (HL)

14. Deposits and H/P • s49(2) LPA 1925: court may order deposit to be repaid • Repossession of goods on hire-purchase • But: s90 CCA 1974: not recoverable after 1/3rd is paid without a court order

15. Compensatory damages • Protected interest: • Reliance interest • Expectation interest Is this a good idea?

16. Compensatory damages • Qualifications • Contracts for personal satisfaction/non-pecuniary interest • Jarvis v Swann Tours [1973] 1 All ER 71 (CA): contracts aimed at a pleasurable experience • Farley v Skinner [2001] UKHL 49 (HL)

17. Compensatory damages • Remoteness: • Damages recoverable are: • arising naturally; OR • Reasonably supposed to have been in the parties’ contemplation (Hadley v Baxendale) • But: The Achilleas [2008] UKHL 48… • Reconciliation: Sylvia Shipping v Progress Bulk Carriers [2010] EWHC 542 (Comm).

18. Specific performance • Equitable remedies – awarded only exceptionally, where • common law remedies would be inadequate, • appropriate and do not force personal service, and • it would not be unfair/oppressive to enforce the contract.

19. Classroom discussion of questions • Please discuss each question in your group for three minutes. • Please present your findings.

20. End of session 3 See you tomorrow morning in the same place. – Please do the recommended readings and think about the questions.