Remedies for Breach of Contract

One of the most common kinds of legal action is an action in breach of contract. The court must be satisfied that there was a contract, that one party is in breach, and that the other party has suffered some loss because of the breach. If all these conditions are fulfilled, the court must then decide how the party in breach must compensate the other party. The remedies for breach of contract are damages, a specific performance order or an injunction.

The usual award is damages, or monetary compensation, usually in the form of a lump sum.

In deciding just how much in damages to award, the courts try to put the claimant into the same financial position he would have been in if the defendant had carried out the contract properly. Courts will award damages only for loss that arises naturally from the breach and might have been anticipated by both parties when the contract was made. In the 1949 case of Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd the defendants were five months late in delivering a new boiler for the laundry. The claimants sued for loss of profits and for loss of a business opportunity. The court awarded damages for loss of normal profits which should have been anticipated by Newman Industries, but it would not award damages for loss of a lucrative contract because the supplying firm could not possibly have known about this. The court decided that the first claim was reasonable but that the second was too remote. The claim is considered too remote when the claimant's loss could not be foreseeable by both parties at the time they made the contract. So, if the connection between the breach of contract and the claimant's loss is too remote, the defendant is not liable. It is an important concept in both contract and tort. The injured party must do his best to minimise the loss resulting from the breach. If, for example, a hotel reservation is cancelled, the hotelier must make all reasonable attempts to relet the room for the period in question, and he cannot claim compensation for any loss caused by his failure to do this.

Courts may, at their discretion, provide alternative remedies for breach of contract. A specific performance order requires a person to fulfill his obligations under a contract. For example, when contracts have been exchanged for the sale of a house, the court may order a reluctant seller to complete the sale. Specific performance orders will never be granted for any contract of a personal nature. Thus, a person who contracts to work for a company and then refuses to take the job will never be made to do so; the company will only be able to claim damages.

An injunction either prohibits a person from doing or continuing to do a certain act (a prohibitory injunction) or orders him to carry out a certain act (a mandatory injunction). For example, if an artist agrees to take part in a show and then changes his mind, an injunction can be issued to restrain him from appearing elsewhere on that day (in the hope that this might induce him to keep his initial obligation). If he still decides not to perform, then the organisers will be entitled to damages for any losses incurred.

Specific performance and an injunction' are equitable remedies developed by the courts of equity and will only be granted if a) damages are not an adequate remedy and b) if the court can adequately supervise enforcement. Both remedies are discretionary, that is, they will be granted only if the court considers it just and convenient to do so.

In other areas of civil law there are some other specific remedies, for example, in family law cases the court may give orders which regulate how family members are to live. We shall consider remedies specific to other areas of law in later chapters of this book.

Enforcement

As almost everyone knows, it is one thing to get a judgment and it may be another to get the money. If the debtor has no money or no assets to sell, then no method of enforcement will succeed. In all other cases there are a number of ways in which a judgment may be enforced.

Warrant of execution. In the case of an order to pay money, the court may order that the defendant's property should be seized and sold. In this case, the bailiff will enter the premises and place a lien on certain assets notifying the debtor that these assets will be sold unless the debt is paid in full within a certain period. A lien is the right to hold another's property while pressing a claim against him.

A charging order makes it impossible for the debtor to sell his land or securities without paying off the debt.

If a warrant of specific delivery is made, the court bailiff is ordered to seize the goods and deliver them to the successful litigant.

The so-called 'garnishee' order is directed to anyone who owes the debtor money requiring them to pay it into the court.

For larger debts, there may be a bankruptcy and liquidation order declaring the debtor bankrupt. In this case a receiver is appointed by the court to enable the creditor to obtain payment of a debt.

Receivership. A receiver may also be appointed when the debtor receives an income, such as rent from tenants, which must be collected by an independent person.

Attachment of earnings. For smaller debts, there may be an order requiring the debtor's employer to deduct a sum of money from the debtor's wages and transfer it into court. However, the order can be discharged if the debtor loses or changes his employment.

If a person disobeys a court order to do something or not to do something, he will be guilty of contempt of court and will be fined or sent to prison.

Date: 2016-03-03; view: 756