Hello, this is the final lecture in contract and we are looking at termination, breach and remedy today. In the previous lecture, you'll remember we were looking at the different ways in which contracts can terminate. So firstly, amicable termination, for example, an employment contract that was said to last for perhaps 12 months.

So through the passage of time, the normal way in which most contracts end is through performance. And that is where either party or both parties actually do exactly what they said they were going to do. So we have entire performance.

We looked at how we establish breach. And that is something that the judge is going to do. He's going to firstly look at the contract itself, the contents of the contract.

What were the terms that both parties had agreed to? So in other words, what were their contractual obligations? And then.

the judge will look at what both parties did or did not do. In other words, he will look at the performance of the parties. Then it's really a question of deciding how serious that breach is and also whether or not, what type of contract it was, was payment based on completing all those contractual obligations or is it possible that the doctrine of substantial performance could apply so that even if you are in breach, you might be entitled to payment. And if you remember, usually where this is the situation where it isn't an entire contract or a lump sum contract, as for example, in Cutter and Powell, who was a sailor, and he promised four times his normal wages if he arrived back in London.

Unfortunately, he died part of the way back. And so his widow was unable to claim any proportion of... wages that he was going to earn.

So where it isn't an entire contract or lump sum, then the doctrine of substantial performance basically will perhaps look at the value of the contract and then the amount of work that wasn't completed and will probably just pay on a quantum merit basis as much as he has earned or quantum valibat as much as it is worth. The judge will also look at whether or not there are any lawful excuses for that breach. Has the contract been frustrated through an event that was out of either party's hands? Was there a mutual mistake made?

So really, that's something that goes to the heart of contract formation, where both parties, for example, in the Japanese bank case, they were contracting over a machine that hadn't even been built yet. Was performance prevented by one or other parties? Or has, for example, there been an innocent misrepresentation?

Then the courts will decide whether, well, really, when looking at how serious that breach is, is it a breach of a condition? So a condition is a term that goes to the very heart or the very root of that contract. Is it a warranty, breach of a warranty? So terms that are less serious.

And if you remember from last week, the damages really will depend on whether it is a breach of condition or breach of a warranty. If it's a condition, then that will entitle the innocent party to repudiate that contract, to bring it to an end and to claim damages as well. With a warranty, usually that doesn't result in that contract terminating.

but it will allow the innocent party to claim damages. And then we have unnamed terms. So, for example, terms implied into a contract through the Supply of Goods and Services Act. So we could have a breach of a Section 13. You know, is the work done to a reasonable standard?

And if it is so bad, that would be a breach of a Section 13 condition. If it is just minor problems. for example, a decorating contract as in Honig and Isaacs, where there was a bookshelf that hadn't perhaps been put on properly, that would have been a breach of a Section 13 warranty. Now, the purpose of damages in breach of contract is not to punish.

This is not America. I know that happens. We have what's called a punitive damages. So irrespective of the deliberateness of the breach, it is not about punishing. It is about really putting the person back, the innocent party back in the position they would have been in had the contract been performed, as in the case of Robson and Harmon.

So it's about compensation. And that's what damages is. Now, there's another type of damages, and that is what we call liquidated damages.

And this is a sum agreed by the parties at the time they entered into the contract as being an amount that would be payable in the event of a breach. For example, it might be that payment was scheduled over several installments. And in the event that one payment wasn't there on time, maybe that allowed the other party to claim a percentage, for example, 20 percent or whatever. You will have a look at that a little bit later. Now, damages or is really compensating for a loss that was an inevitable consequence of the breach.

And if we look at the case of Hadley and Baxendale. Here, a mill owner, his crankshaft had broken and he employed the defendant to courier that crankshaft back to the repair shop and then to bring it back again. And due to neglect, the defendant was seven days late in returning the crankshaft, which actually meant that the mill was inoperable for an additional seven days.

Now, um... During this, what had happened really when they entered into the contract was that it was not made clear to the courier that that was the only crankshaft, that he couldn't operate the mill until that was returned. So it wasn't in the defendant's mind, if you like, in his contemplation as being a consequence of the breach. So firstly, this introduced this two-limbed test. And the first part of that is that the damage...

or loss must flow from the breach. It's got to arise naturally from that breach. So we have causation. So that in a sense is what we call causation in law. It's causation in fact, rather, but then if it isn't in the party's contemplation, it's too remote.

So that is causation in law. And what that really means is that although factually the breach might have caused the loss, if it's too remote. it isn't something that can be claimed for. So also have a look at the case of Victoria Laundries, where the claimant purchased a large boiler for use in their drying and laundry business.

The defendant was aware that they wished to put it to immediate use and knew the nature of their business. And in fact, actually, it took another nine months before the damaged boiler was repaired, replaced and actually installed. And that, of course, meant that Victoria Laundries were not able to operate their laundry, well, these new boilers. And they had entered into these especially lucrative contracts on the basis of having this new boiler. And of course, they lost those contracts.

So they tried to claim for that as well. Now, factually applying the two limb test, that breach supplying a faulty boiler. which they didn't replace for nine months, actually caused their loss.

But it certainly wasn't in the manufacturers in Newman's contemplation as being a consequence of their breach. So the claimants could only recover losses which were in the reasonable contemplation of the parties, which included the loss of profit that could be expected from the lack of a use of the boiler, but not their success. are the exceptionally lucrative contracts since the defendant was unaware of this contract. So what do we mean by quantum?

Well, we talk about damages as heads of damages. Are they going to be compensatory or are they liquidated? So in compensatory, this is quite a good case really to have a think about the way in which the courts determine damages, but also what they take into consideration when making their award.

So in St Albans District Council, the International Computers had entered into a contract with St Albans District Council to provide software to calculate the amount of council tax that each household should pay. Unfortunately, there was a glitch in the software, which meant that some people were paying too much and others not enough. And so the claim made against international computers amounted to £1,313,000.

Now, international computers had limited its liability by putting a clause, an exclusion clause in the contract that was in their standard form contract. And it limited their liability to £100,000, certainly a lot less than the council had lost there, which was over a million. Now, the council claimed breach of contract and that the liability limitation was unreasonable under the Unfair Contract Terms Act.

International computers claim that the limitation of liability should remain. Now, Judge Scott Baker awarded the full sum only because the council was operating on it. international computers written standard terms of business. So under that the Unfair Contract Terms Act section 3 applied.

Now it found that actually that clause was unreasonable because international computers had ample resources. In fact they had 50 million pounds worldwide product insurance. Now when we look at liquidated damages so if you remember this is an amount that has been agreed by the parties as payable in the event of a breach. So in this particular case, the client who'd ordered a very expensive yacht to be built had agreed to pay a fixed sum of 20% of the contract price in the event of a failure to pay one of the installments. It was also agreed actually that the other party or that the boat builders could stop work, which they did.

So that's sort of an example of liquidated damages. And then within that, you could also consider a penalty clause where a typical in construction contracts where there is a penalty for perhaps late completion of a handover of a refurbished building, for example. Now we're going to look at the different types of damage. So we've got damages for inconvenience, for discomfort, for disappointment, for reliance loss. loss of expectation and cost to cure.

So we'll look at these one by one. So in this first case, actually, a solicitor failed to take action to recover the claimant's house. And as a consequence, the claimant and his wife had to move in with his in-laws for two years.

Now the house is very small, and it really was very awkward living there. And it was held that... he was entitled to recover damages to reflect the inconvenience of having to live in overcrowded circumstances. Now, Justice Barry emphasised that there is a distinction between near annoyance or disappointment at the failure of the other party to carry out their contractual obligations and actual physical inconvenience and discomfort caused by the breach, as it had in this particular situation.

Then we have damages for disappointment. And in this case, there was actually a contract between the purchasers of the house and the surveyor who went to survey it specifically to look at whether or not the house, you know, the garden, they were going to hear aircraft noise because it was sighted very close to, I don't know whether it's some kind of beacon by Oxford Airport. And so the part of the reason for this contract was really to see whether or not it was going to this aircraft noise was going to affect the amenity value of the house.

For whatever reason, the surveyor didn't find that there was a problem. But of course, when the couple moved in, it was actually located under this spiral route and their enjoyment of the house was extremely compromised by the noise. Now... The buyer apparently didn't intend to sell the house, but was given an award for the impact on his enjoyment of that house.

So then we have disappointment or distress in Jarvis and Swantours. And here, Mr. Jarvis, a solicitor, had booked a 15 day skiing holiday over the Christmas period with Swantours. Now the brochure.

in which the holiday was advertised made several claims about the provision of enjoyment including house parties, friendly welcome from English speaking, hotel owners, variety of ski runs, well that obviously is dependent upon the weather, but afternoon tea, a yodeler evening and so on. Now many of these didn't go ahead or were not as described. And also Mr Jarvis was situated in the part of the hotel where there was hardly anybody staying and nobody spoke English at all.

So at the trial, the judge awarded him £30 on the basis that he'd only been provided with half of what he paid for. No damages should be recovered for disappointment. Mr Jarvis appealed and it was held by the appeal court that where a contract is entered into for the specific. Purpose of the provision of enjoyment or entertainment.

Damages may be awarded for the disappointment, distress, upset, frustration caused by a breach of contract in failing to provide the enjoyment or entertainment in question. Now, you may recognize this chap here, this actor as being in Gladiator. This is Oliver Reed and in Gladiator.

Back in the 70s, he had entered into a contract with Anglia TV to play the leading role in a television play. And subsequently, Reid pulled out and Anglia was unable to find a replacement. So they abandoned the play, but they had incurred serious expenses and obviously wanted to make a claim against Reid for that.

Now it was held that... But whilst damages generally seek to put the parties in the position they would have been in had the contract been performed, clearly that wasn't possible here. But the parties may elect to claim reliance loss. So in reliance on Oliver Reid actually fulfilling his contractual obligations.

So being in this play, they had obviously gone and had screenplay written. They probably got some of the production sets ready. some of the clothing ready and so on and you know hired additional actors supporting actors as well so they were able to claim their expenses for reliance loss. Now we have this sort of question of whether the courts in some situations should award loss of expectation or the cost to cure and this is a really good case to explain that and as you can see from the decisions this actually went to three different courts so the situation is this rexley electronics was meant to build a a pool a swimming pool that was meant to be seven foot six inches deep but it was built only to six foot nine it was also found that the pool was safe for diving although it wasn't as deep as they wanted it to be built um and you know you Mr. Forsyth was explaining that, not explaining, but I mean, there was talk about whether or not you could have a diving board on there, but it was actually said that he never really intended to put a diving board there.

Also, you know, they got a swimming pool. It just wasn't as deep as they wanted. It had clearly added value to the property and they could enjoy it.

So, Forsyth took Ruxley Electronics. Electronics II court for breach of contract. Now, the first court said, still a benefit, improved the value of the property.

So what should be awarded is expectation loss. You know, that expectation that it was going to be seven foot six inches deep, so you can swim down that far. In actual fact, it was only six foot nine. So they awarded Forsyth £2,500 for loss of enjoyment. You see the cost to the The cost to build it was just over £21,000.

Now, the Court of Appeal disagreed with that, and they awarded cost to cure. So again, Bruxley Electronics appealed that decision, and the House of Lords said that expectation loss was the correct decision to be made here. Firstly, the cost was out of all proportion to the loss of enjoyment. And so again, they...

re-awarded £2,500 for the loss of that amenity value. And that was also because they had heard, or there was some evidence to suggest that Ruxley, well, that the award from Ruxley was not going to be used by Forsyth to rebuild his pool to the correct depth. It was actually going to be used for something else. So really, it's usually...

loss of expectation. It isn't always cost to cure, but it very much depends on the situation. Now, looking at the differences that we, well, what we've just covered, really, so you can be awarded compensation for consequential loss from a breach of contract for the loss of your amenity, amenity value of something, for reliance loss, for inconvenience and distress, but obviously personal injury, pain and suffering, and also injury to property, your possessions.

And providing it is an inevitable consequence of that breach, so it has flown from the breach as in Hadley and Baxendale, and it would be in the mind of the party in breach as a consequence of, you know, the breach. Okay, so in other words, that loss cannot be too remote. So when looking at remoteness of loss, we've looked at Victoria, Laundries and Newman, that those lucrative contracts were too remote, because they weren't in the mind of Newman Industries as being a consequence of their breach of contract.

And in Hadley and Baxendale, you know, the mill not working was an unforeseen consequence of defendants'negligence in not bringing back this crankshaft for an additional seven days. So something else that must happen, actually, is that where there is a breach, the claimant must, if you, you know, if possible, either bring the contract to a close, he mustn't add to his own loss. So he needs to, I suppose, pull a halt to any more or any further loss. Now, in terms of awarding, I suppose, awards from the court, when we look at the different types, equitable remedies, these are discretionary.

So these are things like injunctions and specific. performance. And it's entirely up to the courts whether or not to award these. It's not something we can demand.

We might want an injunction for something, a court order. But again, if it's something that needs policing, then the courts will be very reluctant to do that. And it is entirely up to them what they award.

Specific performance as well, it won't be granted if damages, in other words, financial compensation, are an adequate remedy. Also, where there is no consideration passing both ways or, as we said, where police would have to where the court would have to police compliance of that specific performance. And certainly if it's a contract for personal services, they won't do that or where both parties are actually in breach. Where they will do is if it is something unique, so for property or perhaps for for a painting that is really.

and you know unique. Okay so in terms of termination of a breach so the right to terminate a contract only arises if it's a fundamental breach so really if it's a breach of something like a condition or where for example there has been an event that has frustrated that contract that has made it you know that pointless really performing think about Krell and Henry. The only purpose of hiring the flat on Pall Mall was to watch the coronation.

Perhaps where there has been a mutual mistake, where one party has made performance impossible. You know, perhaps the parties have completely fallen out over something. And, you know, you've got a contract to decorate somebody's house and they won't let you in.

So that would be a situation where you could repudiate, you could terminate that contract and claim. damages from the other party. Now, to determine whether there is a right to terminate or repudiate that contract, the courts will look at the terms of the contract and, of course, how serious that breach is. Now, who can sue? Now, if you think about consideration, those people, those parties, if you provide consideration, you are the you have privity of contract.

So if you remember Tweddle and Atkinson, the two dads who promised to give the groom £100 on the day of the wedding, one did, the other one died beforehand, and the groom tried to sue. But because of privity of contract, he wasn't able to. But now there is an exception to that rule.

And that's from 1919, was where the contracts Rights of the Third Parties Act was introduced and where the beneficiary of that contract is actually named so in tweddle and atkinson if the groom had been named and that agreement had been made after 1919 then he would have been able to sue so if the contract's named for a made for a named beneficiary they gain this right to sue so if you like that circumvents uh privity of contract but then we also have some other situations where it isn't just the parties to the contract who can sue and be sued. Actually, in St Albans, the district council sued international computers on behalf of the residents who had been affected by their computer glitch. And in Jackson and Horizon Holidays, Mr Jackson had booked a 28-day holiday in Ceylon for himself and his family through Horizon Holidays. The hotel turned out to be unsatisfactory for various reasons relating to cleanliness, provision of services.

And actually, he, you know, obviously it was quite disappointing there. And so Jackson sued Horizon Holidays on behalf of himself and his family and was awarded damages to compensate him for the disappointment. You know, not just to himself, but also his family. wife and children.

So this is an exception to the rule of privity of contract. In Smith and Eric Bush, as another example of an exception to this rule of privity of contract, and here, as you'll discover when we start to do professional negligence, is a situation where a surveyor, actually, he was undertaking a mortgage valuation. Well, the...

a survey and valuation for the lender. So he had a contract with the lender and he did a pretty poor job actually and missed some important factors or damage to the property that had reduced the value. He wrote up his report and the report was inaccurate. Now the lender was able to sue him for breach of contract, but in actual fact, the buyer themselves and the house was a low value home.

The buyer was... relying on that report to make the decision on whether or not to purchase the house. And also the buyer was able to sue the surveyor as well for breach of a duty of care in tort. So again, that's something that we will look at next year when we talk about the law of tort.

And also Shanklin Pier, that's another interesting case where the Shanklin Pier hired a contractor to paint their pier. And they discussed with this company called Detail Products the suitability of a certain type of paint and were assured that the paint in question would last for seven years. Now, this was said in an attempt.

Obviously, Detail Products were selling their. their paint and saying it's amazing stuff it will last you seven years um and so what the defendants um defendants did um you know was i suppose given assurance to shanklin pier that their paint you know it's great stuff gonna last seven years so on that representation on that statement shanklin pier told their um contractor the painters of the pier you to go and buy that paint. So the contract ended up being between the painters and Detail Products. Anyway, the paint was pretty rubbish and before the decorators, painters, and even finished painting the pier, it had started to peel off.

So Shanklin Pier tried to sue Detail Products and of course we have this issue of the fact that there was no contractual relationship. between Detail and Shanklin Pier. Now the courts found that there was a collateral warranty between the owners of the pier and Detail products supported by consideration.

How did the courts work this out? Well the pier owners had been assured by Detail that their paint would last seven years and based on this assurance the pier owners had instructed the painters to buy that specific paint that represented. good consideration.

And on that basis, the owners of the pier could recover damages directly from detail. On, you know, as a general rule, only the parties can sue, parties to the contract can sue or be sued. And that's basically privity of contract.

And that is about, you know, who has provided the consideration, who are the parties to the contract. That's it, privity of contract. But we do have these exceptions.

Now, who awards the damages? Well, the court awards damages. not all damages, but some of the damages.

So they will award what we call damages, which is this financial compensation to put you back in the position you would have been in had the contract been performed, at least as far as money can do so. So if you remember, if I just flick back now to damages, what you can actually claim for, loss of amenity, reliance loss, inconvenience, distress, personal injury. an injury to property.

So those really are what the court is going to look at and compensate you for your loss. Then they occasionally will order specific performance. But remember, I said it would be only if it was property as in land, or if it was something like a really, you know, a painting that was unique, they were looking for something unique.

And then of course, an injunction. And this is something again, that the The courts will only award if that is what they feel as to be the equitable remedy, the right thing to do. Then we have the different type of damages that are agreed by the parties. So liquidated damages, that is an award that is agreed at the time of the contract, at the time the contract is formed, an award that will be paid or some that will be paid in the event of a specific breach.

For example, missing a... payment or failure to complete something on on time then we have the penalty clause which is typical in construction contracts where you have perhaps a refurbishment of a building and if that is completed late then the developer builder contractor has to pay the client a fee back so some of their profit goes and then something else that um is important to consider is someone else responsible for the loss. Sometimes it can be the client themselves, you know, who has contributed towards that loss.

Sometimes it can be another party as well. And then we look at the duration of liability. So the right to bring a claim will lapse. within a period of time, obviously.

And thank goodness that's the case, because, you know, it'd be like having the sword of Damocles hanging over your head, you know, until you died, basically. So there is a limitation to bring an action against somebody. So simple contracts are normally six years. Speciality contracts are those under seal or deed.

The time limit is 12 years. And there is a long stop, and that is... 15 years, but basically different rules will apply if a breach has been deliberately concealed. If you are dealing with a child, in which case the clock doesn't start ticking until the child becomes an adult. And then if somebody suffers from mental health problems, then if they have bouts where they are unwell, then the clock will kind of pause there.

until they are well enough to continue with an action. Okay, so that is it for this particular lecture. Thank you very much.