Hand Out 21-C

(Sessions 18 & 19)

BUSINESS LAW

(Breach of Contract)

A. Force Majeure

Performance becoming (a) impossible, (a) upon happening of an event outside control of
parties, e.g., strikes, accidents, delays in delivery, changes in government policy, acts of God (these are
usually grounds for a party to ask for suspension or cancellation of operation of contract under what is
called a force majeure clause in the contract);or (b) unlawful by operation of law, such as when, in
times of war, a bar is placed on trading with the enemy, or on use of resources for non-military
purposes.
Taylor v. Caldwell (1863): performance becoming impossible, upon happening of an event
outside control of parties,. (e.g., a music hall hired for concerts burns down, without any negligence on
the owner's part).

B. Time of the Essence

Rickards (Charles) v. Oppenheim (1950): Upon the manufacturer's failure to deliver a car
to the purchaser by the original delivery date, the purchaser served notice on the manufacturer stating
that he would not accept delivery after a specified new date, four months hence. When the car was
still not delivered, the purchaser bought another one. Some three months later, the manufacturer
offered to deliver the car to the purchaser, and, when the latter refused to accept sued him for the price.
His action failed, the court holding that, even though the purchaser had waived the original delivery
date, he was entitled, by giving reasonable notice, again to make time of the essence of the contract.

C. Conditions & Warranties

In the ultimate analysis, the court, of course, decides if the breach is a breach of a condition or
of a warranty (see, e.g., Bettini v. Guy (1876): an Italian opera singer's promise to give a series of concerts
on certain dates was held to be a condition, but his promise to arrive in the country six days before the
first concert was regarded merely as a warranty, the breach of which did not entitle the concert
organizer to escape liability under the contract).

D. Anticipatory Breach

Hochester v. De La Tour (1853): when a person, who had been employed by a travel agency
as a courier starting the following summer, was informed by the agency before he was due to begin
work that his services would not be required, the court held that he could sue the travel agency
immediately he was told of the agency's decision, and without waiting for the summer to arrive.

E. Calculating Damages

[The Rule Against Remoteness] Or the rule in Hadley v. Baxendale (1853): a carrier,
who had delayed the delivery of a broken shaft of a mill to the manufacture for repairs, was held
not to be liable to the miller for loss of his profits during the delay, because, in the court's view,
he could not have known, nor was he informed, that the miller h ad only one shaft.
Czarnikow v. Koufos (1969): a shipper, who failed to deliver a cargo of sugar on
time, was held liable for the loss of profit caused to the owners by a drop in the price of
sugar in that time, because, in the court's view, the shipper must have known the sugar was to
be sold.
BTC v. Gourley (1956): in estimating future earnings, income tax that would have been
payable on those earnings are to be deducted. Thompson Ltd v. Robinson Gun makers Ltd (1955): if
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there is a market for goods not delivered under a sale of goods contract, the plaintiff should buy
those goods there and can recover the difference between the contract price he would have paid and
the market price he actually paid; similarly for goods not accepted, should sell the goods there, and
can recover the difference between then contract price he would have got and the market price that
he actually got. In this case, because of a glut, there was no market for the motor car that the
defendant had bought but refused to accept, the plaintiff could recover the full amount of the profit he
would have made on the sale if completed. The opposite was the case in Charter v. Sullivan (1957), in
which only nominal damages were allowed because the plaintiff could sell in the market as many
cars of the model in question as he could obtain.
In England, damages are therefore much more modest than, say, in USA, where juries
are used in civil cases and tend to award punitive damages.

F. Liquidated Damages

This is usual in buildin g contracts, under which the builder agrees to pay to the owner
x amount per week of delay in completing the works; or in shipping contracts.

G. Quantum Meruit

QM cannot be used in respect of a 'lump sum' contract (i.e., under which a party has
promised to complete the whole task before being paid anything), because the express promise to be
paid the full amount at the end takes precedence over an implied promise to pay partial amounts
before that. A case in point is Cutter v. Powell (1795): the executor of a sailor who died while serving on a
ship at sea could not recover anything for the work he did during a substantial portion of the voyage
completed before his death, because completion of the voyage was held to be a condition precedent for
payment. To ameliorate the effects of harsh decisions like this, the courts have developed the doctrine
of substantial performance , under which, if a task is substantially completed, then the whole lump sum
payment for it can be recovered, less any deductions to compensate for minor omissions or defects
(Hoenig v. Isaacs (1952)). QM is, of course, available for ordinary employer-employee type
contracts, which are not lump sum but for payment of salary weekly or monthly.

H. Specific Performance

This may be granted for sale of rare goods, but not for ordinary goods that can be bought in
the market.
A person who has contracted to buy a house will lose his deposit, but will not have
specific performance ordered against him, if his mortgage application is turned down by the bank
and he breaks the contract.
No specific performance, e.g., to a building contract, because would involve the court in
constant supervision.

I. Mandatory Injunction

Lumley v. Wagner (1852): where a singer had contracted to sing in one person's theatre and
nowhere else during the period of the contract, an injunction was issued against her when she was
induced into singing elsewhere by a third party. An order of specific performance was, however,
refused, because this being a contract of employment, she could not be forced to perform it. In other
words, an injunction is available (and is a useful remedy) for enforcing a negative term, but not for
enforcing a positive term of a contract.