FINAL EXAM REVISION
Farhan, a well-known fishmonger at Seksyen 6 Shah Alam wet market concluded an
agreement with Tamim, a credible fish supplier from Kajang to supply 50KG of fish
every day. The fish was supplied and delivered to Farhan at 5 AM every day as agreed
without any delay. However, on Sunday, 13 August 2023, Tamim did not supplied the
fish as scheduled. He overslept and woke up at 10 AM with 17 missed calls and 5
messages from Farhan alleging that he had breached their agreement and caused
Farhan to suffer from losses of profits, revenues as well as potential and regular
customers on that day. Assuming the court is about to award remedy for breach of
contract to Farhan, explain how the court measures the amount of damages that he is
entitled to. (25 marks)
As what can be identified from the question, Tamim has breached the contract
that he made with Farhan as he did not carry out what has been agreed on which is to
send the supplies of fish to Farhan on time every morning. The primary issue here is
how the court should measure the amount of damages Farhan is entitled to claim for
remedy for breach of contract due to Tamim’s failure to supply fish to him on 13 August
2023.
The rule applicable for this situation is section 74 of the Contracts Act 1950 which
stated that when a contract has been broken, the innocent party is entitled to receive
compensation for any loss or damage from the party who broke the contract. In
determining the damages to be awarded to the innocent party, the court has to decide
two things which are the remoteness of the damages (whether the loss is recoverable)
and the measure of damages. The loss recoverable must be the loss which is the
direct cause of the breach of contract. The loss must be within the two limbs of section
74 of the Contracts Act which are first: when the damage or loss caused to the injured
party arose naturally in the usual course of things from the breach. And second: when
the parties to the contract were fully aware at the time when they made the contract
that damage or loss is likely to result from the breach. If the loss does not come
within these two limbs, it is said that the loss is too remote or indirect and thus not
recoverable. Hence, in this case, the second limb is applicable as Tamim was
technically aware at the time of the contract that there will be obvious damage or loss
that will happen if he breaches the contract, it will clearly affect Farhan’s business.
On the other hand, in order to determine the amount of damages, the court has
to measure the damages. In assessing the measure of damages, the court will not
award compensation for any loss which is too remote. For example, in the case of
Hadley v Baxendale. In this case, the claimant, Hadley, owned a mill featuring a
broken crankshaft. The claimant engaged Baxendale, the defendant, to transport the
crankshaft to the location at which it would be repaired and then subsequently transport
it back. The defendant then made an error causing the crankshaft to be returned to the
claimant a week later than agreed, during which time the claimant’s mill was out of
operation. The claimant contended that the defendant had displayed professional
negligence and attempted to claim for the loss of profit from the unexpected week-long
closure. The defendant claimed that such action was unreasonable as he had not
known that the delayed return of the crankshaft would necessitate the mill’s closure and
thus that the loss of profit failed to satisfy the test of remoteness. Hence, for the
outcome of this case, the court stated that a party could only successfully claim for
losses from breach of contract where the loss is reasonably viewed to have resulted
naturally from the breach. As Baxendale had not reasonably foreseen the
consequences of delay and Hadley had not informed him, therefore he was not liable for
the mill’s lost profits. From this case, damages may be awarded for any loss which was
in the contemplation of both parties as the probable result of the breach, specifically
special damages. Special damages refers to irregular damages such as physical
injuries during a breach of contract. It covers losses besides contractual losses, these
damages might not have been directly caused by the breach of contract. For example,
loss of business opportunities, damage or harm to business reputation and loss of
operating revenue.
In conclusion, the court will determine the damages that Farhan is entitled to
claim based on 2 main techniques which are by determining the remoteness of the
damages and by measuring the damages.
