CONTRACT LECTURE 14 REMEDIES PART 2
C STRICKLAND
Track/slide 1
In a previous lecture we considered the main remedy for breach of contract, that is, damages.
In this lecture, we consider other remedies for breach of contract, namely:
i. an agreed sum
ii. specific performance
iii. injunctions, and,
iv. quantum meruit.
We shall start then with an agreed sum.
Track/slide 2
The claim for an agreed sum is a common law remedy so is available as or right. It usually means that the claimant is suing for the PRICE of the contract. It differs from a claim in damages in that:
i. there is no need to prove loss, and so
ii. there is no need to worry about remoteness of damage nor to
iii. mitigate loss
This is because when suing for the price the claimant is basically just enforcing a DEBT. Although, should the claimant want to, they can ask for the agreed sum and also any loss over and above the price.
We might ask, why would anyone sue for the price only?
Well, as we have mentioned, there is no need to prove loss or worry about mitigation and remoteness. In addition, the amount being claimed is known – it is a ‘liquidated sum’ - (whereas the amount of damages is for the court to decide) and the case can get through court quite quickly.
Track/slide 3
These rules can however sometimes result in what appears to be an abuse of the innocent party’s ‘rights’ following breach of contract. This can be seen in the case of White and Carter (Councils) Ltd v McGregor 1962, a House of Lords case.
In this case the appellants who were advertising contractors had made a contract with the respondent, who owned a garage, to display adverts for the garage on council litter-bins for a period of 3 years. On the same day that the deal was made for renewal for a further 3 years of the advertising contract, the defendant said he had changed his mind and didn’t want to go ahead. This amounted to an anticipatory breach of contract. Despite this, the advertisers decided to go ahead with the contract and displayed the adverts for the 3 years and then brought an action for the ‘agreed sum’ for breach of contract.
In the House of Lords it was held that the advertisers had been entitled to carry out the contract and could recover the full contract price.
Lord Reid stated that in the case of an anticipatory breach the innocent party may
either accept the repudiation and sue for damages
or
he may affirm the contract and then sue for an agreed sum, as the plaintiffs did here.
Lord Reid stated that:
i. since this was an action for an agreed sum, the contract price, the
advertisers had no duty to try to mitigate their loss, by for example
accepting the end of the contract and then trying to get another one.
He also said that,
ii. continued performance of the contract despite the anticipatory
attempt at breach was permitted so long as the plaintiffs had a
‘legitimate’ interest in continuing with the contract, be this
a financial interest or other interest. If there is no legitimate
interest in continuing with the contract the plaintiff should accept
the breach and sue for damages. His Lordship stated:
‘Here the respondent did not set out to prove that the appellants had no
legitimate interest in completing the contract and claiming the contract
price rather than claiming damages; there is nothing in the findings of fact
to support such a case, and it seems improbable that any such case could have
been proved. It is, in my judgment, impossible to say that the appellants should
be deprived of their right to claim the contract price merely because the benefit
to them, as against claiming damages and re-letting their advertising space, might
be small in comparison with the loss to the respondent: that is the most that could
be said in favour of the respondent. Parliament has on many occasions relieved
parties from certain kinds of improvident or oppressive contracts, but the
common law can only do that in very limited circumstances.’
His Lordship further said that
iii. continued performance is only possible if this can be achieved
without the co-operation of the other side – and clearly in this
case this was possible.
The actions of the advertisers do seem a little bizarre in this case and the case has been criticised – for instance, it has been said that even in an action for an agreed sum the plaintiffs should be required to mitigate.
Track/slide 4
We can now consider the question of whether interest can be charged for late payment of the agreed sum.
At common law the position would appear to be that the debtor only has to pay the actual price of the contract without interest. However, this common law position is usually avoided by either:
i. an express term in the contract stating that interest will be charged
for late payment or
ii. application of the Late Payment of Commercial Debts
(Interests) Act 1998 though this only applies to sale and supply
contracts where both sides are acting ‘in the course of a business’.
Track/slide 5
We can now move on to consider specific performance.
First, we should remember that ‘damages’ for breach of contract are the main remedy for breach of contract. Specific performance is rare, other than in contracts for the sale of land.
An order of specific performance is an equitable, and therefore discretionary remedy, that compels the actual performance of the contract. If the performance does not take place this amounts to contempt of court for which the person may be sent to prison or fined. The court may also sequester property.
That the order of specific performance is only available as a ‘secondary’ remedy to damages is seen by Anson as a good thing because:
i. when specific performance is ordered it relieves
the claimant of any duty to try to mitigate loss, and,
ii. it is less necessary these days since the courts are now better
at assessing the amount of damages that can be awarded to
compensate the innocent party
Track/slide 6
Generally then, specific performance is only available where:
i. damages are not an adequate remedy,
ii. he who comes to equity comes with clean hands,
iii. the contract is not one for personal services,
iv. the contract would not take a lot of supervision to enforce, and
v. where the performance to be enforced is clearly ascertainable.
Track/slide 7
First then we shall consider the point that specific performance is only available where damages are not an adequate remedy. However, these days the
scope of when it may be ordered is wider in that it may be
ordered where it will ‘do more perfect and complete justice than
an award of damages’. The key case here is Beswick v Beswick 1968.
It was Lord Reid in the House of Lords that awarded specific performance
to achieve a ‘just result’ in the circumstances of the case. Lord Pearce
granted specific performance because he said it was a more ‘appropriate’
remedy. The extent to which this case means that specific performance
is ‘generally available’ in unclear. Professor Treitel has suggested that
whether or not it is granted depends on the ‘appropriateness’ of it in the
circumstances of the case in hand.
Let us consider what happened in this case.
Peter Beswick operated a coal round and made a contract with his nephew that
he would transfer the business to the nephew. One of the stipulations in the
contract was that when Peter died, the nephew would pay Peter’s widow
£5 a week for the rest of her life. When Peter died, the nephew only made one
payment of £5 and then stopped.
The widow sought to enforce the payments of the weekly £5 in her capacity
as administratix of Peter’s estate and in her personal capacity. She was successful
in gaining an order of specific performance from the House of Lords rather than
damages. We can see why below.
Track/slide 8
Lord Reid stated:
‘Applying what I have said to the circumstances of the present case, the respondent in her personal capacity has not right to sue, but she has a right as administratix of her late husband’s estate to require the appellant to perform his obligation under the agreement. He has refused to do so and he maintains that the respondent’s only right is to sue him for damages for breach of his contract.
If that were so, I shall assume that he is right in maintaining that the administratix could then only recover nominal damages because his breach of contract has caused no loss to the estate of her deceased husband.
If that were the only remedy available the result would be grossly unjust. It would mean that the appellant keeps the business which he bought and for which he has only paid a small part of the price which he agreed to pay. He would avoid paying the rest of the price, the annuity to the respondent, by paying a mere 40 shillings damages...
The respondent ‘s second argument is that she is entitled in her capacity of administratix of her deceased husband’s estate to enforce the provision of the agreement for the benefit of herself in her personal capacity, and that a proper way of enforcing that provision is to order specific performance. That would produce a just result, and, unless there is some technical objection, I am of opinion that specific performance ought to be ordered. For the reasons given by your Lordships, I would reject the arguments submitted for the appellant that specific performance is not a possible remedy in this case.’
Track/slide 9
Lord Pearce disagreed with Lord Reid on the amount of damages that would be available for breach of contract but agreed on the availability of specific performance when he stated:
‘In the present case I think that the damages, if assessed, must be substantial. It is not necessary, however, to consider the amount of damages more closely since this is a case in which, as the Court of Appeal rightly decided, the more appropriate remedy is that of specific performance.
the adminstratix is entitled, if she so preferes, to enforce the agreement rather than accept its repudiation, and specific performance is more convenient than an action for arrears of payment followed by separate actions as each sum falls due. Moreover, damages for breach would be a less appropriate remedy since the parties to the agreement were intending an annuity for a widow; and a lump sum of damages does not accord with this. And if (contrary to my view) the argument that a derisory sum of damages is all that can be obtained be right, the remedy of damages in this case is manifestly useless.
The present case presents all the features which led the equity courts to apply their remedy of specific performance. The contract was for the sale of a business. The defendant could on his part clearly have obtained specific performance of it if Beswick senior or his adminstratix had defaulted. Mutuality is a ground in favour of specific performance.’
However, the court will refuse the order is they consider that the award of damages will put the plaintiff in as beneficial a position as if the contract had been specifically performed.
Track/slide 10
Specific performance is also only available on the basis that
‘he who comes to equity comes with clean hands’ – one has to
remember that specific performance is an equitable remedy and so equitable maxims apply. So, the court may refuse specific performance if it thinks the claimant’s behaviour has been
‘tricky’ or ‘unfair’.
This equitable point was explored in Quadrant Visual Communications Ltd v Hutchinson Telephone (UK) Ltd 1993. The plaintiff’s appeal was against an order refusing specific performance of a contract and payment of £1.2263 million with interest. In the contract it specified that the sum was to be payable ‘free from any equity, cross claim, set off or other deduction whatsoever’. It was held that the words ‘any equity’ covered the concept of coming to equity with clean hands. However, it was also held that whilst this part of the contract might bind the parties to the contract, once the issue was before the court, then when specific performance has been requested, the court’s discretion to award it or not could not be fettered by reference to the contents of the contract. Otherwise, the court would simply be rubber stamping the contract. The appeal was dismissed.
Track/slide 11
Specific performance is also only available if the contract is not one for personal services – if it is a contract for personal services then the courts are reluctant to order specific
performance as it would be an infringement of personal liberty.
The case of Page One Records Ltd v Britton 1968 shows the relationship between specific performance and injunctions [that usually order someone not to do something]. In this case
the plaintiffs, Page one records, were the managers of the pop group ‘the Troggs’. In the contract between them and the Troggs it stated that the pop group would not employ anyone else as their manager for the 5 years of the life of the contract. When things turned sour between the two, the group sought to employ a new manager, Harvey Block Associates Ltd. Page one records therefore sought an injunction preventing them from doing this. The injunction was not granted because if it had it would have forced the group to keep page one as their manager and they had lost faith in them. Thus, the granting of the injunction would have had the same effect as if the court had ordered specific performance of the 5 year contract and it would not do so for such a personal service.