CONTRACT [30] ONLY
TUTORIAL 4: REMEDIES 2




Learning Objectives:

By the end of this tutorial students should be able to:
Understand the different interests protected by contract damages
Explain the way in which expectation loss is calculated in commercial cases involving loss of profits
Appreciate the role of the rules on remoteness of damage
Explain the duty to mitigate
Understand the function of injunctions and specific performance in providing a remedy for breach of contract

ESSENTIAL READING:
Review the lecture (PPT slides, your own notes)

Textbook
O'Sullivan and Hilliard, Ch 17.67-17.109 and Ch 18
Cases
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528
This is an  English contract law  case on the  remoteness  of damage principle.
Facts
Newman Industries Ltd were meant to deliver a boiler for Victoria Laundry (Windsor) Ltd. The delivery was five months - 20 weeks late . As a result of not having enough laundry capacity , Victoria Laundry lost a lucrative cleaning contract from the  Ministry of Supply (government) . Victoria Laundry sued for the ordinary profit that it had forgone through not having the boiler on time. The question was whether it could also claim the extraordinary profit it would have made, had it been able to take advantage of the lucrative Ministry of Supply contract. The delivery of the boiler was delayed in breach of contract and the claimants brought an action for the loss of profit which the boiler would have made during the period in which the delivery was delayed. The claim contained a sum for a particularly lucrative contract which they lost due to the absence of the boiler.

Judgement
The Court of Appeal held that Newman Industries only had to compensate for the ordinary , not the extraordinary loss of profits. He distinguished (at p 543) losses from "particularly lucrative dyeing contracts" as a different type of loss which would only be recoverable if the defendant had sufficient knowledge of them to make it reasonable to attribute to him acceptance of liability for such losses. The vendor of the boilers would have regarded the profits on these contracts as a different and higher form of risk than the general risk of loss of profits by the laundry. Although it was known that the defendant was aware that they wished to put it to immediate use and knew the nature of their business.
The court distinguished the approach to be taken in claims for damages under contract and tort. In cases of breach of contract the aggrieved can only recover such loss actually resulting as was at the time of the contract reasonably foreseeable as likely to result from the breach. In tort, the question whether loss was reasonably foreseeable is addressed to the time when the tort was committed. In contract, the question is addressed to the time when the parties made their contract. Where knowledge of special circumstances is relied on, the assumption is that the defendant undertook to bear any special loss which was referable to those special circumstances. It is assumed too that he had the opportunity to seek to limit his liability under the contract for ordinary losses in the event that he was in breach of it. Asquith LJ said: ‘1: It is well settled that the governing purpose of damages is to put the party whose rights have been violated in the same position, so far as money can do so, as if his rights had been observed: (Sally Wertheim v..Chicoutimi Pulp Company [1911] AC 301. This purpose, if relentlessly pursued, would provide him with a complete indemnity for loss de facto resulting from a particular breach, however improbable, however unpredictable. This, in contract at least, is recognised as too harsh a rule : hence,  2: In cases of breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach,  3: What was at that time reasonably so foreseeable depends on the knowledge then possessed by the parties or, at all events, by the party who later commits the breach.' and  ‘But to this knowledge, which a contract breaker is assumed to possess whether he actually possesses