Facts of Case: ATI entered into contract with UpScale Bank Ltd to provide senior securities specialist to give lecture to a group of employees working in its securities department on 1st November 2017. UpScale Bank informed ATI Ltd on 25th October that they had cancelled the lecture due to internal issues and no longer required their services. Meanwhile MoneyPeople Ltd approached ATI to deliver same lecture on the same say, to which ATI agreed but charged a slightly higher amount to them i.e. £12,000. Now ATI requested to UpScale for the compensation of £9000 and claimed that it was due if the contract had not been cancelled.
Legal Provisions
Majority of commercial agreements include express provisions for remedies such as in a contract it is presumed or might be in express form within the contract that all the terms governing the contractual association have been encompassed by the parties to the contract in express terms within the contract. The parties might intend to relocate rights and remedies under law which are not specifically mentioned within the contract. The main aim of the cumulative clause is to guarantee the rights of the parties to be specifically provided in the agreement along with the rights provided by the general law. The remedies that are specifically desired by any of the party should specifically be preserved in the contract.
The damages for loss in breach of contract claim are accessible as right not like the equitable remedies of particular performance and injunction compensations for the damage incurred due to breach of contract claim that are available as right to the party suffering loss. The law provides the right to the innocent party that they can claim compensations from the party that has breached the contract and the damages might be nominal or substantial as per the situation.
The nominal damages are granted when innocent party does not suffer any loss due to breach by the other party while substantial damages are granted for loss incurred due to breach by the other party in the form of monetary compensation. In order to obtain substantial damages from the party breaching the contract, the innocent party is required to exhibit that they have suffered loss due to the breach which is termed as ‘remoteness’ as well as the amount of their loss which is termed as ‘measure’.
It becomes the liability of the party in breach of contract to claim that the innocent party has been unsuccessful in mitigating their damage and that they are no more responsible for the loss. As ATI entered into contract with UpScale Bank and scheduled the lecture by their specialist, the other party cancelled it just before 7 days of the lecture date. As ATI was relying on UpScale for the accomplishment of contract by them, the former made so many preparations and breach by them resulted in loss as they have to give the contract to other party in higher rates because of the preparations already made by them. So, ATI Ltd is eligible for substantial compensation from UpScale Bank.
The ‘remoteness of loss’ means that the innocent party might recover damages for the loss suffered by them only if the loss has occurred due to the breach of contract. Thus, the aim of such a damage is to place the innocent party in a situation that they could have the contractual obligations to be performed properly. In Hadley v Baxendale [1854], the principle of remoteness has been explained and it provides information about the losses that are recoverable, which include the losses flows naturally from the breach as well as the losses in observation of the parties during the formation of contract in the form of probable results of breach.
If the loss underwent by the innocent party does not exist in any of the above mentioned categories, then it is considered as too remote and cannot be recovered by the party in breach of contract. This rule in Hadley v Baxendale [1854] has been interpreted in a manner that the loss within the reasonable contemplation can only be recovered. ATI Ltd suffered loss due to the contract cancellation by the UpScale Bank. They had to arrange for the lecture at higher costs as they have already made preparations so the loss has occurred due to the natural breach of contract.
The ‘measure of damages’ is a technique to calculate the compensations entitled to the innocent party and it includes loss of bargain as well as expectation loss. The purpose of the court is to place the innocent party in the situation they would have been if the contract had been performed appropriately. Generally, the court utilizes one of the methods to assess the loss i.e. difference in value or cost of cure.
In some cases, reliance loss might also be sought where the loss of expectation cannot be proved and its goal is to place the innocent party in the situation, they would have been, if the contract had never been entered into. It involves the indemnity for their extra expenses due to reliance on the contract. Similarly, ATI Ltd can claim for cost of cure as well as reliance loss because it was reliant on the UpScale Bank for the lecture to be given by the specialist from their organization. When the contract was cancelled by UpScale, they had to arrange the lecture even at higher costs. So, it becomes the responsibility of UpScale Bank to recompense the suffering party and claim made by ATI Ltd is completely valid.
Conclusion
Therefore, ATI should be entitled to the claim even if they had turned down the contract of the other party because it was due if the lecture had not been cancelled by UpScale. It made contract with the other party to recover from the loss incurred to them by UpScale so UpScale should provide damages to ATI Ltd.
ATL Claim Likely to Succeed or Not
Facts of Case: ATL entered into contract with WriteIt Ltd for supply of 50 projectors and 50 printers on 1st November 2017 and the price of contract was £2000. It was in the knowledge of WriteIt that ATL generally utilizes projectors and printers for the purpose of business presentations but it was not aware that ATL has a special contract also to supply 40 projectors and 40 printers to a newly created government department in £15000. Due to the failure of WriteIt to supply the projectors and printers, ATL lost its general business of cost £5000 along with the special contract. ATL claims £25000 from WriteIt for the loss of general contract, special contract and other troubles suffered by the company due to breach of contract by WriteIt.
Legal Provisions
It is the responsibility of the party in breach of contract to claim that the innocent party has been unsuccessful in mitigating the damages because of which, the defendant breaching the contract cannot be held liable for the contract. ATL has not informed WriteIt about the special contract they have entered into. The contract between both the parties was related to the general business purpose and WriteIt was not aware of the special contract by the ATL.
The innocent party cannot recuperate for the damage incurred to them that they could have escaped by taking sensible steps. It is articulated as the responsibility of the innocent party to mitigate the loss and it is not applicable to the actions for the price of goods delivered but for the agreed amount and is not considered as an action for the compensations. However, there is no duty to alleviate before occurrence of breach in actual, the innocent party should not exaggerate the loss incurred to them because it is the accountability of the defendant to demonstrate that the plaintiff has been unsuccessful to alleviate their damages.
In this case, Writeit has failed to perform the contract and ATL had to suffer loss due to this reason. However, they have suffered loss, they cannot exaggerate the loss and claim for the damages for loss incurred due to special contract. Furthermore, it is in the knowledge of ATL as well that WriteIt was not aware about their special contract so, why would they compensate for the loss caused due to it.
Furthermore, Sale of Goods Act also offers the penalties of dispute occurring in contracts for the sale of goods. The supplier failed to supply the goods in a reasonable time period and liable for breach of contract. The contract was entered into between both the parties for the projectors and printers and the supplier failed to perform the contract.
Under the Consumer Rights Act 2015, the consumer services must be delivered with sensible maintenance and ability. It is considered as express provision in a contract that the price being paid for the service needs to be reasonable and the service is required to be performed within reasonable time period. It means that the service is considered to be as non-compliant if it is not executed with sensible care and ability and is not executed in a manner as informed about the service and not within desired time period.
The ‘measure of damages’ provides assessment of entitlement of compensations to the innocent party and it includes loss of bargain as well as expectation loss. The objective of the court is to place the innocent party in the situation they would have been, if the contract had been performed in a proper manner. The court can utilize either difference in value or cost of cure. The reliance loss can also be sought where the loss of expectation cannot be proved and its purpose is to place the innocent party in the situation, they would have been, if the contract had never been entered into. As mentioned earlier that it involves the security for their extra expenses due to reliance on the contract.
WriteIt entered into contract with ATL but failed to perform the contract. It can be considered to be as the breach of contractual obligations by the supplier due to which ATL had to suffer loss. However, they had entered into special contract with another party to sell the items for profit, WriteIt was not at all aware about the same. Due to the failure of WriteIt to perform their contract, ATL had to suffer extra loss on special contract as well as in general contract with WriteIt. It becomes the liability of the supplier to pay the damages to ATL. ATL wishes to claim £25000 from WriteIt for the overall loss incurred to them. WriteIt is liable to pay for the loss occurred in general business along with the troubles caused to ATL of £5000 but not liable to pay the loss caused to ATL due to their non-fulfillment of contract of £15000.
The supplier can be held liable under Sale of Goods Act because of their failure to supply the items to ATL. The supplier can be held liable for breach of contract and should compensate to the ATL. However, ATL should claim for the damages but should not exaggerate the amount of compensation. Neither WriteIt was aware of the other contractual obligations of ATL with other party nor they be held liable for compensating the loss incurred to ATL due to that reason.
Conclusion
Therefore, the claim of ATL is likely to succeed partially as they have to bear the loss incurred to them due to their non-fulfillment of the special contract with other parties. So, ATL should have to bear the loss of £15000 as they breached the contract with the government department to whom they were supplying projectors and printers.
References
Allen & Overy, ‘Basic Principles of English Contract Law’ (A4id.org, 2018) <https://www.a4id.org/wp-content/uploads/2016/10/A4ID-english-contract-law-at-a-glance.pdf> accessed 12 December 2018
AVDR, ‘English Contract Law’ (Avdr.nl, 2017) <https://www.avdr.nl/docs/training1805290/Power%20point%20academie%2017.pdf> accessed 12 December 2018
Cotton S, ‘Remedies For Breach Of Contract’ (Uk.practicallaw.thomsonreuters.com, 2018) <https://uk.practicallaw.thomsonreuters.com/7-101-0603?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1> accessed 12 December 2018
Crown, ‘Unfair Contract Terms Explained’ (Assets.publishing.service.gov.uk, 2015) <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/450410/Unfair_Terms_Explained.pdf> accessed 12 December 2018
Department for International Development, ‘Standard Terms And Conditions – Service Contracts’ (Assets.publishing.service.gov.uk, 2018) <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/457696/DFID_Standard_Contract_Section_2_Standard_Terms_and_Conditions-Sept15.pdf> accessed 12 December 2018
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Legislation.gov.uk, ‘Consumer Rights Act 2015’ (Legislation.gov.uk, 2015) <https://www.legislation.gov.uk/ukpga/2015/15/pdfs/ukpga_20150015_en.pdf> accessed 12 December 2018
Legislation.gov.uk, ‘Sale of Goods Act’ (Legislation.gov.uk, 1979) <https://www.legislation.gov.uk/ukpga/1979/54/pdfs/ukpga_19790054_en.pdf> accessed 12 December 2018
Parry S, ‘The Sanctity of Contracts in English Law’ (Socialsciences.exeter.ac.uk, 1959) <https://socialsciences.exeter.ac.uk/media/universityofexeter/schoolofhumanitiesandsocialsciences/law/pdfs/The_Scanctity_of_Contracts_in_English_Law.pdf> accessed 12 December 2018
Pearce DR Halson, ‘Damages for Breach of Contract: Compensation, Restitution and Vindication’ (2008) 28 Oxford Journal of Legal Studies
Scottish Law Commission, ‘Discussion Paper on Remedies for Breach of Contract’ (Scotlawcom.gov.uk, 2017) <https://www.scotlawcom.gov.uk/files/3114/9968/2972/Discussion_Paper_on_Remedies_for_Breach_of_Contract_DP_No_163.pdf> accessed 12 December 2018
University of London, ‘Introduction and General Principles’ (London.ac.uk, 2018) <https://london.ac.uk/sites/default/files/study-guides/contract-law-study-guide.pdf> accessed 12 December 2018.
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