Commercial Litigation: Damages and Other Remedies for Breach of Contract

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A Thorogood Special Briefing

COMMERCIAL LITIGATION The Consequences of Breach of Contract – Damages and Other Remedies

Rachel Burnett

Inside front cover


COMMERCIAL LITIGATION The Consequences of Breach of Contract – Damages and Other Remedies

Rachel Burnett

Other Titles from Thorogood Publishing EU Employment Law – A Practical Guide Patricia Leighton

Discrimination Law and Employment Issues David Martin

Applying the Employment Act 2002 Susan Singleton

Effective Recruitment – A Practical Guide to Staying Within the Law Patricia Leighton and Giles Proctor

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© Rachel Burnett 2011

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying, recording or otherwise, without the prior permission of the publisher. Rachel Burnett has asserted her right under the Copyright, Designs and Patents Act 1988 to be identified as the author of the work.

Robert Mecrate-Butcher

Reviewing and Changing Contracts of Employment Annelise Phillips, Paula Rome and Thomas Player

Surviving a Corporate Crisis Paul Batchelor

Freedom of Information Act in Practice: 2008 Susan Singleton

Transforming HR Ian Hunter and Jane Saunders

This Special Briefing is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than in which it is published and without a similar condition including this condition being imposed upon the subsequent purchaser. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author or publisher.

Commercial Contracts – Legal Principles and Drafting Techniques Rachel Burnett

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A CIP catalogue record for this Special Briefing is available from the British Library. ISBN: 1854187 481 9781854187 482 Printed in Great Britain by Marston Digital

The author

Rachel Burnett, Solicitor, BA Hons, DTech hc, CITP, FBCS, ACIL Rachel Burnett’s career combines both a technical and business background within the IT industry and in legal practice. Originally an IT professional after graduating from Exeter University, she worked for large corporate organisations in system development and project management. She qualified as a solicitor and joined one of the first niche IT law practices. Rachel is Head of the IT/IP team and a Partner at Paris Smith LLP solicitors, following several years as a partner in City of London law firms. Rachel has been awarded an Honorary Doctorate in Technology from Southampton Solent University, and is an Associate Lecturer in law with the Open University. Rachel was President of the British Computer Society 2007-2008. She is a livery member of the City of London Information Technologists’ Company, and a member of the Law Society of England and Wales. Rachel is author of IT Contracts: Effective Reviewing, Negotiating and Drafting, and Commercial Contracts: Legal Principles and Drafting Techniques, both published by Thorogood. She is author of Outsourcing IT: The Legal Aspects (Gower 2009) and co-author of Drafting and Negotiating Computer Contracts (Tottel 2005), both in their second editions, and author of the IT Law Guides series published for the Institute of Chartered Accountants. She writes on IT law for journals and professional publications, including as a regular columnist for the IMIS Journal and BCS IT Now, and is an experienced presenter both in the UK and abroad. [email protected]

A THOROGOOD SPECIAL BRIEFING

iii

Contents The author ...................................................................................................iii

1

INTRODUCTION

1

Contract breach and remedies ...................................................................2 Contract or tort ............................................................................................3 This Report ...................................................................................................4

2

ALTERNATIVES TO LITIGATION FOR BREACH OF CONTRACT

5

Contractual alternatives to litigation .........................................................7 Procedural alternatives to litigation ........................................................11

3

BASIC PRINCIPLES

15

Repudiatory breach ...................................................................................16 Anticipatory breach...................................................................................17 Risks for the innocent party .....................................................................17 Contractual right of termination..............................................................19 Basis for damages .....................................................................................20 Objective of damages ................................................................................20 Loss or damage suffered...........................................................................21 Causation ....................................................................................................22 Public policy ...............................................................................................22 Limitation....................................................................................................23 Foreseeability of loss .................................................................................23 Expectation loss .........................................................................................25 Reliance loss ...............................................................................................25


v

COMMERCIAL LITIGATION: THE CONSEQUENCES OF BREACH OF CONTRACT – DAMAGES AND OTHER REMEDIES

4

MEASURING DAMAGES

27

Compensation as if the contract had been performed..........................28 Intervening events .....................................................................................29 Indirect loss or damage.............................................................................29 Time for assessment .................................................................................30 The rule against double counting ............................................................31 Foreign currency .......................................................................................31 Deposits and part payments ....................................................................32 Liquidated damages ..................................................................................32 Mitigation ...................................................................................................33 Contributory negligence...........................................................................34

5

SPECIFIC KINDS OF AWARDS

35

Loss of a Chance ........................................................................................36 Disappointment or mental distress..........................................................37 Loss of amenity ..........................................................................................40

6

OTHER REMEDIES

43

Claim for an agreed sum...........................................................................44 Restitution...................................................................................................45 Equitable remedies ....................................................................................48 Specific performance ...............................................................................49 Injunctions ..................................................................................................49 Rescission ...................................................................................................51 Rectification................................................................................................53 Declaratory judgment ...............................................................................55 Account of profits ......................................................................................55

APPENDIX LIST OF CASES AND STATUTES

57

List of cases cited .......................................................................................58 List of statutes mentioned.........................................................................60

vi



Chapter 1 Introduction Contract breach and remedies Contract or tort This Report


Chapter 1 Introduction The law on remedies for breach of contract is technical and complex, built mainly from legal precedent. This Report aims to provide advice, guidance and remedies for those who deal directly with contracts and contractual problems (in businesses and other organisations) as well as for those whose work is affected by the contents of a contract. It is relevant for drafting and negotiating contract terms as well as for problems arising from performance of the contract.

Contract breach and remedies A breach of contract occurs when one of the parties to a contract fails to carry out its obligations as set out in the contract (in other words, it has broken the terms of what the parties agreed). The contract itself may contain terms entitling the defaulting party to put matters right by rectifying the breach, and it may choose to do this. If not, there are various legal ‘remedies’ available to the party injured by the breach, who may take legal action accordingly to obtain redress. ‘Remedies are the law’s response to a wrong (or, more precisely, to a cause of action).’ 1 Most frequently this will be to obtain financial compensation, but there are other remedies applicable in certain circumstances. The remedies available, the kinds of damages that may be claimed, and the principles establishing how much compensation the innocent party is entitled to claim, have largely developed (and continue to develop) through precedents set by the courts from previous rulings. The current trend in the courts is to develop judgments according to the actual facts of the particular case rather than to develop and apply broad principles. The principles are described in this Report, illustrated throughout by relevant cases, and sometimes with apposite quotations from the actual judgments.

1

2

Mr Justice Roth in Luxe Holding Ltd v Midland Resources Holding Ltd [2010] EWHC 1908 (Ch)


1 INTRODUCTION

Contract or tort The focus of this Report is on remedies available for breach of contract. Contractual obligations are entered into voluntarily by the parties. The law of tort, another category of law, imposes obligations on the parties without any option as to compliance. Tort covers a wide range of law, which is different from contract law, and in turn both of these categories are different from criminal law. In tort, injury, loss or damage may be caused by breach of a legal duty or in contravention of a right conferred by law, other than through breach of contract, giving rise to a right to recover damages. There must be a legal right that has been infringed as well as damage suffered. Remedies may be available in tort concurrently with contract. In some commercial claims the same set of facts may be argued on the basis either of tort or of contract. There may be tactical reasons for bringing a claim under one heading rather than another, where there are differences in the application of the law. Lord Goff of Chieveley said: ‘…given that tort duty is imposed by the general law, and the contractual duty is attributable to the will of the parties, I do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is most advantageous to him’.2 In this case, the time limit within which the action had to be brought was longer for tort than for contract, and the parties therefore wished to sue for negligence, rather than in contract. In the context of commercial contracts, the kinds of torts that may arise and cause loss or damage are: •

Negligence as legally defined

•

Torts affecting goods – damage, destruction or misappropriation

•

Torts affecting land – damage or deprivation of use

•

Torts causing personal injury or death

•

Economic torts – such as negligent misstatements that cause economic loss, or infringement of intellectual property rights, such as patents or trade marks

•

Breach of a statutory duty imposed by legislation

•

Misrepresentation

In some situations the duty in tort may be wider than in contract, and therefore a claim would be easier to prove in tort. For example, in a case on the tort 2

Henderson v Merrett Syndicates [1994] 3 All ER 506


3


of a negligent misstatement, it was stated that a duty of care would arise irrespective of any contractual relationship in certain circumstances.3 But generally under English law, breach of contract is easier to prove than negligence. In certain cases damages may be sought either under contract or in tort. For example, if goods are delivered and are of unsatisfactory quality and do not meet the agreed specification, there will be a claim in contract. There could also be a claim for negligence under the law of tort. The tendency recently in commercial litigation, where claims may be brought on either basis, is that the courts will focus on the similarities rather than the differences.

This Report The cases discussed in this Report are principally commercial, and therefore between companies or other commercial organisations. The claimant and defendant will normally be referred to neutrally, that is as ‘it’ rather than ‘he’ or ‘she’, unless there is an individual person concerned. ‘Claimant ‘has replaced ‘plaintiff’ in recent terminology. ‘Claimant’ will be the term normally used in this Report. In the Chapters that follow: •

Chapter 2 discusses contractual and procedural alternatives to litigation.

•

Chapter 3 considers how contracts may be terminated following certain kinds of breaches, and the basic principles involved in awards of damages for breach of contract.

3

4

•

Chapter 4 looks at the factors concerned in assessing damages.

•

Chapter 5 describes specific kinds of damages awards.

•

Chapter 6 investigates other remedies for breach of contract.

By Lord Morris of Borth-y-gest in Hedley Byrne & Co v Heller & Partners Ltd [1964]AC 465 (HL)



Chapter 2 Alternatives to litigation for breach of contract Contractual alternatives to litigation Procedural alternatives to litigation


Chapter 2 Alternatives to litigation for breach of contract In most cases a contract will be carried out or ended without any breach by either party. The most satisfactory conclusion to a contract is that each party carries out its obligations and receives its rights. For example, a supplier provides a single delivery of goods and its customer pays for them, as specified. The contract has been performed. It may continue for so long as the obligations and rights of the parties stay in force. However, a contract may be brought to an end or, technically, ‘discharged’, in a number of ways: performance, expiry, further agreement, ‘frustration’, or by its contractual terms, as well as on account of certain types of breaches. There may be a date set out in the contract itself fixing its duration, after which it will have expired and no longer be in effect, such as a contract for services to be provided over a period of time. The parties may agree to end the contract. This agreement must be supported by ‘consideration’, one of the essential elements of a legal contract, that is to say that there is some bargain or reciprocity between the parties – a price paid by one party for a promise by the other. Where both parties still have rights and obligations to carry out, relinquishing those rights will constitute the consideration. But where one party has carried out its side of the bargain, and is releasing the other party from part or all of its obligations, it must be getting something out of the agreement, rather than making a gratuitous promise, for there to be consideration. Otherwise the release must be in the form of a deed. A contract is said to be ‘frustrated’ if a supervening event makes performance of the contract impossible or radically different from what the parties originally anticipated. The event must be quite beyond what the parties intended in entering into the agreement, making it impossible to carry out. A contract will not be frustrated just because it has become more difficult to perform or because of hardship or inconvenience to either party. The contract itself is likely to contain explicit provisions under which it may be brought to an end, under specified conditions at the option of one of the parties,

6


2 ALTERNATIVES TO LITIGATION FOR BREACH OF CONTRACT

for instance if the other party becomes insolvent. The contract may also specifically permit a party to terminate the contract in the event of its breach by the other party, perhaps for particular kinds of breaches, which may be described as ‘material’ or ‘major’ or ‘continuing’ or ‘multiple’, to avoid termination for trivial defaults. This will be a contractual right of termination. ‘Termination’ means that the injured party is no longer required to perform its obligations under the contract. It is not that the contract is treated as if it had never existed. The latter is technically ‘rescission’ – the contract is rescinded. Not all breaches allow the innocent party to terminate the contract. Breach of contract by one party that causes loss to the other party will entitle that other party to bring an action for damages – financial compensation for loss suffered – and possibly other remedies depending on the nature of the breach. If the breach consists of a condition – a term in a contract that is so fundamentally important that the whole transaction would be drastically affected if it is not carried out – then the contract may be treated as terminated by the injured party.

Contractual alternatives to litigation If one party is in breach and there is no agreement on resolving the problem, the party not at fault may choose to litigate to obtain redress for the loss or damage suffered. However, provisions may be included in the contract to allow for management of any conflicts that arise during the contract relationship, in an attempt to avoid formal means of dispute resolution.

Indemnities An indemnity is a promise by one party to pay for loss or damage or to keep the other party free from loss or damage in defined circumstances. The essence of an indemnity is taking on the liability to make good the loss. It is the foundation of the institution of insurance. The party giving the indemnity takes responsibility for making good any loss caused by a particular obligation. A contractual indemnity may therefore provide for compensation in specific circumstances, sometimes but not always subject to upper financial limits. This often occurs where there is a risk that a third party will suffer loss. Thus if a provider is processing personal data on behalf of its customer, it may indemnify the customer in their agreement in respect of any


7


loss or damage caused to the data subjects whose personal data is being processed, for whom the customer has legal obligations. It is a contractual means of allocating the risk to the party giving the indemnity.

Compensation for performance failures An advance estimate may be made of compensation for a foreseeable failure, to be paid by the party at fault. For example, for any delay in meeting a completion date for implementing a system, the supplier may agree that the contract should state that specific sums should be paid for each week of delay until actual completion, with an upper limit of amount or number of weeks. The sums are known as ‘liquidated damages’ and they are payable to the customer on account of the inconvenience and disruption caused. For this contractual purpose, they should also be limited in extent, by number of weeks allowable as delay, and/or a ceiling amount. The customer will not want to terminate the contract if completion will be delayed but achievable. But the customer must reserve the right to take more drastic action if the point is reached when the completion date moves ever further away, and the compensation is no longer adequate. Another example where compensation may be specified in advance is for service provision, where service level agreements may be negotiated for agreed levels of services and compensation in the event of failure to meet those key service levels. Liquidated damages are discussed further in Chapter 4.

Retention of title In standard supply and purchasing agreements, provision is often made for title to the goods to pass on delivery, but English law on ‘retention of title’ effectively allows a supplier to hold on to title until payment for the products in question has been received in full, provided that the clause is clear and unequivocal. This concept is a reasonable form of security in return for extending credit payment terms. The risk is that the customer becomes insolvent before paying for the goods. And if title has passed, the supplier will have lost both the products and the payment for them. The purpose of the retention of title clause in a contract is to enable goods to be repossessed if they are not paid for. The supplier wants to establish a position whereby it is not merely an ordinary unsecured creditor in respect of unperformed contractual obligations, and that its goods are not available for disposal by a receiver or liquidator.

8



Where a customer is a reseller or other distributor who has sold goods on for which the supplier has not been paid, the law gives innocent third party purchasers good title. Some suppliers then attempt to establish prior rights to the proceeds of such sales. This is legally possible, but it involves cumbersome administrative procedures, possibly including registration of interests at Companies House, and will not be practicable for many suppliers for their normal contractual situations. Some retention clauses are extremely convoluted, and attempted enforcement of them has established a body of law based on the outcome of litigated cases. There are many areas of ambiguity, but suppliers who attempt to cover every possible contingency run the risk that the carefully constructed wording will fail for lack of clarity. It will often be commercially unrealistic to require resellers to keep products in their original packaging, and not to sell goods on until they have been paid for, or to require them to notify their end-user customers formally that, initially at least, prior title is vested in their own supplier. A contractually agreed right is often included for the supplier to enter premises where products are kept in order to repossess them, but it is of limited value, because an entry cannot be forced without court authority. Whatever the clause says, a receiver or a liquidator may well challenge it in the interests of seeking to retain possession of goods. Repossession of goods is almost always a second-best result for a supplier. The supplier must be able to identify the products and relate them to specific invoices. There will not often be the opportunity to sell goods at the same price to another party unless they remain unopened. It is a means of mitigating losses, particularly as it is rare for a supplier to end up with full payment in a receivership. In practice, the supplier must immediately notify the administrative receiver or liquidator of the defaulting customer. An administrator, however, has greater statutory protection from creditors. And if the products are recovered, VAT cannot be claimed on the bad debt. Sometimes a receiver or liquidator will be able to realise a better value for goods that incorporate the supplier’s products and may elect to honour an outstanding contract, or at least to bargain a compromised price with the supplier. A receiver or liquidator will often seek a specialist supplier’s help in disposing of highly technical products on a shared revenue basis. Individual decisions on the approach to be taken should depend on the typical trading circumstances and the value of the average products being sold.


9


Good credit control is a much more practical and effective mechanism to minimise the risk of an insolvent customer. Sophisticated search and investigation facilities are readily available from credit control agencies, and these can be effective tools in helping suppliers to assess credit risks.

Force Majeure The purpose of a force majeure clause is to allow suspension of the contract or even termination without liability for breach of contract where an unforeseeable event outside a party’s control prevents performance of its obligations. It may simply cover events ‘outside the reasonable control’ of the parties, but it may specifically define certain agreed situations where there might otherwise be doubt: natural disasters or other Acts of God, fire, hurricanes, war, riots, impossibility of obtaining raw materials, delays by third parties such as sub-contractors, government intervention, industrial disputes – and so on.

Escalation A contractual provision may require a dispute to be escalated up through the hierarchy of each party to the contract before formal legal action is initiated. Senior managers, perhaps at Board level, may well be remote from the day-today involvement of the staff dealing full-time with the services or products. They will not be so close to the details, and therefore are less likely to have reached an entrenched position or to have to defend themselves against any personal blame. They may also have the authority to be able to solve the dispute swiftly by making a practical decision, possibly with concessions on either side, in the interests of their organisation.

Time limits A ‘last chance’ may be given. For example, there may be a provision for the contract to be terminated if the customer ‘fails to pay the amounts due for a period of 30 days after written notice’. The supplier must formally advise the customer that the latter owes money under the contract, but that the final sanction will not take effect provided that payment is made immediately in response to the formal advice. By notification in writing, there is an opportunity to correct anything that has inadvertently gone wrong, perhaps administratively in the accounts department.

10



Expert determination For determination of certain kinds of disputes of a technical nature, the contract wording may include the appointment of an agreed external independent technical expert (to act as expert, not as adjudicator). This must also be subject to agreement on the acceptance of the professional independence and expertise of the expert selected, and also agreement on what constitutes a dispute confined to technical issues. For example, this might be over what should be included in a particular technical definition, or whether a new release of software comprises a new version, upgrade or update, if these are differentially treated in the contract.

Procedural alternatives to litigation If none of the alternatives discussed above is applicable or has been successfully effected, and if the party in breach has not rectified the breach, the innocent party may litigate by initiating formal legal proceedings. However, it may be agreed in the contract to go to arbitration instead of litigation, or to attempt an Alternative Dispute Resolution (ADR) procedure first, in order to resolve a contractual dispute.

Arbitration An arbitration provision enables the parties to use arbitration procedures rather than court proceedings for resolving a dispute. Although the jurisdiction of the court cannot be excluded in a contract, the law permits arbitration to be specified as the method of adjudication. Arbitration is similar to litigation in being adversarial, but it is more flexible in that there is no obligation to conform to legal rules of evidence and procedure, and in the choices of timing and adjudicator. The disputing parties choose a neutral person – or more than one – to resolve the dispute by the remedy of a binding and enforceable decision or award. For international trade, arbitration is often a preferred route for settling disputes. Arbitration in the UK is governed by the Arbitration Act 1996. There can be greater flexibility in the legal rules of evidence and procedure, but the conduct of arbitration depends entirely on the nature of the agreement to arbitrate. The parties have much autonomy in deciding how the dispute should be resolved, subject to certain public interest safeguards. Statutory rules apply, unless there are other provisions in the agreement.


11


An arbitration hearing may be less formal than a court hearing. The arbitrator is required to act fairly and impartially. Evidence is often given in the form of documents, and it is sometimes possible to make an award based entirely on written submissions. A decision made by the arbitrator will normally be binding on the parties. There is an appeal to the courts from an arbitration award only in very limited circumstances. An arbitration award is therefore more final than a High Court decision. It is enforceable by the courts in exactly the same way as a court judgment. Suppliers usually exclude payment of money due from the arbitration process, as there exist well-defined court procedures for debt collection. A claim for an agreed sum is discussed in Chapter 6.

Alternative Dispute Resolution (ADR) Through the option of ADR, a framework is created for the parties themselves to negotiate a solution that they both find mutually satisfactory, with the assistance of a neutral third party, sometimes also with experts. The process is relatively informal, cheap, flexible and voluntary (although if it is unsuccessful, the costs will, of course, have been increased). There is no continuing obligation and it can be stopped at any time. The neutral third party’s role is based on consent, and the process stays under the control of the parties. The costs are usually divided between the parties. ADR changes the emphasis of the dispute from an outcome of 100 per cent success or failure to a co-operative process controlled by the parties themselves to achieve a workable settlement. Its success depends on the willingness of the parties being ready to resolve their dispute in a mutually satisfactory way. The mediator cannot impose a solution. The parties do not have to agree until both are satisfied. Decisions are not binding, and should there not be an outcome on which both parties are happy to rely, any confidentiality agreed about the procedure will not have any effect if the matter subsequently proceeds to a court hearing. The courts are required to encourage the use of ADR in appropriate cases as part of the litigation process, and to facilitate it through case management. Skilled mediators may achieve remedies that are outside the scope of the courts to award, in reaching a practical resolution of a problem. For example, in a dispute between neighbours about a water supply pipe, the judges in the Court of Appeal were unanimous in finding it unsatisfactory that it had not been mediated.4 A

4

12

Martin v Childs [2002] EWCA Civ 283



joint expert had reported that the best solution was for each property to be fed by its own pipes. The recommendation had not been followed.


13


Chapter 3 Basic principles Repudiatory breach Anticipatory breach Risks for the innocent party Contractual right of termination Basis for damages Objective of damages Loss or damage suffered Causation Public policy Limitation Foreseeability of loss Expectation loss Reliance loss


Chapter 3 Basic principles In a contract the parties are mainly free to specify for themselves any remedy for a breach, including any limitations on the consequences of breach – this is known as the principle of freedom of contract. However, the law provides rules for designating the consequences when nothing is stated in the contract. There may also be specific legal remedies available for particular breaches of particular types of contracts. For example, under the Sale of Goods Act 1979, section 49 specifically provides that if the property in the goods has passed to the buyer, who refuses to pay according to the terms of the contract, the seller may maintain an action against the buyer for the price of the goods. This is discussed further in Chapter 6.

Repudiatory breach A ‘repudiatory breach’ means such a serious breach as to show that the party in default has no genuine intention to perform its contractual obligations, or that the other party has been deprived of a substantial part of the contractual benefit. The breach cannot readily be rectified. Effectively the conduct causing the breach demonstrates that the offending party no longer intends to be bound by the terms of the contract. Poor performance, or a single non-payment out of a schedule of ongoing payments, would not inevitably be repudiatory conduct. If the contract stipulates a time for performance, on or by a particular date, and the time is not met, the innocent party may sue for damages if loss has been suffered. The contract may be terminated if time is specifically stated to be ‘of the essence’ or because it was not complied with, the innocent party is deprived of substantially the whole benefit of the contract. In the event of a repudiatory breach of contract, the other party then has the choice as to whether to terminate the contract or whether to accept, or technically ‘affirm’, the contract so that it must still be performed. Affirmation may be expressed or implied, but in practice it is clearly better that it is expressed. It is generally irrevocable.

16


3 BASIC PRINCIPLES

In either case, the innocent party will be entitled to damages on account of the breach.

Anticipatory breach If one party informs the other party in advance that they will not perform their contractual obligations, this is an anticipatory breach. The breach may be by stating that the contract obligations will not be carried out or it may be clear from the party’s conduct that the obligation will not be performed. For example, a service provider may notify the customer a week before the services are due to be provided that the services will not be performed because he has found more lucrative work. Alternatively the customer may find out by other means that the service provider has agreed to work for another customer instead. Normally an anticipatory breach will also be a repudiatory breach, as the whole contract is renounced or the other party will not perform its contractual obligations. Unlike other breaches of contract, for an anticipatory breach to be sufficiently fundamental to be repudiatory, the other party must choose to accept that the contract is terminated in order to sue for damages. The alternative is to make it unequivocally clear that it is keeping the contract in force, affirming it, giving the repudiating party the opportunity to perform, and then the other party will have suffered no loss. If the repudiating party does not perform as required under the contract, the injured party can then seek damages for this actual breach of contract. If the other party does choose to treat the contract as repudiated, then it may claim damages immediately rather than waiting for the time when performance should have taken place. The advantages of claiming damages immediately are that they may minimise loss, and if any money has been paid in advance, this does not mean that the claim is delayed until the time fixed for performance. However, problems can arise in assessing damages earlier than the loss would be known about.

Risks for the innocent party There are risks for the innocent party in either course of action, whether in taking a decision to treat the contract as repudiated or in affirming it.


17


If the innocent party is wrong in treating a breach as repudiatory and the contract as repudiated, that party may itself breach its obligations under the contract, and be deemed to have acted in repudiatory breach. The other party could then claim damages and perhaps also terminate the contract. If the innocent party has treated the contract as repudiated, and yet inconsistently exercises certain rights under the contract, it may be regarded as having affirmed the contract, and lost the right to terminate it. If the innocent party does not treat the contract as repudiated and affirms it, both parties should continue to perform their obligations. The innocent party may do so even if it knows that the other party does not need them to be performed, and instead of claiming damages, it may sue to recover the contract price. One case raised the issue of whether an innocent party can accept a repudiation of the contract merely by failing to perform its own obligations, that is to say, not specifically notifying the repudiating party. The case was about a contract for the sale of a cargo to be loaded. The claimant believed that loading was not going to be completed within the contractual term, and telexed the defendant to say, ‘In view of the breach of this condition we must reject the cargo and repudiate the contract’.5 It was not in dispute that this was an anticipatory breach of contract. On the 11th March the defendant informed the claimant when the loading was completed. On the 15th March the defendant resold the cargo. No further communication took place until the defendant claimed damages of $US 1 million, the difference between the contract and resale prices. In the Court of Appeal it was held that failure to perform contractual obligations was not sufficiently clear and unequivocal in itself to constitute acceptance of a repudiation, because it could instead be a misunderstanding, indecision or inadvertence by the innocent party. It seems that the contract was terminated by the resale of the cargo. How long can an innocent party take in deciding whether to terminate a contract by accepting the other party’s repudiatory breach? A Formula One racing team was in ‘clear, grave and continuing’ breach of contract by changing its name from the name required by the contract they had entered into with their sponsors. They had not even discussed it. Their sponsors’ names were no longer part of the team name. The sponsors did not inform the team that their contract was terminated due to this breach for nearly three months. The team asserted that this was too long and this meant that the sponsors had affirmed the contract. The Court of Appeal took into account that the delay was during the winter break between racing 5

18

Vitol SA v Norelf Ltd [1995] 3 All ER 971


3 BASIC PRINCIPLES

seasons, and that the Formula One team must have known its sponsors were considering their position.6 The consequences of the breach itself, whether there was any urgency in needing to inform the party in breach, and whether the delay might mislead the party in breach. So each case will depend on its facts. If the sponsors had not taken so long, there might not have been any argument.

Contractual right of termination If the contract sets out particular rights of termination for certain breaches, and the innocent party exercises its right under the contract to terminate in accordance with the terms, where there has been a serious and therefore repudiatory breach, this may operate separately to acceptance of that breach. The risk for that party is that exercise of that right may be seen as an affirmation of the contract because of reliance on the terms for the purpose of terminating it. This could affect whether damages are recoverable or the amount. But a contractual notice to terminate will not always be acceptance of the other party’s repudiatory breach. There is a presumption that the parties have not intended to give up their rights at law to repudiate the contract in the event of serious breach. But it will be a matter of construction of the wording in the contract in any individual case as to whether the parties intended to exclude the right to repudiate the contract. In drafting the contract where a contractual right of termination for a specific breach is required, it is worth considering whether to set out what the consequences would be for the contract and the defaulting party. Thus on the facts of one case, a party that exercised its contractual rights to terminate a contract and recover a pre-agreed amount did not automatically lose its rights to treat the contract as repudiated and recover damages for loss of a bargain.7 However, in another case, where the innocent party followed the contract’s termination procedure by giving the other party 30 days notice of termination, as required, by so doing, it had affirmed that the contract continued to exist. It had not terminated the contract on grounds of a repudiatory breach.8 The cases often have complicated sequences of facts, and the events surrounding the breaches and notices are frequently complex.

6

Force India Formula One Team Ltd v Etihad Airways PJSC [2010] EWCA Civ 1051.

7

Stocznia Gdynia SA v Gearbulk Holdings Limited [2009] EWCA Civ 75

8

Shell Egypt West Manzalla GmbH v Dana Oil Egypt Ltd [2010] EWHC 465 (Comm)


19


Basis for damages The normal legal remedy for breach of contract is damages; in other words, financial compensation for loss suffered. Any breach of a contract term gives the innocent party the right to claim damages, although if no loss has been suffered, the damages would be merely nominal. Certain breaches also give the innocent party the right to terminate, as discussed above. Various principles govern the award of damages for breach of contract, the objective in making the award and what the claimant must prove. The defendant’s breach of contract must have caused the claimant’s loss or damage. The broad principles are discussed below. The amount the claimant should receive is known as the measure of damages. Further rules on measuring damages are discussed in Chapter 4.

Objective of damages The objective of damages is to compensate the claimant, not to punish the defendant. Damages are based on the loss to the claimant and not the gain to the defendant. Steyn L.J. said: ‘An award of compensation for breach of contract serves to protect three separate interests. The starting principle is that the aggrieved party ought to be compensated for loss of his positive or expectation interests. In other words, the object is to put the aggrieved party in the same financial position as if the contract had been fully performed. But the law also protects the negative interests of the aggrieved party. If the aggrieved party is unable to establish the value of a loss of bargain he may seek compensation in respect of his reliance losses. The object of such an award is to compensate the aggrieved party for expenses incurred and losses suffered in reliance of the contract. These two complementary principles share one feature. Both are pure compensatory principles. If the aggrieved party has suffered no loss he is not entitled to be compensated by invoking these principles.’ 9 There is a third principle that protects the aggrieved party’s restitutionary interest. The object of such an award is not to compensate the plaintiff for a loss, but to deprive the defendant of the benefit he gained by breach of contract. The classic 9

20

In Surrey County Council and Anor v Bredero Homes Ltd [1993] 3 All ER 705


3 BASIC PRINCIPLES

illustration of this is a claim for the return of goods sold and delivered where the buyer has repudiated his obligation to pay the price. This is discussed in Chapter 6.

Loss or damage suffered The first rule is that the claimant must have suffered loss or damage or else there is no point in making a claim. If a claim is made nevertheless, only nominal damages will be awarded. Thus, in a contract for £1,000 worth of services, the service provider may find a more lucrative contract, and tells the customer that the services will not be provided. The service provider will be in breach of contract. The customer finds an alternative provider who charges £850. It would not be in the customer’s interest to sue the service provider, because no loss has been suffered and only nominal damages would be obtained. A claimant may obtain damages for various kinds of losses in particular circumstances according to the facts, including: •

Loss of profit

•

Damage to property

•

Physical injury

•

Injury to economic position.

There may be difficulty in assessing what the amount of damages should be, but an award will still be calculated if it is a case where compensation should be awarded. ‘The amount may be small and since it cannot be quantified directly, there may be room for difference of opinion about what it should be. But in several fields the judges are well accustomed to putting figures to intangibles, and I can see no reason why the impression of the exercise should be a barrier’.10 ‘There may be many circumstances where a judge has nothing but his common sense to guide him in fixing the quantum of damages, for instance for pain and suffering, for loss of pleasurable activities or for inconvenience of one kind or another.’11 Examples of loss or damage suffered where an award may be made even though it is not straightforward to calculate the compensation payable are for loss of

10 Lord Mustill in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 11 Sir David Cairns in Atkins Ltd v Scott (1991) 7 Const LR 221


21


a chance, for mental distress and disappointment in certain limited situations and for loss of amenity. These are discussed in Chapter 5.

Causation The injured party must establish a causal link between the loss and the defendant’s breach of contract. The breach must be an effective or dominant cause of the loss. If there are a number of causes, the court is not obliged to select which one was the most effective breach of contract. In a case over an accountant’s negligence, the defendant firm had drawn up the accounts of the claimant company without showing that it was in fact insolvent.12 The claimants said that if they had known, the company would have ceased trading and would not have gone on to make deals that resulted in losses. The claim was that the accountants’ negligence had therefore directly caused the losses. The Court of Appeal disagreed. It was poor investment decisions that had caused the losses, not the negligence in drawing up the accounts. That had simply provided the opportunity for the losses to be incurred.

Public policy If the objective of the contract is the deliberate commission of a crime, it will be illegal and the courts will not enforce it. A claim where the cause of action arises from the claimant’s illegal or immoral conduct will not be enforced if the contract was entered into for that illegal or immoral purpose, or the contract was itself illegal. In certain circumstances, an innocent party who did not know of the other party’s illegal purpose or performance may claim damages. Generally the concern is what the effect of the illegality is on the parties’ rights. Thus money or property transferred under an illegal contract cannot be recovered.

12 Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360

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3 BASIC PRINCIPLES

Limitation Claims for breach of contract must be brought within a time limit, under the Limitation Act 1980. For contracts this must be within six years of the date of the breach, the date on which the cause of action accrued, that is, the facts and law arising which give the innocent party to the contract the right to seek legal redress. If the contract is a deed, the time limit is twelve years. Damages for personal injury arising from breach of contract must be claimed within three years. If there has been fraud or mistake, the limitation period begins to run only once the innocent party has discovered, or should have discovered, it. The contract sometimes specifies a shorter limitation period. For acquisition agreements, the limitation period is often defined as six years from the date of the contract for breach of tax warranties, linked to the HM Revenue and Customs time limit for re-opening tax assessments, and a shorter time for non-tax affairs. For standard form contracts, the provision may be subject to the reasonableness test under the Unfair Contract Terms Act 1977, and should be justified. Equitable remedies are discussed in Chapter 6, such as specific performance or injunctions. The Limitation Act does not apply to these. However, the courts are likely to follow comparable statutory periods. Moreover, equitable remedies are subject to certain principles, or doctrines, one of which is known as ‘laches’, requiring remedies to be sought without delay.

Foreseeability of loss The normal aim of damages for breach of contract is to put the successful claimant into the position that it would have been in had the contract been properly performed. However, not all the claimant’s losses will be recoverable, and this is discussed further here and in Chapters 4 and 5. The basic principles are that losses are recoverable as damages that arise: •

‘Naturally, according to the usual course of things, from such breach of contract itself’, or

•

Such as may reasonably be supposed to have been in the contemplation of the parties, at the time they made the contract, as the probably result of the breach of it’.13

13 Alderson B in Hadley v Baxendale [1854] 9 Exch. 41


23


Losses must not be too ‘remote’ – in other words, they should be foreseeable. It was a case in the mid-19th century that established this principle and it still applies today. The plaintiffs, who owned a flourmill, had sent off a broken crankshaft, to be used as a pattern for a new one. Delivery was delayed because of the defendants’ negligence. The plaintiffs claimed for loss of profits in operating their business because of the delay. However, the plaintiffs had not told the defendants of the need for prompt delivery. The defendants could have expected the plaintiffs to have a replacement in their possession. They did not have to pay damages for the plaintiffs’ loss of profits. Losses ‘arising naturally’ are within the parties’ reasonable contemplation. ‘Abnormal losses’ are within the parties’ reasonable contemplation only if the circumstances were known by both parties. Both these points have been redefined, for the starting point of applying them to be ‘the extent of shared knowledge of both parties when the contract was made’.14 A further Victorian case applied the test of reasonable foreseeability. The plaintiffs were launderers and dyers. They ordered a boiler and informed the defendants that they intended to put the boiler to immediate use in their business. The boiler was damaged and consequently delivered several months late. It was held that, in the circumstances, loss of normal business profits was a reasonably foreseeable consequence of the delayed delivery. However, the plaintiffs also claimed the profit on a number of highly lucrative dyeing contracts that they would have accepted if the boiler had been delivered on time. The defendants did not know of the highly lucrative contracts, and so this loss was held to be too remote to be recoverable. However, in a later case, it was held that ‘reasonable foreseeability’ was not the test to be applied. It was stated that it ‘would extend liability for breach of contract beyond what is reasonable or desirable’. A stricter test of remoteness was appropriate in contract, ‘if one party wishes to protect himself against a risk which to the other party would appear unusual, he can direct the other party’s attention to it before the contract is made’.15

14 Evans LJ in Kpohraror v Woolwich Building Society [1996] 4 All ER 119 15 Lord Reid in Koufkos v C. Czarnikow Ltd, The Heron II [1969] 1 AC 350

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3 BASIC PRINCIPLES

Expectation loss The normal aim in assessing contractual damages is to put the innocent party in the position it would have been in had the contract been properly performed. ‘Where a party sustains loss by reason of a breach of contract, he is so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed.’16 This is known as ‘expectation loss’. The defendant’s promise made the claimant expect performance by the defendant, and the defendant’s promise has been broken. If goods are damaged or defective, the normal rule is that damages will be the difference in value between the actual value and the value the goods would have had if they had not been defective. With contracts for services, the prima facie rule is that damages will be the cost of putting the work right. If the innocent party accepts the repudiatory breach at common law it is entitled to loss-of-bargain damages – compensation for loss of profit due to the contract not being performed in the future. That means that damages can be recovered to compensate both for loss suffered in consequence of those breaches that preceded acceptance of the repudiation, and for the loss of the opportunity of performance by the other party of its outstanding obligations under the contract.

Reliance loss Sometimes the loss of expectation is difficult to assess or prove. It may be too speculative to establish the expectation or profit that would have been realised if the contract had been performed. An alternative means of assessment for these situations is ‘reliance loss’. The aim of reliance loss is to put the innocent party in the position it would have been in had the contract never been made, i.e. an indemnity for its out-of-pocket expenses incurred in reliance on the contract. The defendant in one case that illustrates this was an actor who had repudiated a contract with a television company to play the leading male role in a play. The television company abandoned the production because they could not get a substitute at short notice. It did not know what the profit would have been on

16 Robinson v Harman (1848) 1 Ex 850


25


an expectation loss basis, had the production gone ahead. It claimed for its wasted expenditure on the production. The court held that the television company could recover all its wasted expenditure, including expenditure it had incurred before entering into the contract. Lord Denning felt that the pre-contract expenditure was not too remote because the actor should have foreseen that the expenditure had been incurred and would be wasted: ‘It is plain that, when Mr Reed entered into this contract, he must have known perfectly well that much expenditure had already been incurred on director’s fees and the like. He must have contemplated – or, at any rate, it is to be imputed to him – that if he broke his contract, all that expenditure would be wasted, whether or not it was incurred before or after the contract. He must pay damages for all the expenditure so wasted and thrown away.’ 17 Generally the claimant will decide whether to seek damages on a reliance loss or an expectation loss. Sometimes the court will decide which is the more appropriate basis.

17 Anglia Television Ltd v Reed [1972] 1 QB 60

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Chapter 4 Measuring Damages Compensation as if the contract had been performed Intervening events Indirect loss or damage Time for assessment The rule against double counting Foreign currency Deposits and part payments Liquidated damages Mitigation Contributory negligence


Chapter 4 Measuring Damages This Chapter looks at some of the considerations involved in assessing the amount of damages payable. Not all loss or damage caused by the breach of contract will be compensated. One limitation is the extent to which the damage was foreseeable in the event of breach when the contract was made, or remoteness, discussed in Chapter 3. Factors that may need to be taken into account in assessing the damages include: •

Compensation as if the contract had been performed

•

Any intervening events

•

Whether the loss or damage is indirect

•

When the damages should be assessed

•

The rule against double counting

•

Foreign currency

•

Whether the sum is a deposit or part payment

•

Whether the sum constitutes liquidated damages or a penalty

•

Mitigation of losses by the claimant

•

Any contributory negligence on the part of the claimant.

Compensation as if the contract had been performed Damages are normally payable to represent the situation if the contract had been performed. In one case a fire destroyed the claimant’s factory because of a defectively designed heating system installed by the defendant.18 Part rebuilding or restoration was not an option. The measure of damages was the cost of building a new factory. The claimants had no choice if they were to continue their business. Although

18 Harbutt’s Plasticine v Wayne Tank and Pump Co Ltd (1970) 1 All ER 225

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4 MEASURING DAMAGES

the new factory was more modern than the one that had been destroyed, there were no additional facilities. In another case the defendant was in breach of contract by supplying the wrong kind of scrap metal. It was fed into a fragmentiser machine and damaged it. Damages were awarded for the whole cost of the replacement rotor that was needed. It was not the claimant’s fault that a new rotor had to be bought. Damages were not to be reduced because the part replaced normally lasted for seven years, and had been in use for three years.19

Intervening events If an intervening event causes greater damage than the original breach of contract, the claimant cannot recover loss that would have been suffered if the supervening event had not occurred. The first defendant was in breach of contract for installing a defective heat exchanger. The second defendant repaired it. The claimant’s engineers put the heat exchanger back into service without checking the repairs. There was an explosion, damaging the claimant’s plant and causing loss of production. The claimants could therefore not recover hypothetical lost profits for the heat exchanger needing further repair from the first defendant, hypothetical because the intervening event caused by the claimant’s engineers’ negligence had caused greater damage.20

Indirect loss or damage If the facts show that the loss or damage flows naturally and directly from the breach of contract as discussed in Chapter 3, it will be recoverable as a direct loss. Suppliers’ contracts often include an exclusion of liability for other losses or damage, rather imprecisely defined as ‘indirect’ or ‘consequential’. However, loss of business or loss of profits may be either direct or indirect according to the facts, and whether it was in the reasonable contemplation of the parties at the time the contract was made (as discussed in Chapter 3) – and therefore, depending on the context, may or may not be recoverable. Normally loss of profits will not be recoverable unless the possibility of such profits was brought to the attention of the party liable for the loss. If excluded

19 Bacon v Cooper (Metals) Ltd [1982] 1 All ER 397 20 Beoco Ltd v Alfa Laval Co. Ltd [1994] 3 WLR 1179


29


from liability, this should be expressly specified in the contract, and not assumed to be part of the general exclusion for indirect or consequential loss or damage. However, if this exclusion provision forms part of the supplier’s standard terms and conditions, it will be assessed as to its reasonableness under the Unfair Contract Terms Act 1977, and must be a justifiable exclusion of liability by the supplier to be enforceable. There are also constraints on such provisions for contracts with consumers under this Act and other legislation.

Time for assessment Normally the loss is suffered at the time when performance of the contract should have taken place or at the time of breach, and that will be the point at which damages will be assessed, in the interests of certainty and finality. For example, generally where a contract for the one-off sale of goods has been repudiated, the loss caused, whether to the seller or buyer, ‘can be measured by the difference between the contract price and the market price at the date of the breach. The seller can resell his goods in the market. The buyer can buy substitute goods in the market. The loss caused by the breach can thereby be fixed.’ 21 However, sometimes this will not be appropriate, and then the court may choose a more relevant date. For example, where a real possibility of a subsequent event, occurring since the date of the breach but before the assessment of damages is made, would have lessened the actual loss, such damages may be reduced accordingly. In one case, a time charter party contract was repudiated, and the repudiation accepted, in December 2001. The ship owner claimed damages for the full term of the repudiated time charter, which would have been four years. The second Gulf War broke out in March 2003, and if the contract had still been in force, the evidence was that the charterers would have exercised the contractual right that they had to terminate on those grounds. The majority decision of the House of Lords was that the ship owner was entitled to damages only up to March 2003. This follows the principle that the innocent party should be restored to the same position it would have been in if the contract had been properly performed, and therefore the damages are to compensate for actual loss. The loss is ascertainable rather than speculative. The financial compensation is for the loss of the contractual bargain itself, not more valuable rights than those lost.22

21 Waller LJ in North Sea Energy Holdings NV v Petroleum Authority of Thailand [1999] 1 Lloyds Rep 483 22 Golden Strait Corporation v Nippon Yusen Kubishika Kaisha, The Golden Victory [2007] UKHL 12, [2007] 2 AC 353 [HL]

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4 MEASURING DAMAGES

The rule against double counting When calculating damages, the amount of compensation must not be distorted by any duplication of items within the claim to reach the exact amount. Nor must the claimant receive more in damages than would be retained; thus the effect of taxation is taken into account. If a person receives compensation for loss of income that would normally have been taxed, and if the compensation itself is not liable to be taxed, there will be a deduction from the award for the amount of the tax so that the recipient does not get a higher sum than would otherwise have been received net, representing the sum lost, after tax. If the damages are to replace a loss of income that would have been taxable in the hands of the claimant, then the damages are payable as the gross pre-tax amount, and the claimant will pay the tax due. One of the many cases involving ‘Names’ at Lloyds in the 1980s and 1990s, concerned the question of interest payable to the claimants for the damages.23 The awards would be the gross pre-tax amount. This amount would be liable to income tax when received. By the time of the award, interest for several years was due on the damages. The Names were entitled to the interest on the share of the damages that would be theirs, but not the interest on the share of the money that would have been payable as tax to the Inland Revenue. The Names would have received more money than they would otherwise have had, at the defendants’ expense. Interest was awarded on 75% of the damages recovered.

Foreign currency Where appropriate, damages may be awarded in a foreign currency. In a case illustrating this principle, a customer was sued because payment had not been made for goods delivered in England by a Swiss textile supplier.24 The claimant must show why it is more appropriate to receive damages in a foreign currency. The exchange rate between the pound sterling and the Swiss franc had fallen by approximately 40 per cent between the date payment became due and the date of the court hearing three years later. Damages were ordered to be paid in Swiss francs or the sterling equivalent at the date of payment, on the basis that the claimant should be properly compensated for loss suffered.

23 Deeny v Gooda Walker Ltd [1995] LRLR 361 [1996] LRLR 109. 24 Miliangos v George Frank (Textiles) Limited [1976] AC 443


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Deposits and part payments One party may require the other to pay a sum of money in advance, to be forfeited if the other party breaches the contract. If the money is a part payment towards the price of the contract, it may be recoverable. But if it is regarded as a deposit, it will generally be irrecoverable. It will depend on the construction of the contract and the intention of the parties at the time of making the contract. If the loss caused by the breach is less than the amount to be retained by the innocent party, then that would not be reasonable. In a case about a contract for the sale of land, the defaulting purchaser had paid a deposit of 25 per cent of the purchase price.25 The normal deposit amount was 10 per cent. The other party, the bank, had not established that there were any special circumstances that would justify the higher figure. The contractual provision was therefore a penalty and not allowable as such. It was held that the bank had to subtract its actual losses from the deposit and repay the remainder. If the advance payment is a part payment and not a deposit, the party in breach may recover it, subject to any claim for damages by the innocent party in respect of the breach.

Liquidated damages As discussed in Chapter 2, the parties may expressly include a provision in the contract that a fixed sum will be payable to the innocent party in the event of a particular breach, known as ‘liquidated damages’. Such provisions are commonly found for late performance, in construction and engineering contracts, for breach of outsourcing service levels, or delay in the supply or sale of goods, or early cancellation of standard goods in an ongoing contract. They are not found in contracts of employment and are not normally appropriate for defective performance. The purpose of the provision is to compensate for the particular breach, and at the same time enable the contract to continue where in spite of the breach it is in the best interests of the parties that it should, avoiding the risk of termination. It also avoids the problems of having to prove the actual loss.

25 Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 [PC]

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4 MEASURING DAMAGES

The parties are free to negotiate and agree a figure to represent the damages suffered by the breach, provided that it is not arbitrary and is a genuine estimate of compensation for the potential losses. It may be hard to quantify a loss, and then an informed estimate must be agreed. It is helpful to keep a record of how the amount was reached. An aggrieved party may not make a profit from a breach of contract and a sum that is regarded as a penalty is not enforceable. The courts will look at the situation rather than whether the term ‘penalty’ or ‘liquidated damages’ was used, but clearly it is advisable not to use the term ‘penalty’. Lord Dunedin said: ‘The question of whether a sum stipulated is a penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach’.26 If the provision were to be invoked and the innocent party had suffered a loss that was less than the estimate, the pre-agreed figure would apply, provided that it was a genuine estimate.

Mitigation If the claimant sustains a loss that could be recouped by taking remedial measures, the damages awarded by the court will be reduced to take account of this. It is for the defendant to prove that the claimant has failed to mitigate his loss.27 There is no duty to mitigate before the breach, but the innocent party should not aggravate his loss. The time of the breach is the point at which mitigation is considered. For instance, if the supplier of goods refuses to deliver them under the contract, the customer should try to buy them from another source. Someone who is dismissed from their employment in breach of contract should try and find another job. In one contract for the sale of crêpe de chine, the claimant failed to pay the first instalment on time. The defendant therefore refused to make further deliveries, but offered to do so if the claimant would pay cash with each order. The claimant refused to do so. The price for crêpe de chine increased and the claimant brought legal proceedings to claim damages for the difference between the market price 26 Dunlop Pneumatic Tyre Co. Ltd V New Garage and Motor Co. Ltd [1915] AC 79 27 Pilkington v Wood [1953] Ch 770


33


and contract price. However, it was held that the claimant should have accepted the offer made by the defendant, and would have thereby avoided the losses. It had failed to mitigate its loss.28 The claimant may attempt to mitigate, yet increase its losses. If the action was reasonable, then the cost will be recoverable. If the claimant is put in the position of having to take steps to minimise or overcome the effect of the defendant’s breach, and if the steps were reasonable, the defendants will be held responsible for the additional losses.29 Lord Macmillan said: ‘The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.’

Contributory negligence If the injured party’s negligent actions contributed to the loss, the Law Reform (Contributory Negligence) Act 1945 may apply. This Act apportions liability ‘where any person suffers loss partly of his own fault and partly of the fault of any other person or persons … the damages recoverable in respect thereof shall be reduced to such an extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility of the damage …’.30 The Act will not apply ‘where the defendant’s liability arises from some contractual provision which does not depend on negligence on the part of the defendant’.31 Thus where the defendant contractor was in breach of a contract to execute work in an expeditious, efficient and workmanlike manner, but had failed to comply with statutory requirements relating to asbestos, this was a strict contractual obligation. Because of this, the claimant’s failure to supervise the work did not cause any reduction in damages under the Act.

28 Payzu v Saunders [1919] 2 KB 581 29 Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 (HL) 30 Section 1(1) 31 Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852, citing Hobhouse J in [1986] 2 All ER 488, 508

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Chapter 5 Specific kinds of awards Loss of a Chance Disappointment or mental distress Loss of amenity


Chapter 5 Specific kinds of awards Case law has developed on the kinds of awards that may be made for loss of a chance; disappointment or mental distress – often for ruined holidays; and for loss of amenity.

Loss of a Chance In a 1911 case, the top fifty contestants in a talent contest were to attend an audition.32 At the audition twelve winners would be selected, who would be given theatrical employment for three years, with payment between £3 and £5 per week. The claimant was one of the top fifty, but she was not told the time and place of the audition. She lost the chance of being one of the twelve. She was awarded £100 damages. The chance of being selected was one in four, so she might not have been chosen. But there was still a pecuniary value to have achieved the right to be one of the limited class of competitors and that could be quantified as what was reasonable in the circumstances of a real or substantial chance. In a much later commercial case there was a lost chance to re-negotiate a property transaction, because of a solicitor’s negligence.33 The Court of Appeal held that if the claimant could show on the balance of probabilities that re-negotiation would have taken place with a substantial chance of obtaining better terms, then compensation could be awarded. Stuart-Smith LJ referred to this as: ‘The plaintiff’s loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff … or independently of it’. A recent commercial case established that the court will prefer to estimate a value rather than to work on the basis of the loss of a chance.34 The loss was dependent on the value of the defendant’s assets, which included the value of certain shares in a company involved in a dispute.

32 Chaplin v Hicks [1911] 2 KB 786 33 Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602 34 Law Debenture Trust Corporation PLC v Elektrim SA [2010] EWCA Civ 1142

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5 SPECIFIC KINDS OF AWARDS

‘If something of value has been lost, the court must do its best to estimate that value and should not too readily decide that it is a matter of chance what the true value of something as concrete as a share is likely to be’. The case was contrasted with cases where non-legal aspects were involved, as in the two other cases referred to above.

Disappointment or mental distress Historically it was regarded as ‘purely sentimental’ if disappointment or distress were caused by breach of contract, and damages would not be recoverable.35 However, nearly a hundred years later from the case where that phrase was used, ‘In a proper case damages for mental distress can be recovered in contract,’ said Lord Denning MR.36 That case was a contract for a holiday, where the claims made in the brochure were not realised in fact. The brochure for a Christmas skiing holiday called the holiday a house party, stated that the hotel had its own bar open on several evenings, and that a welcome party and various other social events were included in the price of the holiday. Only thirteen guests were at the hotel in the first week of the claimant’s holiday and he was the only guest for the second week. The social events fell short of their descriptions and the skiing did not live up to the claims in the brochure. Compensation was paid for disappointment and distress at the loss of enjoyment of the holiday and the loss of the facilities promised. Any breach of contract may cause some disappointment and inconvenience, but ‘proper cases’ where damages can be awarded for disappointment are exceptionally those where an important objective of the contract is to provide entertainment, pleasure and relaxation, to provide a pleasurable amenity, such as a contract for a holiday, or where the mental suffering is directly related to the physical inconvenience and discomfort caused by the breach. Judges may not always agree on whether the contract falls within the ‘exceptional’ category.37 In the case where this principle was upheld, the claimant was purchasing a house about 15 miles from Gatwick airport. He consulted a surveyor to inspect the house, to investigate whether the property would be affected by aircraft noise. The surveyor stated that it was unlikely that the property suffered greatly from aircraft noise. In fact the house was close to a navigation beacon and was markedly affected by aircraft noise. The claimant could not enjoy the property as he had

35 Mellor J in Hobbs v L&SW Rly Co [1875] 10QB 111 36 Jarvis v Swan’s Tours [1973]1 All ER 71 37 Farley v Skinner [2001] 3 WLR 899


37


intended to do. He could not sit beside the pool in the morning or enjoy predinner drinks in the evening. It was described as a ‘confounded nuisance’. The court held that because the defendant was in breach of his contractual obligation to provide the claimant with accurate information about the noise, the claimant was entitled to damages for being deprived of the chance of making an informed choice about whether to buy the property, which resulted in mental distress and disappointment. Effectively the award may be regarded as for ‘mental distress – or for ‘loss of amenity’, discussed below. Where solicitors negligently failed to obtain and enforce an injunction to prevent a former male friend molesting the claimant, she was entitled to damages for mental distress. It was a direct and foreseeable consequence of the solicitors’ failure to achieve the very purpose of the contract.38 The Court of Appeal gave guidance on what damages were allowable for a ruined holiday, in the particular case of a world cruise for three months on the maiden voyage of the Queen Victoria cruise ship.39 Mr. and Mrs. Milner booked the holiday eighteen months in advance at a cost of £59,052.20, a discount on the advertised price of £65,558. They expected the holiday to be the ‘experience of a lifetime’. They suffered continual noise in their cabin from turbulent weather affecting the floor plates, preventing them from sleeping. They were moved temporarily to another, less comfortable but quieter room, although their clothes stayed in the first cabin. For the next seventeen days between New York and Los Angeles they were given a suite. After this they had to go back to the first cabin for one night, where they were affected by further noise. They moved again to temporary accommodation. After 28 days with 78 to go, when the cruise reached Hawaii, the Milners refused the offer of a better room and disembarked, staying in a hotel for six weeks and returning home on the Queen Elizabeth ship. Cunard accepted liability for breach of contract. The Milners accepted £48,270.00, leaving the net cost of the holiday at £10,782.20. They claimed over £76,000, including £8,500 for diminution in value, £50,000 for distress, disappointment and loss of enjoyment, £4,300 for wasted expenditure on Mrs. Milner’s 21 evening dresses and £13,440 for the cost of the hotel accommodation and return voyage.

38 Heywood v Wellers [1976] QB 446 39 Milner & Milner v Carnival Plc (trading as Cunard) [2010] EWCA Civ 389

38



In the Court of Appeal, Ward LJ agreed that the holiday had been wrecked for the Milners. He compared the award of damages that should be made with other holiday cases and also cases of personal injury and psychiatric damage. He said: ‘As for the diminution in value of this holiday, the essence of the task, hypothetical though it may be, is to try to assess the difference between what the supplier contracted to provide and what was actually provided. It is essentially an assessment of a pecuniary loss. It is essential to exclude from this consideration how the client felt about the diminution in the service supplied, for therein lies the risk of a duplication of damages.’ The amount actually paid after the refund, not the full cost of the holiday, should be the benchmark for damages. The Milners had voluntarily left the Queen Victoria in Hawaii, and so the claim should cover only the month they were on board. The actual cost paid for the holiday counted, not the advertised cost. The award made for diminution in value was £3,500. ‘The obvious comparison to make is the assessment of general damages in personal injury cases and the awards when psychiatric injury has been suffered.’ There was no medical evidence here of psychiatric injury. Mr. Milner was awarded £4,000 and Mrs. Milner was awarded £4,500 for inconvenience and distress. Ward LJ found that the reason Mrs. Milner had not been able to wear her evening dresses was because they had left the cruise at Hawaii, so that the claim for wasted expenditure was not appropriate. He considered that the award should reflect the disappointment of Mrs. Milner not being able to wear her dresses under the heading of distress. ‘Adding in the £3,500 for the diminution in value and looking at the matter in the round, I am satisfied that a total award of £12,000 is fair and just compensation for the failure of Cunard to meet their guests’ legitimate expectations.’ In all the Milners received compensation amounting to £1,217.80 more than the net cost of the holiday. However, these contracts are consumer contracts, not contracts where both parties are businesses. Damages are not awarded for distress and disappointment in commercial contracts. A breach of contract arose through the failure of solicitors to carry out a conveyance of premises for a motor repair business. Damages were not payable for anguish and vexation caused where the object of the contract was to carry out a commercial activity with a view to profit.40 The class of case where damages would be paid for mental distress should not 40 Hayes v James and Charles Dodd [1990] 2 All ER 815 (CA)


39


‘include any case where the object of the contract was not comfort or pleasure, or the relief of discomfort, but simply carrying out a commercial activity with a view to profit’.41

Loss of amenity The next case shows that a claimant may not recover all losses suffered as a result of the defendant’s breach of contract.42 This principle has already been considered in Chapters 2-4. This case illustrates compensation for loss of amenity. Mr. Forsyth ordered a swimming pool for his home. The specification was for a maximum depth of 7’6”. When built, the actual depth of the pool was 6’9”, and only 6’ under the diving board. The claim was for payment of the balance of the price of the pool. Mr Forsyth, a keen swimmer, counter-claimed for the cost of demolishing the old pool and building a new pool, which would have been £21,560, equal to the outstanding balance. In the House of Lords, the court’s concern was to compensate for the losses actually suffered. The shortfall in depth did not cause any difference in value between the pool and the pool that should have been built, or to the increase in value of the property on which it was constructed. It was held that the replacement cost was out of all proportion to the loss. The cost of the work claimed for in respect of a property may not necessarily be reflected by an increase in the value of the property. The court will recognise that it may have the effect of making a property more comfortable, or more suitable to the claimant’s tastes. It is likely that the ‘consumer surplus’ will not be able to be precisely valued financially, because it represents a personal subjectivity. Nevertheless it may be recognized for compensation if it is removed by the defective performance. However, in this case, the claimant ‘cannot be allowed to create a loss which does not exist in order to punish the defendants for their breach of contract.’ 43 ‘Indeed were he to receive the cost of building a new one, and retain the existing one, he would have recovered not compensation for the loss, but a very substantial gratuitous benefit, something which damages were not intended to provide.’ 44

41 Staughton J in Hayes v James and Charles Dodd [1990] 2 All ER 815 (CA) 42 Ruxley Electronics and Construction Ltd v Forsyth [1995] 3 WLR 118 43 Lord Lloyd in Ruxley Electronics and Construction Ltd v Forsyth [1995] 3 WLR 118 44 Lord Jauncey in Ruxley Electronics and Construction Ltd v Forsyth [1995] 3 WLR 118

40



Mr. Forsyth did not succeed in his counterclaim. But he was awarded £2,500 to compensate for ‘loss of amenity’ or ‘consumer surplus’. All measurements of damages must take account of the special facts of each case and of any special features. Damages must not confer a gratuitous benefit on the claimant – and the test of ‘reasonableness’ is relevant.


41


Chapter 6 Other remedies Claim for an agreed sum Restitution Equitable remedies Specific performance Injunctions Rescission Rectification Declaratory judgment Account of profits


Chapter 6 Other remedies In this Chapter various remedies for breach of contract in different situations are considered. In some cases, they may be used in combination with a claim for damages or with each other, in others they may be used as an alternative to claiming damages. The first remedy discussed is a simple claim for the price of goods or services that have been supplied but not paid for. Next, the remedy of restitution is described. Finally, the remedies that follow are known as ‘equitable’ remedies, such as injunctions. These kinds of remedies developed historically, to enable justice to be done in particular cases and in certain circumstances, where following the strict legal rules and procedures would not have led to a just result.

Claim for an agreed sum Where the contract is for a specific price for the supply of goods or services, the payee has carried out its contractual obligations, and the date for payment has been reached, but no payment has been made, rather than a claim for damages, the supplier may simply make a claim for the price, rather than bring a claim in damages. The sum is known and agreed in the contract, and is therefore defined as a ‘liquidated’ sum. This can be done by applying for summary judgment. This is a procedural device to avoid an unnecessary trial, which can achieve a result speedily, where there is no dispute as to the facts and the claimant is entitled to judgment as a matter of law. If the failure to pay arose from a contract for the sale of goods, the Sale of Goods Act 1979 specifies the claim: ‘Where, under a contract for sale, the property in the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods.’ 45

45 At section 49

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6 OTHER REMEDIES

In one notable case the action was for an agreed sum in a contract for the display of advertisements on litter bins for the defendant’s business over three years.46 The defendant, a garage proprietor, repudiated the contract on the day it was made (repudiation is discussed in Chapter 3). The claimant advertising contractors refused to accept the repudiation, performed the services under the contract by displaying the advertisements for 156 weeks, and then claimed the contract price. If the claimants had accepted the repudiation, they could have sued for the lost profit on the contract, as damages, subject to their duty to mitigate. It was held by a majority in the House of Lords that the claimants were not bound to accept the repudiation, and could therefore claim the full contract price as a debt. Since it was not a claim for damages there was no duty to mitigate as discussed in Chapter 4. It was subsequently described as a ‘grotesque’ result.47 There was a minority dissension by two of the House of Lords’ judges, one of whom was Lord Reid. He suggested: ‘If it can be shown that a person has no legitimate interest, financial or other, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself.’ In later cases this qualification by Lord Reid has been followed where the claimant’s conduct has been held to be ‘wholly unreasonable’, and the defendant would therefore be liable in damages, not for the contract price.48

Restitution For damages, the defendant is ordered to compensate the claimant for losses caused by the defendant’s breach of contract. By contrast, the purpose of the remedy of restitution is normally measured in terms of the defendant’s gains rather than the claimant’s losses, as a means of achieving fairness between the parties and preventing the defendant from being ‘unjustly enriched’. The claimant recovers the gains made from the defendant. Three situations in which a claimant may bring a claim for restitution are: 1.

The defendant has received a benefit – money, goods or services – and the claimant has not been recompensed at all under the contract. The defendant has not complied with its contractual obligations at all –

46 White & Carter (Councils) Ltd v McGregor [1962] AC 413 47 Lord Denning MR, citing a quotation from a text book by Cheshire and Fifoot, in Attica Sea Carriers Corporation v Ferrostaal Poseidon Bulk Reederei GmbH, The Puerto Buitrago [1976] 1 Lloyd’s Rep 250 (CA) 48 For example, Clea Shipping Corp. v Bulk Oil International Ltd [1984] 1 All ER 129


45


technically a ‘total failure of consideration’. The test is whether the defendants have performed any of their obligations under the contract, not whether the claimants have received anything. In one case, the contract obligations consisted of design and construction of ships as well as delivery of them.49 The defendants therefore did not succeed in their argument that there was total failure of consideration because they had not taken delivery. ‘The general rule of law is, that where a contract has been in part performed, no part of the money paid under such contract can be recovered back. There may be some cases of partial performance which form exceptions to this rule, as, for instance, if there were a contract to deliver ten sacks of wheat and six only were delivered, the price of the remaining four might be recovered back. But there the consideration is clearly severable.’ 50 2.

The defendant has breached the contract and as a result has profited. In this situation, if the claimant terminates the contract because of the defendant’s breach, the claimant may sue for damages in contract, or may alternatively bring a claim in restitution. In restitution the claimant will receive a reasonable sum for the value of the goods or for the services.

3.

Where there is no contract, but work has been carried out. A supplier sometimes starts providing services without a contract having been properly contemplated or agreed. In certain circumstances the principle that applies is that the supplier should be remunerated in proportion to the value of the work done. The party benefiting from the work should not be ‘unjustly enriched’ by obtaining the work and not paying for it.

One case arose from a dispute in which one party supplied distribution and warehousing services in anticipation of a formal written contract that had not been finalised.51 The supplier had won a tender for the supply of distribution and warehousing services ‘subject to contract’ over five and a half years. It started to carry out the services before the formal contract had been negotiated, invoicing the customer for the services. The customer paid the invoices. After 15 months the customer wanted to terminate the ‘interim arrangement’. It was held that it was unlikely that an interim agreement had been made. Not all the important terms had been agreed, especially as to performance and price. There was no indication that the negotiations had stopped being ‘subject to contract’ or that 49 Stocznia Gdanska SA v Latvian Shipping Co. [1998] 1 WLR 574 50 Bovill CJ in Whincup v Hughes [1871] LR 6 CP 78 51 Whittle Movers Ltd v Hollywood Express Ltd [2009] EWCA Civ 1189

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6 OTHER REMEDIES

the parties had waived the requirement for a formal signed document. The court held that the supplier claimant was entitled to claim for payment to be made at a reasonable price for the services carried out, so that the party receiving the services was not unjustly enriched. If work has been carried out only on the basis of hope that it would lead to a contract, or in preparation for a contract, the costs of such work would not generally be recoverable under the principle of unjust enrichment. However, exceptional circumstances may apply when a claimant has been led to believe that it would benefit under a future contract. In another dispute, Countrywide Communications Limited (‘Countrywide’), a public relations and communications consultancy, undertook free work in connection with a tender for a system to computerise social security assurance benefits payments.52 They had been assured that if the sole shareholder remaining in the tender consortium, ICL Pathway Limited, won the tender, Countrywide would be granted a sub-contract for the public relations work. ICL Pathway’s bid was successful, but there was a change of personnel, the new person having dealt with a competitor of Countrywide. The rival was awarded the sub-contract instead of Countrywide. Countrywide could not claim breach of contract because there was no contract. However, it succeeded in its claim for payment for its contribution to winning the business. Otherwise there would be effectively a ‘denial of justice’. The considerations included whether the services would normally be free; how much risk had been taken that the services would not be recompensed; whether the defendant obtained real benefits from the claimant; and the circumstances in which the sub-contract was not granted – whether one party was at fault. Countrywide had supplied its services free because it had been promised a subcontract if the bid was successful, as it was. Countrywide had accepted the risk of the bid failing, but not the risk that if the bid succeeded, their services would no longer be required because of a change of personnel. It was fair for Countrywide to be compensated for its work, based on an hourly rate for its time.

52 Countrywide Communications Ltd v ICL Pathway Ltd [1999] All ER (D) 1192


47


Equitable remedies For most commercial contracts, financial damages will be an adequate remedy, and if that is the case, an equitable remedy will not be available. Judges exercise discretion in granting equitable remedies where relevant in order to achieve justice, although they still follow precedents and procedural rules. If the application for an equitable remedy is refused, damages may still be claimed for loss suffered. In exercising discretion the courts take into account the balance of benefit and hardship between the parties and whether any third party rights would be affected. There are certain doctrines that the courts will apply in deciding whether to grant an equitable remedy, for example: •

‘Equity will not assist a volunteer’ – the contract must have ‘consideration’ – in terms of the parties’ respective reciprocal rights and obligations – a promisor must have received something in return for the promise;

•

‘He who comes to equity must come with clean hands’ – an applicant must have acted fairly. To illustrate this principle, one case arose because of a petrol price war.53 Lostock Garage was tied to selling Shell petrol. Two garages in its neighbourhood that were not tied to Shell reduced their petrol prices. Shell subsidised two other Shell garages nearby but excluded Lostock, which was forced into trading at a loss, and obtained petrol from another supplier. Shell sued for damages for breaching the tying provision in the contract and an injunction (discussed further below) to prevent Lostock from getting petrol elsewhere. The court held that it would not be just and equitable to grant the injunction while Shell operated its support scheme. Shell was operating unfairly.

•

‘Delay defeats equity’ – the application must be made expeditiously; an illustration where this applied is in a case discussed below in the context of rescission. The claimant, Mr Leaf, had bought a picture from the defendants, International Galleries, who had said that it was painted by Constable. Five years later he tried to sell it and found out that it was not by Constable. This was far too late for him to claim the equitable remedy of rescission for a non-fraudulent misrepresentation. He should have examined the picture in the first few days of owning it. 54

53 Shell UK Ltd v Lostock Garage Ltd [1976] 1 WLR 1187 (CA) 54 Leaf v. International Galleries [1950] 2 KB 86

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6 OTHER REMEDIES

Specific performance Specific performance is an order by the court to compel a party to perform its contractual obligation. For the sale of goods, the Sale of Goods Act 1979 provides for this as a remedy, but it is still at the discretion of the court: ‘In any action for breach of contract to deliver specific or ascertained goods the court may, if it thinks fit, on the plaintiff’s application, by its judgment or decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages.’ 55 It is a suitable remedy for many construction contracts, because the contract specifies the work that needs to be completed, with a definite expected result, rather than concerning various ongoing activities carried out over a long period of time.56 It is not appropriate for contracts of personal services, such as employment contracts. An order of specific performance was refused in respect of a covenant in a contract to keep a shop open during normal business hours.57 Argyll Stores, the defendant, had a supermarket comprising 30 per cent of the applicant shopping centre’s letting area. It was operating at a loss, and Argyll Stores had not found a buyer, so they closed it. It would cost £1 million to restore the supermarket to operation. The grounds for refusal were that an order would not be made to compel a party to run a business which might lead to considerable losses, which would be out of proportion to the losses suffered by the applicants; that it would be difficult to formulate the order; and that if the order were not complied with, it would lead to a punishment of contempt of court which would be heavy handed and oppressive in the circumstances.

Injunctions For an injunction to be awarded when financial damages would not be an adequate remedy to compensate the claimant, the claimant may need to restrain the defendant from conduct in breach of contract – to compel performance of a positive contractual act – a mandatory injunction. The courts will consider the same factors as discussed above in relation to specific performance. They will use a test of ‘balance of convenience’ weighing the benefit 55 Section 52(1) 56 Jeune v Queens Cross Properties Ltd [1973] 3 All ER 97 57 Co-op Insurance v Argyll Stores [1997] 3 All ER 29


49


to the injured party against the detriment to the other party. An injunction will not be granted if its effect would be to compel a party to do something that he could not have been ordered to do by specific performance.58 For the following remedies, ‘freezing orders’ and ‘search orders’, the application to the court will be made ‘ex parte’, that is, the defendant will not be party to the proceedings, and will learn of them only when the order is being carried out, when bank accounts are frozen or premises are raided. They will often be made on an ‘interlocutory’ or interim basis, since they will be needed urgently. They may be granted for a limited time, before and until the full trial or a specified date. A freezing order, to freeze a company’s assets, may be made to prevent defendants from moving their assets abroad or from disposing or dealing with assets located within the jurisdiction of the High Court so as to avoid the ability to meet an applicant’s claim.59 The assets may be cash, goods, industrial equipment, properties, ships, aircraft, even insurance policies or a company’s goodwill. An order to search premises, a mandatory injunction, authorises the applicant to enter and search the premises of defendants, in order to obtain specific relevant evidence and to copy or remove it to prevent its removal, destruction or concealment by the defendants.60 It is usually invoked in disputes involving infringement of intellectual property rights or disclosure of confidential information. For instance, it is useful for obtaining electronic material that could easily be destroyed, such as unauthorised copies of copyright works, or for a confidential customer database. The applicant must show evidence of specific possession of, or access to, the material, and that there is a real possibility that the materials would be destroyed or disposed of if the defendant knew that they were required, and that the applicant would suffer greater damage than the defendant if the order were not made. The court will exercise its discretion as to whether to grant the injunction according to the particular circumstances. The risk is either that the injunction may turn out not to have been justified or that without it, the claimant’s rights at judgment may be unsatisfied. The claimant must show a good arguable case, with some evidence that there would be a real risk of dissipation of the assets otherwise than in the normal course of business. It must be ‘just and convenient’ for the injunction to be granted. It will not be granted if it might destroy the defendant’s whole business or if it would interfere unacceptably with third parties. 58 Lumley v Wagner [1852] 1 DM & G 604 59 Formerly known as a Mareva injunction, now under the Civil Procedure Rules 1998 60 Formerly known as an Anton Piller order, now under the Civil Procedure Rules 1998

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6 OTHER REMEDIES

The remedies have developed and have become very effective in practice in cases of commercial fraud, to counter increasingly sophisticated and immediate means of disposing of assets or destroying evidence. For example with complicated fraud schemes, the tracing of assets may be more difficult to achieve once large amounts of cash have been transferred electronically from one country to another. These orders are often referred to as the law’s ‘nuclear weapons’.61 An order may also be made to require a third party involved in the activities but not in the actual proceedings to provide information in advance of the trial to identify the wrongdoers.62

Rescission The term ‘rescission’ is used in different ways. The termination of a contract for breach, that is to say, by defective performance – or no performance – by one of the parties, affects future rights and obligations – ‘de futuro’, as discussed and illustrated in detail throughout this Report. ‘Rescission’ is sometimes used for this kind of termination. But strictly speaking, the correct use of the term, and its verb ‘to rescind’, is to define the termination of a contract where there was something wrong with its formation. The contract will be extinguished from the start – ‘ab initio’. The contract is in existence, valid and effective, until it is rescinded. It is voidable. (Note that this is different from a void contract, which is an apparent contract that in fact has never come into existence.) To rescind the contract the innocent party must notify the other party. If the contract is rescinded, both parties are restored to their pre-contractual positions. Neither party needs perform any future obligations. Each party should return to the other any money or goods transferred when the contract was in force. As an equitable remedy, the right to rescind may be lost, and this is termed a bar to rescission. The innocent party may decide to treat the contract as continuing, and affirm it (and may also be entitled to damages in certain circumstances). This affirmation would be a bar to rescission. Misrepresentation illustrates when the remedy of rescission may apply. A statement made before the contract is finalised may be a ‘representation’, that is, a statement made by one party that persuades, or ‘induces’, the other party to enter into the contract. If it is an untrue statement of fact or law, it is a misrep-

61 Originally coined by Lord Donaldson MR in Bank Mellat v Nikpour [1985] FSR 87, 92 62 Norwich Pharmacal v Comsners of Customs and Excise [1974] AC 133


51


resentation. If it had become a term of the contract, the innocent party could take action for breach of contract, claim damages for any loss suffered, and might be able to terminate the contract. If it is not incorporated into the contract itself, the innocent party cannot sue for breach of contract for the misrepresentation. There are three kinds of misrepresentations, with different consequences. All three kinds make the contract voidable. An innocent misrepresentation is a statement that the maker reasonably believes is true – even though it is not. A negligent misrepresentation is made carelessly, with no reasonable basis for believing it to be true. A fraudulent misrepresentation is the worst – deceit, a deliberate lie going beyond exaggeration or ‘sales talk’. It is hard to prove fraudulent misrepresentation. There has to be clear evidence that the representation was made, that it was known to be false, and that the person to whom it was made relied on it. One of the largest IT cases to come to trial concerned misrepresentation of expertise and resources in a contract to build a customer relationship management system for a new call centre.63 To win the contract, the salesman had represented that the dates given for delivery within the customer’s requested deadline were based on a proper assessment of the time that it would take. The finding was that the supplier had never carried out such an assessment. The deliberate lie was a fraudulent misrepresentation. The supplier was also liable for negligent misrepresentation about having an achievable programme (and for breach of contract in failing to resource the project properly). As to the remedies for misrepresentation, the contract is voidable, so the innocent party can rescind the contract by notifying the other party. The aim of rescission is to restore the parties to their pre-contractual position, so each party will return what they have received under the contract. But delay is one bar to rescission as to other equitable remedies, as discussed earlier. Thus in the case brought by Mr Leaf for non-fraudulent misrepresentation that a picture was painted by Constable, time started to run from the date of the contract. He could have rescinded the contract within a few days, but not five years later. Damages may be awarded for fraudulent or negligent misrepresentation regardless of whether the contract is rescinded. For innocent misrepresentation, the court may award damages instead of rescission. Mr Leaf could have claimed damages, but in fact he had not done so.64

63 BSkyB v EDS [2010] EWHC 86 64 Leaf v. International Galleries [1950] 2 KB 86

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6 OTHER REMEDIES

Rectification Rectification is a remedy where, in certain circumstances, the court modifies erroneous contract wording to reflect the true agreement between the parties. One party may be mistaken as to the wording, known as unilateral mistake; or both parties may be mistaken, known as common mistake. If both parties have not reached genuine agreement because they are at cross-purposes and have not agreed definite terms, there is no binding contract. For rectification of unilateral mistake, one party must be aware that the other party is mistaken as to the inclusion or omission of a particular term in the contract that is to the first party’s benefit, and not informed the other party.65 This may be because of fraud or misrepresentation, discussed in the section on Rescission, above. The party seeking rectification must prove actual knowledge of the mistake. In mutual mistake, the court starts from the premise that what is in the contract is what the parties meant, and therefore the party alleging that the contract needs to be rectified must prove it. It must be shown that the wording on the original contract is a mistake; what the contract was intended to state; and that the parties had not changed their minds during negotiations. It may be clear from the document itself as a matter of construction what the mistake is and also what the correction should be. However, if the matter is litigated, it will be because there is a dispute over what the terms state, and it may be difficult to provide the evidence required. Rectification will not be granted if a contract is merely ambiguously drafted. Denning LJ stated: ‘In order to get rectification it is necessary to show that the parties were in complete agreement on the terms of their contract, but by an error wrote them down wrongly; and in this regard, in order to ascertain the terms of their contract, you do not look into the inner minds of the parties – into their intentions – any more than you do in the formation of any other contract. You look at their outward acts, that is, at what they said or wrote to one another in coming to their agreement, and then compare it with the document which they have signed. If you can predicate with certainty what their contract was, and that it is, by a common mistake, wrongly expressed in the document, then you rectify the document; but nothing less will suffice.’ 66

65 George Wimpey UK Ltd v VI Construction Ltd [2005] EWCA Civ 77 66 In Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] 2 QB 450


53


Rectification was ordered by the court in one case concerning a contract for the sale and purchase of two companies.67 The contract had not specified the method of drawing up accounts, and the parties disagreed as to which method should have been used. The parties had stated their intention to proceed in accordance with certain accounting principles, both at meetings and in correspondence. The claimant expected the contract to have provided for consolidated accounts in compliance with the GAAP principles of acquisition accounting. The other party said that simple aggregation of profits was what was required. From evidence of the negotiations it was clear that the method of consolidated accounts following the GAAP principles had been the intended basis for preparation of the accounts. The requirements for rectification were re-stated in the case. There must be a ‘continuing common intention’ by both parties up to the time of the written contract document. It must be shown that the contract did not reflect this intention. If rectification is granted, the correct wording must not conflict with any other provisions in the contract. But rectification will not solve the problem of a badly drafted document. In another case, the court was asked to rectify a guarantee.68 A guarantee is a particular kind of legal document that must be in writing and signed by the guarantor, under the Statute of Frauds 1677.69 It was held that to satisfy this requirement, the guarantee must be clear in the wording of all its material terms. The errors in the document before the court were so fundamental and extensive that rectification was not a solution. For rectification, the ‘previous negotiations of the parties and their declaration of subjective intent’ may be admissible in evidence.70 This is an exception to the normal rule in respect of pre-contractual negotiations not recorded in the finalised contract, which are not admissible. Rectification is not necessary when the court is able to correct an obvious mistake in a document, where it is clear what the correction should be. This is known as ‘construction’, and is not an equitable remedy. The court will consider as an objective test what a reasonable person, with the same background knowledge as the parties had, would have understood. It will aim to give effect to the business purpose of the contract.

67 Grand Metropolitan plc v William Hill Group [1997] 1 BCLC 390 68 Fairstate Ltd v General Enterprise & Management Ltd and another [2010] EWHC 3072 69 Section 4 70 Investors’ Compensation Scheme Ltd v West Bromwich Building Society (No. 1) [1998] 1 WLR 896

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6 OTHER REMEDIES

Declaratory judgment A declaration or declaratory judgment is a conclusive and legally binding statement of the law made by the court to clarify a particular area. In contract, this may be to determine a specific issue or whether a term is enforceable, or about the rights and obligations of the parties. The court will not make any orders for specific performance nor award damages. There is no means of enforcing a declaratory judgment. The remedy may work so as to prevent a breach of contract, once the parties have found out the meaning in the contract.

Account of profits The remedy of an account of profits is available very exceptionally for breach of contract. George Blake had been a former member of the intelligence services. He escaped to Moscow in the 1960s, and became notorious as a double spy. In 1989 he published his best selling autobiography that contained information from the time of his employment. However, he had signed an agreement at the beginning of his employment not to divulge official information. In the case brought by the Attorney General, Lord Nicholl, in the House of Lords, said, that in considering all the circumstances, including the subject matter, the purpose of the contractual provision and the consequences of the breach, it was appropriate to assess whether: ‘The claimant had a legitimate interest in preventing the defendant’s profitmaking activity and, hence, in depriving him of his profit’.71 If George Blake had not been so well known because of his background and activities, royalty payments would not have been so high. This was a landmark case, but even so, the requirements for an account of profits to be applicable were stated only in general terms. They have more recently been re-stated by Mr Justice Roth as follows: ‘When, exceptionally, a just response to a breach of contract so requires, the court should be able to grant the discretionary remedy of requiring a defendant to account to the plaintiff for the benefits he has received from his breach of contract. In the same way as a plaintiff’s interest in performance of a contract

71 Attorney General v Blake and another [2000] UKHL 45


55


may render it just and equitable for the court to make an order for specific performance or grant an injunction, so the plaintiff’s interest in performance may make it just and equitable that the defendant should retain no benefit from his breach of contract.’ 72 It has been held that there must be more than a deliberate breach of contract to justify the remedy of an account of profits for breach.73 Mr Justice Sales said: ‘In the light of Blake’s case, where one was not dealing with infringement of a right which was clearly proprietary in nature and there was nothing exceptional to indicate that the defendant should never have been entitled to adopt a commercial approach in deciding how to behave in relation to that right, the appropriate remedy was likely to be an award of damages assessed by reference to a reasonable buy out fee rather than an account of profits. The law would control the choice between those remedies, having regard to the need to strike a fair balance between the interests of the parties at the remedial stage, rather than leaving it to the discretion of the claimant.’ 74

72 In Luxe Holding Ltd v Midland Resources Holding Ltd [2010] EWHC 1908 (Ch) 73 Luxe Holding Ltd v Midland Resources Holding Ltd [2010] EWHC 1908 (Ch) 74 In Vercoe and others v Rutland Fund Management Ltd and others [2010] EWHC 424 (Ch); [2010] WLR (D) 6

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Appendix List of cases and statutes List of cases cited List of statutes mentioned


Appendix List of cases and statutes

List of cases cited •

Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602

•

Anglia Television Ltd v Reed [1972] 1 QB 60

•

Attica Sea Carriers Corporation v Ferrostaal Poseidon Bulk Reederei GmbH, The Puerto Buitrago [1976] Lloyd’s Rep 250 (CA)

•

Atkins Ltd v Scott (1991) 7 Const LR 221Bacon v Cooper (Metals) Ltd [1982] 1 All ER 397

•

Attorney General v Blake and another [2000] UKHL 45

•

Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 (HL)

•

Bank Mellat v Nikpour [1985] FSR 87

•

Barclays Bank plc v Fairclough Building Ltd [1995] QB 214

•

Beoco Ltd v Alfa Laval Co. Ltd [1994] 3 WLR 1179

•

BSkyB v EDS [2010] EWHC 86

•

Chaplin v Hicks [1911] 2 KB 786

•

Clea Shipping Corp. v Bulk Oil International Ltd [1984] 1 All ER 129

•

Co-op Insurance v Argyll Stores [1997] 3 All ER 29

•

Countrywide Communications Ltd v ICL Pathway Ltd [1999] All ER (D) 1192

•

Deeny v Gooda Walker Ltd [1995] LRLR 361 [1996] LRLR 109

•

Dunlop Pneumatic Tyre Co. Ltd V New Garage and Motor Co. Ltd [1915] AC 79

•

Fairstate Ltd v General Enterprise & Management Ltd and another [2010] EWHC 3072

•

58

Farley v Skinner [2001] 3 WLR 899



•

Force India Formula One Team Ltd v Etihad Airways PJSC [2010] EWCA Civ 1051

•

Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852

•

Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] 2 QB 450

•

Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360

•

George Wimpey UK Ltd v VI Construction Ltd [2005] EWCA Civ 77

•

Golden Strait Corporation v Nippon Yusen Kubishika Kaisha, The Golden Victory [2007] UKHL 12, [2007] 2 AC 353 [HL]

•

Grand Metropolitan plc v William Hill Group [1997] 1 BCLC 390

•

Hadley v Baxendale [1854] 9 Exch. 41

•

Harbutt’s Plasticine v Wayne Tank and Pump Co Ltd (1970) 1 All ER 225

•

Hayes v James and Charles Dodd [1990] 2 All ER 815 (CA)

•

Heywood v Wellers [1976] QB 446

•

Henderson v Merrett Syndicates [1994] 3 All ER 506

•

Hobbs v L&SW Rly Co [1875] 10QB 111

•

Investors’ Compensation Scheme Ltd v West Bromwich Building Society (No. 1) [1998] 1 WLR 896

•

Jarvis v Swan’s Tours [1973]1 All ER 71

•

Jeune v Queens Cross Properties Ltd [1973] 3 All ER 97

•

Koufkos v C. Czarnikow Ltd, The Heron II [1969] 1 AC 350

•

Kpohraror v Woolwich Building Society [1996] 4 All ER 119

•

Law Debenture Trust Corporation PLC v Elektrim SA [2010] EWCA Civ 1142

•

Leaf v. International Galleries [1950] 2 KB 86

•

Lumley v Wagner [1852] 1 DM & G 604

•

Luxe Holding Ltd v Midland Resources Holding Ltd [2010] EWHC 1908 (Ch)

•

Martin v Childs [2002] EWCA Civ 283

•

Miliangos v George Frank (Textiles) Limited [1976] AC 443


59


•

Milner & Milner v Carnival Plc (trading as Cunard) [2010] EWCA Civ Hedley Byrne & Co v Heller & Partners Ltd [1964] AC 465 (HL)

•

North Sea Energy Holdings NV v Petroleum Authority of Thailand [1999] 1 Lloyds Rep 483

•

Norwich Pharmacal v Commissioners of Customs and Excise [1974] AC 133

•

Payzu v Saunders [1919] 2 KB 581

•

Pilkington v Wood [1953] Ch 770

•

Robinson v Harman (1848) 1 Ex 850

•

Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344

•

Shell Egypt West Manzalla GmbH v Dana Oil Egypt Ltd [2010] EWHC 465 (Comm)

•

Shell UK Ltd v Lostock Garage Ltd [1976] 1 WLR 1187 (CA)

•

Stocznia Gdanska SA v Latvian Shipping Co. [1998] 1 WLR 574

•

Stocznia Gdynia SA v Gearbulk Holdings Limited [2009] EWCA Civ 75

•

Surrey County Council and Anor v Bredero Homes Ltd [1993] 3 All ER 705

•

Vercoe and others v Rutland Fund Management Ltd and others [2010] EWHC 424 (Ch); [2010] WLR (D)

•

Vitol SA v Norelf Ltd [1995] 3 All ER 971

•

Whincup v Hughes [1871] LR 6 CP 78

•

Whittle Movers Ltd v Hollywood Express Ltd [2009] EWCA Civ 1189

•

White & Carter (Councils) Ltd v McGregor [1962] AC 413

•

Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 [PC]

List of statutes mentioned

60

•

Arbitration Act 1996

•

Law Reform (Contributory Negligence) Act 1945

•

Sale of Goods Act 1979



•

Statute of Frauds 1677

•

Unfair Contract Terms Act 1977


61

Other specially commissioned briefings from Thorogood BUSINESS AND COMMERCIAL LAW Commercial Contracts: Legal principles and drafting Burnett, Rachel • £145

ISBN: 978-185418702-4

This briefing takes into account relevant legislation and case law. For all points of the law and critical distinctions, you will find crystal-clear explanations and guidelines to a host of case studies illustrating the law and its application.

IT Contracts: Effective Reviewing, Negotiating and Drafting Burnett, Rachel • £145

ISBN 978-185418675-1

This report provides useful insight into IT contracts, principally in respect of business-to-business transactions. It provides advice and guidance in explaining and understanding the structure and content of different kinds of IT contracts for reviewing, negotiating and drafting purposes. The report also takes into consideration the various legal and commercial entities required to successfully manage risk, avoid costly mistakes and reflect the details of the transaction. Legal explanations are provided from a commercial perspective.

Corporate Governance Martin, David • £99

ISBN: 978-185418354-5

This briefing is a clear, accessible and jargon-free analysis of the practical application of Corporate Governance. With short case studies to illustrate legal requirements, the author guides the reader through all aspects of the Corporate Governance programme, concentrating specifically on its use by organisations who are not required to adopt it, such as listed PLCs.

Email: Legal issues 2008 Singleton, Susan • £125

ISBN: 978-185418630-0

One of the biggest changes to office life in the last five years has been the growth of e-mail. On balance a major advantage to businesses, enabling postage charges and time to be saved, but e-mail also comes with certain legal risks. This report seeks to highlight those areas where employers particularly need to consider relevant risks. However in most cases the risks can be minimised to an acceptable level and nothing with this report should put any employer off letting their employees loose on e-mail. It highlights principal issues which arise and the means to ensure enforcement, in particular, by presenting to employees a coherent e-mail and Internet use policy so they know where they stand.

For full details of any title, and to view sample extracts, please visit:

www.thorogoodpublishing.co.uk

Freedom of Information Act in Practice 2008 Singleton, Susan • £145

ISBN: 978-185418632-4

• Do you want to know how to use the Act to obtain information about your own competitors? • Are you worried about making your contracts fully confidential? These and many other issues are expertly dealt with in this valuable new report. This report shows how businesses can ensure that they don’t disclose information inadvertently and how to protect their own information by drafting new contracts in the right way. Susan Singleton has advised many clients in all sectors on the FOIA from a practical standpoint.

International Commercial Agreements Attree, Rebecca • £99

ISBN: 978-185418286-9

This report appears at an exciting time for international commercial lawyers: new legislation, fresh opportunities – and the challenge of understanding fully how to exploit them. Recent changes to EC Competition Law have made a significant impact upon parties’ freedom to contract commercially, generally giving them greater flexibility. In the field of e-commerce, the EC has issued a welter of laws that are in the course of being implemented into national laws. The report explains the principles and techniques of successful international negotiation and provides a valuable insight into the commercial points to be considered as a result of the laws relating to: • pre-contract • private international law • resolving disputes (including alternative methods, such as mediation) • competition law • drafting common clauses • and contracting electronically

Software Contract Agreements Bond, Robert • £145

ISBN: 978-185418692-8

A thorough explanation of the law combined with expert guidance on negotiating and drafting the best contract for your client. • A clear explanation of the law relating to computer contracts with particular emphasis on software licenses • A wealth of advice, tips and techniques for successful contract negotiation and drafting • Leading author: an expert with over 25 years’ experience in IP/IT law in a wide range of sectors • Valuable sample contracts

Achieving Business Excellence, Quality and Performance Improvement Chapman, Colin & Hopper, Dennis • £99

ISBN: 978-185418018-6

This valuable briefing identifies all the areas critical to developing an effective performance improvement process. It is a practical guide to the use of business excellence models and frameworks, quality standards, benchmarking tools, selfassessment programmes and the latest performance improvement initiatives.

The Commercial Exploitation of Intellectual Property Rights by Licensing DesForges, Charles • £99

ISBN: 978-185418285-4

This report will show you – whether as licensor or licensee – how to identify and secure profitable opportunities, strategies and techniques for negotiating the best agreement, and finally the techniques of successfully managing a license operation.

Intellectual Property Protection and Enforcement Brazell, Lorna • £99

ISBN: 978-185418054-4

Incorporating the latest developments in IP law, this briefing reviews each of the principal forms of intellectual property right available in the United Kingdom, describing the nature of the right itself and explaining: How rights arise or can be obtained, How rights can be exploited, What is necessary to protect rights from erosion or loss, What actions will constitute infringement of a right, under either civil (enforced by the owner) or criminal (enforced by public authorities) law, What remedies are available to the owner of the right, once infringement has been proved. Each chapter can be read on its own for convenient reference, and the introduction to each chapter also makes it clear where awareness of another section may be useful.

Waste Management: The changing legislative climate Hand, Caroline • £69

ISBN: 978-185418367-5

This valuable briefing explains what all the new legislation, directives and regulations mean in practice and what you need to do to stay within the law. Recent far-reaching changes to the law and practice affect everyone – commerce and industry, central and local government and householders.

Websites and the Law Singleton, Susan • £99

ISBN: 978-185418331-6

Is your company/client website legal? Do you know what information you are required by law to put on it? What can you do with people’s personal data sent to your website? This briefing deals with all the practical legal issues which arise with websites – both those sites which sell goods or services and those which advertise.

Need it now? Download a PDF of the report at: www.thorogoodpublishing.co.uk

BUSINESS STRATEGY AND MANAGEMENT A Practical Guide to Knowledge Management Brelade, Sue & Harman, Chris • £99

ISBN: 978-185418230-2

An expert but jargon-free guide to enable you to manage the knowledge in your organisation successfully and to identify, gather and use that knowledge to maximum advantage.

Analyse your Business – A performance health check O’Connor, Carol • £99

ISBN: 978-185418170-1

This briefing offers the tools and techniques for company-wide analysis and is essential reading for business leaders responsible for corporate performance. Its purpose is to put minor issues into perspective and discourage the use of quick fix solutions for bigger problems.

Tendering & Negotiating MoD Contracts Boyce, Tim • £99

ISBN: 978-185418276-0

This specially commissioned report aims to draw out the main principles, processes and procedures involved in tendering and negotiating MoD contracts. As Tim Boyce writes in the Introduction, ‘it is important to realise that the SPI embraces a conceptual shift in the role of the MoD procurers’. What does this ‘huge shift in thinking’ mean for contractors? How exactly has the role of MoD purchasing changed? This briefing covers every aspect of competitive tendering, negotiation and contractual negotiations in this new era. There can be few people who combine Tim Boyce’s experience and expertise with a gift for explaining issues and procedures with such clarity.

Understanding SMART Procurement in the MOD Boyce, Tim • £99

ISBN: 978-185418164-0

The main thrust of this report is on issues to do with strategy, organisation and processes. The single most encouraging and exciting feature of the SMART procurement initiative is that it embraces the need to change the culture. There is a commitment within the high political echelon of the MoD to make this change happen. Probably the greatest single challenge is to ensure that this commitment is maintained through the inevitable changes of personality at the political and senior management level.

IT Governance Norfolk, David • £99

ISBN: 978-185418371-2

This specially commissioned briefing sets out what the latest legislation says and what it means, its impact on the organisation as a whole and on the IT group specifically, and how to implement an effective IT governance initiative in your company.



Practical Techniques for Effective Project Investment Appraisal Tiffin, Ralph • £99

ISBN: 978-185418099-5

How to ensure you have a reliable system in place. Spending money on projects automatically necessitates an effective appraisal system – a way of deciding whether the correct decisions on investment have been made.

Project Risk Management: The commercial dimension Boyce, Tim • £95

ISBN: 978-185418257-9

This briefing will show you how to fully appreciate all the commercial dimensions of important projects and understand how to identify all the risks during the pre-contract bidding phase.

Strategy Implementation Through Project Management Grundy, Tony • £99

ISBN: 978-185418250-0

The gap: Far too few managers know how to apply project management techniques to their strategic planning. The result is often strategy that is poorly thought out and executed. The answer: Strategic project management is a new and powerful process designed to manage complex projects by combining traditional business analysis with project management techniques.

Surviving a Corporate Crisis: 100 things you need to know Batchelor, Paul • £99

ISBN: 978-185418208-1

Seven out of ten organisations that experience a corporate crisis go out of business within 18 months. This briefing not only covers remedial action after the event but offers expert advice on preparing every department and every key player of the organisation so that, should a crisis occur, damage of every kind is limited as far as possible.

Technical Aspects of Business Leases: Overcoming the practical difficulties Dowden, Malcolm • £99

ISBN: 978-185418194-7

The purpose of this briefing is to highlight areas where technical issues might lead to practical difficulties, and to give clear guidance to help those involved in property management avoid the pitfalls.

FINANCE Tax Planning for Businesses and their Owners Hughes, Peter • £145

ISBN: 978-185418402-3

Written for business owners and managers, this special report offers expert advice on the tax implications of your business decisions – guiding you in making the right business and personal choices for tax reduction.

Trade Secrets of Business Disposals Pearson, Barrie • £145

ISBN: 978-185418321-7

If you’re like most people, you’ll only get one chance to sell your business and to capitalise on years of hard work and planning. You can either fluff it, or make sure you get the best possible advisor and become financially secure for life, and possibly very rich. This briefing shows you how to make your business ‘investorready’ for maximum capital return.

Trade Secrets of Business Acquisitions Pearson, Barrie • £145

ISBN: 978-185418366-8

In this invaluable new briefing one of the City’s most successful deal-makers distils 40 years’ experience as both principal and advisor. “Losing a deal by adopting the wrong tactics is unforgiveable” he writes, but it happens all too often. This briefing offers both professional advisors and principals the opportunity to transform their rate of success, clarifying hard truths and highlighting avoidable mistakes. It is laced throughout with proven tactical advice to ensure that both deals and post-acquisition management are carried out with maximum success.

VAT Liability and the Implications of Commercial Property Transactions Buss, Tim • £145

ISBN: 978-185418307-1

The option to tax is a major VAT planning tool but you have got to get the detail right to take full advantage – and getting it wrong can be very costly. This briefing shows you how to plan for maximum advantage and avoid costly mistakes.

EMPLOYMENT LAW Data Protection Law for Employers 2008 Singleton, Susan • £145

ISBN: 978-185418626-3

This briefing seeks to summarise the application of the Act to the employment discipline. It concentrates on the areas, which are useful and practical to employers by examining the Information Commissioner’s Office code of practice. It answers many of the mundane, day-to-day data protections issues that employers and those who are responsible for personal data need to know.

Discrimination Law and Employment Issues Martin, David • £145

ISBN: 978-185418678-2

The Age Discrimination Act is billed by lawyers as the most significant change in employment law since the 1970s. In addition to sex and race discrimination laws, in the last two years employers have also had to cope with sexual orientation discrimination and religious discrimination. David Martin, an expert on employment law and practice, analyses the practical aspects of dealing with each of the anti-discrimination laws. He demonstrates how to ensure that paperwork and systems comply totally with the law, and he provides a range of helpful case studies to illustrate the key issues and bring them to life.

Effective Recruitment: A practical guide to staying within the law Leighton, Patricia & Proctor, Giles • £145

ISBN: 978-185418683-6

The ways to undertake the task continue to grow, making the decision as to how best to recruit for a given employment situation more complex. This specialist text is responding to a number of imperatives, including legal ones. There have been, and are, anticipated changes that make it essential that recruitment practitioners act both effectively and within the law.

Employee Sickness and Fitness for Work: Successfully dealing with the legal system Howard, Gillian • £99

ISBN: 978-185418281-4

Many executives see employment law as an obstacle course or, even worse, an opponent – but it can contribute positively to keeping employees fit and productive. This briefing will show you how to get the best out of your employees, from recruitment to retirement, while protecting yourself and your firm to the full.

Employment Law Aspects of Mergers and Acquisitions: A practical guide Ryley, Michael • £99

ISBN: 978-185418363-7

This report will help you to understand the key practical and legal issues, achieve consensus and involvement at all levels, understand and implement TUPE regulations and identify the documentation that needs to be drafted or reviewed within the context of a merger, acquisition or disposal.

Navigating Health and Safety Law: Ensuring compliance and minimising risk Pope, Chris • £99

ISBN: 978-185418353-8

If you have already been challenged by the insurer, inspector, or one of your workforce about the status of your health and safety this briefing will give you a workable answer to questions like Is my health and safety policy legally compliant? How do I avoid being liable for an employees ill health arising from previous employment? Who should carry out safety inspections – is it my responsibility?

Successfully Defending Employment Tribunal Cases Hunt, Dennis • £99

ISBN: 978-185418267-8

Sweeping changes to the way employment tribunal claims are dealt with have increased the risk of higher costs and more expensive claims. This indispensable report covers all the changes and their implications for HR professionals.

The Thorogood Promise If you are not totally satisfied and you return a publication in mint condition within 14 days of receipt, we will refund the cost of the publication, no questions asked.

HR, RECRUITMENT AND TRAINING Applying the Employment Act 2002: Crucial developments for employers and employees Williams, Audrey • £99

ISBN: 978-185418253-1

The Act represents a major shift in the commercial environment, with far-reaching changes for employers and employees. The consequences of getting it wrong, for both employer and employee, will be considerable – financial and otherwise. The Act affects nearly every aspect of the workplace.

Dismissal and Grievance Procedures Hunt, Dennis • £99

ISBN: 978-185418376-7

This briefing explains what all the regulations say and what steps you need to take to operate effective dismissal, disciplinary and grievance procedures. It covers all the requirements of the Disputes Resolution Procedures that came into effect in October 2004. It tells you where and when the regulations apply – and what you need to do.

Enabling Beyond Empowerment Williams, Michael • £99

ISBN: 978-185418084-1

By applying the range of practical management techniques detailed in this briefing, you can provide the authority and means to empower in a way that substantially reduces the dangers.

Flexible Working Williams, Audrey • £99

ISBN: 978-185418306-4

Recent research shows that far too many individuals, as well as firms, are unaware of flexible working rights. How employers and employees deal with them is of crucial – and increasing – importance to both. This briefing clarifies the law, sets out the rights of employer and employee, and offers valuable practical advice on best practice.

How to Turn your HR Strategy into Reality Grundy, Tony • £99

ISBN: 978-185418183-1

From a diagnosis of HR issues to an analysis of the external and internal future environment of your company and the effect on your human resources – this is practical information aimed at HR and senior line managers.

Internal Communications Farrant, James • £99

ISBN: 978-185418149-7

There is growing evidence that the organisations that ‘get it right’ reap dividends in corporate energy and enhanced performance. In these organisations, internal communications have equal status with the external communications functions. This practical briefing will show you how internal communications, taken in their widest sense, can improve the performance of organisations.

Mergers and Acquisitions: Confronting the organisation and people issues Thomas, Mark • £145

ISBN: 978-185418676-8

Why do so many mergers and acquisitions end in tears and reduced shareholder value? This report will help you to understand the key practical and legal issues, achieve consensus and involvement at all levels, understand and implement TUPE regulations and identify the documentation that needs to be drafted or reviewed.

New Ways of Working Jupp, Stephen • £99

ISBN: 978-185418169-5

New ways of working examines the nature of the work done in an organisation and seeks to optimise the working practices and the whole context in which the work takes place. It is more about promoting the best ways of doing things than simple cost driven change. Although it emphasises the importance of business and organisation, it spans the concerns of people, property, technology, community and environment.

Power Over Stress at Work Araoz, Daniel • £99

ISBN: 978-185418176-3

The HR manager can learn how to deal creatively with stress from the information in this briefing and pass on their knowledge down the ranks. He or she will then halt the downward spiral of diffusing stress and produce a more positive knock-on effect – namely to increase the productivity of the entire workforce and reduce absenteeism resulting from this terrible illness.

Reviewing and Changing Contracts of Employment Phillips, Annelise; Player, Thomas & Rome, Paula • £99

ISBN: 978-185418296-8

The Employment Act 2002 has raised the stakes. Imperfect understanding of the law and poor drafting will now be very costly. This briefing will: • Ensure that you have a total grip on what should be in a contract and what should not • Explain step by step how to achieve changes in the contract of employment without causing problems • Enable you to protect clients’ sensitive business information • Enhance your understanding of potential conflict areas and your ability to manage disputes effectively.

Trade Secrets of Using e-Learning in Training Bray, Tony • £99

ISBN: 978-185418326-2

Definitely not for ‘techies’, this briefing is practical and jargon-free – giving you step-by-step skills and processes to enable you to design effective e-learning products with confidence.



Transforming HR Hunter, Ian and Saunders, Jane • £99

ISBN: 978-185418361-3

The blue-print for the future of HR – how to deliver proven value to your Board, business and colleagues. The briefing is based on interviews with 60 HR leaders from across industry and public and not for profit sectors. The briefing covers HR outsourcing and shared services.

MARKETING, PR AND SALES Corporate Community Investment Genasi, Chris • £99

ISBN: 978-185418192-3

Supporting good causes is big business – and good business. Corporate community investment (CCI) is the general term for companies’ support of good causes, and is a very fast growing area of PR and marketing.

Defending your Reputation Taylor, Simon • £99

ISBN: 978-185418251-7

‘Buildings can be rebuilt, IT systems replaced, people can be recruited, but a reputation lost can never be regained…The media will publish a story – you may as well ensure it is your story’ Simon Taylor. ‘News is whatever someone, somewhere, does not want published’ William Randolph Hearst When a major crisis does suddenly break, how ready will you be to defend your reputation?

Implementing an Integrated Marketing Communications Strategy Hart, Norman • £99

ISBN: 978-185418120-6

Get ahead and stay ahead of your competition through better integration of your marketing communications. Norman Hart was an international consultant, lecturer and author on marketing, advertising and public relations. His books included The CIM Marketing Dictionary, Strategic Public Relations, The Practice of Advertising and Industrial Marketing Communications.

Insights into Understanding the Financial Media: An insider’s view Scott, Simon • £99

ISBN: 978-185418083-4

This practical report will help you understand the way the financial print and broadcast media works in the UK. It will also provide you with techniques and guidelines on how to communicate with the financial media in the most effective way, to help you achieve accurate and positive coverage of your organisation and its operations.

Lobbying and the Media: Working with politicians and journalists Burrell, Michael • £99

ISBN: 978-185418240-1

Lobbying is an art form rather than a science, so there is inevitably an element of judgement in what line to take. The best lobbying is always based on accurate, up-to-date information and on a well-argued case, founded on credible evidence, and delivered to the right audiences in the right tone of voice at the right time. Sounds simple, but it isn’t. This expert briefing explains the knowledge and techniques required.

Managing Corporate Reputation: The new currency Dalton, John & Croft, Susan • £99

ISBN: 978-185418272-2

ENRON, WORLDCOM… who next? At a time when trust in corporations has plummeted to new depths, knowing how to manage corporate reputation professionally and effectively has never been more crucial. This briefing shows you how to: • Develop PR, brands and relationship management as the vanguards of your corporate reputation • Strengthen your internal as well as external communications • Improve the effective management of your stakeholders

Practical Techniques for Effective Lobbying Miller, Charles • £99

ISBN: 978-185418089-6

Understanding the system and the process in which it works is essential to lobbying effectively. Uncoordinated, uncontrolled and badly planned approaches will do more harm than good, and risk antagonising the people you most want to influence. This briefing provides the techniques required for effective lobbying.

Public Affairs Techniques for Business Wynne-Davies, Peter • £99

ISBN: 978-185418175-6

This briefing shows in practical terms how you can counter potential threats through a professionally structured and implemented public affairs campaign. Today’s successful companies recognise that in order to survive and prosper a comprehensive and disciplined approach to public affairs is no longer just a useful asset, it is now a necessity.

Selling Skills for Professionals Tasso, Kim • £99

ISBN: 978-185418179-4

Many professionals still feel awkward about really selling their professional services. They are not usually trained in selling. This is a much-needed briefing which addresses the unique concerns of professionals who wish to sell their services successfully and to feel comfortable doing so.

Strategic Customer Planning Melkman, Alan • £95

ISBN: 978-185418388-0

This is very much a ‘how to’ briefing. After reading those parts that are relevant to your business, you will be able to compile a powerful customer plan that will work within your particular organisation for you. Charts, checklists and diagrams throughout.

Strategic Planning in Public Relations Knights, Kieran • £145

ISBN: 978-185418225-8

Tips and techniques to aid you in a new approach to campaign planning. Strategic planning is a fresh approach to PR. An approach that is fact-based and scientific, clearly presenting the arguments for a campaign proposal backed with evidence. This briefing provides valuable tips and techniques to improve your PR and campaign planning.

Successful Competitive Tendering Woodhams, Jeff • £99

ISBN: 978-185418235-7

To win business, you must make a convincing case. This briefing will help you become more skillful, and more successful in your tendering.

Techniques for Ensuring PR Coverage in the Regional Media: An insider’s view Imeson, Mike • £99

ISBN: 978-185418019-3

This in-depth briefing will give you the tools and techniques you need to enjoy the opportunities offered by the regional and local media. It offers you practical guidance and advice on how to apply them with maximum effect for your next PR campaign.

Order Form FIVE WAYS TO ORDER 1 Tel: +44 (0)1235 465 500 2 Fax: +44 (0)1235 465 556 3 Email: [email protected] 4 Web: www.thorogoodpublishing.co.uk 5 Post: Marston Book Services, 10-12 Rivington Street, London EC2A 3DU Title

ISBN

Price

Authors

Commercial Contracts: Legal principles and drafting

978-185418702-4

£145

Burnett, Rachel

IT Contracts: Effective Reviewing, Negotiating and Drafting

978-185418675-1

£145

Burnett, Rachel

Corporate Governance

978-185418354-5

£99

Martin, David

Email: Legal issues

978-185418256-0

£145

Singleton, Susan

Freedom of Information Act

978-185418347-7

£145

Singleton, Susan

International Commercial Agreements

978-185418286-9

£99

Attree, Rebecca

Insights into Successfully Managing the In-house Legal Function

978-185418174-9

£95

O’Meara, Barry

Software Contract Agreements

978-185418692-8

£145

Bond, Robert

Achieving Business Excellence, Quality and Performance Improvement

978-185418018-6

£99

Chapman, Colin & Hopper, Dennis

The Commercial Exploitation of Intellectual Property Rights by Licensing

978-185418285-4

£99

DesForges, Charles

Intellectual Property Protection and Enforcement

978-185418054-4

£99

Brazell, Lorna

Waste Management: The changing legislative climate

978-185418367-5

£69

Hand, Caroline

Websites and the Law

978-185418331-6

£99

Singleton, Susan

A Practical Guide to Knowledge Management

978-185418230-2

£99

Brelade, Sue & Harman, Chris

Analyse your Business – A performance health check

978-185418170-1

£99

O’Connor, Carol

Tendering & Negotiating MoD Contracts

978-185418276-0

£99

Boyce, Tim

Understanding SMART Procurement in the MOD

978-185418164-0

£99

Boyce, Tim

Qty

Title

ISBN

Price

Authors

IT Governance

978-185418371-2

£99

Norfolk, David

Practical Techniques for Effective Project Investment Appraisal

978-185418099-5

£99

Tiffin, Ralph

Project Risk Management: The commercial dimension

978-185418257-9

£99

Boyce, Tim

Strategy Implementation Through Project Management

978-185418250-0

£99

Grundy, Tony

Surviving a Corporate Crisis: 100 things you need to know

978-185418208-1

£90

Batchelor, Paul

Technical Aspects of Business Leases: Overcoming the practical difficulties

978-185418194-7

£99

Dowden, Malcolm

Tax Planning for Businesses and their Owners

978-185418334-7

£145

Hughes, Peter

Trade Secrets of Business Disposals

978-185418321-7

£145

Pearson, Barrie

Trade Secrets of Business Acquisitions

978-185418366-8

£145

Pearson, Barrie

VAT Liability and the Implications of Commercial Property Transactions

978-185418307-1

£145

Buss, Tim

Data Protection Law for Employers

978-185418283-8

£145

Singleton, Susan

Discrimination Law and Employment Issues

978-185418339-2

£145

Martin, David

Effective Recruitment: A practical guide to staying within the law

978-185418683-6

£145

Leighton, Patricia & Proctor, Giles

Employee Sickness and Fitness for Work: Successfully dealing with the legal system

978-185418281-4

£99

Howard, Gillian

Employment Law Aspects of Mergers and Acquisitions: A practical guide

978-185418363-7

£99

Ryley, Michael

Navigating Health and Safety Law: Ensuring compliance and minimising risk

978-185418353-8

£99

Pope, Chris

Successfully Defending Employment Tribunal Cases

978-185418267-8

£99

Hunt, Dennis

Applying the Employment Act 2002: Crucial developments for employers and employees

978-185418253-1

£99

Williams, Audrey

Dismissal and Grievance Procedures

978-185418376-7

£99

Hunt, Dennis

Enabling Beyond Empowerment

978-185418084-1

£99

Williams, Michael

Flexible Working

978-185418306-4

£99

Williams, Audrey

How to Turn your HR Strategy into Reality

978-185418183-1

£99

Grundy, Tony

Internal Communications

978-185418149-7

£99

Farrant, James

Mergers and Acquisitions: Confronting the organisation and people issues

978-185418676-8

£145

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978-185418169-5

£99

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Power Over Stress at Work

978-185418176-3

£99

Araoz, Daniel

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978-185418296-8

£99

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978-185418326-2

£99

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978-185418361-3

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978-185418192-3

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978-185418251-7

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978-185418120-6

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Title

ISBN

Price

Authors

Insights into Understanding the Financial Media: An insider’s view

978-185418083-4

£99

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Lobbying and the Media: Working with politicians and journalists

978-185418240-1

£99

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Managing Corporate Reputation: The new currency

978-185418272-2

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Practical Techniques for Effective Lobbying

978-185418089-6

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Public Affairs Techniques for Business

978-185418175-6

£99

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Selling Skills for Professionals

978-185418179-4

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Strategic Customer Planning

978-185418388-0

£99

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Strategic Planning in Public Relations

978-185418225-8

£145

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Successful Competitive Tendering

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£99

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Techniques for Ensuring PR Coverage in the Regional Media: An insider’s view

978-185418019-3

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Qty

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Breach Of Promise

A Breach of Promise

Breach of Trust

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Breach Of Promise

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A Breach of Promise

Breach of Trust

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