<TOPIC13>REMEDIES:DAMAGES CaseName 1.Expectation interest Robsinsonv Harman(1848) Facts Thefollowingcasesfallintothiscategorybutarenotincluded: RuxleyElectronicsandConstructionLtdvForsyth Psoughtdamagesforbreachofacontracttograntalease.The premiseswereworthconsiderablymorethantheagreedrent. Psoughttorecoverbothofhisrelianceloss(20)andlossof bargain(didnotmentionhowmuch).

Judgment Rationale

Pwon

SunrockAircraft Corpv Sandinavian AirlinesSystems (2007) AlfredMcAlpine ConstructionLtdv PanatownLtd (2001)

PleasedtwoaircrafttoD.Upontheendofthelease,Dreturnedthe aircraftunrepairedtoP. Psoldthetwoaircraft.Then,PsuedDforbreachofcontract,which providedthatDshouldhaverepairedtheaircraftbeforereturning them. McAlpine,aconstructioncompany,contractedwithPanatownfor aconstructioncarriedoutonlandownedbyX(Panatownssister company).Panatownterminatedthecontractonthegroundof McAlpinesfailureinperformance,whichresultedindefectivework thatrequiredsubstantialrepairingcost. PanatownsoughtdamagesagainstMcAlpineontwogrounds: 1. Itisentitledtorecoverdamagesinrespectofaloss sustainedbya3rdparty,namelyX 2. Itsufferedalossofbargainwhichentitledittorecover substantialdamages,althoughthelosswasnotfinancial

Pwon (butonly awarded nominal damages) Panatown notentitleto recover damages (bya32 majority)

Inadditiontotherelianceloss(20),Pwasentitledtoafurther200forhislossof bargain(i.e.expectationloss).Thejudgmentdidnotmentionhowthedamageswas calculated,butinferredfromParkBsclassicformulation,Pdidnotendupina bettersituationthanhewouldhavebeeninhadthecontractbeenperformed. ClassicformulationbyParkB:Theruleofcommonlawis,thatwhereaparty sustainsalossbyreasonofabreachofcontract,heis,sofarasmoneycandoit, tobeplacedinthesamesituation,withrespecttodamages,asifthecontracthad beenperformed. Thisformulation,however,failedtodistinguishbetweenmethodschosenbythe courtforfulfillingtheperformanceinterest:diminulationofvalue/costofcure. Normally,thedamagesinthiscasewouldhavebeenthecostofrepair.However,sinceP soldthetwoaircraftatapricewhichreflectedthefactthattherehadbeennodiminutionin thevalueoftheaircraft,Pwasheldtohavesufferednoloss.Thereforeonlynominal damageswasawarded.

Panatownwasnotentitledtorecoversusbtantialdamagesoneitherground Onthefirstground(narrowground),itwasheldunanimousthatbecausethere wasalreadyaDoCdeedbetweenMcAlpineandX,therewasnojustificationfor PanatowntorecoverdamagesonbehalfofXwhenXhaditsowncauseofaction againstMcAlpine.Otherwiseitmightintroducenewproblemssuchasdouble liability. Onthesecondground(broaderground),therewasanevensplitofdecisionwith thefifthjudge(LordClyde)favoringPanatownsargumentinprinciplebutnoton thefacts. LordClye:...whereAcontractswithBtopayasumofmoneytoCandBfailsto doso.ThelosstoAisinthenecessitytofindotherfundstopaytoCand providedthatheisgoingtopayC,orindeedhasdoneso,heshouldbeableto recoverthesumbywayofdamagesforbreachofcontractformB. However,inthepresentcasebecausetherewasalreadyadeliberatecourse adoptedbyPanatownsuchthatXwouldhaveitsownrightofactionagainst McAlpineincaseofbreach,LordClydethusdidnotconsiderthiscasean exceptiontothegeneralruleofprivity.

 AngliaTelevisionv Reed[1972]1QB 60 C&PHaulagev Middleton[1983] 1WLR1461

D,anactor,contractedwithPtoplayaleadingroleinaTVshow.D laterrepudiatedthecontractPhadtoabandontheproduction becausehecouldnotgetasubstitute.Psuedforrelianceloss whichaccountedforexpenditureincurredbothbeforeandafterthe contractwassigned.

Pwon

SincePelectedtoclaimtheirreliancelossinsteadoflossofprofits,Pwouldbe entitledtorecoverbothprecontractualandpostcontractualcostsaslongasthe costwasreasonablyinthecontemplationofthepartiesaslikelytobewastedifthe contractwasbroken.Namely,wastedexpenditurecanberecoveredwhenitis wastedbyreasonofDsbreachofcontract. Pwasheldtohavetherighttoelecteitherrelianceorexpectationloss.However,in anotherAustraliancase(CommonwealthofAustralia[1991]),itwassuggestedthat PhasnosuchrighttoelectreliancelosscouldONLYberecoveredincaseswhere therewaseithernoprofit,oritwastoospeculativetoassesstheprofit. Doublerecoverywouldbeprohibited.

3.Therestitution interest PlanchvColburn (1831)8Bing14

4.Nonpecuniary loss FarleyvSkinner [2002]2AC732

TheplaintiffagreedtowriteabookforD.Theagreed contractpricewas100tobepayableoncompletion. Pcommencedwritingandhadcompletedagreatdealofit whenDcancelledtheseries.Drefusedtopaythe plaintiff. Pbroughtanactiontoenforcepayment.

Pwon (recover50 ona quantum meruitbasis)

If a partytoacontractis preventedformcompleting thecontractbytheotherheor she may either sue for compensation for the breach of contract or claim payment fortheamountofworkthatheorshehasalreadydone.

PaskedD,asurveyor,toinspectthehouseandinparticularto investigatewhetherthepropertywouldbeaffectedbyaircraft noise.Dstatedthatitwasunlikelythatthepropertysuffered greatlyfromaircraftnoise.Infactthehousewasmarkedlyby aircraftnoise.PsoughtdamagesfromDbecausehisuseand enjoymentofthepropertywasimpairedbytheaircraftnoise.

Pwon (awardof 10,000 pounds)

LordScott:ifPhadknownabouttheaircraftnoisehewouldnothaveboughtthe property.Pcouldeitherclaimforbeingdeprivedofthecontractualbenefit,orhe couldclaimashavingconsequentiallossonbreachofcontract. Surveyorswillnotordinarilybeliablewhenahouseisdefectiveanditcauses distress.

5.Thedateof assessmentof damages GoldenStraitCorp vNipponYusen KubishikaKaisha

In1998,GSC,shipowner,charteredanoiltanker,TheGolden Victory,toNYKKuntil2005.Eitherpartycouldcancelthe charterpartyifwarbrokeoutbetweencertaincountriesincluding

HLheldthat NYKKwas liableforno

Themajorityheldthatbecausetheoutbreakofwaroccurredbeforethedamagesfellto assessed,theycouldbetakenintoaccount.Thevictimshouldbeplacedinthepositionasif thecontractwereperformed.Thecourtshouldnotignorefactsthatwereavailable.

(TheGolden Victory)[2007]2 AC353

theUSA,UKandIraq.In2001,NYKKrepudiatedthecontractand theowneracceptedtherepudiation.AmericahadstartedtheIraq War,inMarch2003.Thiswasjusttheeventthatwouldhave allowedNippontocancelthecharter,ifstayedwithit.The arbitratorheldthattheoutbreakofwarhadcreatedalimitonthe payabledamages.NYKKwasliablefornodamagesafter21March 2003.

damages However,LordBingham,dissenting,wouldhaveheldthatdamagesshouldbeassessedon after21 thedateofthebreach.ThatshouldhavemeantGoldengotdamagesforfouryearslefton March2003. thecharterparty.HeemphasisedtheimportanceofcertaintyandpredictabilityinEnglish commerciallawandsaidthisdecisionwouldhurtit.

6.Damagesforthe lossofachance ChaplinvHicks [1911]2KB786 Dadvertisedonanewspaperinvitingapplicantsfromfemale readersforworkinthetheatre.10applicantsweretobeshortlisted ineachofthefiveareasbyreadersofthenewspaper.Dwouldthen select12fromtheshortlistof50.Pcametopofherarea,butwas notgivenareasonableopportunityofpresentingherselfforthe finalselectionbyD. Pwasaforeigndomestichelper.Shetookupatwoyearcontractof employment,livingandworkinginDsresidence.Shewasforcedto leaveheremploymentaftersixmonthsbecausetheemployer, disregardingherlegalrights,workedherlikeaslave.Daccusedthe plaintiffoftheft.BecauseofthisaccusationtheImmigration Departmentrefusedtheplaintiffsapplicationtoseekalternative employment.Pwasvindicatedbythejudgewhofoundthe defendantsaccusationunfounded. Dagreedtohavetwoaircraftoperatingattheairport.Thecontract durationwasdefinedastenyearsfromtheestablishmentofthe operationoftheaircraft.Inreturnforbasingtheaircraftthere,P providedsubstantialfundingtotheairline.Thecontractwasvery specificonanumberofpoints,butitdidnotspecifyacriteriato measuretheairlinesmannerofperformancee.g.thenumberof flightsorthenumberofpassengerstheairlinehadtotakefromthe airport.Dwithdrewfromtheairportin2006afterincurring substantiallosses.Pbroughtaclaimagainsttheairlineforlossof income.

Pwonand wasawarded damages.

Thelossofarighttobelongtoalimitedclassofcompetitorsisofpecuniaryvalueforwhich damagescanbeawarded.

SemanaBachicha vPoonShiuMan [2000]2HKLRD 833

Pwonand got damages.

The dismissed employee would be, as she was, awarded damages for loss of employment opportunities and for the hurt to her feelings by the employers false accusation (that she wasathief).

DurhamTees ValleyAirportLtd vbmibabyLtd [2010]EWCACiv 485

Plostatthe firstinstance andthen woninthe appeal.

The Court of Appeal held that the contract was not too uncertain to be deemed unenforceable. The contract contained sufficient termsto determine theairlinesmeasureof performance. It was unnecessary to implyaquestionastohowmanyflightstheairlineshouldhavemade from the airport. In examining whethera breach of contract had occurred, the question the court had to ask was whether the airline had in a real and genuine sense been flying their aircraft from the airport. The Court of Appeal held that the levelofdamagesshouldbethe money the airport would have received had theairline remained at the airport for a further eight years, as the contract stipulated. The court madeanumber ofassumptionsincluding thefactthattheairlinewouldhaveperformedthecontractinitsowninterest.

7.Remoteness

Hadleyv Baxendale(1854) 9Exch341

Theclaimantsownedamill.Acrankshaft,whichwasessentialfor theoperationofthemill,brokeandneededtobereplacedusingthe originalasatemplate.Theclaimantsengagedthedefendants,afirm ofcareers,totransportthebrokenparttoengineersinGreenwich whereareplacementwouldbemadebutthedefendantsfailedtodo thiswithinthetimeframespecifiedthusdelayingthearrivalofthe newpartandcausingthemilltostandinoperative.Theclaimants soughtdamagestocompensateforthelossessustainedwhilstthe millwasidle.

Dwon

TheLosswastooremoteandshouldnotberecoverable.Itwouldhavebeenanentirely differentpositionifthedefendantshadbeenmadeawarethatthemillwouldbeinoperable withoutthepartbuttheywerenotawarethatthiswastheonlycrankshaftthattheclaimant possessed.ThejudgementgaverisetotheHadleyforeseeabilitytest: FirstLimb:Lossarisingnaturallyfromthebreachofcontract(soimplicitlywithinthe foresightoftheparties).Thisrequiresnospecialorexpertknowledgeasitislossthatarises intheordinarycourseofthings. SecondLimb:Losswhichwasreasonablywithinthecontemplationofbothpartiesatthe timethecontractwasformed.Thiscoverslossthatisnotintheordinarycourseofthings. i.e.abnormalloss,hencespecialknowledgeorawarenessisrequired. Pwonforthelossofadditionalprofitbutlostforthelossofrevenuefromthegovernment contracts. Thedefendantswereawarethattheclaimantsaimedtoincreasetheirbusinessbyacquiring anotherboiler,thusthelossoftheadditionalincomewasreasonablyforeseeable consequenceofbreach,whereastherewasnothingtosuggestthatthedefendantswere awareoftheclaimantsplansconcerninggovernmentcontractssothiswasnotrecoverable. VictoriaLaundryprovidesanexampleoftheoperationofthesecondlimbofHadleytestand setsthestandardofremotenessasreasonableforeseeability.

VictoriaLaundry (Windsor)v NewmanIndustries [1949]2KB528

Theclaimantsranalaundrybusiness.Thepurchasedaboilerfrom thedefendantsthatwasduefordeliveryinJuly.Theboiler sustainedsomedamageandhadtoberepairedwhichdelayed deliveryuntilNovember.Theclaimantshadmadethedefendants awarethattheyneededtheboilertoexpandtheirbusinessandthat theywanteditforimmediateuse.Theyclaimeddamagesto representthelossofordinaryprofitsthatwouldhavebeenmade fromtheiradditionalbusinessiftheboilerhadarrivedasgreedand alsoforthelossofgovernmentcontractsthattheyhadintendedto secureoncetheboilerarrived. TheclaimantcharteredTheHeronIItotransportacargoofsugar onajourneythatshouldhavetaken20daysbutactually,duetoa deviationfromtheroutebythedefendant,took29daysduring whichthepriceofsugarfellsignificantly.Thelatearrivalputthe defendantinbeachofcontractsotheclaimantsoughtdamagesto coverthedifferenceinthepricehereceivedforthesugarandthe higherpricethathewouldhavereceivedhadtheboatarrivedon time.Theclaimanthadnottoldthedefendantthatheintendedto sellthesugaratthedestinationbutthedefendantwasawarethat hewascarryingsugarandthatdestinationwasapopulartrading placeforsugar. Thedefendantssoldapigfoodhoppertotheplaintiffs.Itwas defective.Thenutsinitwentmouldy.254pigsdiedasaresultof eatingmouldynuts.Atthetimeofthecontractitwasfound,asa fact,thatthepartiescouldnothaveforeseenseriousillnessarising asaresultoftheconsumptionofmouldynuts.

Pwon

CzarnikowLtdv Koufos(TheHeron II)[1969]1AC 350

Pwon

TheHouseofLordsheldthat,althoughtheclaimanthadnottoldthedefendantthathe intendedtosellthesugarassoonastheboatarrived,thedefendantsknowledgethathe wascarryingsugarandhisawarenessthatthedestinationwasapopulartradingplacefor sugarwassufficienttomakeitsoprobablethatitmusthavebeenwithinhiscontemplation atthetimethecontractwasmade.theHouseofLordscriticisedthereferencetoreasonable foresightinVictoriaLaundry,asthisisatermthatismoreappropriateintort,withLord Reidstating:Iusethewordsnotunlikelyasdenotingadegreeofprobability considerablylessthananevenchancebutneverthelessnotveryunusualandeasily foreseeable.

Parsons (Livestock)Ltdv UttleyIngham& CoLtd[1978]QB 791

Pwon

Principle:wherepartiescontemplatethetypeofconsequencewhichmayfollowabreachof contract,theywillbeliableforspecificdamageofthattype,evenwherethespecificdamage wasnotforeseeable.WhilePcouldnotrecoverforhislossofprofitonthepigs,itwould havebeeninthecontemplationofthepartiesthattherewasarealpossibilityofharm comingtothepigsiftheirfoodwasmadeunfitbyreasonoftheconditionofthehopper. ThefactthattheycouldnotforeseetheextentoftheharmwasimmaterialandPcould

recoverthecostofhispigs. ChenvLord EnergyLtd[2002] 1HKLRD495 LordEnergyLtdcontractedtopurchasefromChenaproperty.The saledidnotproceedduetoabreachofcontractbyChen. TheCourtofAppealheldthatVs,thevendors,wereinbreachofa saleandpurchaseagreementandthatP,thepurchaser,wasentitled tospecificperformance.Vsweregrantedastayoftheorderof specificperformance,pendingtheirapplicationforleavetoappeal totheCourtofFinalAppeal.TheappealtotheCourtofFinal Appealwasdismissedandsubsequently,Vsassignedtheproperty toP.AtissuewashowwasthelosswhichPsufferedasaresultof thestay,tobeassessed.Pcontendedthatasitmighthaveresold thepropertyafterassignment,thelosswasthedeclineinmarket valuefromwhenthestaywasorderedtowhenthepropertywas assigned. Pwon (1)Theapproachtobeadoptedinassessingsuchlosswasanalogoustothatwhichwas adoptedinthecaseofaclaimfordamagesbasedonabreachofcontract.Thenormal measureofdamagestoapurchaserasaresultofadelaybyavendortoperformthecontract wasthelossofrentalduetolossofuseoftheproperty,butthiswasdisplacedwhereother lossescamewithinthereasonablecontemplationofthepartiesorwhereitwaspossibleto imputeknowledgeofspecialcircumstancestothevendor.Here,itwasnecessarytodecide: (a)whetherthepossibilityofaresalebyPwaswithinthereasonablecontemplationofthe partiesand(b)ifitwasnot,whethertheknowledgethatPwasliabletoresellafter assignmentcouldbeimputedtoVs.Itwasonlyiftheanswersto(a)and(b)wereinthe negative,thatitwasnecessaryforPtoshowthatVshadactualknowledgeofhisintention toresell (2)Thecorrectdatefordecidingwhatthepartiesreasonablycontemplatedwasthedate whenthestaywasordered.Onthatdate,ontheevidence,itwaswithinthereasonable contemplationofthepartiesthatPmightreselltheproperty.Itcouldalsobesaidfromthe evidencethattheknowledgethatPmightresellcouldbeimputedtoVs (3)ThedemarcationbetweenthetwolimbsoftheruleinHadleyvBaxendalewas sometimesblurred.Thiswasparticularlythecasewhereknowledgeofacertainmatter wasimputedtothedefaultingparty.Thiswasacasewheretheremightbeanoverlap betweenthefirstandsecondlimboftheruleanditwasunnecessarytocategoriseitas fallingstrictlywithineitherlimboftherule. ThearbitratorsappliedthefirstrulesetinHadleyvBaxendale156E.R.145thattheloss resultednaturally,i.e.accordingtotheusualcourseofthings,fromsuchbreachofcontract itselfthepartiesshouldhaverealisedsuchprobabilitywhentheyhadsignedthecontract thatsuchlosswasnotunlikelytoresultfromabreachofcontract. HLheldthatthearbitratorshadappliedtoocrudeatest.Donlyneededtopayextraforthe overrunperiodattheprevailingmarketrate.Reasonablepartieswouldnotenterintoa contractlikethisonthebasisthatthedefaultingpartywouldbeliableforanyloss,however large,occasionedbyadelayinredeliveryincircumstanceswhereithadnoknowledgeof,or controlover.Thecommonintentionofreasonablepartiestoacharterpartyofthissort wouldnothavebeenthat,intheeventofarelativelyshortdelayinredelivery,an extraordinaryloss,measuredoverthewholetermoftherenewedfixture,wassufficiently likelytoresultfromthebreachofcontracttomakeitpropertoholdthatthelossflowed naturallyfromthebreachorthatlossofthatkindshouldhavebeenwithinthedefaulting party'scontemplation.SeealsoVictoriaLaundry(Windsor)vNewmanIndustries[1949]2

Transfield ShippingIncv MercatorShipping Inc(The Achilleas)[2009] 1AC61

DcharteredashipfromPandpromisedtoreturnitbacknolater thanasetdate.PcontractedwithanothercustomerXatagood ratetolettheshipafterDwouldreturnit.Dfailedtoreturntheship ontime.Whentheshipwasreturned,themarketratedropped sharplyandXwouldonlytaketheshipatamuchlessrate.Psued Dforthedifferencebetweenthepriceitoriginallycontractedwith XandtheamountitwouldactuallygetfromX.Dagreedthatits liableforreturningtheshiplate,butarguedthatitwouldpayan extraamountreflectingthemarketratefordailyhireduringthe delay. PwonArbitrationandCA,DappealedtoHL.

Dwon

K.B.528. 8.Causation SouthAustralia AssetManagement CorpvMontague Ltd[1997]AC191 9.Mitigation British Westinghouse Electricand ManufacturingCo LtdvUnderground ElectricRailways CoofLondonLtd [1912]AC673 D,avaluer,negligentlyadvisedP,hisclientbank,thatproperty whichitproposedtotakeassecurityforaloanwasworthmuch morethanitsactualmarketvalue.Psuednotonlyforlosses attributabletothedeficientsecuritybutalsoforfurtherlosses attributabletoafallinthepropertymarket. DsuppliedPwithturbineswhichweredeficient.Pacceptedand usedtheturbinesbutreservedtheirrighttoclaimdamages.LaterP replacedtheturbineswithotherswhichweremoreefficientthan thosesuppliedbythedefendantswouldhavebeen,evenifthey hadcompliedwiththecontract.Theplaintiffsclaimedtorecover thecostofthesubstituteturbinesasdamages. Dwon Dwasliableonlyforlossesrelatedtothedeficientsecurity.Thevaluerwasnotliablefor anylosssufferedbythelenderasaresultofafallinthemarket,sincesuchalosswasnota foreseeableconsequenceofthevaluer'snegligenceinprovidinginaccurateinformation.The valuersliabilitywasexcludedonthegroundthatitwasoutsidethescopeoftheliability whichthepartieswouldreasonablyhaveconsideredthatthevaluerwasundertaking. AnylosssustainedbyPhadtobebalancedagainstanygaintothemarisingdirectlyoutof thestepstheyhadtakentolessentheconsequencesofthebreach.AlthoughPhadnot beenboundtobuythenewmachines,havingdonesotheconsequentialgaininprofitsand savedexpenseshadtobebroughtintoaccount.Thesavingsexceededthecostofthe machinesandsoPcouldrecovernothing. Thefamousprincipleofmeasuringdamageswassetinthiscase:Thefirstisthat,asfaras possible,hewhohasprovedabreachofabargaintosupplywhathecontractedtogetisto beplaced,asfarasmoneycandoit,inasgoodasituationasifthecontracthadbeen performed.Thefundamentalbasisisthuscompensationforpecuniarylossnaturallyflowing fromthebreachbutthisfirstprincipleisqualifiedbyasecond,whichimposesona plaintiffthedutyoftakingallREASONABLEstepstomitigatethelossconsequentonthe breach,anddebarshimfromclaiminginrespectofanypartofthedamagewhichisdueto hisneglecttotakesuchsteps. Phaddisposedofthevanbyofferingitforsaletocardealersincludedinitsownlistof thosewithwhomitdidbusinessandnoothers.Phadnotexploredthepossibilityofcar auctionsorofadvertisement.Phadthereforenottakensufficientstepstomitigateitsloss. ThecourtadoptedtheformulathatappliedbytheCommissionerofInlandRevenueto calculatedepreciationplusafurther20%deductiontotakeaccountofthefactofaforced sale.Thedifferencebetweenthesumcalculatedandthesumactuallyobtainedwouldbe deductedfromPsclaim(forPdidnottakesufficientstepstomitigateitsloss)andPwould bepermittedtorecoverthesumremainingoutstandingafterthatdeduction. Ifthepartyisplacedinadifficultsitautionbyreasonofthebreachofadutyowedtohim,as longasheactedreasonablyintheadoptionofremedialmeasures,hewillnotbeheld disentitledtorecoverthecostofsuchmeasuresmerelybecausethebreachingpartycan suggestanothermeasurethatwouldbelessburdensometohim.

Dwon

WayfoongCredit LtdvCheungWai WahSamuel [1990]1HKC367

DenteredintoahirepurchaseagreementwithPinrespectofavan. Dpaidthefirstinstalmentsanddefaultedonthecontract.P repossessedthevanandsoldittoathirdpartyatamuchcheaper price,assertingthatthiswasthebestpriceitcouldpossiblyget.P suedforthebalancedueunderthecontractandcostspursuantto theRulesoftheSupremeCourtO84Ar3.

Pwonwith damages deductedfor insufficient mitigationof loss

BancodePortugal vWaterlow&Sons Ltd[1932]AC452

Theplaintiffbankhadengagedthedefendantprinterstoprint banknotes.Thedefendantdeliveredalargenumberofnotestoa criminalwholaterputthemintocirculation.Theplaintifffoundout andtheywithdrewtheissueofparticularnotesandexchangedallof

Pwon

them.Defendantseekstoarguetheyarenotliablefortheloss causedbyexchanging PayzuvSaunders [1919]2KB581 Thedefendantcontractedtosellcrepedechinetotheplaintiffs. Theyagreeddeliverywithin9monthandpaymentwithin1month upondelivery.Whenplaintifffailedtopaythefirstinstalmenton time,defendantrefusedtodeliveranymore.Defendantagreedto delivergoodsifplaintiffpaidcashwhenordering.Refusingthe offer,plaintiffsuedforrepudiation.Themarketvalueofcreperose up.Plaintiffseekstorecoverthepricedifference Thebuyerofashiplawfullyterminatedacontractontheground thatthesellerswerelateintenderingdeliveryofthevessel.The marketpriceforthevesselhadrisenfrom5millionto5.5million. Sellerlatersolditfor5.8million.Buyerclaimedfordamagesofthe costofcure DWon Whatisreasonableforapersontodoinmitigationofhisdamagesisaquestionof factanddependsonparticularcircumstances ifapersoniswronglydismissedwhileheprovidespersonalservice,itis reasonableforhimtorejecttheofferfromtheoldemployer Inthiscase,itsunreasonableforplaintifftorejectthenewofferasbothparties canaccusetheotherofunworthyofcommercialvalue,soitsnotjustthe defendanttreatedtheplaintiffbadly. Thecourtheldthatbuyershouldhaveofferedtobuythevesselfor5millionrather thanclaiming500,0000indamages. Thebuyerwasnotactingreasonablyinmitigatethelossbyclaimingdamages. Thisjudgmentiscriticisedforrenderingtherighttorejectillusory,entitletheseller tothedifferenceinmarketpriceandactuallybenefitthebreachingparty

SotirosShipping IncvSameiet Solholt(The Solholt)[1983]1 LloydsRep605 10.Contributory negligence BarclaysBankplc vFairclough BuildingLtd [1995]QB214

DWon

Thedefendantwasinbreachofacontracttocleanroofscontaining asbestosashefailedtoexecutetheworkinanworkmanlikemanner. Thedefendantarguedthattheplaintiffwasguiltyofcontributory negligenceashefailedtosupervisethework.

PWon

Contributorynegligencewasnotadefencetoaclaimfordamagesbasedona breachofastrictcontractualobligation,evenwhenthedefendantmighthavealso hadaparallelliabilityintort whenthedefendantisclearlyliableunderastrictcontractualduty,hispositionwill notbeimprovedbydemonstratinghewasinadditionnegligent

<TOPIC14>REMEDIES:MONEYREMEDIESOTHERTHANDAMAGESANDSPECIFICRELIEF CaseName Facts PWon Judgment wherethenormalremediesforbreachofcontractprovidedinadequate compensation,thecourtcouldgrantthediscretionaryremedyofrequiringthe defendanttoaccounttotheplaintiffforthebenefitsreceivedfromthebreachof contractevenwherethebreachdidnotinterferewithapropertyinterestofthe claimant Rationale

1.Accountofprofits AttorneyGeneralv Blake[2001]1AC 268 Thedefendantwrotehisautobiographycontaininginformation whichhecontractednottodivulge.Plaintiff,sufferingnoloss, suedhimforbreachofcontractandclaimedfordamages.CA onlyawardedplaintiffnominaldamages.HLgrantedplaintiff restitutionarydamages

ExperienceHendrix LLCvPPX EnterprisesInc [2003]EWCA323

Defendantbreachedasettlementagreementrelatingtomastersof titlesandlicencesofthemusicofplaintiffs.Injunctionwas grantedtopreventdefendantfrombreaching.Butaclaimfor damagesandanaccountofprofitswasdismissed.

DWon

Damagesarecompensatorygenerally.However,financiallosscannotbethe onlycriteria.Sometimes,thejustresponsetothebreachisthatthewrongdoer shouldnotbepermittedtoretainanyprofitfromthebreach. ifconfidentialinformationisdivulgedinbreachofcontract,anaccountofprofits maybeorderedinrespectoftheequitablewrong. Thecourtwillregardtosubjectmatter,purposeofthebreachingprovision,the circumstancesandtheconsequenceofthebreach.Thegeneralguideiswhether theplaintiffhadalegitimateinterestinpreventingthedefendantsprofitmaking activityandhence,indeprivinghimofhisprofit Blakehasthreedistinctfeatures:(1)thecontextofBlakesemploymentinthe securitywasdependentonsecretinformation(2)Thediliberateandrepeated breachesandBlakecouldcommandconsiderablesumsforhispublication(3)the contractualundertakingwasakintoafiduciaryobligationwhereanaccountof profitsisacommonremedy. (1)and(3)aremissinginthiscase,even(2)exists,butisinacommercialcontext wheredetailedassessmentisrequired. Deliberatebreachesofcontractoccurfrequentlyinthecommercialworld. Somethingmoreisneededtomakethecircumstancesexceptionalenoughto justifyorderinganaccountofprofits,particularlywhenanotherremedyis available.

DevenishNutrition LtdvSanofiAventis SA[2008]EWCA 1086

Pboughtanimalfoodsmixedwithvitaminstoproducefoodstuffs soldtocusmters.Psoughtdamagesorarestitutionaryawardina sumequaltothe"overcharge"oramountoftherespondents' wrongfulnetprofitbutfailed.(Pclaimedtheamountbywhichthe pricesitwaschargedforvitaminsexceededthepricethatwould lawfullyhavebeenchargediftherehadbeennocartels.)P appealedbutwasdismissed. DisputebetweenWordWideFund(P)andWorldWrestling Federation(D)fortheuseoftheinitialWWF.Compromise agreementrestrictingusebyWorldWrestlingFederationwas breached,WWFlatersuedforanaccountforprofits.

Appealfailed, Dwon.

AvailabilityofanAccountofProfits 1. Availableonlywhenothercontractualremediesareinadequate(itdependson whetherdamagesalonewouldbesufficientremedyintheeyesoflawforthewrong occurred) 2. PmusthavelegitimateinterestinpreventingDtoobtainsuchinterests 3. Courthaveregardtoallcircumstancesofthecase.IndecidingifPhasalegitimate interest,noonefactorisconclusiveoressentialinallcases. Althoughanaccountofprofits,andWrothamParkdamagesweredistinctremedies,itwas notnecessarilyhelpfultodiscussthemintermsofgainbasedandcompensatory remedies.Thetruepositionwasthat(para59)(ChadwickLJ): 1.thecourtmakesanawardofdamagesontheWrothamParkbasis whenitisajustresponsetocircumstancesinwhichthecompensationwhichisthe claimantsduecannotbemeasured(orcannotbemeasuredsolely)byreferenceto identifiablefinancialloss. 2.Thereareexceptionalcasesinwhichthejustresponsetocircumstancesinwhichthe compensationwhichistheclaimantsduecannotbemeasuredbyreferencetoidentifiable financiallossisanorderwhichdeprivesthewrongdoerofallthefruitsofhiswrong.

WWFWorldWide FundforNaturev WorldWrestling Federation EntertainmentLtd [2008]1ALLER74.

Dwon.

3.ThecircumstancesinwhichanawardofdamagesontheWrothamParkbasismaybean appropriateresponse,andthoseinwhichtheappropriateresponse isanaccountofprofits,maydifferindegree.Buttheunderlyingfeature,in bothcases,isthatthecourtrecognisestheneedtocompensatetheclaimantin circumstanceswherehecannotdemonstrateidentifiablefinancialloss. 4.TolabelanawardofdamagesontheWrothamParkbasisasacompensatoryremedy andanorderforanaccountofprofitsasagainsbasedremedydoesnotassistan understandingoftheprinciplesonwhichthecourtacts.Thetworemediesshouldeachbe seenasaflexibleresponsetotheneedtocompensatetheclaimantforthewrongwhich hasbeendonetohim. 2.Exemplaryawards KuddusvChief Constableof Leicestershire [2002]2AC122 Police(D),forgedP'ssignatureonawithdrawalofacomplainof theft.Psuedforpunitivedamage.CArefusedsuchclaimonthe groundthatpunitivedamageshouldonlybeavailabletocauseof actionthathadbeenrecognisedbefore1964.Abuseofpowerof publicservantwasneveracasebefore1964.Pappealed. Appealedallowed. Pwon. 1.Punitive/exemplarydamages:punishthedefendantforthebreachofcontract.Only recoverableinexceptionalcircumstances:focusingonthebadconductofthedefendant regardedas"contumelious" 2.ThreecategoriesofPunitivedamage. 1)Theoppressive,arbitraryorunconstitutionalactionbytheservantsofthegovernment. 2)Thedefendant'sconducthasbeencalculatedbyhimtobenefithimselfwhichmaywell exceedthecompensationpayabletotheplaintiff. 3)Exemplarydamagesareexpresslyauthorizedbystatute 3.Ajuryshouldbedirectedthatif,butonlyif,thesumwhichtheyhaveinmindtoaward ascompensation(whichmaybeasumaggravatedbythewayinwhichthedefendanthas behavedtotheplaintiff)isinadequatetopunishhimforhisoutrageousconduct,tomark theirdisapprovalofsuchconductandtodeterhimfromrepeatingit,thenitcanaward somelargersum.[thepunitivedamage]

3.Agreeddamages clausesand penalities DunlopPneumatic TyreLtdvNew GarageandMotor CoLtd[1915]AC 79

PsoldTyretoD,adealer,atadiscountprice.PsignedwithDa contractsayingDcannotsellthetyreatapricelowerthanthe markedpricesoldbyP.Dbreachedsuchterm.Thecontractalso statedinthecaseofbreach,DshallpayP$5foreachtyresoldto others.Dcontestedthatisapenaltyclausethatshouldnotbe enforced.

Pwon.

Asinglesumtobepaidinthecaseofbreachispresumedtobeapenaltyonly. ItisNOTaPenaltywhen: 1)Thereisbreachofanumberofstipulationsofvaryingimportance,and 2)thedamageisthesameinkindforeverypossiblebreachandisincapableofbeing preciselyascertained, 3)thestipulatedsum,provideditbeafairpreestimateoftheprobabledamageandnot

unconscionable. PhillipsHongKong Ltdv AttorneyGeneralof HongKong[1993] 1HKLR269 ReMandarin Container[2004]3 HKLRD554 PcontractwithD,HKGov,toconstructhighway.Inthecontract, thereisasumstipulatedtobepaidbyPinthecaseofdelay. Therewasadelay.Pcontestedthatthesumisapenaltyasit exceedstheactuallossofHKGov. Dwon. AccordingtotheLawReformCommittee,thecourtalsoaccepted,thatwhetherasumis penaltydependsonwhetherthesumisagenuineestimationofthelossatthetimeof contract.Eveniftheinnocentpartyderiveabenefitoutofthesum,thesumisstillnota penalty.

PloanedabigsumtoDforcommercialuse.Inthecontract,there isa2%increaseininterestratestipulatedinthecaseofdefault payment.Ddefaulted,paidfortheadditional2%formonths.D thensuedPforthe2%,claimingthe2%increaseisapenalty.

Pwon.

Thestipulatedsum/rateshouldnotbeeasilytreatedaspenalty,especiallywhenboth partieshavesimilarbargainingpower.CourtmadereferencetoEnglishcasesaying1% rateincreaseisOkayandSingaporecasesaying11.25%rateincreaseisNotOkay.Court concludesthatsincethereisgreatriskindefaultingbigloan,2%isnotexcessive.Also, "thepurposeofthe2%increaseisnottodeterdefault"isalsoanimportantfactor.Itis: Todeter=Topenalize.

4.Depositsandpart payments WorkersTrustand MerchantBankLtd vDojapInvestments Ltd[1993]AC573

Vendorssoughttoforfeitanonreturnabledepositof25%of pruchasepirceaspurchaserfailedtopaythebalanceasper contract. Timebeingtheessenceofthecontract Purchaserpaidthebalancewithinterestaweeklaterbutvendor refused. Plaintiffclaimedtorefunda35%ofpurchasepricedeposit forfeitedbyDefendantsduetoPlaintiffthroughabreachof contractbyDefendantandnotpayingthebalance

Dwon

thepaymentofareasonableamountforfeitedonnoncompletionisnotunlawful. However,forthiscase,themarketstandardisonly10%ofcontractprice. AndVendor(planitff)cannotestablishanyspecificreasonsforrequiring25% Courtruledthatbeingapenaltyandwouldnotentertain Courtgrantedrelief,Plaintiffcannotretainthedeposit,butcanclaimlosssuffered.

PolysetLtdv PanhandatLtd (2002)5HKCFAR 234

P/Dwon

Thereisnobreachofcontract.Plaintiffhadwrongfullyterminatedthecontract,hence Defendantisentitledtoforfeitthepayment iftheamountofanagreeddepositmatchedorwaslessthantheconventionalamount( i.e.10%inHK),forfeiturewouldnotattractjudicialscrutiny.However,ifitexceedsthe conventionalamount,forfeiturewasonlypermittedifitisjustified,andinthiscase,special circumstancesisjustified. However,sincethedepositwas$40.25M(35%ofpurchaseprice)andDefendantonly provedadamagesof$33M.Defendanthadtorepaythe$7Mtoplaintifftoavoid overcompensated.

5.Specific performance Societedes

Seealso: BeswickvBeswick(Topic21) DefendantcontracttosellmachinerytoPlaintiff

Dwon

thefactthatbuyershavetowaitbetweenninetotwelvemonthsforareplacement

Industries MetallurgiquesSAv TheBronx EngineeringCoLtd [1975]1Lloyds Rep465 TitovWaddell(No 2)[1977]Ch106

Defendantcouldonlydeliver9monthsafterthescheduleddate Duetomarketcircumstances,Defendantbreachedthecontract andreadytosellthemachinestoothers. Plaintiffappliedforspecificperformance. Defendantbreachofcontractisassumed.

(asinno specific performance granted)

deliverydoesnotofitselfestablishthatthegoodswereunique themachineswasreadilyobtainableinthemarketuponplacinganorder damageswereasufficientremedy Plaintiffwasnotentitledtoadecreeofspecificperformance

ClaimingtheCrownowedafiduciarydutytothePlaintiff( islanders) Claimingspecificperformanceoftheobligationtoreplantthe land Claimingforadeclarationthatthegovernmentwasboundto prescribethetresstobeplanted

Pwon (asinno specific performance granted)

Thereplantclaimwasbindingbyapplicationofthedoctrineofpurebenefitandburden, butlimitedtodoingonlywhatwasreasonablypracticable. althoughspecificperformancewouldlietoenforcethereplantingobligation,itwouldnot bedecreedsinceallrelevantlandownerswerenotbeforethecourt Plaintiffswerelimitedtocompensationindamageswhichwouldbenominalsincethey hadfailedtoprovethattheirlosswasthecostofreplantingasopposedtodiminutionin thevalueoftheland. thecourtdidnotrequiretheemployeetogiveanundertakingthathewillnotpresent himselfforwork thecauseofthedismissalwastheinterventionofatradeunionandtherelationship betweentheemployerandemployeeappearedtoremainastrongone Theterminationisinvalidandemploymentwasstillsubsisting. Damageswerenotanadequateremedy noabsolutebartoacourtgrantinganinjunctiontorestraintheterminationofan employmentrelationship,atleastwherethepartyseekingtheinjunctionisanemployee. Appealdismissed Anagreementwillbespecificallyenforcedifonlyasmallpartofitrequirespersonal services thereisadistinctionbetweenanordertoperformacontractforservicesandanorderto procuretheexecutionofsuchacontract. Thedesirabilityofspecificperformanceasawholecontractmightoutweighthe disadvantagesofspecificallyenforcingtheobligationtoperformpersonalservices. Thefactsshowthecontractwasspecificallyenforceable. TheFrypropositionregardingmutualityisheldwrong.Thecourtwillnotcompela defendanttoperformhisobligationsspecificallyifitcannotensurethatanyunperformed obligationsoftheplaintiffwillbespecificallyperformed,unlessdamagesarenotadequate.

HillvParsons [1972]Ch305

PersonalServiceContract/EmploymentContract Defendant(employer)breachedthecontractbyinvalidnoticeof termination Plaintiffshouldbegivena6monthsnoticeratherthan1month notice PlaintiffworkedforDefendantfor35years.

Pwon

CHGiles&Cov Morris[1972]1 WLR307

PersonalServiceContract Defendantppealedagainsttheorderrequiringtheprocuringby theDefendantoftheenteringintobyacompanywhich Defendantcontrolled.

Dlost

PricevStrange [1978]Ch337

DagreedtograntasubleaseofamaisonettetoPprovidedP carriedoutcertainworkstotheinteriorandexteriorofthe maisonette.AfterPricehadcompletedtheinteriorworks,D repudiatedtheagreementandpreventedPfromcompletingthe workstotheexterior.Phadtheworkstotheexteriorcompletedat herownexpense.PsuedforSPoftheagreement.Dpleadedthat

Pwon

SPcouldnotbegrantedbecausetheremedywasnotmutualat thedataofthecontract. PatelvAli[1984] Ch283 DandathirdpartyenteredintoacontracttosellDshometoP. Thedealwasnotcompletedontime.Pappliedsummaryjudgment andsoughtSP3yrslatter.DuringwhichDsufferedconsiderable misfortune.InthesecircumstancesDaskedcourttorefuseSP andleavePfordamages. Dclosedthesupermarketintheshoppingcenterbecauseitwas losingmoney.Pfearedthattheclosedownwouldaffectother shopsinthecenterandsoughtSPtocompelDtocarryon businessaccordingtotheagreement. Pwon Unduehardshipapplies.Courtheldthatonlyinextraordinaryandpersuasive circumstancescanhardshipsupplyanexcuseforresistingperformanceofacontractfor thesaleofimmovableproperty.(McKendrickcombinationofhardshiptoDandPsdelay)

Cooperative InsuranceSociety LtdvArgyllStores (Holdings)Ltd [1998]AC1 6.Injunctions WarrenvMendy [1989]1WLR853

Dwon

ASPorderwouldnotbegrantedtorequireDtorunabusiness. Therewaspossibilityofwastefullitigationovercompliance.(constant supervision) ItwasoppressivetoDtohavetorunabusinessunderthreatofcontempt. Notinpublicinteresttorequiresb.tocarrybusinessatlosswhenother alternativesorremedyareavailable

Aboxer(Benn)enteredintoanexclusivemanagementcontract withP.HesubsequentlybecamedisillusionedwithPs managementandaskedDtoactashismanager.Psought injunctionagainstDrestraininghimfrominducingabreachby Bennofthecontract. Pwasaprivateschoolofferingtutoriallessonstostudents.Ds wereteachersformerlyemployedbyP.Aftertheyresigned,P obtainedterritorywideinteriminjunctionstorestrainDfrom undertakingbusinessoractivitywhichcompetePs.Darguedthe injunctioncompelledthemtoeitherremainidleortoperformtheir contractswithP,tantamounttoSP.

Dwon.

Injunctionwasnotgranted.Itwaswellestablishedthataninjunctiontorestrainabreach ofcontractforpersonalservicesshouldnotbegrantedwheretheeffectwastodecree performanceofthosepersonalservices.Thisalsoappliedtoasituationwhereaservant wouldbecompelledtoperformpersonalservicesforathirdparty.Compulsionwasa questionoffacttobedecidedinindividualcircumstances. Theinteriminjunctionswerenotunjustandinequitable.anemployercouldseek aninjunctiontoenforceanegativecovenantrestrainingitsemployeefrom competingwithhim,solongasthetheemployeewasnotdriveneithertopoverty ortoperformanceofthecontract. Dshavemanyreasonablealternatives,e.g.teachinthegovernment. Theinteriminjunctionswereappropriatelyterritorywide.Penjoyedaterritory reputationfromadvertising.

BeaconCollegeLtd vYiuManHau [2001]3HKLRD 558

Pwon

<TOPIC15>COMMONMISTAKE CaseName 1.Thedevelopment ofthelaw

Facts

Judgment

Rationale

BellvLever Brothers

PfiredDandagreedtopaycompensation.AfterpayingD, PdiscoveredthattheycouldhavedismissedDforbreach ofhisdutiesasadirector.PsuedDforreturnofmoneyon basisofcommonmistake. Landlordandtenantwronglythoughtthathouseletwas outsidetheRentActlimits,whereasinfactitwaswithin. Tenant,P,suedforoverpaidrent.Landlord,D,claimed rescissionongroundofcommonmistakeandinnocent misrepresentation.

Dwon.

Dwon.

Assumptionthatcontractwasnotterminableturnedouttobefalse,butthisdidnot affectthevalidityofthecontract.Wherebothpartiesenterintoacontractunderafalse andfundamentalassumptionthenasageneralrulethecontractisvalid. TestforCommonMistake:Fundamentalmistake Mistakesonqualityofsubjectmatterofcontractnotsufficienttovoidcontract. Thoughthismistakewasnotonewhichwouldoperatetomakethetenancyvoidat commonlaw,itwasneverthelessvoidableinequity. Inequity,acontractmaybevoidable(notvoid,thusleavingroomfortheprotectionof thirdpartyrights)wherethemistakeisonerelatedtotheattributesratherthanthe essenceofthesubjectmatter. Thegrantofequitableremedies(rescission,inthiscase)isdiscretionaryandin exercisingthisdiscretionthecourtswilltaketheeffectofmistakeintoaccountupon groundswiderthanthegroundsrecognisedbythecommonlaw.

SollevButcher (1950)

GreatPeace

Shipsufferedseriousdamage.Dprovidedsalvageservices, andcalledonPtohelp.DthenrealizedthatPwasfarther awaythanpreviouslythought,cancelledcontract,and refusedtopayfee.Psued.

Pwon

Wherepartieshaveenteredintoacontractwhichisimpossibletoperformattimeofagreement, contractisvoidforcommonmistake. However,herethecontractwasnotvoidforcommonmistake.Thefactthatvesselswerefurther apartdidnotmeanthatitwasimpossibletoperformthecontract. TestforCommonMistake: 1.Mustbeacommonassumptionastotheexistenceofastateofaffairs 2.Theremustbenowarrantybyeitherpartythatthatstateofaffairsexists 3.Thenonexistenceofthestateofaffairsmustnotbeattributabletothefaultofeitherparty 4.Thenonexistenceofthestateofaffairsmustrenderperformanceofthecontractimpossible 5.StateofAffairsmaybetheexistence,oravitalattribute,oftheconsiderationtobeprovided orcircumstanceswhichmustsubsistifperformanceofthecontractualadventureistobepossible. Whereunknowntobothpartiesthespecificsubjectmatteroftheagreementisinfact nonexistencethenthecontractisvoidforcommonmistake. Heldthat:Itwasacontracttobuyspecificgoods,whichinfactdidnotexist.Thebuyerdidnot havetopayforthecorn.Thecontractwasvoid.

CouturiervHastie (1856)

McRaev Commonwealth Disposals Commissions(1951) Australia

Therewasacontractforsaleofacargoofcornthoughtto beintransit.Unknowntobothpartiesthecornhad fermentedandwaslawfullysoldbymasterofship.Buyer arguedthatsincethecargoofcornwasnotinexistence,he wasnotboundtopayprice.Sellerarguedthatconstruction ofcontractstipulatedthatcontractwasforsaleofan ascertainedcargowhichpurchaserboughtonanadventure, andtookuponhimselfallrisksfromshipment. DsoldPtherighttosalvageatankerlyingonaspecified reef.Pfittedoutsalvageexpeditionatconsiderableexpense. Turnsouttherewasnosuchtankerorreef.Pclaimed damagesagainstDforrestitution.Darguedthatthe contractwasvoidabinitio(CourturiervHastie).

Buyerwon.

Pwon.

Heldthatapartycouldnotrelyonmutualmistakewherethemistakeconsistsofabeliefwhichis heldwithoutanyreasonableground,anddeliberatelyinducedbyhiminthemindoftheother party. Inthiscase,Dcannotrelyonanymistaketoavoidcontractbecausethemistakewasinducedby thefaultofitsownservants,whoassertedexistenceoftankerrecklesslyandw/oreasonable

CheeKinKeongv Digilandmall.com PteLtd(2005) Singapore

Pmadelargeorderofmispriced($66insteadof$3500) printersoffofDswebsite.Drealizedmistake,removed listingfromwebsite,andinformedpurchasersthatitwould nothonororders. PknewthatDmadeamistakewithpArgyllricingpriorto theirorder. 2.Commonmistake Also: andthecontractual McRae allocationofrisk GreatPeace WilliamSindallplc PagreedtobuylandfromD.Beforesalewascompleted,P vCambridgeshire madeinquiriesofDregardingrightsofeasementandother CC(1994) publicrightsaffectingtheland.Drepliedthat,sofarasit wasaware,therewerenorightsofeasementorpublicrights affectingtheproperty. Salewascompleted,andPdiscoveredsewersonthe propertyandclaimedDmadeamisrepresentation.Valueof landhadhalvedsincethen,soPwantedtodeclarethe contractrescinded.

Dwon.

ground. Noabsoluterulethatcontractforsaleofaresextinctaisnecessarilyvoid.Iftrueconstructionof contractisthatbothpartiesassumedthesubjectmatterexisted,andneitherofthemundertookin contracttheriskthatthismightnotbeso,thenthecontractisvoid. Actualknowledgeoftheotherpartysmistakeaboutthetermsrendersthecontractvoidat commonlawconstructivenotice(personpresumedtohaveknowledgeofsomething)rendersit voidableinequity. RejectsnarrowGreatPeaceapproachgenerally:Equityisdynamic.Agreatattribute,thusan advantage,ofequity,isitsflexibilitytoachievetheendsofjustice.

Dwon.

3.Approachesto commonmistake Associated JapaneseBank (International)Ltd vCreditduNord (1989)

Also: GreatPeace RoguepretendedtoselltoandleasebackfromPcertain machinesthatdidnotexist.Dguaranteedtherogues obligationsunderthetransaction.Roguewentbankrupt,P suedonguarantee.

Dwon.

Undermistake,itwasthebuyerwhoisliablefortherisksoftherebeingeasementsunknownto theseller. Nogroundsforrescission,eitherformisrepresentationormistake.However,iftherewere misrepresentation(negligentornot),courtwouldhaveuseddiscretionundersec2(2)of MisrepresentationActtoawardPdamages.Thiswouldhelpblockattemptstouseinnocent misrepresentationasapretexttogetoutofabadbargain.Courtsetsoutguidelinesforsuch hypotheticalsituation: Inapplyingsec2(2),onehastoconsiderthenatureofthemisrepresentation(damagevs.actual valueofcontract),lossthatwouldbecausedbymisrepresentationifcontractwereupheld(loss suffered,notdamagesrecoverable),andlosssufferedbyrepresentorbyrecission.Ifgross disparity,thenawarddamagesratherthanrescission. Thecontractwasvoidabinitioatcommonlaw. Therewasanimpliedconditionprecedentthatthemachinesexisted.Asthisconditionwasnot satisfied,contractwasvoidforthisreason. Analternativeargumentundercommonmistakealsosucceeded: 1)Commonmistakeonexistenceofmachines.2)Thesubjectmatteroftheguaranteewas essentiallydifferentfromwhatitwasreasonablybelievedtobeb/cofmistake.Theexistenceof themachinesmadeitmorelikelythatthedebtorwouldbeabletoservicethedebttoeitherPorD. Thus,nonexistenceofthemachineswereoffundamentalimportance. Caseconfirmsexistenceofmistakeincommonlaw.

4.Categoriesof commonmistake

SherwoodvWalker

Also: CouturiervHastie Bell GreatPeace USAcase.

Dwon

ThemajorityofSupremeCourtagreedthatthemistakewenttothewholesubstanceofthe

66Mich568(1887)

Nicholson&Vennv SmithMarriott (1947)

PagreedtobuyacowfromDfor$80.Bothpartiesbelieved thecowtobebarren(unabletobreed),butitturnedoutto beabreedingcow(thevalueofabreedingcowsoaredto $900).Drefusedtodeliverthecowbasedonthiscommon mistake,Psued. Ppaid787tobuyaCaroleanrelic(asetoflinen),which laterturnedouttobeaGeorgianrelic,whichwasonlyworth 105.Suchmistakewascommontobothparties.Psued.

(contract void)

contract.Thecourtstressedthedifferenceinthepriceofthecow,whichmakesthemistakeso fundamentalthatitwentBEYONDameremistakeastoquality.Themistakeaffectedthevery CHARACTERoftheanimalforalltime.

Pwon (breachof sale contract)

5.ThepostGreat Peacecases ApvodedoNVv Collins(2008)

Also:

Digilandmall.com ChadbeenledtobelievethattheRitzhotelwas abouttocomeupforsaleby(X)andenteredintoa contractwithPtofundhimthedownpayment.X turnedouttobeafraud AclauseoftheagreementprovidedthatifLhad notreceivedthenecessarydocumentationbya specifieddate,thenCwouldbeliabletorepaythe 1milliontoP. Theapplicant(P)appliedforsummaryjudgment againstthedefendantbusinessman(C)as representativeofapropertyinvestmentand developmentcompany(L)formoneyowingtoit underacontract. Pagreedtocompromisetheclaimfordamagesfor personalinjurybecausethecourtheldthatthe claimwasservedoutsidethelimitationperiod Platersuccessfullyappealedandthejudgment overruled.Dappliedtostaytheproceedings becausetherewasabindingcontract.Palleged Plost (summary judgmentnot applicable)

Ratio(breachofcontract) Themistakenqualityisanimpliedtermofthecontract(asalebydescriptionwithins.13 oftheSaleofGoodsAct),sincethelinendidnotcorrespondwiththedescription,there hadbeenabreachofcontract Alatercase(Harlingdon&LeinsterEnterprisesLtd[1990])suggestedthatthe breachingtermmustbeadescriptionwithinthecontemplationofthepartiesthatthe buyerwouldrelyonthedescriptionuponenteringthesalecontract. Obiter(voidabilityofthecontractduetocommonmistake) Pwasnotintendingtobuyasetoflinen,butratheraCaroleanrelic.AndGeorgianrelicis anessentiallydifferentthingfromaCaroleanrelic(Bellstest).Thereforethecontract wouldhavebeenvoidaswell. However,inSolle,LordDenningdisagreedthatthecontractinthiscasewasvoid.This illustratestheuncertaintyofvoidabilityinmistakesastoquality.

Itwasnotwithinthepurviewofthecourt,hearingacaseonanapplicationforsummary judgment,todeterminecomplexquestionsoflawandfactarisingoutoftheconstruction ofacontractualclausecontainedinanexclusivityagreement thecasenecessitatedatrialwherebyalltheevidenceandalltheargumentscouldbe airedandjudiciallyconsidered

BrennanvBolt Burden(2005)

Dwon

Mistakeoflawiscapableofrenderingacontractvoidbutthattherewouldnotbea mistakeifthelawweremerelyindoubtandonthefactsthepartiescouldhave discoveredthatthecasewasbeingappealed,soonenteringintoacompromise agreement,bothacceptedtheriskthattheirviewofthelawmightturnouttobemistaken Ashiftinlawcannotbeallowedtoundoacompromiseoflitigationenteredintothe knowledgeofbothhowthelawstoodandofthefactthatitmightnotremainso

thatthecontractforcompromiseagreementwas voidforacommonmistakeoflaw

KyleBayLtdv Underwriters (2007) AnightclubdestroyedbyfireandPenteredinto compromiseagreementwithDonbasisofa mistakeastothepayablesumundertheinsurance policy.Pwaspaidlessthanthewouldhave beenentitledtorecover. Questiononthevalidityofthecompromise agreement Anexhusbandhadagreedtolethiswife(D)live asatenantinhishouseonthebasisthat90%of therentwillbepaidthroughhousingbenefit. TurnedoutDwasnotentitledtosuchbenefit, questionwaswhetherthetenancycontractwas void Dwon

Itwasaquestionofconstructionastowhetheramistakerenderedthecontractvoidand inanyevent,itwasdoubtfulthatamistakeoflawwouldbecapableofpassingthe applicabletestinGreatPeace(whetherthemistakerenderedtheagreedperformance impossible) *therewouldstillbeanintelligiblebasisfortheagreementifthepartiesappreciatedthat thelawwaswhatitisnowknowntobe. Mistakenotsufficienttorenderthecontractvoidsincethesettlementcompromise remainedcapableofperformanceatalltimesandthesubjectmatterwasnotrendered essentiallyandradicallydifferentbythemistake Incontextofacompromiseagreement,theessentialldifferenceratherthan impossibilitytestseemstobepreferable.

GravesvGraves (2007)

Contract voidbut adjustment wasmade

90%oftherentwouldbecoveredbyhousingbenefitwouldmaketheagreementdifferent inkindfromtheoriginallycontemplatedsothattheimpliedconditionthatthetenancy contractwouldendifthehousingbenefitwasnotpayableshouldimply. Impossibilitytestnotsatisfiedbutessentialdifferencewas,whichsuggeststhatthetests maynotbeequatedinsomecontexts. Mistakewouldmakethecontractvoid,butthecourtneedtomakesurethatwifecould notrecoverherdepositandrentpaid,soneedtomakeadjustmentonpartiesposition.

6.Commonmistake andotherdocrtine (frustionand unilateralmistake) Amalgamated Investment& PropertyCovJohn Walker&Sons (1977)

Pagreedtopurchasesomecommercialproperty belongingtoDoncommonmistakethatthe DepartmentoftheEnvironmenthadincludedthe propertyinalistofbuildingsproposedtobe designatedasbeingofspecialarchitecturalor historicalinterest. Thepropertywaslistedonthedayafterthe signingofcontract,whichmadetheproperty worthalotlessthancontractprice Psoughttosetasidethecontractonbasisof mistakeorfrustration.

Plost

Notthecasewherecommonmistakewouldapplybecausethemistakehadtoexistatthe datetothecontract,thepropertywasnotlistedatthedateofthecontract Rejectingalsothefrustrationargument(applyDavisContractorsvFarechamUDC)that performanceofthecontractfollowingthelistingwasnotradicallydifferentfromthe performancecontemplatedbytheparties,itwasmerelyeconomicallydisadvantageous. Theriskofapropertybecominglistedwasaninherentriskwhichwastobebornebythe purchaser.

<TOPIC16>MISREPRESENTATION CaseName

Facts

Judgment

Rationale

 1.Promisesand silencearenot misrepresentations KeatesvEarlof Cadogan(1851)

Alandlordwhowaslettinghishousedidnottellthetenant thatitwasinaruinouscondition

Dwon

Thisfailuretodisclosematerialinformationwasheldnottobeamisrepresentation

2.Whatisa misrepresentation? Edgingtonv Fitzmaurice(1885)

Pwasashareholderwhoreceivedacircularissuedbythe directorsofacompanyrequestingloansofalargeamount withinterestinordertogrowtheirbusiness.However,the moneywasinfacttobeusedtopayoffthecompanysdebt, nottogrowthebusiness.P,whohadtakendebentures, claimedrepaymentofhismoneyonthegroundthatithad beenobtainedfromhimbymisrepresentation. PpurchasedtwopiecesoflandfromDforthepurposeof sheepfarming.DuringnegotiationsDsaidthathebelieved thatitwouldbesuitablefor2000sheep.Pthereforebought thelandinthatbelief.BothpartiesknewthatDhadnot carriedonsheepfarmingontheland.Thelandwouldnot,in fact,hold2000sheep.

Pwon

1)Thuntruestatementastofutureintentionwasamisrepresentationoffact. 2)TherewillbeareliancewherethemisrepresentationwasnottheonlyinducementforPto enterintothecontract.

BissetvWilkinson [1927]AC

Dwon

1)Inordinarycircumstances,anystatementmadebyanownerwhohasbeenoccupyinghis ownfarmastoitscarryingcapacitywouldberegardedasastatementoffact.This,however, isnotsuchacase.Inthesecircumstances,Dwerenotjustifiedinregardinganythingsaid byPastothecarryingcapacityasbeinganythingmorethananexpressionofhisopinion onthesubject. 2)Therefore,astatementofopinioncannotgiverisetoanactionablemisrepresentation.In theabsenceoffraud,Phadnobasisonwhichtorescindthecontract. Therehadbeenmisrepresentationbyconduct,sincetheparticipationofallfiveband membersinthecommercialhadinducedDintoenteringthecontract,andtheband membershipwasnotabouttochange. Pcouldnotdischargetheburdenimposedbythestatute(equivalenttoHKMOs3(1))of showingthatitreasonablybelievedtherepresentationtobetrue,regardlessoftheeffect thatthegroupwasunawarethatanymemberhaddeclaredanintentiontoleavebeforethe minimumtermofatoursponsorshipagreementexpired.

SpiceGirlsvAprilla WorldService[2002]

D(amanufacturer)contractedwithP(promoterofaband)to sponsoraconcerttour.Thegrouphadappearedin promotionalmaterialbeforeDenteredintothecontract.This contractwasbasedontherepresentation(madeatthe promotionalphotocall)thatallfivemembersoftheband, eachwiththeirdistinctiveimage,wouldcontinueworking together.Oneofthemleftthebandaftertheagreementwas entered. Psuedtoseekpaymentofvariousfeespursuanttothe contract.DcounterclaimedformisrepresentationofP.Trail judgefavouredD,andPappealed.

Dwon,appeal dismissed.

DimmockvHallett (1866) 3.Therequirementof inducement RedgravevHurd (1881)

Duringnegotiationsforthesaleofland,thelandwas describedasfertileandimprovable.

Dwon

Thisstatementhadinsufficientsubstancetobeclassedasarepresentationasitisamere salespuffortalk.

P(asolicitor),advertisedforapartnerDtojointhebusiness andbuytheaccompanyinghouse.Psaidinaninterviewwith Dthatthepracticebroughtin300pa,whenitwasonly200 pa.PshowedDsummariesthatcametoa200paaverage incomeandsaidthattherestofthe300figurewasborneout byotherpapersintheofficethathecouldcheck(infactthey showednobusiness).Ddidnotinspectthepapers,untilhe realisedthetruthjustbeforecompletionoftheagreement.He hadsignedthecontractbutherefusedtogothrough.Psued forspecificperformanceandDcounterclaimedforrescission basedonfraudulentmisrepresentation. See:

Pwon

Therewillberelianceevenifthepartytowhomtherepresentationismadeisgivenan opportunitytoverifyitstruthbutchoosesnottodoso.Thereisnodutyofverification.The misrepresentationwillstillbeconsideredtobeaninducement.

4.Remediesfor misrepresentation

HedleyBrynevHeller MO

5.Rescission TSBBankplcv Camfield[1995]

1)Thewifewasentitledtohavethewholetransactionsetasideasagainstherhusband. Termsshouldnotbeimposedonthewifeasaconditionofherobtainingequitablerelief. WhileitmightbejusttograntthebanksecurityforGBP15k,therewasnoauthorityto suggestthatamortgageecouldbeentitledpartiallytoenforceachargeagainstthewife.In anyeventthewifehadnothingtoreturntothebankasshedhadreceivednothingfromthe bank. 2)Thewifesrighttosetasidethetransactionisanallornothingprocess,thoughnot invariably. Thegeneralprinciplewasthatamisrepresenteewaspermittedtorescindthewholeofa contractbutnotpartofit.Theprinciplethattherecouldnotbepartialrescissionwaspartof thewiderrequirementthattherecouldnotberescissionunlesstherecouldberestitutioin integrum.Further,therequirementwastheconceptualconsequenceofthebasicnatureof theremedyofrescissionwhichwastodischargeallthepartiesfromthebargainintowhich themisrepresentorhadinducedthemtoenter.Thecourthadnopowertocreateanew

PhadconstructivenoticeofamisrepresentationbyDwhich Dwon, hadinducedhiswifetochargethematrimonialhomesothata allowingthe loancouldbemadetohisbusiness.Dhadinnocently appeal. misrepresentedtohiswifethathertotalliabilitywaslimitedto GBP15kwheninfact,itwasunlimited.Dappealedagainstthe decisiongrantingPpossessionofherhouseandjudgment forGBP15k.

DeMolestinavPonton [2002]

AmanXdiedandleftabusinessempirebasedinEcuador withprincipalbusinessinbananas.Disputesaroseamongst hisfamilyafterhisdeath.Severalagreementswereentered intowhichwereintendedtoresolvealloftheoutstanding boththedisputesbetweenXswidowandsecondwifeand hischildrenaswellasthedisputesbetweenXschildren

Dwon. Applications dismissed.

themselves.Thereweresixchildren,ofwhomfivewerestill aliveaswastheirmother,Xsfirstwife.Proceedingswere subsequentlybroughtbythefirstPs,whoweretwoofXs daughters,torescindsomeoftheagreementsandfor damagesonthegroundsthattheywereinducedtoenterinto theagreementsbythefraudoftheirbrother,D1.D1didnot disputethatiftherepresentationsweremadetheyweretrue orthathebelievedthemtobetruehiscasewasbasedonhis denialthathehadmadetherepresentationsallegedatall.

bargainfortheparties.Rescissionwouldnotbewithheldwheresubstantialrestitutionwas possible,butthatremedywasnotfetteredbysomeoverridingequitabletestastowhether theconsequenceswouldworkunfairlytothemisrepresentor.Thescopeoftheequitable discretioninarescissionclaimwasconfinedtoadjustmentstoachievesubstantial restitutiontoaccommodateeventsthathadoccurredafterthecontracthadcomeintoforce anddidnotextendtothegeneralreconstructionofthebargaintoachieveanobjectively overallfairresult.Intheinstantcase,althoughtherewereseriouslegalandfactualobstacles tobeovercomebytheclaimantsiftheyweretoestablishthattheywereentitledtorescind thesharedistributionagreements,noneoftheissuesthatarosecouldbeconclusively determinedpriortoafulltrial. Dwon,appeal allowedin part. 1)Itwasnotpossibletoanswerthequestionwhetherapartycouldavoidacontract procuredbyduressincircumstanceswherehecouldnotgivecounterrestitutionuntilthe factshadbeenfound. 2)Theprinciplethatcourtcansetasidethecontractinsuchawaythatjusticecanbe achievedappliedwheneverrescissionwassought,includingforduress,eventhough restitutioinitegrumwasnotstrictlypossible. 3)Forpracticaljustice,theprimaryobjectivemaynotalwaysbetorestorebothpartiesto theirpreviouspositions.

HalpernvHalpern [2007]

Dappealedagainstadecisiononanapplicationforsummary judgmentandagainstadecisionthatrescissionwasnot availableasaremedyforduressifsubstantialrestitution couldnotbegiven.Pclaimedtoenforceacompromiseof nheritanceallegedtohavebeenreachedwithD.

6.Fraudulent misrepresentation DerryvPeek(1889)

Dweredirectorsofacompany,whichwasauthorisedby statutetoruntramwaysbyanimalpower,orwiththeconsent oftheBoardofTrade,bysteampower.Theprospectus issuedbythecompanyindicatedthatsteampowerwouldbe used,buttheBoardofTraderefuseditsconsent.Phad obtainedsharesinthecompany,actinginrelianceuponthe representationintheprospectus.

Dwon

1)Thecaseconcernedthetortofdeceit.IntheabsenceofanyevidencethatDbelievedthe statementintheprospectustobeuntrue,theyhadnotcommittedthetortofdeceit. 2)Definitionoffradulent:fraudisprovedwhenitisshownthatafalserepresentationhas beenmade(i)knowingly,or(ii)withoutbeliefinitstruth,or(iii)recklessly,carelsswhetherit betrueorfalse.Althoughthesecondandthirdshallbetreatedasdistinctcases,thethirdis butaninstanceofthesecond,foronewhomakesastatementundersuchcircumstancescan havenorealbeliefinthetruthofwhathestates.Therefore,topreventafalsestatement beingfraudulent,theremustalwaysbeanhonestbeliefinitstruth. (1)therepresentationandwarrantyclausedidnothavethepurportedeffectofexcluding liabilityorremediesformisrepresentationasaclauseintendedtoexcludeliabilityfora misrepresentationwhichhadbecomeawarrantyoftheagreementwasineffective.Evenif thatwasnotso,theclausewouldhavebeenineffectiveasattemptingtoexcludeallformsof misrepresentationincludingfraudulentmisrepresentation. (2)thelimitationclauseonlyappliedtobreachesoftheagreementorclaimsonwarrantiesin thecontract,notmisrepresentationsinducingPtoenterintothecontract.Rescissionwas notavailable,as,onthefacts,thepartiescouldnotberestoredtotheirprecontract

ThomasWittervTBP IndustriesLtd[1996]

D,aconglomerate,negotiatedthesaleofacarpetcompanyto P.InthecourseofsodoingDnegligentlymisrepresentedthat therewasaspecialoneoffexpenseofGBP120kinaccounts produced,andthatthoseaccountsspreadthebiannual expenseofproducingpatternbooksovertwoyearsinsteadof immediatelywritingitoff.Thesalecontractincludeda provisionstatingthatPacknowledgedithadnotbeen inducedtoenterintotheagreementbyanyrepresentationor

Pwon

warranty,andacontractuallimitationclausethatDwasnot liableforabreachoftheagreementunlesswrittennoticewas given.WhenPsuedfornegligentmisrepresentation,D soughttorelyonthosetwocontractualprovisions. SmithNewCourt Securitiesv ScrimgeourVicker (AssetManagement) Ltd[1997]AC PhadboughtsharesinapubliccompanyXataninflated priceinrelianceonfalserepresentationsmadebyabrokerfor D.AfraudinvolvingXcausedthevalueofthesharesto slumpandPsoldthesharesatasubstantialloss.Thetrial judgeawardeddamagesbeingthedifferencebetweenthe pricepaidbyPandthetruevalueoftheshareshadallfacts aboutXbeenknownatthetimeofpurchase.CAsubstituted alowerawardonthebasisthatP'slossuponsellingthe shareswasnotforeseeableandshouldbeassessed accordingtothecircumstancesandthedatetheyboughtthe shares.Bothappealed. Drantwohairdressingsalonsinneighbouringareas.P purchasedoneofthesalons.Duringnegotiations,Dhad falselyrepresentedthathepersonallywouldnotbeworking athisothersalon.Pfailedtomakeaprofit,anddiscovered thatDwasworkingfulltimeathissalon.Pwasunabletosell thesalonfor3years.AttrialPwasawardeddamagesofGBP 33k,includingGBP15kforlossofprofitsduringtheperiodin whichPownedthebusiness.Dappealedagainsttheaward forlossofprofits. See: Pwon

positions. (3)Recklessdoesnot,ofitself,establishfraud,unlessitisblatantdisregardforthetruthand isthereforesufficientlyserioustobedishonest. (4)Lossoftherighttorescindwouldnotremovethispowertoawarddamages. Pisentitledtoconsequentiallosses.ThetestofremotenessindeceitisthatPmayrecover forallthedirectlossincurredasaresultofthefraudulentinducement,regardlessof foreseeability.Pweretobeputinthepositionthattheywouldhavebeeninhad misrepresentationnotoccurred,andthusDwasliableforalllossesdirectlyflowingfromthe fraudulentlyinducedtransactioneveniftheywerenotforeseeable.

EastvMaurer[1991]

Dwon,while allowthe appealonlyin part.

(1)Phadfailedtoearnexpectedprofitsfromthebusinessandwasentitledtothelossof expectedprofits,butthejudgehaderredinassessingdamagesonthebasisthatD's statementamountedtoawarrantythatthebusinesswouldhaveremainedatthesamelevel. (2)Damagesfordeceitshouldcompensatetheplaintiffforalllossessuffered,includingloss ofprofitsthatcouldreasonablyhavebeenanticipated.

7.Nonfraudulent misrepresentationat generallaw EssoPetroleumv Mardon[1976]

HedleyBrynevHeller

Duringthenegotiationsofthefranchiseofapetrolstation,a representativeofPstatedthatthestationwouldsell200k gallonsoffuelannuallybasedonitsproximitytoabusyroad. Dcontractedonthebasisofthisstatement.Thelocal authoritytheninsistedthatthepumpsandentrancetothe petrolstationweremovedsuchthatthestationwouldbe accessibleonlyfromsidestreetsandunseenbypassing trade.Asaresult,actualsaleswerearound85kgallons.Dlost allhismoneyintheenterprise.Pclaimedforbackrent.

Dwon

Thefailuretodisclosethechangeincircumstancesamountedtonegligent misrepresentationundertheHedleyByrneprinciple(specialrelationshipisneeded). Denning:Ifamanwhohasorprofessestohavespecialknowledgeorskill,makesa representationbyvirtuethereoftoanother,withtheintentionofinducinghimtoentera contractwithhim,heisunderadutytousereasonablecaretoseethattherepresentationis correct.Ifhenegligentlygivesunsoundadviceormisleadinginfoorexpressesanerroneous opinion,andtherebyinducestheothersideintoacontractwithhim,heisliable.

8.Nonfraudulent misrepresentation underMO HowardMarineand DredgingCoLtdv Ogden&Sons (Excavations)Ltd [1978]

PquotedDapriceforthehireoftwoseagoingbarges,and toldDthecubiccapacityofthebarges.SubsequentlyPtold Dthatthecarryingcapacityofeachbargewasabout1800 tonnes.Pgavethisfigurebecausethatwastheweightgiven inLloydsRegister.Infactthecarryingcapacitywascorrectly statedintheshippingdocumentsas1055tonnes.dhiredthe barges.theysubsequentlyrefusedtopaythehirecharges whentheybecameawareofthereducedcarryingcapacity andclaimeddamagesbecauseofPsmisrepresentation. D1boughtacarfromD2.Thecarwasboughton hirepurchasethroughP,afinancecompany.D1andD2 representedtoPthatD1hadpaida20%depositofGBP1.6k andsothetotalpurchasepricewasGBP8k,wheninfactD1 hadpaidadepositofGBP1.2kandthetotalpurchaseprice wasGBP7.6k.AsaresultPpaidD2GBP6.4k,whenitwould haveonlybeenpreparedtopayGBP4.8k.D1soldthecarto Xwhoobtainedgoodtitle. DsoldlandforhousingtoPforGBP5million.Inreplytoa precontractualenquiryastowhetherDwasawareofany undisclosedeasementsaffectingtheland,Dhadanswered notsofarasthevendorisaware.Infactthereweresewer pipesundertheland. See:

Dwon

1)BurdenofproofshiftontoDunderMO 2)Therewasinsufficientevidencetosustainanargumentthattherewashonestbeliefin misrepresentation. 3)Pdidnothaveanobjectivelyreasonablegroundtodisregardthefigureintheships documentsandrelyontheLloydsRegisterfigure.

RoyscottTrustLtdv Rogerson[1991]

Pwon

PwasabletorecoverGBP3.6kbeingthedifferencebetweentheamountpaidbyittoD2and theamountreceivedfromD1beforehedefaultedonthepayments. ThemeasureofdamagesunderMOs2(1)wasthemeasureofdamagesforfraudulent misrepresentation.Therefore,PwasabletorecoverfromD2anylosswhichfloweddirectly fromDsmisrepresentation.

WilliamSindallplcv CambridgeshireCC [1994]

Dwon

Therewasnoactionablemisrepresentation.Iftherehadbeen,themeasureofdamagesunder MOs2(2)wouldbethedifferencebetweentheactualvalueofthesubjectmatteratthetime ofthecontractandthemisrepresentedvalueofthesubjectmatter.

9.Excludingliability formisrepresentation OverbrookEstatesv GlencombeProperties Ltd[1974]

MOs4 Pwon

Pinstructedauctioneerstosellaproperty.Theparticularsof salestatedthatneithertheauctioneernoranypersoninthe employmentoftheauctioneerhasanyauthoritytomakeor giveanyrepresentationorwarranty.D,whowerethe highestbiddersattheauctionallegedthatthreedaysbefore auction,theyaskedtheauctioneerquestionstowhich inaccurateanswersweregivenwhichamountedto misrepresentations.

1)Alimitationontheapparentauthorityofanauctioneerisnotanexclusionclause. 2)Evenifthereweremisrepresentations,thequestionwasnotwhethertheclausewas reasonableunderMOs3.s3wasirrelevantbecausetheclausewasalimitationonthe apparentauthorityofauctioneers,notanexclusionclause.Dkneworoughttohaveknown thatnothingtoldthembytheauctioneercouldbindP.

10.Misrepresentation See: andliabilityincontract

MOs2

<TOPIC17A>DURESSTOTHEPERSONANDTOGOODS CaseName 1.Duresstothe person BartonvArmstrong [1976]AC104 Facts Armstrong was thechairmanand heldthelargestsharingholding in Landmark Corporation Ltd. Barton was the managing director and also had a substantial shareholding in.Thereweretwoother directors Bovil and Cottrel. There had been a long history of ill will between the parties and a struggle over who should have controlling power with Armstrong being the most aggressive. The other directors in the company were also unhappy with Armstrong and wanted him to be removed for abusing certain privileges and they disagreed with the way he ran thecompany believing him to be putting the company at risk of insolvency. However, Armstrong refused to resign. The three managed to take control of subsidiary companies and removed all credit facilities from Landmark Corp. When Armstrong discovered the credit had been removed he made a number of death threats to Barton to pressure him into signing an agreement which contained various elements including the purchase by Barton of Armstrong's shares in the company at a substantialover value. Barton agreed to this partlyduetothethreatsbutalsoduetothe fact that it would mean that Armstrong would no longer have controlling interest and he believed he would be able to turnthe company around without Armstrong's dealings. However, the company became insolvent shortly after and Barton sought to havethecontractsetaside. Inthisaction,the plaintiffissuingthedefendantonanagreement in writing, dated 29 December 2000, signed by both parties by which the defendant agreed to pay the plaintiff the sum of $1,527,690 by instalments. The defendantsaysthathe signed the Judgment Rationale

P won. The The Privy Council advised that Mr Barton could avoid the contract for being under contract could duress, and it did not matter that he may have agreed to the deal anyway. Lord Cross, besetaside. Lord Kilbrandon and Sir Garfield Barwick held that physical duress does notneed to be the main reason, it must merely be one reasonfor entering anagreement.LordCrosssaid the same rule should applyfor duressas inmisrepresentation,thatifArmstrongsthreats were a reason for Bartons executing the deed he is entitled to relief even though he might well have entered into the contract if Armstrong had uttered no threats to induce himtodoso

TamLupWaiFranky vVongShiMing Nicholas[2002]4 HKC135

Dwon.

The essence of D's case is that what P was making were illegitimate and unfounded accusations of impropriety amounting to fraudforwhichhewouldinstigatebothciviland criminal investigations, not only against the defendant himself but against his wife and their friend. Those matters set in train fears that he would be exposed to the media

Agreement under duress and that, accordingly, it is voidable at hissuitandthatitshouldbesetaside.

publicity which he had sufferedas a result of his previous criminal prosecution and that this would also draw in not only his wife but also her distinguished family as well as a totally innocent individual. It is the weight of those factors against a background of a pressured situation extending over 12 hours which, in effect, left him with no practical choice but to submit to a highly artificial agreement when oneconsidersitstermsagainst therealityofthesituation. Theplaintiff wasentitledto recoverback allthathad been unlawfully demandedand taken. Duressto goodswillnot sufficeto rendera contract voidable. This, say the court, "is a payment by compulsion: the plaintiff might have such an immediate want of hisgoodsthatanactionof trover wouldnotdohisbusiness: wherethe rule volenti non fit injuria is applied, it must be when the party had his freedom of exercising his will, which thisman had not: we must take it he paid the money relyingon hislegalremedytogetitbackagain."

2.Duresstogoods AstleyvReynolds (1731)

The plaintiff had pledged goods for 20 pounds, and when he offered to redeem them, the pawnbroker refused to surrender themunlesshewaspaid10poundsforinterest.

SkeatevBeale (1841)

P claimed that sum 1 was owed by D and seized some of D's property. D agreed to pay the sum 2 immediately and the remainder later.WhenhefailedtopaylaterPbrought anactionin which D replied saying that only sum 2 was due andthathehad been pressured into agreeing to the remaining money due to the seizureofhisgoods.

The court held that D wasnotentitledtoset asidethetransactionforduress eventhough the seizure of the goods was unlawful. At the same time as this case was another case, Astley v Reynolds ,whichstated thatitwaspossibletoclaimthat apaymentmadeinorder to release goods was paid under duress. The difference between the cases seems to be that in Skeatesum2waspaidasconsiderationforthepromisetopaythe sum1whereasin Astleytherewasnoconsideration. The distinction between the cases isweakandSkeate isnolongergoodlaw,aswasmade clear by LordGoff inDimskalShippingvInternationalTransportWorkers' Federation. If it can be said that'illegitimatepressure' was appliedto thevictim bywithholdingtheir goods, and that thiswas 'a' causeof the contract, the contract is voidableonthebasisof duress.

DimskalShipping CoSAv International TransportWorkers Federation(The EviaLuck)[1992]2 AC152

The ITWF threatened strike action unless certaindemands were met. The cost of strike action would be astronomical for Dimskal and therefore they agreed to the demands. They later soughtto have the agreement set asideas beingprocuredbyduress.There was clearly present a coercion of the will and absence of choice the main question for the court was the legitimacy of the

Englishlaw appliedand thethreatwas therefore unlawfuland illegitimate.

LordGoff:Economicpressurecanamounttoeconomicduress,providedthepressureis illegitimate.ItisnotagoodtesttoaskwhetherPhasbeencoerced(seeAtiyah).Under Englishlawblacking(refusingtoallowdocking)isillegitimate.Ifanactionislegitimised bystatute,thenitcannotbeillegitimate.Theillegitimatepressuremustbeasignificant causeofDsacte.g.agreeingtonewcontract.

pressure. At thetime ofthethreatenedstriketheEviaLuckwasin Sweden. Thecourt had to determine whetherEnglishlaw applied or Swedish law applied to the threatened strike action as under Swedish law the threatenedstrikewouldbelawfulsotherewould be no illegitimate pressure applied, however, under English law the strike would be unlawful and thethreatwouldberegardedas illegitimate.

<TOPIC17B>ECONOMICDURESS CaseName 1.Developmentof thedoctrine NorthOcean ShippingCoLtdv Hyundai ConstructionCo (TheAtlantic Baron)[1979] Facts D agreed to build a ship for the claimants for a certain price specified in US dollars. After entering the contract the US dollar was devalued by 10%. D threatened not to complete unless the claimants paid an additional 10% on the contractually agreed price. P had a valuable charter lined up so agreed to pay the additional sums and did pay them without protest.8monthsafter delivery of the ship P brought an action to recovertheadditional sumspaid. Thecontract wasvoidable forduress, however,since Phadleftitso longin bringingthe claimPhad affirmedthe contractand losttheirright torescind. Pwon. Judgment Mocatta J noted the best known case of Maskell v Horner, and also Skeate v Beale, where Lord Denman CJsaidanagreementwasnotvoidbecauseitwasmadeunderduress of goods, but notedthat older cases do not deal withwhathappens whenthe threatisto breachacontract. He decided that there was such a thing aseconomicduress,athreattobreaka contractis one form and if it led to a contract for valuable consideration I think that contract is a voidable one which can beavoided and the excess money paid under it recovered. The agreement here was caused by economic duress. However, because of the delay in bringingthecasetocourteconomicduresscouldnotbefoundinthiscase:'theactionand inactionoftheownerscanonlyberegardedasanaffirmationofthevariation.' TestforDuress:Itismaterialtoenquire Whetherthepersonallegedtohavebeencoerceddidordidnotprotest Whether,atthetimehewasallegedlycoercedintomakingthecontract,the coercedpartyhadanalternativecourseopentohim(suchasanadequatelegal remedy) Whetherhewasindependentlyadvisedand Whetherafterenteringthecontracthetookstepstoavoidit. Inthepresentcasethedefendantdidnotprotestatthetime.Healsocouldhaveenforced thecontractofsalethroughspecificperformanceandthushadanotheravenueofredress Rationale

PaoOnvLauYiu Long[1980]AC 614

P had threatened not to complete the main contract for the purchase of shares unless subsidiary agreements were met including a guarantee and an indemnity. D was anxious to complete the main contract as there had been a public announcement of the acquisition of shares and did not want to undermine public confidence in the companyand theconsequent affect on shareprices.Dcould havesuedforspecific performance of the agreement but this would have delayed matters and damaged the company's reputation. D had taken legal advice on

all these matters before agreeing to the guarantee and indemnity. P thensought to enforce the guaranteeand Dsought tohavethe agreementsetasideforeconomicduress. UniverseTankships ofMonroviav International TransportWorkers Federation(The UniverseSentinel) [1983]1AC366 The International Transport Workers' Federation black listed a Pwon. Universe Tankship Inc ship in the context of a trade dispute. To secure the release oftheship,UniverseTankshipsIncpaid$6,480 into ITWFs welfare fund. ITWF admitted this was an agreement procured by duress, but it argued its actions were protected by immunity from tort in Trade Unionand LabourRelationsAct1974 s13.

availabletohim.Hehadtakenlegaladviceandtooknostepstoavoidtheagreementprior totheclaimantseekingtoenforcetheguarantee.Thereforenoeconomicduresscouldbe established.Itwassimplycommercialpressurefarshortofduress. Lord Diplock: duress is not about not knowing what you are contracting for, but his apparent consent was induced bypressureexercisedonhimbythatotherpartywhichthe law does not regard as legitimate, with the consequence thattheconsentistreatedinlaw as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind. It was not appropriate to say the conduct was commercial pressure wherever one party to a commercial transaction isinastronger bargainingpositionthantheotherpartyshouldgiverisetoarightofredress. Lord Scarman: duress not only renders a contract voidable but is also a tort if it causes damage or loss (referring to Barton v Armstrong and Pao On v Lau Yiu Long). It comes from (1) pressureamountingtocompulsionofthewillofthevictim and(2) theillegitimacy of the pressure exerted. The lack of any practicable choice but to submit should be proved for (1) and here, for (2) the question was whether it was a trade dispute. The majority heldthepaymentwasunconnectedwithtermsandconditionsofemploymentand thereforenotatradedisputewithins29(1).Hencetheactwasduress. Inthesecircumstancesitwasheldthatthepaymenthadbeenmadeunderduressandthat theclientwasentitledtorecoveritback.TheCourtofAppealheldthatthethreatofa breachofcontractunlessthecomplainantpaidtheextrasumwasthoroughly unreasonablebehaviourandthereforeillegitimate.

B&SContracts andDesignLtdv VictorGreen PublicationsLtd [1984]

A contractor (P) who had undertaken to erect stands for an exhibition at Olympia told his client (D), less than a week before the exhibition was due to open, that the contract would be cancelled unless the client paid an additional sum to meet claims which were being made against the contractor by hisworkforce. The consequenceof not having the stands erected intime would have been disastrous for the client in that it would have gravely damaged his reputation and might have exposed him to heavy claims for damages from exhibitors to whom space on the stands hadbeenlet. CTN Cash and Carry Ltd had a dispute with Gallaher Ltd about whether CTN should pay for some cigarettes that were delivered to the wrong warehouse and got stolen beforeGallaherLtdcould pick them up again and take them to anotherwarehouse.Gallaher believed that CTN was liable, because the riskofanyhadalready

Clientwas entitledto recoverthe money.

CTNCashand CarryLtdvGallher [1994]

Gallherwon.

An important feature of the case is thatitwaslawfulfor thedefendantstoinsistthatthey would no longer grant credit to the plaintiffs.Thedefendantsdemandforpaymentofthe invoice, coupled with the threat to withdraw credit, was neitherabreachofcontractnora tort. One factor which the courttook into accountin arrivingatthisconclusionisthefact that the defendants bona fide thought that the goods were at the risk of the plaintiffs at

passed,andthreatenedtowithdrawCTNscreditfacilityforfuture dealings. They were entitled to do this for any reason. CTN paid. Later it was determined that the risk ofthelostcigarettes wasnot onCTNandtheysuedforrepayment.

the time they werestolen and thattheplaintiffsowedthedefendantsthesuminquestion. The defendants exertedcommercialpressureontheplaintiffsinordertoobtainpaymentof a sum which they bona fide considered due to them. This factor was considered to be criticallyimportant. Moreover, in considering whether a threat of lawful action is morally or socially unacceptable andtherefore illegitimate, the courtsconsider whether the threat is used to backademandthatisunreasonable. Thesolider failed. The Privy Council advised that thecontractwasnotavoidableforduress.TheMODwere justified in introducing the confidentiality agreement. Lord Hoffman said there was no illegitimate pressure, so no duress. That first element is pressure amounting to compulsionofthewillofthevictimandthesecondwastheillegitimacyofthepressure. Generally speaking, the threat of any form of unlawful action will be regarded as illegitimate. On the other hand, the fact that thethreatislawfuldoesnotnecessarilymake thepressurelegitimate.."

Rv AttorneyGeneral forEnglandand Wales[2003]

After the Gulf War, an SAS soldier oftheBravoTwo Zeropartrol was told to sign a confidentiality agreement or be demoted. He signed. Then he returned to New Zealand. He got a publishing contractforhismemoirs,aboutmaterialintheGulfWar. The New Zealand Court of Appeal denied an injunction, but allowed an account of profitsand an assessment of damages for breach of contract. R appealed to the Privy Council, contending the contractwasunder duresswhenhesigned,giventhethreatof demotion. Seealso: CTNCashandCarryLtdvGallher

2.Whatis illegitimate pressure? DSDNSubseaLtdv Petroleum GeoServicesASA [2000]

The factual background to this case is concerned the development of a Floating Production Storage and OffTake vessel ("FPSO") in the Banff sector of the North Sea. PGS Offshore Technology AS ("PGS") contracted with DSND Subsea Limited ("DSND")toprovidesubseaworkrequiredtohookupthe FPSOtoanunderwaterwellhead.Theagreementwasformalisedin a number of documents. The first of these was the heads of agreement. There was no dispute about the terms of this agreement. Subsequently, the parties entered into a further document, the Memorandum of Understanding ("MOU"). PGS later alleged inter alia that this agreement was entered into as a resultofeconomicduress.DSNDhadrefusedtocontinueworkon the FPSO untilPGShadagreedtoprovidei)assurancesastotheir insurance cover and an indemnity, and ii) a reimbursable basisof

PSGlostthe case.

There was no allegation ofduress by PGS at the time the MOUwasenteredinto.Indeed, the allegation of duress was only raised after the proceedings had beencommencedona different basis. In addition, rather than complain about the tactics employed by DSND, PGS representatives went to dinner with their DSND counterparts. The judge was also swayed by the fact that the negotiated terms of the MOU contained "give and take on both sides" albeit that DSND finally achieved a better result than PGS. It was also clear thatPGSconsideredDSNDsconcernsoverinsurance andindemnityasgenuinegiventhe risks involved in the project. As a result, he found that PGS had not entered into the contract under duress, even though the suspension of work by DSND was in breach of contract. Dyson J stated that this was "reasonablebehaviourbya contractoractingbona fideinaverydifficultsituation".

payment. PGS were under severe financial pressure from their employer and were at risk of substantial damages for delay. PGS agreed to these terms. They claimed later that they had done so underduress.

Dyson J then went on to consider whether, assuming that duress had been established, PGS had affirmed the MOU by its subsequent conduct. The Judge confirmed that a contract entered into under duress is only voidable not void. As a result, the partywho has the right to avoid the contract loses that right by affirming the contract.A contract may be affirmed expressly or alternatively impliedly by acquiescence. On thisthe Judge stated "..it will provide evidence ofacquiescenceifthevictimfailstotakeanystepstoset aside the transactionwithin areasonable time after he is freedfromtheundueinfluence." Therefore once a party becomes aware of his right to avoid thecontractduetoeconomic duress, he is obliged to act promptly if he wishes tobeescapethecontractonthatbasis. In DSND Subsea PGS hadgonefurtherthanmereacquiescence, theyhadactuallyrelied upon the terms of the MOU to take issue with DSND. This,Dyson J concluded, was a clearaffirmationofthecontractbyPGS. Pwon. While there had been nophysicalthreatstoP,itwasclearthatbothelementsofeconomic duress: illegitimate pressureandcoercionofthe willwerepresent.Thejudgeheldthat"for there to be economic duress,thepressure applieddoesnothavetobeinthemannerofan express threat orcoercion.Pressureforthispurpose couldtakemanyforms. Ifthevictimis left with no practical choice but to submit because of the course of action of the other party,thiswouldsuffice.

EstinahvGolden HandIndonesian EmploymentAgency [2001]4HKC607

P was an Indonesian domestic helper who lodged a claim in the Small ClaimsTribunalagainstthedefendantagencyforthesumof 9633dollarsrepresentingthe differencebetween theamountP had paid to the agency to assist her to obtain a job for her in Hong Kong and the amount that D could charge legally. D had made clear that without the additional payments, they would not process the papers necessary for P to continue in employmentin HongKong. Kafco,asmallcompany dealinginbasketware,hadsecuredalarge contract from Woolworths and had obtained a large quantity of goods tofulfillit.TheyenteredintoacontractwithAtlas,national road carrier, todistributethegoodsto Woolworth'sshops.Before entering into the contract, Atlas's manager inspected the cartons used by Kafco and, estimating a minimum load of 400 cartons, quoted a price1.10poundpercarton(440poundsintotal).Infact, the first load contained only 200 cartons which the manager said was not viable unless Kafco agreed to pay a minimum of 440 pounds per load. It was essential to Kafco's commericial survival that they should be able to meet delivery dates. It would have been difficult, if not impossible, to find alternative carriers to do so. Kafco agreed to the new terms but later refused to pay atthe newrate. Wimpeyisacivilengineeringcontractor.In1982,itwasawardeda

AtlasExpressv Kafco[1989]

Kafcowon.

It was held that Kafco was notboundbythenewterms:economicduresshadvitiatedthe new agreement and in any case there was no consideration for it.TuckerJ foundthatthe defendant's apparent consent to the agreement was induced by pressure which was illegitimateandhefoundthatitwasnotapprobated.

TungWingSteelCo

Twon.Whas

T was wholly within its rights to refuse to sell any more rods as the only arrangement

LtdvGeorge Wimpey InternationalLtd [1985]HKEC164

contract by MTRC to build a project. W entered into a written agreement with Tung for the supply of steel. After supplying slightly over 2,000 tons of rods to W at the prices fixed by the written agreement, T wrote to W stating, in effect, that it was no longer prepared to sell steel rodsattheoldprices.Wprotestedat being asked to pay this higher price. Nonetheless, W did enter into a fresh written agreement dated the 20th December 1983. There was a provision for 45 days' credit in the agreement in writing dated 20th December 1983.Whastakenadvantageofthat 45 day credit period by acceptingthe747.357 tonsinvoicedunder the written agreement dated 20th December 1983,butwithholding paymentofthesumofHK$325,287.20.

failedtojustify withholding thesumof HK$325,287.20 inrespectof thepriceofthe steelbarssold toitbyT.

between it and W was in the nature of a standing offer and there had never been any agreement to supply all of W's requirements for the contract. The evidence made it perfectlyclearthatToperatedina highlycompetitivemarketforthesupplyofsteel rodsin Hong Kong. Far fromenjoyingamonopoly,Wfailedtomaketheslightestefforttofindan alternative source ofsupply after receiving T'sletter.Therewasnoevidenceonhowlong it might have taken MTRC to approve an alternative supplier. Itmight wellbethatMTRC couldhaveapprovedanalternativesupplierinasshortaperiodasonedayeven.

Esquire (Electronics)Ltdv HongKongand ShanghaiBanking CorpLtd[2007]3 HKLRD439

P was a longstanding client of D. In 1981, the Plaintiffobtained Pwon. 100% finance from Dtopurchase thePropertyat $180 million.The Property was mortgaged to D and charged with a $300 million banking facility. Later, the property market slumped and P had difficulty in repaying the Defendant. In 1983, P entered into a restructuring agreement with 5 creditor banks, with D being the lead bank.In1985,TheBankofAmerica,one ofthecreditorbanks wanted to get out of the restructuring agreement. As a result, D bought BAs debt at 36% of the original debt. In 1986, the restructuring agreement was extended. From as early as 1985, P noticed that for the nonproperty part of its debt, D had overcharged by some $30 million. On 12 March 1987, the Bank denied such overcharge despite internal reports showing there had indeed been overcharge. Further, it demanded P to sell the Property otherwise it would make demand on all loans, sell the Property and liquidate the company. P succumbed to D and agreedto thesale of the Property. Dfurtherrequiredthe Ptosign a PowerofAttorneyappointingDasitsagenttoselltheProperty. The Property was sold to BethlehemManagementLimitedat$180 million. The Plaintiff only found it out by accident some 6 years later that Bethlehem was a company owned by the Ho family, a closeassociateoftheBankandthesalewasdoneinhaste. Seealso:

There are 3 requirements for economic duress: first,theillegitimatepressureamountingto compulsion was applied second, the illegitimate pressure so applied was a significant cause of the victims actions and third, the illegitimate pressure applied did not give the innocentpartyanyrealchoice. On the facts of the case, the court found that there was illegitimatepressureexerted.The principal pressure was thatDinsistedP owedit$30millionoverchargeand threatenedif D didnot agree to the sale within24hours,Dwouldmakedemandonallloans includingthe overcharge and would liquidate P. This principal pressure was coupled with two subsidiary threats being that D would add on to the total debt of P the extra $12 million writtenoff debt of BA and liquate the home of Arjan, who was one of the major shareholders of the Plaintiff company. For thesecondrequirement,thefactthatPresisted for a long time and P would not have agreed to the sell but for the illegitimate pressure showed that the pressure applied wasasignificant cause.Forthe thirdrequirement,given the controlled position of P and the deadline for 24 hours, there was nothing theP could do but to surrender. D also blocked all other alternatives so that P had no choice but to agreetothesale.

3.Didthe

illegitimate pressurecausethe victimtoactasheor shedid? HuytonSAvPeter CremerGmhH

DimskalShippingCoSAvInternationalTransport WorkersFederation(TheEviaLuck)

Issues arose out of a consignment of wheat delivered by Cremer to Huy. Under the terms of their contractual agreement, H was required to pay C on presentation of documents in a particular form. H accepted delivery of the goods but H's bank refused to make payment on the basis that the documents were not in the approved form.C contendedthatHhadimpliedlywaivedallrights to reject thedocumentsbyacceptanceofthecargo.Harguedthat the failure to present documents in the proper form was a repudiatory breach. C threatenedtoseekjudgmentforpaymentor to seek recovery of the cargo. An arbitrator was appointed, but the parties reached agreement that H would pay against the documents on the basis that a correct presentation would be deemed to be the first presentation, providedthat C gave up its claims to demurrage and guarantee expenses. C accepted those terms, but latterly claimednottobeboundbythemongroundsof economic duress and the absence of any consideration for its undertakings.

Huytonlost.

To demonstrate economic duress, C would be required to show that there had been illegitimate pressure which constituted a significant cause inducing the other partytoact as it had done. On the facts, C could not demonstrate such illegitimatepressure on the basis that the contractsprovided forpaymentagainstthedocumentsin anyevent.Evenif there had been illegitimate pressure, C had not demonstrated that it was that pressure which had induced it to enter intotheagreement.Itwouldhaveto beshownthatCwould nothave entered intothe agreement "but for" the pressure appliedbyHwhichwasnota contentionwhichhadbeenmadeoutonthesefacts.

4.Woulda See: reasonableperson inthepositionofthe victimhaveactedin thesameway? 5.Therelationship betweenthethree typesofduress See:

NorthOceanShippingCoLtdvHyundaiConstruction Co(TheAtlanticBaron) B&SContractsandDesignLtdvVictorGreen PublicationsLtd HuytonSAvPeterCremerGmhH

<TOPIC18>UNDUEINFLUENCE CaseName Facts Judgment Rationale

1.Actualundue influence WilliamsvBayley (1866)LR1HL

Asonforgedhis father'ssignatureonpromissorynotesandgave them to their bankers. At a meeting of all the parties atthebank, one of the bankerssaidtothefather:"Ifthebillsareyoursweare all right if they are not, we have only one course to pursue we cannot be parties to compounding afelony."Thebank's solicitor said it was a serious matter and the father's own solicitor added, "a case of transportation forlife." After further discussion as to theson'sfinancialliabilitythebank'ssolicitorsaidthattheycould only look to the father. The father then agreed to make an equitable mortgage to the bank in consideration of the return of thepromissorynotes. The Williams family ran a garage business as a partnership with the benefit of a franchise from Toyota. TheWilliamsapproached the bank for a loan which asked for security by way ofa charge on the three showrooms in addition to a charge on each of the partners' homes. The defendant, Mrs Williams, was the wife of one of the sons. She had signed thecharge withouthavingbeen told the full extent of theliability. The signature was executed in the presence of alltheotherpartnersandwitnessedbyasolicitor of the partnership. The charge secured all debts present and future of the partnership and provided for joint and several liability of all the partners. The business wasunableto repaythe loan and became bankrupt. UCB sought to enforce the charge and Mrs. Williamsraised undue influence and misrepresentation in her defence. The trial judge held that undue influence and misrepresentation were established. However, he held that Mrs. Williams would have signed the charge in any event had she known the full facts and also that UCB were not fixed with constructive notice as a solicitor had witnessed the signature therefore they could assume Mrs. Williams had been advised accordingly.MrsWilliamsappealedtotheCourtofAppeal.

Thefather succeededin anactionfor cancellationof theagreement.

It was held by Lord Westbury thatthesecuritygivenforthedebtofthesonbythefather under such circumstances, was notthesecurityofamanwho actedwiththat freedomand power of deliberation that must be considered as necessary to validate acontracttogive securityforthedebtofanother.

UCBCorporate ServicesLtdv Williams[2003]

Mrs.Williams won.

For both undue influenceandmisrepresentationthereisnorequirementtoestablish thata person would not have entered the contract but for the influence or misrepresentation.It was sufficient for undue influence, that anequitable wrong has beencommitted.Thefact that the signature was witnessed by asolicitordoesnotnecessarilymeanthattheywould have advised her. The role of a solicitor will depend upon what theyhadbeeninstructed to do. If there were no instructions to adviseMrsWilliamstheywouldnotbeexpectedto do so and it waswrongofUCB toassumethishadtakenplace.Theywereunderadutyto checkifshehadinfactbeenadvised.

2.Presumed undueinfluence

AllcardvSkinner (1877)

In 1867 an unmarried women aged 27 sought a clergyman as a professor. The following year she became an associate of the sisterhood of which he was spiritualdirector andin1871shewas admitted as a full member, taking vows a poverty, chastity and obedience.Without independentadvice,she madegiftsofmoney and stock to the mothersuperioronbehalfofthesisterhood. She left the sisterhood in 1879 and in1884claimed the return of the stock.Proceedingstorecoverthestockwerecommencedin1885. The case concerned eight conjoined appeals. Each appeal arose out of a transaction in which a wife charged her interest in her home in favour of a bank assecurity for her husband'sbusiness debts. Seven of the claims involved an allegation of undue influence by the husband for which the bank should be held responsible. The House of Lords took the opportunitytosetout theprinciplestobeappliedincasesofallegedundueinfluence.

Psclaimfor themoney failed. However, undue influencewas recognized.

It was held by the Court of Appeal that although the Ps gifts were voidable because of the undueinfluencebroughtto bearuponthePthroughthetrainingshehadreceived,she was not entitled to recover the money due to the delay. The lapse of time operated as a bar. In any case she wouldonlyhavebeenableto recover asmuchofthegiftasremained inthedefendantshandsaftersomeofithadbeenspentinaccordancewithherwishes.

RoyalBankof ScotlandvEtridge (No2)[2002]2AC 773

Insomecases thewifehada successful defense, whereasin othersthe defensewas not established.

1.Establishmentoftheundueinfluence The House of Lords held that it was always up to the party alleging undue influence to prove it. In some cases, however, evidential presumptions will be applied, so that the burden will shift to the other party to disprove thepresumption of undue influence. An evidential presumption of influence will arise in relation to certain recognized relationshipsi.e. solicitor and client, doctor and patient, parent and child, religiousleader andfollower.Inrelationtosuchrelationshipsthepresumptionisirrebuttable. In relation tootherrelationships,suchashusbandandwife,evidencethattherelationship was one of"trustandconfidence"will beneeded.If thisisestablished,itwillbepresumed that one party exercised influence over the other. Wherever there was a relationship in which influencewasprovedorpresumed,then,ifthe transaction isonethatrequiredsome explanation, (e.g. asaleofpropertyatanundervalue),undue influencewillbepresumed.It will be up to the party presumed to have used the undueinfluencetoprovethatthiswas notthecase. 2.Theissuerelatedtobank Where a wife became the surety for the debts of a company whose shares were held by her and her husband, and she had anominal,minorityorequalshareholdingwithhim, the bankwasputoninquiryevenwhereshewasadirectororsecretaryofthecompany. The effect of a party being put on inquiry was that it should take reasonable steps to satisfy itself that the practical implications of a proposed transactionhad been brought home to the relevant person in a meaningful way, so that person should enter into the transactionwithhereyeswideopensofarasitsbasicelementswereconcerned. Appellant and Mr. Li's relationship did not fall within the categories where undue influence was presumed as a matter of law. In cases outside those categories, theparties should concentrate on whether the evidence justified the inference that, on a balance of

Li Sau Ying v Bank of China (Hong Kong) Ltd [2004] 7

The appellant granteda mortgageovera flatsheownedtoabank as security for the indebtedness to the bank of a company in which she had no interest. The companywascontrolledbyaMr.

Theappeal wasdismissed byCFA.

HKCFAR579

Ip and the appellant had granted the mortgage atthesuggestion of a friendof hers, a Mr. Li, who was anassociateofMr.Ip.The appellant claimed to be entitled to rescind the mortgage contract on the ground that she had been procured to enter into it by misrepresentations made byMr. Li or by the undue influence of Mr. Li over her. The bank, it was alleged, had actual or constructive notice of these improprieties. The judge at first instance held that there was undue influence exerted on the appellant. The bank appealed to the HongKongCourtofAppeal which unanimously allowed the appeal. CA held that there was noundueinfluence.appealedtotheCourtofFinalAppeal. A 74 year old man who was in poor health wrote four cheques totaling 297,000 to the defendant who had assumed the role of caring forhim. This sum was about 91% ofhistotalliquidassets (i.e. not property assets). A further effect of the gifts of money was that he became liable for capital gains tax amounting to almost 50,000. On his death his family sought to recover the money.The Dconcededthattherewasarelationshipoftrustand confidence and that the gift wassolargeastotrigger thesecond criteria that the giftwasto themanifestdisadvantageoftheparty or, put otherwise, not reasonably accounted for by ordinary motives. B, a bank, brought bankruptcy proceedings against W, on the basis of two personal guarantees she had given in respect of a debt owed by a company (the company).Wandherhusband,H, were directors and shareholders of the company andW wasalso its secretary. W claimed in an affirmationthatshe hadsignedthe documents due to H's misrepresentation of their effect and she was unaware that they were personal guarantees. W said she signed them because she trusted H. She was simply a nominal director and the company's businesswasconductedsolelybyH. WalsosaidshehadnocontactwithB andthiswassupported by H's evidence. The Judge held that W had established undue influence by H, butthat B had not been put on inquiry because W had a substantial shareholding of 30% and was an "active director" of the company. The Judge therefore made the bankruptcyorder.Wappealed. ThePwon.

probabilities,theimpugnedtransactionwasprocuredbyundueinfluence. Whatever the degree of trust and confidencethatby1995appellantretainedinMr.Li,the shift from the 1994 mortgages to the 1995 mortgage did not represent anunconscionable abuse by Mr. Li of thattrust and confidence. In advising appellant to enter into the1996 mortgage in placeof the 1995 mortgage, Mr. Li had not unconscionably abused thetrust and confidence appellant hadinhim,onany objectivecomparisonwithher positionunder thosetwomortgages.

HammondvOsborn [2002]EWCACiv 885

The trial judge held that the presumption had been rebutted as it wasmadeafterfull,free andinformedthought. The Court of Appeal held thatithadnotbeenrebutted.Theoldmanhadnotreceivedany legal advice and his attentionwas not drawn to the proportion ofhis total assetsthathe had given away. There was nothing sinister or wrong with what the defendant had done butthatisnotnecessaryforundueinfluence.Thusthegiftofmoneyhadtobereturned.

ReLaiYinShan,ex parteHongKong andShanghai BankingCorpLtd [2002]3HKLRD 500

TheCAheld theappealand setasidethe bankruptcy order.

Whereitwasprovedthatthecomplainantplacedtrustandconfidenceintheotherpartyin relationtothemanagementofthecomplainant'sfinancialaffairscoupledwithatransaction whichcalledforexplanation,itwouldnormallybesufficient,failingsatisfactoryevidence tothecontrary,todischargetheburdenofproofthattherehadbeenundueinfluence.The Judge'sfindingofundueinfluencewascorrect. Ws evidence threw open the question of theextentofher beneficialinterest.Further,her 30% of the shareholding was less than half of Hs, yet theguaranteeswereforthewhole amount of the company's debts. The company documentsdid not demonstrate an active participation, but merely showed her appointment as a director and secretary and her shareholding.

3.Remedies OSullivanv ManagementAgency &MusicLtd[1985]

P sought to set aside for undue influence a number of management, sole agency, recording and publishing agreements and transfers of copyright.Darguedthatthe appropriateremedy, namely restitutio in integrum, was inapplicable in the circumstances because the agreements had all been performed and the parties had irrevocably altered their positions, and that therefore P was limited to obtaining damages instead of reconveyance of the copyrights and delivery up of the master tapes.

Pwon.

The Court of Appealheld thatPwas notbarredfrom havingthecontractssetasidebythe fact that restitutio inintegrumwasimpossible becausethe contractshadbeenperformed. A contract entered intobyapersoninbreachofa fiduciaryrelationshipcouldbesetaside in equity even though it was impossible to place the parties in the precise position in which they had been before, provided the court could achieve what was practicallyjust between the parties by obliging the wrongdoer to give up his profits and advantages, while atthesametimecompensatinghimfor anyworkhehadactuallyperformedunderthe contract.

CheesevThomas [1994]

The 88 yearsold P paid 43,000poundstoD,hisgreatnephew,to Appealswere finance the purchase of a house in which P was to live. D dismissed. borrowed 40,000 from a building societytomakeupthepurchase price of 83,000 and the house, which itwasagreedwastobelong to D on P'sdeath, wasconveyed intoD's nameandPmovedin.P discovered that D hadallowedthemortgagepaymentstofallinto arrears and decided to withdraw. He claimed repayment of the 43,000. The house was sold for 55,000 and 17,000 was left after redemption. The judge held that the transaction should be set aside because of D's undue influence, andthat the loss brought about by the fall in the value of the house should be shared between the parties in proportions of the purchase. D appealed against the decision that the transaction was affected by undue influence.P appealed against the decision that heshouldsharea proportionoftheloss. P, Mahoney, operated a hotel business in partnershipwithP, his soninlaw. P wantedo runthehotelonhisown.Mwasreluctant to sell his shares even though his financial position was precarious, but eventually he and P agreed a price of 200,000, calculated on the basis ofanassessmentofthecompany'sassets and liabilities. The money was to be paid over ten years. The agreements were executed in March 1988. P later soldthehotelin 1989 for 3.275 million and M commenced proceedings based on undue influence. Beforetrialof theaction,thecompanywentinto liquidation and the payments due to M under the agreements ceased, with some 80,000 pounds outstanding. M's claims of undue influence against P succeeded and the question arose as Pfinally obtained appropriate remedy.

The Court of Appeal held that justice required that eachpartyshouldbereturned asnear to his original positionas was possible and that D should not be requiredtoshoulderall whole of the loss brought about by the fall in the market value. Accordingly, each party should get back a proportionate shareofthenetproceedsofthehouseandthejudgehad correctly decided that the proceeds of sale should be divided between the parties in the proportionsof43:40.Theappealswouldthereforebedismissed.

MahoneyvPurnell [1996]

The CourtofAppealheld thatsincethecompanywas liquidation,thecourtwasentitledin those circumstances to award compensationinequitytoMequal tothe March1988value of what he had surrendered under the agreements, with appropriatecreditbeinggivenfor what he had received under them. M was accordingly entitled to the sum of 202,131 poundsincompensationfromP.

to the appropriate equitable remedy in circumstances where the partiescouldnotberestoredtotheirformposition. 4.Basisofthe doctrine Rv AttorneyGeneralfor EnglandandWales [2003]UKPC

FormermemberofSASBravoTwoZeropatrolaskedtosign confidentialityagreementsothathewouldreturntounit.

Plost

(1)thenatureofthecontractwasnotanunfairexploitationoftherelationshipreliedonby R.AnyonewishingtoserveorcontinueservingintheSAScouldreasonablyhavebeen requiredtosignthecontract. (2)unabletoobtainlegaladviceirrelevanttothefinding (3)considerationhadbeenprovided(toreturntohisoldunit) (1)Thecourtbelowhadconfusedthequestionofwhetherthetransactionwas commerciallydisadvantageoustoDwithwhetheritwasunfairbetweenhimandP. (2)PdidnothavearesponsibilitytosaveDfromtheconsequencesofembarkinguponan unwiseproject.Itssoleresponsibilitywasnottotakeunfairadvantageoftherelationship betweenCandD. (3)itwasnormalbankingpracticetoinsistonmoneybeingusedforthepurposeforwhich itwasborrowed.Neithertheimpositionofsuchacondition,orN'sinsistenceonits observance,wereunfair. (1)thelawofundueinfluencewasnotconcernedwithdishonestorwrongfulactsbutwith thepresumedinfluencearisingfromarelationshipoftrustandconfidencewhichshould notdisadvantagethevictimifthetransactionwasnotsatisfactorilyexplainedbyordinary motives (2)Itwasthenatureofthecontinuingrelationshipbetweentheparties,ratherthanany specificactonthepartoftherecipient,thatwasrelevantwhenconsideringundue influence. (3)Theparticipationofasolicitorwouldnotrebutthepresumptionofundueinfluence (1)H'sconcealmentofhisaffairfromWdidamounttoundueinfluencesufficienttovitiate themortgagetransactionasbetweenthem. (2)Afindingofundueinfluencedidnotdependuponaconclusionthatthevictimmade nodecisionofherown,orthatherwillandintentionwascompletelyoverborne. (3)Aconsciousexerciseofwillcouldnonethelessbevitiatedbyundueinfluence (4)2quesitonsThefirstquestionwaswhetherWreposedasufficientdegreeoftrustand confidenceinHtogiverisetoanobligationofcandourandfairnessThesecondquestion waswhetherH'saffairwassomethingwhichhisobligationoffairnessandcandour towardsWrequiredhimtodiscloseinconnectionwithhisrequestthatshechargeher interestintheirhomeassecurityforhisdebts.

National CommercialBank (Jamaica)LtdvHew [2003]UKPC

DhadlongstandingrelationshipwithP,thebank.Doverdraft fromthebankaccountandwasunabletoservicetheloan.lower courtheldthatcontractshouldbesetasidebecauseofundue influencebecauseDsmanagerChadactednegligentlyin advisingPontheoverdraft.

Pwon

PesticciovHuet [2004]EWCA

DeedofgiftofahousetoPbyhermentallydisadvantaged brotherwassetasideonthebasisofundueinfluenceofthe relationshipbetweenthem

Plost

HewettvFirstPlus FinancialGroupplc [2010]

Ahusband'sdeliberatefailuretodisclosetohiswifethathewas havinganaffairwhenhewasrequestingthatsheagreetogranta mortgageoverthematrimonialhomeinordertosecurehisdebts amountedtoundueinfluence.

Pwon

<TOPIC19A>UNCONSCIONABILITYINEQUITY CaseName 1.Theoldauthorities EarlofAylesfordv Morris(1873) Facts Pentitledtolargepropertyintheeventofsurvivinghisfather.P waslargelyindebted.ThecreditorrecommendedPtoapplyto moneylender.Moneylenderlentthemoneywithaninterestrate of60percent.Phadnoprofessionalassistanceinthesematters, andnoapplicationwasmadetohisfatherortothesolicitorsof thefather Pworkedasaplumberandlaundryman,earningverylittle.They soldtheirreversionoftheirunclesestatetoDundertheadvice ofaninexperiencedwhoalsoactedforD.Interestwasworth muchmorethantheamountitwassoldfor. MsCresswelldivorcedfromherhusbandandthencontractedto conveyhimherinterestinSlateHallinreturnforreleasefrom mortgageliability.Shelatersuccessfullyarguedthatsheshould gethalfoftheprofitofmadefromthehousebecausehehad exploitedherweaknessessomuchastovitiateherconsentto thecontract,andshewasvulnerabletothisbecauseshewas themodernequivalenttoa"poorandignorant"person TheDboatwreckedafteracrashwitharock,Panswereda distresssignalbutrefusedtotakerefugeesunlessmasterofD paid4000.Masteragreedbutlaterrefusedtopay.Pbringan action. Pwon Judgment Creditorsactionrestrainedbecauseofunconscionablebargain.Itwascertainthatthe debtor,untilhisreversionaryinterestfellintopossession,wouldneverhaveanymeansof hisowntomakepayment. Rationale

FryvLane(1888)

Pwon

Wherethepurchaseismadefromapoorandignorantmanataconsiderableundervalue, thevendorhavingnoindependantadvice,thetransactioncanbesetaside

CreswellvPotter [1978]

Pwon

FryvLanetest: (1)poorandignorant>>memberofthelowerincomegroupandlesshghlyeducated. (2)whetherthesalewasataconsiderableundervalue (3)whethertherewasanyindependentadvice

TheMedina(1876)

Payment reduced.

TheCourtofAppealheldthatthe4000wasexcessive,andsoonly1800wouldbe awarded. itwasverylargeincomparisonwiththeservicesrenderedleadingtotheconclusionthat theremayhavebeensomeunfairdealing.ThecaptainoftheMedinawasboundto acceptanytermswhichwerepresseduponhimbytheTimor.

2.Themodern Englishapproach LloydsBankLtdv Bundy[1975]

Pbankbreachedfiduciarycareinprocuringadditionalcharge overDsasset,Ddidnottakeindependentadvice.Dhadalong standingrelationshipwiththeBank

Dwon

AspecialrelationshipexistedbetweenthedefendantandH(onbehalfofthebank)and thebankwasinbreachofitsdutyoffiduciarycareinprocuringtheadditionalcharge whichwouldbesetasideforundueinfluence,thedefendanthavingwithoutanybenefitto

himselfsignedawayhissoleremainingassetwithouttakingindependentadvice. LordDenning,M.R.Englishlawgivesrelieftoonewho,withoutindependentadvice, entersintoacontractupontermswhichareveryunfairorforgrosslyinadequate consideration,whenthisbargainingpowerisgrievouslyimpairedbecauseofhisown needsordesires,ignoranceorinfirmity,coupledwithundueinfluencebroughttobearby theotherparty NationalWestminster BankplcvMorgan [1985]AC68 BoustaanyvPigott (1995) Dchargedthehousetothebankinreturnforaloan.Bank managerseeksignaturefromDswife,whoreluctantlysignedit. Wifeargueundueinfluence AnewleasebetweenPandDwhichwassaidtobe unconscionablebargain. Pwon Iin"undueinfluence"casesthemererelationshipofpartieswasnotsufficienttoraisethe presumptionwithoutmore,thatthetransactionitselfhadbeenwrongfulinthatit constitutedatakingofadvantageofthepersoninvolved PmusthavetakenadvantageofPbefore,duringandaftertheinterviewwithK(the solicitor)andwithfullknowledgebeforethenewleasewassettledthatherconductwas unconscionable.

Dwon

3.TheAustralian approach CommercialBankof AustraliaLtdv Amadio(1983)

DguaranteedhissonsindebtednesstoP.Dseekdefenceof unconscionableafterhissontbusinessfailedandbanksought toenforcetheguarantee

Dwon

Itwasunconscionableonbasisthat: (1)DspokeandunderstoodlittleEnglish (2)Ddidnotseekindependentadvice,norseekingofsuchadvicesuggestedbythebank (3)thebankwasawareofthesonsprecariousfinancialposition (4)bankfailedtoadviseDtolimitontheirliability

3.TheHongKong authorities SemanaBachichav PoonShiuMan [2000]2HKLRD

Pforeigndomestichelpertookupanoppressiveandexploitative workregimewithD.Therewasasettlementagreementbefore trialthatwasunconscionablebargain

Pwon

Settingasidetheagreementonbasisofunconscionability: DknewthecircumstancesunderwhichPleftherjobandthatPwaslabouring underamistakethatshehadincurredanetliability Neitherpartywaslegallyrepresentedwhentheagreementwassigned. Pwasapersonwithaneconomicandsocialdisadvantage,andwithamarked inequalityofbargainingpower,whencomparedwithheremployer. DtookadvantageofP'signorancetosecureforhimselfanoppressivebargainby unconscionablemeans. Agreementsetasideongroundsofunconscionability (1)PwereatseriousdisadvantageandgiverisetotheopportunitytoDtotake unconscionableadvantage.HerePswereindisadgantageastounderstand,negotiateand

LoWovCheung ChanKaJoseph [2001]3HKC

Pshalfshareinthelandinquestionsubstantiallyundervalued duetoDsmisrepresentationmadeabouttheusageoftheland.

Pwon

agreeacontractforsaleofpropertyinHK.Lackofassitanceandindependentadvice. (2)termsofbargainwereoppressive.Undervalueoftheassetswasataserious disadvantagebyamorallyculpableexploiter (3)conductofDwasculpable.Dwasawareofthedisadvantageandtheconductwas designedtotakeadvantageofthisthroughmisrep. MingShiuChungv MingShiuSum [2006]HKLRD Mingaprivatecompanychairmanwasafatherofsevenand MingShiuSum,oneofhissonswasmanagingdirector.Ming composedadocumentwhereheindicated1000shareseachwill beallocatedto7childrenuponhisdeath.MingSiuSumwas allocatedanadditional10,000shares.Heshowedhisfathers signatureandhisonthedocument.Othersixcompalinedthat thefatherdidnotknowwhathewassigning. Plost Fatherssignaturewasbindingasnoevidenceofvitiatingfactorswhichwouldinvalidthe signatures Inconsideringunconscionability:reliefonthegroundof"unconscionableconduct"is usuallytakentorefertotheclassofcaseinwhichapartymakesunconscientioususeof hissuperiorpositionorbargainingpowertothedetrimentofapartywhosuffersfrom somespecialdisabilityorisplacedinsomespecialsituationofdisadvantage,ega catchingbargainwithanexpectantheiroranunfaircontractmadebytakingadvantageof apersonwhoisseriouslyaffectedbyintoxicatingdrink.

<TOPIC19B>UNCONSCIONABLECONTRACTSORDINANCE(CAP458) CaseName ShumKitChingv CaesarBeautyCentre Ltd[2003]3HKLRD Facts PsignedupforgoldcardVIPwithDandenteredintoacontract (treatmentpackage)withD.Thetermsofthecontractwasnot explainedanditwasprintedinawaythatmakepplhardtoread. Pclaimedallthemoneysheahdpaid. Plost Judgment (1)TheCourthadjurisdictionunders.5torefusetoenforcethewholeoranypartofa consumercontract,orlimititsapplicationorreviseoralteranyunconscionablepart,ifit foundthatanypartofthecontractwasunconscionable. (2)Unders.5andforanunconscionablebargainatcommonlaw,forthecontracttobe unconscionable,DhadtohaveknowledgeofP'sweaknessandhadtohaveknowingly takenadvantageofsuchweakness. (3)DdidnothaveanyknowledgeofP'sweaknesses,andhadoverlookedsomeimportant factors.ButPdidnothavetheproperopportunitytoreadandcomprehendthetermsof thecontractunders.6(1)(c). (4)Itwouldnot,however,bejusttosetasideorrefusetoenforcethewholeofthe contract.ThetreatmentpackagehadbeenclearlyexplainedtoPandshehadfreely acceptedit.Thecontractwouldbeenforcedwithouttheclause. Inthiscase,therelevantmattersins.6were:therelativestrengthsofthebargaining positionsofthepartieswhetherDscouldhaveacquiredtheidenticalservicefroma personotherthanPsandwhetherDswereabletounderstandtheprovisions.Taking, interalia,thesemattersintoaccount,theprovisionswereunconscionable: (a)PswereinamuchstrongerbargainingpositionthanDsandwereabletouse Rationale

HingSengCredit CardvTsangNgaLee [2000]3HKLRD

Whetherprovisionsinthecreditcardagreementswas enforceable(providedthattheymaybeunconscionableunder UCO)

Pwon

standardformagreementsthatweredraftedwithoutconsultingtheconsumerandwith Ps'interestsinmind. (b)Therewasalackofchoiceinacquiringidenticalservices,whichaddedtothe unequalbargainingpositionbetweentheparties. (c)Dswerenotapositiontounderstandtheprovisions.Therewasnocontroloverthe languageandthesizeofthefontused.Further,suchprovisionswerenotdrawntothe attentionofconsumersorexplainedtotheminlanguagethattheywouldunderstand. (d)Theprovisionswereextremelywideandextendedtoallcostsandexpenseseven thoseunreasonablyincurred. (e)theinterestratechargedbyPswereextortionate <TOPIC20>ILLEGALITY CaseName 1.TheHongKong authorities HingSengCredit CardvTsangNgaLee [2000]3HKLRD 2.Contrarytopublic policy PearcevBrooks (1866) Facts Seeabove seeabove Judgment seeabove Rationale

PsuppliedcoachforD,aprostitutetousebyheras partofherdisplaytoattractmen.Pclaimforthehire ofthecoach.

Plost

Pcouldnotcoverbecauseprostitutionisillegal. anypersonwhocontributestotheperformanceofanillegalactbysupplyingathingwiththe knowledgethatitisgoingtobeusedforthatpurpose,cannotrecoverthepriceofthethingso supplied. Aplaintiffcannotrecoverthepriceofgoodssoldanddelivered,whatevertheirnaturemaybe,toan immoralinstitution,ifatthetimewhenhesuppliedthegoodsheknewthenatureoftheinstitution.

TheKiHingLauvThe ShunLoongLeeFirm (1910)

Thesubjectmatteroftheactionwasbaseduponan illegalconsideration,namelythatthegoodsorpart ofthemweresuppliedtothedefendantsforthe purposesoftheirbrotheltotheknowledgeofthe plaintiffs. N/A

Plost

WongLeungWingv AmericanExpress InternationalInc

N/A

N/A

[1992]HKCU SitKamTaivGammon IronGateCoLtd [2010]HKCU 3.Contractsin restraintoftrade NordenfeltvMaxim NordenfeltGuns& AmmunitionCoLtd [1894]AC N/A N/A N/A

Amanufacturerofgunsandammunitionfor purposesofwarcovenantedwithacompanyto whichhispatentsandbusinesshadbeen transferredthathewouldnotfor25yearsengage exceptonbehalfofthecompanyeitherdirectlyor indirectlyinthebusinessofamanufacturerofguns orammunition Defendantcompanycarriedontwogarage businessesatMandCwithfillingstations.Each wastiedtotheplaintiffoilcompany.Solus agreementwasenteredbetweenthemandtheperiod ofrestraintonMgaragewas41/2yearsbutonC garagewas21years. DrenewedagreementwithP,wastheirworldwide exclusiveagentandmanagerfrom2006to2010.D arguedagreementwasinrestraintoftradebecauseit restrictedDsfromworkingforanyothermanager andcopyrightoftheirworksbelongtoPunder agreement

Plost

Havingregardtothenatureofthebusinessandthelimitednumberofthecustomers(namelythe Governmentsofthisandothercountries),thecovenantthoughunrestrictedastospacewasnotwider thanwasnecessaryfortheprotectionofthecompany,norinjurioustothepublicinterestsofthis countrythatitwasthereforevalidandmightbeenforcedbyinjunction.

EssoPetroleumv HarpersGarage (Stourport)Ltd [1968]AC

Partially enforced

Thedoctrineofrestraintoftradeappliedtobothbutthattheshorterperiodwasreasonable,sothat thattiewasvalid,buttheotherwasnotandwasinvalid,eventhoughtherewasnoevidencewhythey enteredintosuchlongperiodofagreement.

HummingbirdMusic LtdvAcconci[2010] 1HKLRD

Acontractwasnotregardedinlawasbeinginrestraintoftradesimplybecauseittiedtheparties duringthecontinuanceofthecontract.Thelawhadalwaysfavouredfreetradeandthedoctrineof restraintoftradeasitappliedtocontractswasacorollaryofthat:therewasadistinctionbetween contractswhichwere,ineffect,infurtheranceoftradeandthosewhichwereinrestraintoftrade Theagreementwasmerelyregulatingnormalcommercialrelationsbetweenthepartiesandtherefore werefreeofthedoctrine. (1)Provisionsinacontractofemploymentrestrictingfieldsofemploymentaftertheemployeehasleft theemployeroperateinrestraintoftradeandareunenforceableunlesstheemployercanshowthatat thetimethecontractwasmadetherestrictionswerereasonablyrequiredfortheprotectionofthe legitimateinterestsofthepartiesandthepublic. (2)Protectionagainstcompetitionfromaformeremployeeisnotalegitimateinterest.Theonly legitimateinterestoftheemployeristheprotectionofhisconfidentialinformation. (3)InHongKongin1985theplaintiffsdidnotneedarestrictionof3yearstoachievetheirlegitimate objects.1yearwouldhavebeenampletobreaktheconnectionofMr.Margotwiththeplaintiffs'clients

HoWingcheongv Margot[1991]1 HKLR

PsignedemploymentagreementwithDwhich requiredDnotseekemploymentwithanyother firmsengagedinthestockbrokingbusinessinHK foratleast3yearsafterterminatingtheemployment

Dwon

"forasufficientperiodtoletthenextmanobtaintheconnection" BuchananvJanesville Ltd[1981]HKLR P,ahairstylistagreedwithD(locatedinCentral)not toworkinHongKongasahairdresserorinany capacityconnectedwithhairdressingincompetition withDforaperiodofoneyear.Pleftandworkedfor anotherfirminTST.Dobtainedarestrainingorder. Pwon Tomakeacovenantinrestraintoftradereasonableasbetweenthepartiesitmustbe: (a)reasonableinpointoftime (b)reasonableastothegeographicalareaofitsoperationand (c)reasonableinrespectofthetypeofworkheisnotpermittedtoengage. Thisparticularcovenantthoughreasonableastotime,wastoowideinrespectofgeographicalarea andmuchtoowideintheambitofrestraintimposedontheemployeeinrespectofheractivities Eveniftheagreementwasnottoovagueasregardstheareaofrestrictiontobeenforcedbyinjunction, therestrictionwaswiderthanwasreasonablynecessaryfortheplaintiffs'protection.

MasonvProvident Clothing&SupplyCo Ltd[1913]AC

DagreedwithP,aclothingandsupplycompany, thathewouldnotwithin3yearsafterthe terminationoftheemploymenttobeintheemploy ofanyotherpersonorfirmcarryingonorengaged inabusinessthesameorsimilartothatofDwithin 25milesofMiddlesex,London. PamusicwriterandDapublisherenteredintoa standardfromexclusiveservicecontract.Thefull worldcopyrightwasassignedtoDinreturnfora fixedpercentageofanyroyaltiesreceived.Dcould terminateorassignthebenefitoftheagreement whereasPcoulddoneither.NoobligationuponDto publishorpromoteanycompositionofP. MerchantShipping(SafetyandLoadLine Conventions)Act1932:ABritishloadlineshipshall notbesoloadedastosubmergetheloadline indicatingorpurportingtoindicatethemaximum depthtowhichtheshipisentitledtobeloaded.This appliestoloadlineshipsnotregisteredinthe UnitedKingdomwhiletheyarewithinanyportin theUnitedKingdom.Psshipwasoverloaded.D withheldasumequivalenttothefreightonoverall additionalcargocarriedbytheshipbywhichitwas foundtobeoverloadedandcontendedthatPwas notentitledtorecoveranypartofitastheyhad

DWon

ASchroederMusic PublishingCoLtdv Macaulay[1974]

Pwon

Indeterminingtheenforceabilityofacontractinrestraintoftradethecourtwillconsiderthefairnessof thebargainhavingregardtowhethertherestrictionsarebothreasonablynecessaryfortheprotection ofthelegitimateinterestsofthepromiseeandcommensuratewiththebenefitssecuredbythepromisor. Thestandardformagreementcouldnotbejustifiedasmouldedunderthepressuresofnegotiation, competitionandpublicopiniontheplaintiffhadnobargainingpowerasagainstthedefendants restrictionsappearedunnecessaryandcapableofoppressiveenforcement.

4.Statutoryillegality StJohnShippingCorp vJosephRankLtd [1957]

Pwon

1.Theinfringementofastatuteintheperformanceofacontractwhichwaslegalwhenmadedidnot renderthecontractillegalunlessthecontract,asperformed,wasonewhichthestatutemeantto prohibit,whichwasnotthecasehere. 2.Inordertosucceedintheirclaimforfreighttheplaintiffsneeddonomorethanshowthattheyhad deliveredthegoodstothedefendantsinthesamegoodorderandconditioninwhichtheyhad receivedthem,anditwasnotnecessaryforthemtodisclosethattheyhadcommittedanillegalityinthe courseofthevoyage. 3.Theprinciplethatarightwasunenforceableifitdirectlyresultedfromthecrimeoftheperson assertingitdidnotapplyinthepresentcase,fortheplaintiffs'righttofreightfromthedefendantswas notarightwhichwasbroughtintoexistencebytheircrime.Theirhandsarestillclean.

performedthecharterinanillegalmanner. Archbolds (Freightage)LtdvS SpanglettLtd[1961] PemployedD,whowerefurnituremanufacturers,to carrywhiskyfromLeedstoLondon.Dusedavan whichwasunknowntoPandhadnoAlicence.The whiskywasstolenowingtothenegligenceofD's driver.P'sclaimfordamageswasmetbyapleathat thecontractwasillegalbecausethevanhadnoA licence. Phadbeeninoccupationofgovernmentlandfor manyyearsandoperatedarestaurantontheland.D wasemployedtomanagetherestaurantinreturnfor amonthlysum.Pbroughtaclaimforarrearsof payment,DsetupP'sillegaloccupationoftheland indefence. Pwon Whereacontractisonthefaceofitlegalandisnotforbiddenbystatute,butmustinfactproduce illegalitybyreasonofacircumstanceknowntoonepartyonly,itwillnotbeheldillegalsoastodebar theinnocentpartyfromobtainingrelief.Assumingthatthecontractwasforcarriageinthatparticular van,thecontractwasneitherexpresslynorbyimplicationforbiddenbytheRoadandRailTrafficAct 1933,andwasnotonthefaceofitillegalandcouldbereliedonbytheplaintiffsastheydidnotknow thatitcouldonlybeperformedbycontraveningtheAct.

YipAlicevWongShun (No2)[2003]2HKC

Pwon.

Theoccupationofgovernmentlandprobablydidnotbecomeillegaluntilanoticewasservedandnot compiledwith.Eveniftheoccupationwasillegaltherewasnoindicationthattherelevantstatutoryrule shouldaffectthecivilrightsofthepartieswhosedealingsinvolvedtheoccupationoftheland.Public policymayattimesbebetterservedbyrefusingtonullifyabargainsaveonseriousandsufficient grounds.

5.Consequencesof illegality OomvBruce(1810)

AninsurancewasmadeforgoodssentfromLondon toRussiaafterthehostilitiesbyRussiaagainstUK butbeforepeopleinLondonknewit.Thegoods wereconfiscated.Assuredsued. D,thesecretaryofacharity,fraudulently representedtoPthatheorthecharitywasina positiontoundertakethatPwouldreceivea knighthoodifPmadealargedonationtothefunds ofthecharity,andundertookthatthetitlewouldbe conferredifthedonationwasmade.Preliedupon thoserepresentationsandinthebeliefthatthe secretarywasauthorizedbythecharitytogivethe undertaking,madealargedonationtothefundsof thecharity.Pdidnotreceivetheknighthood. PagreedtomakeoverallhisstockintradetoXin ordertopreventP'screditorsgettingholdofthe goods.FictitiousbillsofexchangeweregivenbyX. Dwasacreditorandwasawareofwhatwasdone

Partly refunded.

Theinsurancepolicywasvoidinitsinception,buttheagentoftheassuredwasentitledtoareturnof thepremiumpaidunderignoranceofthefactofsuchhostilities.SincePhadnoknowledgeaboutthe hostilitieswhentheyeffectedtheinsurance,nofaultwasimputabletothemforenteringintothe contract,andthustheycouldrecoverthepremium. Ifacontractwhichisillegalasbeingcontrarytopublicpolicyhasanyelementofturpitudeinitthe partiestothecontractareinparidelicto(equalfaults),andifoneofthepartiestothecontracthasbeen defrauded,noactionfordamagescanbemaintainedbythepartydefrauded,eventhoughthecontract isnotofacriminalnature.Acontractforthepurchaseofatitleisanimproperandillegalcontract,as beingagainstpublicpolicy.AsPknewthathewasenteringintoanimproperandillegalcontracthe couldnotrecoverbackthemoneyhehadpaidfromthecharity,norrecoverdamagesfromthecharity oritssecretary,norclaimtorepudiatethecontract.

ParkinsonvCollegeof AmbulanceLtd[1925]

Dwon

TaylorvBowers (1876)

Pwon

Thefraudulentpurposewasnotcarriedout.Pwasnotrelyingontheillegaltransaction,butwas entitledtorepudiateit,andrecoverhisgoodsfromX,andDhadnobettertitlethanX,asheknewhow Xhadbecomepossessedofthegoods.

betweenPandX.SomemonthsafterwardsX executedabillofsaleofthegoodstoD,forthe allegedpurposeofsecuringthedebtduefromPto D,butPwasnopartytothebillofsale,nordidhe sanctionorknowofit.Pbroughtanactionagainst Dforthedetention. BowmakersLtdv BarnetInstrumentsLtd [1945] DhiredsomemachinetoolsfromPunderahire purchaseagreement.Theagreementdidnotcomply withstatutoryrequirements.Dmissedpaymentsdue undertheagreementandPsoughttorecoverthe machines.DarguedthattheP'sillegalityinfailingto complywiththestatutoryrequirementsbarredtheir recovery. Pwon Pdidnotpleadtheillegalagreementinmakingtheirclaim.Itwasbasedontheirownershipofthe machineandthereforetheydidnotneedtorelyontheirillegalitytofoundtheclaim.Noclaimfounded onanillegalcontractwillbeenforcedbythecourt,butasageneralruleaman'srighttopossessionof hisownchattelswillbeenforcedagainstonewho,withoutanyclaimofright,isdetainingthem,orhas convertedthemtohisownuse,eventhoughitmayappearfromthepleadings,orinthecourseofthe trial,thatthechattelsinquestioncameintothedefendant'spossessionbyreasonofanillegalcontract betweenhimselfandtheplaintiff,providedthattheplaintiffdoesnotseek,andisnotforced,eitherto foundhisclaimontheillegalcontract,ortopleaditsillegalityinordertosupporthisclaim.An exceptiontothisgeneralrulearisesincasesinwhichthegoodsclaimedareofsuchakindthatitis unlawfultodealinthematall.

<TOPIC21>THIRDPARTIES CaseName Facts Dwon. Judgment Groomwasnotapartytothecontractnordidheprovideconsiderationtohisfathers promise.Nostrangertotheconsiderationcouldtakeadvantageofacontract,evenifthe contractwasmadeforhisbenefit.Nolegalentitlementwasconferredonthirdpartiesto anagreement.Thirdpartiestoacontractdidnotderiveanyrightsfromthatagreement norweretheysubjecttoanyburdensimposedbyit. 1.Thedoctrineofprivityrequiresthatonlyapartytoacontractcansueonit. 2.Thedoctrineofconsiderationrequiresapersonwithwhomacontractnotunderseal ismadeisonlyabletoenforceitifthereisconsiderationfromthepromiseetothe promisor. 3.Thedoctrineofagencyrequiresthattheprincipalnotnamedinthecontractcanonly besuedifthepromiseewascontractedasanagent. Rationale

1.Contractualbenefits andprivity TweddlevAtkinson Groomsfatherandbridesfatheragreedtopaygroom200 (1861) poundsrespectively.Bridesfatherdiedandhisexecutor refusedtopay.Groomsued.

DunlopPneumatic TyreCoLtdvSelfridge &CoLtd[1915]AC

PwasatyremakerandagreedwithX,oneofitsdealers,notto selltyresunderitsrecommendedprice,andtohavethesame undertakingfrombuyers,otherwise5poundsforeachtyresold wouldbepaidbydefaultersinliquidateddamagestoP.D boughttyresfromXandsoldthemunderPssetprice.Pwas notapartytothecontractbetweenXandD.

Dwon.

2.Privityand

contractualburdens LumleyvGye(1853) Psignedanexclusiveservicecontractwithasinger.Dknewthe contractandinducedthesingertoperformforhistheatrebya higherpayment.PsuedDforinducementofbreechofcontract. PsenthercoattoXforcleaning.XreachedanagreementwithP tosubcontractthecleaningworktoD.Thecoatwasstolenby anexemployeeofD. AshipsankinitsTaipeiHKvoyageandallgoodsonitwere lost.Cargoownerwantedtosueshipowner,butshipowner claimedthatithadsubcontractedtheTaipeiHKvoyagetoa subbailee,andthesubcontractbetweenitandthesubbailee includedanexclusivejurisdictionclausewhichsetthatall disputesshouldonlybegovernedbyTaiwanlawinwhichthe cargoownersclaimwastimebarred.Cargoownerarguedthat itselfwasnotapartytothecontractwhichincludedthe jurisdictionclauseandthereforeshouldnotbeboundtoit. PlentmoneytoXforthemtobuysecurities.Itwasacondition oftheloanthatitmustbespentonacquiringthespecified securitiesandthatrepaymentoftheloanshouldbemadefrom thesaleofthesesecurities.Xgrantedachargeoverthe securitiestoD,whowasunawareofthecondition,withoutthe necessaryconsentfromP.PclaimedaninjunctiontopreventD actingcontrarytotheoriginalcontractualobligations. Pwon. Ifapartymaliciouslyinterferesinacontractperformance,heisliableindamagesforthat interference.

MorrisvCWMartin& Sons[1966]

Pwon.

Theownerofgoodsmaysueasubbaileedirectlyforanylossordamageoccurring throughthefaultortheftofthesubbailee'sservants.

KHEnterprisesv PioneerContainer [1994]2AC

D(shipowner) won.

1.AlthoughtherewasnocontractorattornmentbetweenPandD,Dbyvoluntarily takingpossessionofPsgoodsinthecircumstancesassumedanobligationtotakedue careofthemandareliabletoPfortheirfailuretodoso. 2.However,Pinthiscasehadexpresslyconsentedtothesubbailmentoftheirgoodsto anothercarrieronanyterms.Theincorporationoftheexclusivejurisdictionclauseinthe subbailmentwouldbeinaccordancewiththereasonablecommercialexpectationsof thosewhoengageinthistypeoftrade. 3.SincePhaddeliberatelyandadvisedlyallowedthetimelimittoexpireinTaiwan,the appealwasdismissed. IntheabsenceofactualknowledgeofthecontractualobligationinfavorofP,Dcould notberestrainedbyinjunction."Constructive"noticewasnotenough.

SwissBankCorpv LloydsBankLtd [1979]

Dwon.

3.Trustsof contractualpromises ReSchebsman[1944]

Schebsmanwastheemployeeofacompany.Onhisretirement, thecompanyagreedtopayhimasumininstalmentsoversix years,andifhediedwithinthatperiod,certainsumsweretobe paidtohiswidow.Sdiedintwoyears,shortlyafterhavingbeen declaredbankrupt.Thetrusteeinbankruptcyclaimedthatthe paymentstohiswidowweremadeonthebasisofatrust,and thereforeshouldfrompartofhisestateandgotopayoffhis creditors.

Widowwon.

ThecontractbetweenSandthecompanywassimplythatpaymentsshouldbemade directlytohiswidow.Swouldhavehadnorightsoverthem.ItwasacontractbetweenS andthecompany,notatrust.MrsShadnorighttoenforcethiscontract,butequally thetrusteeinbankruptcyhadnoclaim.Sincethecompanywaswillingtopaythewidow, shewon.

4.Assignmentof chosesinaction ZhangQiyunvShun ShingConstruction& EngineeringCoLtd [2010]2HKLRD

NEGATIVEJUDICIALTREATMENT.D,ascontractor, contractedwithX,asprojectmanager,tobuildaschool.The AgreementprovidedthatX"shallnotassignthisAgreementor anyinterestthereinwithoutthewrittenconsentofD".D terminatedtheAgreementonthegroundofX'sunsatisfactory performance.XwassubsequentlywoundupbytheCourtand thiswasconvertedintoacreditor'svoluntaryliquidation.X's liquidatorsissuedawritagainstDclaimingthebalancedue undertheAgreementasdamagesandthenassignedX'scause ofactiontoP.Theissuewaswhether,intheabsenceofconsent byD,theassignmentwaseffectiveatlawandsoPhadlocus standitocontinuetheproceedings.

Actionstruck out.

1.Unders.199(2)(a)oftheCompaniesOrdinance,aliquidatorinawindingupbythe courthadthestatutorypowertosellabarerightofaction,andthattransactioncould notbechallengedonthegroundofchamperty.Pursuanttos.251(1)(b)oftheOrdinance, thisstatutorypoweralsoappliedtothecreditor'svoluntarywindinguphere. 2.However,thepurportedassignmenttoP,beingcontrarytotheNonAssignment Clause,wasnoteffectiveatlaw.First,ifrightsarisingunderacontractweredeclaredby thecontracttobeincapableofassignment,apurportedassignmentwouldbeinvalidas againstthedebtor.Thelegitimatecommercialpurposeofsuchaclausewastoensure thattheoriginalrightsofonepartyunderthecontract(egtherighttofuture performanceandtherighttothebenefitsaccruedunderthecontract)wouldnotbecome vestedintwoseparatepeopleorotherthirdparties.Second,itmadenodifferencethatX wasinliquidation.Thus,Phadnolocusstandiandtheactionwouldbestruckout. 3.Eveniftheassignmenthadbeeneffective,asanassigneeofacontract,Phadboth thebenefitof,andwasboundby,thearbitrationclauseandtheproceedingswouldhave beenstayed.SoPcouldnotresistarbitrationbyarguingthathewasnotapartytothe originalcontract.

5.Collateralcontracts, himalaya,exclusion andexclusive jurisdictionclauses ShanklinPiervDetel Products[1951] P,theownersofapier,requiredhiscontractorstouseD'spaint. AcontractwasenteredintobetweenthecontractorsandD.D warrantedexpresslytoPthatthepaintwouldhavealifeoffrom seventotenyears.Thepaintprovednottobeuptowarranty andPwereputtoextraexpense. Adrumofchemicalswasshippedunderabillofladingwhich containedaparamountclauselimitingthecarrier'sliabilityto USD500foranypackagebyreferencetotheUnitedStates CarriageofGoodsbySeaAct1936.Thedrumwasdamagedby thenegligenceofstevedoresemployedbythecarrierand damageexceedingUSD500resultedtothechemicals.The consigneesuedthestevedores. Pheldabilloflading,oneclauseofwhichprovidedwide

Pwon.

AwarrantybetweenPandDmaybesupportedbytheconsiderationthatPshould causeXtoenterintoacontractwithD.PwereentitledtorecoveragainstDdamagesfor breachoftheexpresswarrantiesalleged,notwithstandingthatthemaincontractofsale wasbetweenDandX,andnotbetweenDandP.

ScruttonsvMidland SiliconesLtd[1962] AC

Pwon.

Onlyapersonwhoisapartytoacontractcanrelyonit.Thereforeastevedorewhois notapartytothecontractofcarriagebetweenshipperandcarriercannotrelyonan exemptionclauseinthatcontractwhereneithershippernorcarriercontractedasagent forthestevedore.

TheEurymedon

Dwon.

Wheretheinitialpartiestoacontractexemptthirdpartiesfromliabilitythosethird

[1975]AC

exemptionfromliabilityforthecarrierofthegoodsandany independentcontractorinvolvedintheircarriage.Thegoods weredamagedbyDwhowerestevedoresengagedas independentcontractorsbythecarriers. Cargoowners,P,claimedagainstshipowners,D,forbreachof contractanddutyandfornegligenceinandaboutthecarriage ofplywoodfromIndonesiatoChinaonboardD'svessel,as plywoodinoneoftheholdshadbeendamagedbyseawater.P gotawritfromHongKongcourtwhichcausedD'svesseltobe arrestedinHongKongbutagreedtoreleasethevesseluponD providingsecuritybyabank'sletterofundertaking.Dappliedto stayP'sactiononthebasisthatPwereboundbythetermsofan exclusivejurisdictionclauseinthebillofladingwhichX(which hadcharteredthevesselfromD)hadissuedtoPinIndonesia uponreceiptofthegoods. Pwon.

partiesmayattractthebenefitsofanexemptionclausebyperformanceofthecontract. TheperformanceofservicesbyDcreatedafullcontract.Thatperformancewas sufficientconsiderationalthoughsomethingthatthecarrierwasalreadyboundtodo, becausebyD'sperformance,Pobtainedthebenefitofadirectlyenforceableobligation. 1.Since,asamatterofconstruction,theHimalayaclausedidnotprovideforthe applicationoftheexclusivejurisdictionclausetothecarrier'sservants,agentsand subcontractors,Dcouldnottakeadvantageoftheexclusivejurisdictionclause. 2.IncontrasttoThePioneerContainer,thepresentcasewasnotconcernedwitha questionofenforceabilityofaterminasubbailmentbythesubbaileeagainstthehead bailor,butwiththequestionwhetherasubcontractorwasentitledtotakethebenefitof atermintheheadcontract.Theformersituationdependedonthescopeoftheauthority oftheintermediatebailortoactonbehalfoftheheadbailorinagreeingonhisbehalfto therelevantterminthesubbailmentwhereasthelatterdependedonthescopeofthe agreementbetweentheheadcontractorandthesubcontractor,enteredintobythe intermediatecontractorasagentforthesubcontractor,underwhichthebenefitofaterm intheheadcontractmightbemadeavailablebytheheadcontractortothe subcontractor. Employeesareabletogainprotectionwhere: 1.thelimitationofliabilityclausemust,eitherexpresslyorimpliedly,extenditsbenefitto theemployee(s)seekingtorelyonitand 2.theemployee(s)seekingthebenefitofthelimitationofliabilityclausemusthavebeen actinginthecourseoftheiremploymentandmusthavebeenperformingthevery servicesprovidedforinthecontractbetweentheiremployerandtheplaintiffwhenthe lossoccurred.

TheMahkutai[1996] AC

LondonDrugsv KuehneandNegel InternationalLtd (1993)

CANADIANCASE.DwasstoringatransformerownedbyP. Dwon. Thecontractincludedalimitationofliabilityclausewhichlimited liabilityfordamagetothetransformerto$40.Twoemployees weremovingthetransformerwithaforkliftandnegligently droppedit.Psuedthetwoemployeesonthebasisthatthey owedaseparatedutyofcareandcouldnotseekprotection underthecontract.

6.Usingremediesto overcomeprivity problemsSpecific remedies BeswickvBeswick [1968]AC

PshusbandassignedhisbusinesstoDinconsiderationofthe nephewemployinghimfortherestofhislifeandthenpayinga weeklyannuitytoP.Sincethelattertermwasforthebenefitof someonenotpartytothecontract,Ddidnotbelieveitwas enforceableandsodidnotperformit,makingonlyonepayment oftheagreedweeklyamountof5pounds.DarguedthatasP wasnotapartytothecontract,shewasnotabletoenforceit duetothedoctrineofprivityofcontract.

Specific performance granted.

Thirdpartieswerenotallowedtosuetoenforcebenefitsunderacontract.However,HL heldthatPinhercapacityasherdeceasedhusbandsadministratrix(i.e.astheperson representingsomeone'sestatewhodieswithoutawill)couldenforcePspromisetopay Danannuity.Pwasentitledtospecificperformanceofthecontract.

7.Usingremediesto overcomeprivity problemsDamages (identifyingthe plaintiffsloss) JacksonvHorizon Holidays[1975]

Seealso: AlfredMcAlpineConstructionLtdvPanatownLtd (Topic13)

Pbookedafourweekholidayinahotel,everythingtobe"ofthe higheststandard."ThebrochureissuedbyDdescribedthe hotelasenjoyingallthefacilitiesofaminigolfcourse,excellent restaurant,swimmingpool,beautyandhairdressingsalons. Noneofthesematerialised. PcontractedtosellsomelandtoD,for850,000,onthe understandingthatanother150,000wouldbepaidtoathird partyoncompletion.Dterminatedthecontractallegingthey wereallowedtodoso,byprovisionofthecontract,where statutoryauthorityhadstartedacompulsorypurchase(infact theywereallowedtodosoonlyifacompulsorypurchasebegun afterthedateofthecontract).Psuedforthefull1,000,000for repudiatorybreach,DpointedoutthatPwouldhavenoclaimon the150,000forthesakeofprivity,andthebeneficiaryofthis moneywouldhavenoclaimastherewasnocontractinplaceto supportit. ThelesseesofabuildingenteredintoastandardformJCT contractwithD(contractors)toremoveasbestosfromthe building.Clause17(1)oftheStandardFormBuildingContracts 1963providedtheemployershallnot,withoutwrittenconsentof thecontractor,assignhiscontract.Thelesseesassignedtheir interestsintheproperty,theirlegalrights,benefitsofcontracts, etc.,toPinactionswhichhadbeguninrespectofpoorwork.

Pwon.

Pcouldsueonthecontractnotonlyforhisownlossanddisappointment,butalsofor thatofhisfamily.AlthoughPwasnotatrusteefortheothers(whodefinitelycouldsue), hehadenteredintothecontractpartlyfortheirbenefit.

WoodarInvestment DevelopmentLtdv Wimpey[1980]

Dwon.

Apartywhotookactionrelying,albeiterroneously,simplyonthetermsofthecontract andnotmanifestingbyhisconductanulteriorintentiontoabandonitwasnottobe treatedasrepudiatingit.TheevidenceofDsconductwasinsufficienttosupportacase forrepudiation. Percuriam.Ifvendorsmadeacontractthatasumofmoneywastobepaidtoathird partytheycouldnot,withoutshowingthattheyhadthemselvessufferedlossorwere agentsortrusteesforthethirdparty,suefordamagesfornonpaymentofthatsum.IfP inthiscasedidhaveagoodclaimforbreachofcontract,however,theycouldclaim damagesonbehalfofthebeneficiary.

LindenGardensTrust LtdvLenestaSludge Disposals[1994]1AC

Dwon.

1.Atrueconstructionofclause17(1)prohibitedassignmentwithoutconsentandthat sinceapartytosuchacontractmighthaveagenuinecommercialinterestinensuring thatcontractualrelationswiththepartyheselectedwerepreserved,therewasnoreason forholdingthecontractualprohibitiononassignmentasbeingcontrarytopublicpolicy. Accordingly,thepurportedassignmentsofcontractualrightswereineffectivetovest anysuchrightsintheassignee 2.Goodsexpectedtobepassedthroughseveralhandsmightgivearighttothethird partiestosuetheoriginalsellerfordefects. Sincebothpartieswereawarethatthebuildingcontractswereenteredintoforthe benefitofPanditwasforeseeablethatdamagecausedbyabreachofthecontracts wouldcauselosstoP,P,asassignee,couldclaimsubstantialdamagesforlosscaused byD'sbreachesofthecontracts,andthedamagesshouldbeassessedonthenormal basisasifPhadbeentheemployerunderthecontracts. Theremedyindamagesforbreachofcontractwasnotlimitedtothelossthatcouldbe

DarlingtonBCv WiltshierNorthernLtd [1995]

XenteredintobuildingcontractwithD,aconstruction company,forthebenefitofP.Pursuanttoacollateralagreement enteredintowithP,XassignedtoPallrightsandcausesof actionagainstDtowhichXwasentitledunderitscontractwith D.PbroughtanactionagainstDforbreachofthecontract. XaskedDtoprepareareportonthegeographicalconditionofa

Pwon.

OfferHoarvLarkstore

Pwon.

Ltd[2006]

land.Dinthereportsaidthelandwassatisfactoryforthe purposeofresidentialdevelopment.XthensendthelandtoP. Whiletheconstructionwasinprogress,landsliphappenedand Pwassuedbyotherswhosufferedlossfromthelandslip.X thenassignedtoPitsrightsandbenefitsunderthereportand therighttosueD.DarguedthattheonlylossesthatPwas entitledtoclaimbyvirtueoftheassignmentofthecauseof actionwerethelossesthatXcoulditselfhaverecoveredfromD atthetimeoftheassignmentandthat,astheassignmentofthe causeofactiontookplaceafterXhadpartedwiththesitetoP andthesubstantialdamageoccurredbeforetheassignmentof thecauseofactiontoP,XandthereforePhadnorighttoclaim andrecoversubstantialdamagesforlossresultingfromthe landslip. Pwantedtointerveneasundisclosedprincipalonacontract madebetweenXwhichwasoneofitssubsidiaries,andD. Dwon.

provedatthedatewhenthebreachoccurredandthecauseofactionfirstarose,sothat, subjecttoissuesofcausation,remoteness,quantumandlimitationofaction,therewasa remedyagainstthepartyinbreachforlosswhichoccurredafterthecauseofactionhad accrued.Theassignmentwasadelayedconsequenceoftheearliersaleofthesiteand completedthattransaction.PwasseekingtorecovernomorethanthelosswhichX,the assignor,wouldhavesufferedandbeenentitledtorecoverifithadnotsoldthesite. Therulethatanassigneecouldnotrecovermorethantheassignorwasnotdesignedto allowapartytoescapeliabilityforhisbreach,buttoensurethathedidnothavetomeet abiggerliabilitythanhewouldhavebeenundertotheassignor.Therefore,sincethere wasnoexpressprohibitionagainstassignmentandnoimpliedprohibitionfromany specialcircumstances,PwasentitledtoclaimsubstantialdamagesfromDfortheloss sufferedinconsequenceofthelandslip.

RollsRoycePower Engineeringplcv RicardoConsulting Ltd[2004]

XdidnotenterintothecontractasagentforPasundisclosedprincipal.Dhadentered thecontractontheclearunderstandingthatitwasdealingsolelywithX,sincethiswas notanordinarycommercialcontract,butoneinrespectofwhichitwasinconceivable thattheparticularidentitiesoftherespectivecontractingpartieswasnotofthegreatest significancetotheother.ThusnodutyofcarewasowedbyDtoP,sinceDhadno reasontosupposethatXwasactingotherthanonitsownbehalfandforitsown benefit.Moreimportantly,PhaddeliberatelyconcealedfromDthetruenatureofits interestandinvolvementintheproject.