Injunctions in Relation to Contract Law

Questions about Fothergill Set the Stage for More Assertive Injunctions:

The price of coal was fluctuating.

The plaintiff had built a railway line for the defendant

The contract was for another two or three years into the future.

So how do you measure damages?  The safest way is to wait until the three years was up and then sue for damages suffered and show what the damages are.

It’s difficult: what are the quantities of coal and what’s the price of coal?

Note: the more difficult they are to calculate, the more likely it is that damages will be inadequate           

2. Is this really equal to SP? Does an injunction raise the same problems as SP?

An injunction is much easier to define than SP. (“Don't do X vs. Do “X”) It’s much more black and white

Can’t really order SP on this K, because we don’t know what that is: the K said “all the coal” – what does that mean?

Really, it’s just a negative K: says you can’t sell to anyone else.

An injunction could say the same thing, and would reinforce the K.

Parties won’t be coming back to court – it’s basically on or off right now. So, an injunction would work better than SP here.

Vancouver Island Milk Producers v. Alexander [1922 BCCA]

Facts: Three-year K whereby a farmer agreed to sell all his milk to the milk marketing board. Price of milk goes up and ∆ starts selling his milk directly to vendors.

Held: No injunction.

Reasons:

Milk is fungible, damages are calculable, the loss is not irreparable.

The key factor: the K had a liquidated damages clause that specified that if either of the parties breached the contract, the damages would be $500.

The parties had contracted for an efficient breach model, so the court allows them to stick to that.

Metropolitan Electric Supply v. Ginder

Courts will grant injunctions, even in situations where they would not grant SP, if they’re of the view that the injunction is necessary to protect plaintiff from irreparable harm, so long as there is no substantive reason to avoid the injunction.

The most commonly-cited substantive reason to avoid the injunction is that it’s going to force the parties into a co-operative relationship they’re not really capable of being in.

Facts: Long-term requirements contract.

A requirements contract is one in which a buyer agrees to take all of his or her requirements for a certain thing (here, electricity) from one supplier.

Note: an exclusive supply K is the same thing but the other way around: where supplier agrees to provide all their supply to one buyer.

These are the types of cases (exclusive requirement, exclusive supply) where courts are most willing to expand the range of the injunction.

Held: Injunction granted. In appropriate cases, injunctions can be used.

The court says SP can’t be ordered because they can’t assess what that would entail. The buyer hasn’t promised to take electricity at all. What they’ve promised is to not take electricity from anyone else. So it is conceptually possible to grant an injunction of that negative promise.

There are no definitional or supervision issues, so the court grants the injunction.

Nothing close or collaborative about the parties (electrical co and person), so there’s no concern about forcing people into a relationship.

Not a JV and not likely to cause much friction.

The appeal is that it solves the dispute today without forcing the plaintiff to go back to court three years from now to argue what the damages remedy should be.

However, we’ll still only grant these injunctions where damages are inadequate

This is a long term arrangement that is intended to lock them in long term. How would damages be calculated? Can they go out and arrange Ks with other parties? That wouldn’t cover the full benefit obtained from this K.

Thomas Borthwick

Facts: The defendant slaughterhouse agreed to supply one distributor with all its product. The court gives quite a detailed evolutionary analysis of how courts enforce injunctions differently from SP.

Held: Court grants injunction. Slaughterhouse may not sell to third parties.

Reasons

2. There may be practical reasons to avoid SP (long term, necessary good faith) but the injunction may be a practical way to provide the plaintiff with what it needs.

Adopts paragraph from Corbin on p. 1163 and says that where SP raises technical or practical concerns, it’s fine to use an injunction even if that injunction has the same practical effect as SP.

However, it’s only done where damages are inadequate.

Here they are inadequate because it’s a long-term arrangement meant to give a distributor a secure source of supply so it can go out and enter other contracts with the people it’s going to sell do.

Difficult to measure what the loss of that would mean.

Second step is: Are there any substantive reasons not to enforce the injunction?

The most common reason is that the courts will not force the parties into an antagonistic relationship.

Here the court decides that it’s not a partnership or a joint venture and slaughtering cows is a relatively standardized, mechanistic business where the relationship between the parties is kind of irrelevant to carrying out the contract.

How does this Mesh With the Concept of Efficient Breach?

Assessing whether to grant a K Injunction:

1. Should the court exercise its discretion to grand an injunction?

Cassels mentioned that we seem to need a negative covenant, or at least to be able to imply one.

The parties seem to be deciding that damages are going to be inadequate, when they impose a negative covenant – maybe the courts are just deferring to the decision of the contracting parties?

2. Are there any reasons not to award?

Most common reason is forcing the parties to return to/continue in a bad relationship

Ask whether the relationship requires good faith.

Using Injunctions to Enforce Restrictive Covenants

Restrictive covenants usually come up in sale of business Ks that include a term saying “And X agrees not to enter into this trade for X years in the same geographical area”

Also in employment contracts.

Restrictive Covenants in Sale-of-Business Contracts

Issue: how should the courts balance the freedom to enter into contracts with the public policy in favour of free competition?

Consider the importance of letting people work and not preventing them from earning a livelihood.

Cantol v. Brodi Chemicals Ltd.

Court refuses to grant injunction to enforce a clause in employment K that would prevent the employee from selling plumbing fixtures.

Three points:

1. These cases are different from the American Cyanamid model. A strong prima facie case that the clause is valid is required. Para 12 of Cantol.

2. Even if there is a strong prima facie case, irreparable harm is going to get a harder look. Damages are really going to have to be inadequate.

3. There is a paradox in these cases. In order to be valid, a restrictive covenant has to have a short duration. If the employer tries to prohibit the employee from working in the same industry for 10 years, it’s illegal. What that means is that these cases are usually decided at the interlocutory stage. So this is going to decide the case.

Towers v. Cantin

You can sometimes get an injunction.

Facts: High-placed executive with insurance company. Gets hired away by KPMG who basically hired her to get her customers from her former company. Former company seeks an injunction.

Held: Granted. First of all, there’s no question that the covenant was legal and that it was breached.

This case involved the establishment of major business relationships over a long period of time and the goodwill was significant.

The injunction was also not oppressive. KPMG agreed they would have hired her anyway.

Other reasons why injunctions are more readily given in this context:

1. Easy to enforce

2. Courts assume that when a contractual clause is stated in the negative then an injunction is kind of the only way to protect the plaintiff’s interest. There was an old rule of equity (p. 1153) that said where there was a negative covenant, the courts had to issue an injunction. This is no longer the case, but there is a general presumption that for negative covenants, damages are not adequate and injunctions are the proper remedy.

Restrictive Covenants in Employment Contracts

This involves one of the closest to absolute rule that exists in the law: You cannot get specific performance of a personal service contract.

In the ordinary employment contract, damages are adequate. Note that this assumes the employee’s services are not unique – the adequacy of damages is predicated on the fungibility of employee services.

Employment contracts are a paradigm of good faith and consideration. You have to get along in order for it to work. Courts are realistic about forcing a disgruntled employee/r to work together.

 If the court is forcing someone to work, it’s state-sponsored enforcement of labour, which is the same thing as slavery or indentured servitude and we don’t care for that.

 The problem is, it’s a little more complicated when it comes to issuing an injunction.

 Where there is an explicit negative covenant in the employment agreement, while SP can’t be ordered, injunctions can be issued, sometimes.

Lumley v. Wagner [1852, Eng.]

First case where this happened.

Facts: W had a contract to sing for L for three months and would not sing for anyone else. The courts say they would never force her to sing. But they can stop her from singing for someone else. And they did.

So long as the injunction doesn’t necessarily amount to an order of SP, we will grant the injunction. 

Warner Brothers v. Nelson [1937, Eng.]

Gives nuance to Lumley

“Bette Davis case”


Facts: Bette Davis had a contract with WB. Required her to give WB her exclusive services to perform in movies for them and not to work for anyone else. So the contract had positive and negative features.

Held: The court builds on Lumley and grants the injunction.

Points:

1. An affirmation that SP will not be granted. You can’t make someone do a job.

2. But you can grant an injunction so long as its necessary effect is not to grant SP. This is the “sing or starve” rule. If the necessary effect of the injunction is that she will remain idle and unpaid or work for the employer, then the court will not grant the injunction. But so long as she has other options and the injunction won’t necessarily compel her to work, then the court will grant the injunction.

3. There does have to be irreparable harm. The mere fact that there’s a negative covenant does not remove the court’s discretion. The court here says that an injunction will only be granted if there’s irreparable harm. Here, the court said that Bette Davis was irreplaceable and was a unique asset. WB also had Bette Davis movies they were about to market and if she could go make other movies their movies would be less valuable.

4. These are not restraint of trade cases. Not so concerned about the employee.

The contract here is inside the employment relationship. It’s not saying she can’t work after she’s employed. She has a job. She just can’t have two jobs. So this doesn’t raise restraint of trade concerns because she is currently capable of plying her trade.

The clause said that Bette Davis would not, during the contract, render any services in business of any other person or engage in any other occupation. So the clause, literally enforced, would have created a sing or starve situation.

So the court doesn’t enforce the clause as written. They write the order in a narrower fashion, saying it’s only about making movies and also that it’s only for three  years (the time that was reasonably necessary to protect current Bette Davis movies)

JC: Does it mean anything that the two leading cases both involve women?

Detroit Football Club v. Dublinski [1955, ONHC]

Facts: Quarterback for Detroit hired by the Argonauts.

Held: No injunction granted. His services are not that unique. There are lots of QBs. The loss can be compensated in damages. And this is a football-or-starve situation.

Page One Records v. Britain

(The Troggs case)

Facts: The Troggs sang “Wild Thing,” in case you didn’t know. Further, Cassels seems legitimately convinced they were one of the most important bands of all time. The Troggs wanted to break ties with their manager. Manager sued for injunction.

Held: No injunction.

Reasons

1. An injunction would have compelled performance. The Troggs couldn’t work without a manager. Note that this is much more employee-favourable than Bette Davis. Because the Troggs could have worked without a manager, just not as a band.

2. The situation lacked mutuality. If they were forced to use the manager, the manager wasn’t forced to work for them. They would be vulnerable to exploitation because it was possible that the court would force them to only use the manager, the manager stopped working or stopped going a good job, the band couldn’t sue for SP. The court refused to put them into that position. This is the principle of mutuality.

This isn’t a big problem in most employment cases, because the employer usually just has to pay money.

3. The court says that damages were easily calculated.

Legal Architecture

Not rocket science. There are easily-stated general principles, but the way you tell the story and frame the facts can have a big impact on the way the courts exercise their discretion. 

Directory: outlines
outlines -> Chabot College Fall 2010 Course Outline for Computer Application Systems 60 business software applications/general accounting
outlines -> Adil Khan Contracts Midterm outline- waldron
outlines -> Remedies for breach of promise (1) The Interests Protected
outlines -> Chapter Five: Written Documents 1 Unsigned Documents 1
outlines -> Cases and Materials on Contracts
outlines -> College of Science and Health
outlines -> Evidence outline
outlines -> 2. Act, Omission, Status or Circumstances 4 Consequences and Causation 8 Introduction to Mens Rea and Intent 10 Levels of Fault 11
outlines -> Course Outline as/huma 2650 0A

Download 1.08 Mb.

Share with your friends: