Cases and Materials on Contracts

Whiten v Pilot Insurance Co.

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  Flowchart for Punitive damages
  

3. 
   Is there horrifying behaviour?
   
4. 
   Does this behaviour constitute an “actionable wrong”
   
   • 
     This is broader than tort damages (though can include tortious actions), but will likely refer to the breach of a quasi-fiduciary duty particular to the contract (i.e. acting in good faith to pay out valid insurance claims)
     
5. 
   “If and only if” the damages awarded as compensation are too insignificant to serve as a punishment, then punitive damages may be awarded
   
6. 
   Amount is that which a reasonable jury properly instructive could have concluded that an award in that amount, and no less, was rationally required to punish the defendant’s misconduct
   

• 
  Plaintiff purchased house in 1985, in 1994 at midnight it burnt down
  
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  The defendant was their insurance company,
  
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    Paid out an initial $5000 living allowance and paid some rent for temporary living but then cut off payments and become hostile
    
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  Defendant used legal actions to force the plaintiff to expend what little money they had in an attempt to get them to settle for an unfair amount that was substantially lower than their policy
  

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  Can punitive damages be placed upon the defendant for their behaviour and if so how much?
  

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  For plaintiff, punitive damages apply
  

• 
  Punitive damages in Canadian Law:
  

1. 
   Determining when punitive damages is used isn't about the category of case but in rationally determining the circumstances that warrant an the additional punishment on top of compensation
   
   • 
     BCCA: punitive damages are available whenever "the conduct of the defendant was such as to merit condumnation by the court"
     
2. 
   Objectives of punitive damages:
   
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     Punishment, deterrence, and denunciation
     
3. 
   Acknowledging that punitive measures are primarily based in criminal law
   
   • 
     Prior penalties brought against the defendant can be taken into account
     
   • 
     Similar penalties used in criminal cases can be looked at if the facts are very similar
     
4. 
   Damages should be principled and not exhortatory
   
5. 
   Courts should be rational: keep the facts in mind and see if the punishment serves the objectives of the law (lowest reward that serves the purpose should be used)
   
6. 
   Formulaic methods of determining punitive damages don't work because the plaintiff's loss is unrelated to the desire to punish the defendant
   
7. 
   The overall award should be rationally related to the objectives for which the punitive damages are awarded (retribution, deterrence and denunciation)
   
8. 
   Juries need to be guided in determining punishments
   
9. 
   Appeal courts can change damages if they are beyond what is required to serve the purpose of law
   

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  Punitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also an actionable wrong (broader than a tort) for which punitive damages are recoverable
  
  • 
    A breach of the contractual duty of good faith constitutes an "actionable wrong"
    

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  Assessing punitive damages:
  
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    Imposed only if there is reprehensible conduct
    
  • 
    Assessed in an amount proportionate to such factors as:
    
    • 
      Harm caused
      
    • 
      Degree of misconduct
      
    • 
      Relative vulnerability of plaintiff
      
    • 
      Advantage/Profit gained by defendant
      
  • 
    List goes on Pg. 101
    

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  Reviewing Jury award
  
  • 
    Were the defendant's actions so outrageous that punitive damages are a rationally required to act as a deterrence
    
    • 
      Without punitive damages the defendant would have gotten off with just having to pay what it should have paid in the first place
      

• 
  Proportionate to the degree of vulnerability of the plaintiff:
  
  • 
    Vulnerability generally works against punitive damages-> plaintiffs ought to know contracts involve aggressive self-interested parties.
    
    • 
      In this case it was a "peace of mind" contract
      
  • 
    Punitive damages are not compensatory
    
    • 
      Facts about the mental distress caused to the plaintiff are only relevant to establish oppressive behavior
      
      • 
        Punitive damages shouldn’t be proportionate to loss.
        
      • 
        If a ratio for damages is used it might not “sting” large companies
        
      • 
        The punitive damages must be free to be large enough to deter individuals who are driven by a duty to maximize share value
        

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  Punitive damages should be awarded "if and only if" compensatory damages are insufficient
  

Notes:

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  Fraud doesn't warrant punitive damages 
  

6. Mitigation of Loss

Payzu Limited v Saunders

Ratio:

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  Mitigating Loss:
  
  • 
    First look to at the facts to see whether it would be reasonable for the party to accept the offer and enter into business with breaching party again
    
  • 
    Then do an economic analysis
    
    • 
      Accepting the offer does not mean the party loses their ability to sue on the original contract
      
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  "[the Plaintiff] can recover no more than he would have suffered if he had acted reasonably, because any further damages do not reasonably follow from the defendant's breach"
  
• 
  Whether someone acted reasonably to mitigate their loss is a question of fact
  

 

Facts:

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  Defendant agreed to sell plaintiff 200 pieces of silk at 4s 6d/yard and 200 of different silk at 5s 11d/ yard
  
  • 
    As required between January to September
    
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  The plaintiffs made an order, the defendants delivered and the plaintiffs wrote a cheque to them
  
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  Defendants didn't receive the cheque
  
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  Plaintiffs tried again but it took them a few days to get the cheque in order
  
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  Defendants thought the plaintiffs were in financial trouble and demanded all further payments be made in cash
  
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  Plaintiffs refused
  
  • 
    Plaintiffs money, by using a cheque, would incur more benefits from the discount structure of the contract (not included in these facts because I don’t get it entirely)
    
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  Defendants refused
  
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  Plaintiffs bring action claiming damages for breach of contract
  
  • 
    Damages claimed = difference between market price and the contract price
    
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  Prices go way down? - 6d and 7d /yard.
  
  • 
    Plaintiffs want out because they are losing cash?
    

 

Issue:

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  What is the rule of law as to the duty to mitigate damages?
  
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  Party A has contract to order item from B over period of time. A appears to be in financial trouble. B tries to mitigate loss by making A pay cash
  

 

Decision:

 

Reasons:

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  Trial judge:
  
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    The true question:
    
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      What ought the prudent person ought reasonably to do in order to mitigate his loss arising from a breach of contract.
      
  • 
    Plaintiffs could have looked at the situation they were in an chosen to accept the offer or not
    
    • 
      The plaintiffs were in a position to accept the offer (they had the cash) but instead refused and suffered large losses
      
      • 
        It is imprudent to suffer loss without reason
        
        • 
          Even though they are stupid trial judge awards 50 pounds in damages because they did in fact suffer
          
• 
  The plaintiffs could have accepted the offer, thus mitigating their damages, and then still sued for breach to receive the money they would have had if they could have used cheques
  

• 
  Plaintiffs appeal on damages
  
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  Court of Appeal:
  
  • 
    Defendant argues it was unreasonable for them to not accept the offer… they should only receive what they would have would have lost had they paid in cash for the period
    
  • 
    What is reasonable for a person to do in regards to mitigating loss will always be a question of fact
    
    • 
      If someone is fired and then is offered a job it wouldn't be unreasonable for them to say no due to treatment, but financially it makes no sense…they should mitigate loss
      
  • 
    "[the Plaintiff] can recover no more than he would have suffered if he had acted reasonably, because any further damages do not reasonably follow from the defendant's breach"
    

 

Roth & Co. v Taysen, Townsend & Co.

Ratio:

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  Party who treats repudiation as a breach is bound to do what is reasonable to prevent he damages from being inflamed or increased
  
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  Calculating damages:
  
  • 
    If time of performance isn't fixed, then date of breach
    
  • 
    If time of performance IS fixed, then date of fulfilment
    
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  The determination of if some is reasonable is the objective standard of the reasonable man, not an individual's personal judgment of what is reasonable
  

 

Facts:

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  Contract to ship cargo of maize
  
  • 
    Ship to be ready to load July 15th, Buyer can cancel if ship isn't ready by Aug 15th
    
• 
  Plaintiffs is selling defendant is buying
  
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  Defendant's repudiate contract may 29th, 6 days after entering into contract
  
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  Plaintiffs didn't resell maize until the last possible day delivery could have been made under contract
  
  • 
    Sold at a loss of 3807 3s 8d
    
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  Trial judge rewarded damages of the amount if the cargo had been sold July 24th when plaintiff's brought action
  
  • 
    Def appeals for date of loss being May.29th when they repudiated (688P)
    
  • 
    Plaintiffs cross-appeal for full losses at date of selling (3807P 3s 8d)
    

 

Issue:

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  Should the plaintiffs have sold the maize earlier and mitigated losses?
  
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  A agrees to deliver item to B. B repudiates before delivery. Item's worth goes down so A sues.
  

 

Decision:

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  Both appeals dismissed.
  

 

Reasons:

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  General rule of repudiation treated as breach:
  
  • 
    Damages = the difference between the contract price and the market price of the goods at the date of the breach.
    
    • 
      If repudiation takes place before the day of delivery
      
      • 
        Then, other party can:
        
        • 
          Bring action immediately
          
        • 
          Right to have his damages assessed at the time he brings his action
          
          • 
            Damages aren't different between contract and market price on date action is brought but
            
    • 
      Party who treats repudiation as a breach is bound to do what is reasonable to prevent he damages from being inflamed or increased
      
      • 
        Were the plaintiffs reasonable in not selling until sept 5th?
        
        • 
          No. Market prices were falling, and it was known they would continue to fall
          
• 
  What time to use as damages?
  
  • 
    If time isn't fixed, then date of breach
    
  • 
    If time IS fixed, then date of fulfilment
    
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  Best judgment isn't enough (subjective state of mind doesn't matter) obje
  

 

White & Carter (Councils) Ltd v McGregor

 

Ratio:

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  If there is a legitimate interest, other than immediate financial interest, to perform the contract then the party is entitled to recover damages.
  

→ If you cant show you have legitimate interest in waiting or performing then you have no duty to mitigate because it is not a useless expense? 

Facts:

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  Ds sales manager entered into a contract with P to display ads on litter bins.
  
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  He was not entitled t do this.
  
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  Later that day D wrote to P to cancel contract.
  
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  P refused to accept cancellation and displayed ads.
  
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  P sues for full amount of contract 
  

Issue:

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  Is P entitled to recover the contract price? 
  

Decision:

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  P is entitled to damages 
  

Reasons:

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  Majority - Where one party repudiates the other party has an option.
  
  • 
    it can accept the repudiation and sue for damages for breach of contract OR
    
  • 
    it can refuse to accept the repudiation, fulfill your portion of contract and sue for full contract price;
    
  • 
    no obligation to mitigate if they have a legitimate interest (ie. Cannot incur useless expense) in performing the contract 
    

• 
  Dissenting - Repudiation by one party does not put an end to a contract. If the party who repudiated still refuses to carry out the contract, then what? - The innocent party can sue for damages for loss associated with the breach
  

 

Finelli et at. V Dee et al.

Ratio:

• 
  Repudiation is not something is "accepted" when it is clear the other party is rescinding, the contract is just repudiated
  
  • 
    The innocent party:
    
    • 
      Is free from performance
      
    • 
      Is free to sue for damages (measured on the date of breach)
      

 

Facts:

• 
  Contract between plaintiffs and the "male defendant" for paving of defendant's home
  
• 
  Contract formed June 18th: fixed price and terms included-> no time fixed for performance
  
  • 
    General idea it would be done in October
    
• 
  Defendant called plaintiff prior to any performance being done/contemplated and cancelled the contract
  
  • 
    Plaintiff's sale manager agreed to the cancellation
    
• 
  Plaintiff's proceeded to do the job anyways in November when the defendants were out of town
  
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  Plaintiff sued for price of work done under the contract-> rejected
  
• 
  Questions arose on appeal
  

 

Issue:

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  Was cancellation a rescission or repudiation?
  

 

Decision:

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  For Defendants
  

Reasons:

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  Judge (Laskin) likes the dissenting opinions from White & Carter
  
  • 
    A repudiation gives immediate rise to a cause of action
    
    • 
      This doesn't involve an acceptance of the repudiation
      
    • 
      The innocent party is only able to recover damages caused by the breach of contract
      

 

 

Directory: outlines
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outlines -> 2. Act, Omission, Status or Circumstances 4 Consequences and Causation 8 Introduction to Mens Rea and Intent 10 Levels of Fault 11
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