Where a contract is in written form and it fails to accurately reflect the common intentions of the parties it can be rectified to reflect their common intentions.
Rectification can also be used in cases of unilateral mistake where it would be unconscionable for the non-mistaken party to enforce the contract.
Party seeking rectification must provide “clear and convincing” proof (Pukallus v Cameron).
Common intention must continue up to the time of execution of the contract in question (Pukallus).
Leading authority: Maralinga Pty Ltd v. Major Enterprises Pty Ltd - sale of land. Auctioneer said price could be mortgaged. Draft contract provided for payment on completion; no provision for price to remain on mortgage. HC refused rectification. No mistake had been made as to what the written contract contained; both parties knew it was different to the antecedent bargain.
Cf Winks v WH Heck
Non est factum
A person is generally bound by a document that they sign (Toll v Alphapharm)
To this there is a defence of non est factum. Originally used by the illiterate.
Has been extended but is still very difficult to raise. If successful it renders the contract void.
L’Estrange v Graucob - P bought an automatic slot machine from D, their contract had an exclusion clause for liability and stuff that P didn’t read, the machine didn’t work and P brought a claim for breach of warranty, contract was held to be binding nonetheless.
Saunders v Anglia Building Society - widow of 78 transferred house to rogue instead of nephew. Her glasses were broken. HoL: non est factum was not confined to illiterate people but also those who were permanently or temporarily unable, through no fault of their own, to have, without explanation, any way of understanding the document, whether through defective education, illness or innate incapacity. Necessary too that the contract as it is thought to be, is radically, substantially or fundamentally different that actually signed. Here the transaction wasn’t fundamentally different to the one she thought it was.
Petelin v Cullen - Poor understanding of English. P just thought they were signing a receipt, not agreeing to an option, and it was held on the facts that they could raise the defence but it was noted that if there is fault (ie carelessness) on the part of the person raising the defence, that might exclude it, but that rule will be less strictly applied where the other party was aware of (or ought to be aware of) the circumstances under which the contract was signed (as was the case on the facts).
Conflicting policies:
Injustice of holding parties to bargains to which they did not consent
Allowing a signature to be challenged creates uncertainty and difficulty for the other party.
Remedies I
Punitive damages not awarded in contract – Addis v Gramaphone
Reason for damage
Expectation measure Designed to put P into original position had the contract been performed.
Market value – value of thing.
More beneficial if market value is higher than sum paid (good bargain).
Reliance measure P relied to his detriment upon the contract. Position had the contract never been entered into.
Sum paid – value of thing.
More beneficial if sum paid higher than market value (bad bargain).
Gain-based (restitutionary) damages Strip D of benefit of the contract
Assessing damages
Burden of proof on the balance of probabilities is upon P.
Damages are assessed at the date of the breach. When necessary to do justice can depart from this rule – Johnson v Perez per Mason CJ.
Nominal damages can be awarded in absence of loss.
Expectation Damages
Common law rule placed in same position as if contract performed – Robinson v Harman
Clark v Macourt - Sale of IVF clinic. Had to buy American sperm. Passed cost to clients. Argued that they had suffered a loss. Cost was having to go into the market and find/buy sperm. Look at the position they would have been in had the contract been performed: they would have had a freezer of sperm. Hayne J: May be that the sperm might have been intended for other uses; he says the plaintiff may have used it in her other practice, or indeed given it away. P here had suffered a genuine loss; cost of buying it for $1m from US.
Stable market price no loss
Market value has risen loss (to buyer) is new price – promised price
Market value has dropped loss (to seller) is promised price – market price.
Problems with expectation damages
Damages for cost of cure (CoC) – building done badly ($ for repair or for difference in value)
SOGA s 54
(2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of the warranty.
(3) In the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value which they would have had if they had answered to the warranty.
Ruxley Electronics and Constructions v Forsyth - No $ CoC Pool made too shallow. Still safe to use. No market value depreciation. Significant CoC. Said award would be disproportionate to any resulting benefit; would be wholly unreasonable. Likely influenced by background considerations - guy didn’t even want to use $ for repair.
Bellgrove v Eldridge - $ CoC Faulty foundations. Cost of demolition and rebuilding (CoC) higher than original contract value. Can get when reasonable and necessary that they should be given. Can’t get CoC when wholly unreasonable. Does P intend to use $ for cure? HCA said irrelevant if they want to or not.
Westpoint Management v Chocolate Factory Apartments – Rationalised it as expectation damages. Said whether or not P intends to use money to cure defect goes to question of reasonableness. HC in Bellgrove said irrelevant.
Tabcorp Holding v Bowen - $ CoC Agreed with Westpoint that they are expectation damages. Lessor altered office without permission. HCA “we will award unless fairly exceptional circumstances like Ruxley”
Loss of chance
Lost chance to win pageant. Can recover loss even if chance <50% - Chaplin v Hicks
Recoverable under TPA as long as contract breached – Sellars v Adelaide Petroleum
Baltic Shipping per Mason CJ. Can recover. Here are exceptions.
Injured feelings for damages for breach of promise of marriage
Pain and suffering if breach caused physical injury
Physical inconvenience train didn’t take to right train station or purchasing property with defects not revealed by survey
Physical inconvenience due to breach leading to mental suffering
Object of contract = relax. If you are distressed due to breach.
Holiday booked on faith of brochure (relaxing etc…). Opposite. – Jarvis v Swan Tours
Didn’t fall within: general Baltic doctrine/Mason exceptions – McDonald v SA
Reliance damages
Implied term that tanker existed. Expectation measure impossible to quantify – McRae v Cth
“means of compensating P where there has been no loss of profit or P cannot prove loss of profit with any certainty” – Toohey J
Gain-based damages
Escaped spy writes successful book. Due to exceptional case award GB damages. Fiduciary duty was breached by spy – AG v Blake. Hobhouse dissent as to uncertain when this applies
Distinguished out of existence.
Cth v Amann Aviation
D breached contract and denied P chance of renewal and chance to make profit.
Presumption where parties enter into contract that had contract been performed, that the P would at least have recovered the expenditure. Rebuttable by D.
Issues:
Presumption not always true
Based upon prospect of something happening rather than on an existing contract
Allows Amann to recover cost of expenditure while arguing expectation damages
Remedies II (Limitations upon expectation measure + Debt + Liquidation Damages)
Causation
Reg Glass v Rivers Locking Systems - Burglar proof door not burglar proof. Stolen stuff. Single entrance. Causation.
(1) Other cause of loss
Alexander v Cambridge Credit Corporation - Was there another cause of the loss? Need to show breach was a cause of loss, based upon “common sense principles” (not but for). Difficulty in deciding this.
(2) Break in chain of causation
P should have “been aware or check” the trailer mechanism before driving off. P caused the accident – Lexmead (Basingstoke) v Lewis
Remoteness
Hadley v Baxendale The damage received in respect of the breach should be:
Such as may fairly and reasonably be considered to arise naturally according to the usual course of things from breach; or
Such as should have been within the reasonable contemplation of both parties at the time of the making of the contract and be a probable result of the breach of it
Mason CJ and Dawson in Amann considered these to be of a single principle simply dependent upon the degree of relevant knowledge possessed by the parties:
Imputed knowledge reasonable person knowledge (first limb)
Actual knowledge knowledge particular to the parties (second limb)
Arise naturally
The Heron II - Simply shipping people are presumed to know that prices in commercial markets change. Being late will change the sale price of sugar.
Wenham v Ella – Where hired to organise transfer of land interest, and transfer doesn’t occur, P will lose return on investment.
Reasonable contemplation (RC)
Lucrative government contract not RC for laundry business – Vic. Laundry v Newman Ind.
Test is not just reasonable foreseeable. Standard higher- The Heron II
Reasonable contemplation still enough?
HoL Ordinary foreseeability rule only prima facie presumption. Could be rebutted where the context, surrounding circumstances or general understanding of the relevant market showed that a party would not reasonably have been regarded as assuming responsibility for the loss – Transfield Shipping v Mercator Shipping
Not good law in Australia – Amann
Mitigation
Fail to mitigate losses – D not liable for amount mitigatable
All reasonable steps to mitigate loss
Faulty truck. 1 year noticed kept driving shorter distances (less $). Failure to mitigate. Should’ve terminated agreement. Isolated losses to that 1 year – Burns v MAN Automotive
Not unreasonably incur expense subsequent to the breach
Acted unreasonably only had to go to office to get a certificate – Ardlethan Options v Easdown
Just because other ‘better’ option available in hindsight doesn’t mean you acted unreasonably – Banco de Portugal v Waterlow per McMillan LJ – not for D who created emergency to point this out
Plaintiff obtains a benefit
Only entitled to nominal damages losses completely mitigated by extra profit gained by P’s actions – British Westinghouse Electric & Manufacturing v Underground Electric Railways – applies only where benefit flows directly from breach.
Contributory negligence
Not referring to breach of duty of care, but to acts/omissions of P which contribute to loss claimed: Astley v Austrust
Provided it isn’t also a failure to mitigate, generally doesn’t affect losses that can be recovered (unless the negligence didn’t break the chain of causation).
Only relevant where the claim in contract is concurrent to a claim in tort (contractual duty of care): Law Reform Act1995 s 5.
Otherwise may have different outcomes in the actions, on the same facts. Duty has to be concurrent and co-extensive.
Debt
Debt Contract is for a fixed sum of money. Claim for sum owing not damages.
Remoteness and mitigation do not apply – Young v Qld Trustees
Liquidated damages
Amount payable in case of breach genuine pre-estimate of loss if breach
If not genuine pre-estimate then considered a penalty
Penalty only enforceable to extent of the genuine loss
A sum is a penalty if: “extravagant and unconscionable in amount, in comparison with greatest conceivable loss from potential breach”
Stressed that it had to be extravagant and unconscionable – Ringrow v BP Australia
Remedies III
Specific performance
Specific performance Compel a party to do something to put parties in position per contract – JC Williamson v Lukey
Equitable but structured discretion
Used when damages are inadequate. Very rarely used – Turner v Bladin (available where all that remains in land sale is for purchaser to pay).
Some contracts excluded employment – Byrne v Australian Airlines
Can seek before performance is due.
Factors as to when to award
Is there a lack of mutuality? Specific performance must be full and final relief – JC Williamson v Lukey per Dixon J
If specific performance requires constant supervision only a factor – Patrick Stevedores Operations v Maritime Union of AUS
Delay of P if would prejudice other party will be refused
Hardship to D (illegal action ordered) – Nocton v Angus
P must be willing to perform their obligations too
Injunctions
Equitable remedy to do or not (typical) to do something
Only available where damages are inadequate remedy
Where negative: either perpetual (final) or until final determination of liability is made.
Example of positive stipulation – Burns Phillip Trust v Kwikasair – let him look at register.
Will not be granted where superior court would be cutting of the jurisdiction of another court/body – Dalgety Wines.
Will not be granted where its effect would be directly or indirectly to compel the defendant to perform acts in circumstances where specific performance would not be granted- Dalgety Wines Estates v Rizzon.
