Remedies for breach of promise (1) The Interests Protected

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  “In giving damages for breach of contract, the party complaining should, as far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed.” — “It is a just principle.”
  
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  Complaining party gets what they expected.
  K breacher suffers a loss, but not more than what they’d have lost had K been performed.
  
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  Improves commercial functioning by making it not profitable to breach K. Pressure to keep promises so parties can build future plans.
  

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  Restitution Interest—From 1959, D was unjustly impoverishing premiums from P, which created unjust gains for D, as they repudiated K (albeit by mistake).
  
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  Recission (undo K) an unusual, equitable remedy → insurance K: utmost good faith.
  

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  Reliance Interest—“throwaway costs”—
  
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  If expectation damages uncertain → possible to claim wasted expenditure.
  
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  D ought to have known that if he breached K, all expenditure would be wasted, whether or not it was incurred before or after K formed.
  
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  Courts had a reasonable expectation (2/3) that pre-K expenses would have been covered had K been performed: profit/break even/loss
  

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  Should P have right to choose between reliance and expectation interest?
  
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  Should pre-K expenditures form part of the reliance interest?
  

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  Policy Consideration: Puts P in position had the K not been made. Protects P from a bad bargain at the expense of D.
  
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  Doubtful, for expenses would have still been incurred, so does not put P in position had K not been made. Pre-K not reliance, but hope.
  

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  Would a reasonable person, hearing doctor’s words, believe he was actually promising a 100% hand; or only expressing his opinion?
  
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  No damages for pain and suffering. Pain and suffering is what was bargained for a perfect hand. Expectation measure awarded.
  

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  Difficulty in estimating quantum is no reason for refusing to award any damages.
  
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  Distinction: (i) an absence of evidence makes it impossible to assess damages; (ii) assessment is difficult because of nature of the damages. (ii) = no ground for refusing substantial dmgs.
  

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  First, D paid $105K and cost of leveling land. Cost of performance = $60K. However, property value, if K performed = $12K. Court reverses initial reward for value of land. Finds expectation measure was proper: (i) breach of K willful; (ii) promise of K trumps econ. waste.
  
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  Dissent: If cost of performance grossly more than benefit returned → punishes D. Waste.
  

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  SC of Oklahoma refuses to follow Groves.
  

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  Award: Difference in-K price and market price at the time goods ought to have been delivered, or if there is no such fixed time, then at the time of the refusal to deliver. 49(3)
  
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  If Sale of Goods Act does not apply (an unavailable market) → lost volume awarded— the lost profit margin (supplier/dealer).
  

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  There is a loss above and beyond the difference between K-price and market price, for there is a lost profit margin.
  

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  No loss of a sale.
  

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  Entitled to proportionate damages for loss of the chance.
  

“In K, proof of damage is not part of the liability inquiry.”

1. 
   P must proves on BoP that but-for D’s breach → P had a chance to obtain benefit or avoid loss.
   
2. 
   Chance lost was sufficiently real and significant to rise above mere speculation.
   
3. 
   Outcome depended on someone or something more than the P himself.
   
4. 
   Lost chance had some practical value.
   

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  To be recoverable, losses have to be:
  

1. 
   normally expected to arise from breach
   
2. 
   reasonably contemplated by both parties
   

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  With respect to (1) → would a reasonable person think loss would result from breach?
  
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  With respect to (2) → special circumstances must be reasonably contemplated by parties.
  
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  Apply: Fails on (1) & (2). Common carrier cannot be expected to bear the risks for loss of profits of a factory; special circumstances not communicated.
  

Circularity

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  “Proper test for determining compensation is whether losses should have been foreseen by the promisor at the time of K.”
  
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  What losses were foreseeable? That which a reasonable man would foresee. What would a reasonable man foresee? What the court feels that he ought to pay.
  

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  BLACKBURN J: Special circumstances must be written into the K that the railway would accept the risk of the special loss.
  
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  Theory not generally accepted by later courts.
  
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  Facts: Charges for shipping modest; common carrier; not allowed to refuse to carry; station master did not have power to change K in order to manage the additional risk.
  

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  Applies Hadley: What would a reasonable engineer selling a boiler likely foresee that the laundry company would use it for?
  
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  “Liable to result in the ordinary course of things” does not include (2) special dying K.
  
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  No special knowledge communicated the lucrative dying K. D could not bargain risk.
  

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  Use of tractor to clear entire woodcut was not reasonably foreseeable → lost profits remote.
  
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  Nature of K (“accidental run-in”) leads to inference that tractor was not important.
  
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  Had D contemplated liability for these losses, it is unlikely they would allow the particular 2^nd hand tractor to bear the risks.
  
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  To what extent is this case distinguishable from Victoria Laundry on the facts?
  

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  Distinguishable from Munroe on facts—the way K was negotiated.
  
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  The loss was reasonably foreseeable to result from the breach. Applying test:
  

1. 
   D aware that in the ordinary course of business there would be loss of profits sustained.
   
2. 
   Knowledge of special circumstances contemplated by D.
   

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  DISSENT: Scope of K not contemplated. Information insufficient. High degree of evidence req. for reasonable foreseeability test.
  

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  Losses (difference between sale price at expected date of return and date of actual return) found to be recoverable.
  
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  Fluctuation of the market = reasonably foreseeable; not certain to result, but a “real and serious risk” that prices would fall.
  
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  Hadley rule modified: Was the information available to the D at the time of K-formation sufficient for D to bear responsibility for the risk of that K being breached?—req. real risk.
  

A modification of Hadley? Extreme market fluctuations may be too great a risk to bear in certain commercial contexts.

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  No majority. 3v3 split decision. Damages either:
  

1. 
   Difference between K-price of chartered party (D) and market price or charters during 9 day period. (~100k)
   
2. 
   Price of lucrative K. (~1000k)
   

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  Court, re Hadley: (1) is reasonably foreseeable and normal for Chartered Party cases.
  
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  P, following Heron II, argues fluctuating market is reasonably foreseeable. Ergo (2).
  
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  Hoffman awards (1). Looks at K itself: what does K say and mean in its commercial context?
  
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  “A party is not going to be liable for losses, even if they are foreseeable, if they are not the type or kind of which they can assume the risk or responsibility.”
  

Is the loss too remote? (1) What would a reasonable person think would normally arise from a breach? Standard: strong possibility.

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  Courts reject:
  

1. 
   Emotional damage plaintiff suffered
   
2. 
   Nasty conduct of employer
   

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  Punitive/intangible damages have no place in the law of K; not reasonably foreseeably by D.
  
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  Does not distinguish two heads of damages.
  
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  Public policy reasons motivating:
  

1. 
   Stiff-upper lip theory—primary objective of K law is economic.
   
2. 
   Even if lawfully terminated, employee still likely to experience emotional distress.
   

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  New head: loss of entertainment and enjoyment.
  
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  If K promises entertainment and enjoyment → damages can be awarded for disappointment & distress caused by breach.
  
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  “The right measure of damages is to compensate him for the loss of entertainment and enjoyment which he was promised, and which he did not get.”
  

If employment-K → due notice (unless cause).

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  Aggravated damages are recoverable if D’s conduct could give rise to an independently actionable wrong. If not, courts reluctant.
  
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  Punitive damages recoverable only if D’s conduct = independently actionable wrong.
  
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  P could not prove termination without reasonable notice caused the distress.
  
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  Terminating employment (even wrongfully) is not in itself an independently actionable wrong. Thus, damages not awarded.
  

1. 
   (a) Is it reasonably foreseeable that the breach of K would result in emotional damage? — by:
   IN THIS CASE: (b) Is an object of K the securing of a psych benefit?
   
2. 
   Is the emotional damage sufficient to warrant compensation?
   

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  Damages for mental distress in a “peace of mind” K should be seen as an expression of the general principle of compensatory damages of Hadley v. Baxendale.
  
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  Damages awarded if object of K confers a particular psychological benefit, and sufficiently compensable mental distress is caused by the breach.
  
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  Mental distress must be reasonably contemplated by the parties to attract damages, but needn’t be the dominant aspect or “very essence” of the bargain.
  
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  Mental distress requires substantiating evidence (usually medical evidence).
  

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  Establishes: Duty of Good Faith in terminating an employment contract. Employer must terminate employment in a candid, reasonable, honest, and forthright manner. Duty survives today.
  
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  Wallace Damages: allows the court to extend the period of reasonable notice if duty of good faith breached. Thus, damages flowing from manner of dismissal, as distinct from the mere fact of dismissal.
  

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  Duty of Good Faith and Fair Dealing remains.
  
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  “Wallace damages” no longer binding precedent.
  

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  “Normal distress and hurt feelings resulting from dismissal are not compensable”; rather, intangible injury damages available only where the conduct of the employer is unfair or in bad faith. Back to Baxendale: Is the mental distress reasonably foreseeable upon termination? → How was K breached?
  
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  Punitive: conduct must be outrageous. (Whiten) BUT WINDFALL Punitive damages for wrongful dismissal (and in general) may result in an unfair duplication of damages.
  
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  Followed Bardal v. Globe & Mail Ltd. (1960):
  

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  Punitive damages require an independently actionable wrong.
  (1) This could be a tort, but needn’t be.
  (2) A breach of good faith of an insurance K is independent of the breach of K being awarded.
  (3) Thus, breach of good faith is an independently actionable wrong.
  
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  Quantum proportionality (Windfall)
  (1) Reward should be rationally related to the objectives of punitive damages (retribution/deterrence/denunciation)
  (2) Reward should not exceed the bounds of rationality.
  
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  Normally, a moderate award that carries a stigma to the community is sufficient.
  

1. 
   Contracts are about economic losses, not punishment. So P ought to avoid economic loss by acting reasonably.
   
2. 
   In order to show a compensable loss, you have to show it would flow naturally from the breach. If a reasonable person would have the avoided the loss, it would not have flowed naturally from the breach.
   

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  Purchaser (Payzu) did not act reasonably in order to mitigate their losses.
  
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  Instead of going in the market place and buying expensive replacement property, P should have instead accepted new terms and paid in cash. Claimable losses would only be loss of credit suffered.
  
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  Obiter: Was it unreasonable for D to demand P pays cash? In some cases, this is an unreasonable modification of K obligations to this extent, not so in these circumstances.
  

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  Does a P have the right, upon complete repudiation of a K, to perform the contract, and sue for the full price of K? Or may P only sue for the ordinary expectation damages resulting form the breach, minus those losses reasonably mitigated?
  
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  “If one party to a K repudiates, in the sense of making it clear to the other party he refuses or will refuse, he may accept the repudiation for breach of K whether or not the time of performance has come. Or, he may also disregard the repudiation and the K remains in full effect.” — Anticipatory Breach
  
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  P has option of proceeding as if K is still in effect, or suing right away for damages. How reasonable of a rule is this? Is P always entitled to insist on performance?
  
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  For this to be possible, P must have an interest in the K being performed above and beyond the expected monetary benefit.
  

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  Distinguishes from White & McGregor. In White, K could be performed without any cooperation from D. In this case, P required permission from D to enter driveway and pave it. (Private Prop.) No such permission granted.
  
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  P had no justification to perform K.
  
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  Contra: previous permission granted in K.
  

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  If reasonable grounds for specific performance → needn’t mitigate losses
  
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  No specific performance → mitigate losses.
  
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  When P realized they could not get specific performance, they ought to have known, as a reasonable person, to mitigate loss—purchase new shares and sue for the difference in value.
  

1. 
   If substantial and legitimate interest (land; shares or control of a company) in performance of K → specific performance.
   
2. 
   The time you have to mitigate and the time you have to seek specific performance are both sides of the same coin.
   If mitigate → cannot insist on S.P; If insist on S.P. → Cannot mitigate.
   

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  Generally, building K do not warrant specific performance. This case is an exception:
  

(3) K specifically defines particulars of work.

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  Specific performance ordered.
  

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  Courts will not supervise specific performance—leads to a ongoing hostile relationship between parties; heavy & expensive litigation: contempt proceedings.
  
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  Also, P would be enriching themselves at the expense of D, even if D running at a loss. P benefits from D’s rent and customers.
  
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  Specific performance not ordered when damages are an adequate remedy.
  
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  Specific performance not ordered.
  

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  Courts will not enforce specific performance of personal service K. But Enforcing Negative Covenants—by injunction—ordering Bette Davis not to do what she promised not to do?
  
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  They will not enforce only if (1) the effect of doing so would drive D to starvation or (2) to specific performance of a positive covenant. Courts not compelling her. Find other work!
  

1. 
   An exceptional remedy [equity]
   
2. 
   Only if damages would be inadequate or inappropriate
   
   1. 
      If performance is [unique]. Something not replaceable in the open market.
      
   2. 
      And/or damages too difficult to [estimate].
      
3. 
   Rules of Equity:
   
   1. 
      [Clean hands] – The person who seeks equity must be equitable.
      
   2. 
      [Dispatch] – Carried on with due diligence.
      
   3. 
      [Mutuality] – If one side may seek specific performance, the other ought to as well.
      
4. 
   The courts will not [supervise] specific performance
   
   1. 
      Public policy reasoning: requires long, expensive contempt proceedings.
      
5. 
   The courts will not grant specific performance of a [personal service contract].
   
6. 
   Not available if it interferes with [innocent 3^rd parties].
   

P impecunious; thus cannot mitigate loss. This is in the reasonable contemplation of D.

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  Proper Time for Measuring Damages:
  

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  If, however, specific performance is a legitimate claim—item is such that P can reasonably pursue specific performance—and P pursues specific performance → P cannot mitigate, for P is holding K open for the breacher to perform. Consequently, if P is pursuing specific performance reasonably → P does not have to mitigate until P reasonably knows that the right of specific performance is lost. At this point P must mitigate loss.
  
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  Courts could not award specific performance, for it would interfere with the rights of the 3^rd party (the wife).
  

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  For exceptional cases only.
  
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  Only when other remedies are inadequate.
  
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  No fixed rules, but a useful guide: restitutionary award of accounting for profits awarded for breach of contract if the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity.
  
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  Typically only for breach of fiduciary duty.
  
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  Insufficient justifications:
  
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  (1) “Skimped” performance
  (2) D obtained profit by doing the very thing
  he contracted not to do.
  
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  Canadian courts reluctant to award such damages because of efficient breach. Courts do not want to encourage efficient breach, for it is a Pareto optimal outcome (one party is better off, but nobody loses).
  
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  Canadian Courts emphasize they will usually only award money damages for breach of K equal to the value of the bargain to the P.
  

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  Breach of K
  
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  False representation: (1) representation is untrue; (2) known by D to be untrue; (3) calculated to induce P to act; (4) P believing it, induced to act accordingly.
  

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  A price quote requires the acceptance by the one naming the price to make the contract binding.
  
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  Buyer had to indicate quantity. Ergo, no offer. Instead, offer from P: “We will take two cases Hungarian at your offer yesterday.”
  
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  If a price quote were to be an offer to sell:
  (1) Problems w/ fluctuations in market price
  (2) Problems w/ stock quantities
  

1^st: 3 Brand New/Fur Coats/Worth to $100.00

2^nd: Saturday. Each … $1.00/1 Black Lapin Stole/Beautiful/Worth $139.50 … $1.00/First Come/First Served. K. Offer: Specific terms; means of acceptance explicit.

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  Advertisement is an offer only if clear, definite, explicit, and leaves nothing open for negotiation.
  
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  House Rule Problem: House rule not included in ad. So later on they were trying to change the terms of the agreement. But once you find complete offer and complete acceptance (binding) → other party cannot go adding on new terms. You must proceed on the basis of the terms set out at this point.
  
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  After acceptance → no right to impose new/arbitrary conditions after public offer.
  

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  (ii) is better. Once acceptance is made, offer is bound. If I put something into my basket and change my mind, I would technically not be entitled to do so. But does this objection hold? Could acceptance be when the customer makes their final decision and puts the items on the till?
  
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  If (i) → The pharmacist could not deny you the right to buy; could not intervene. Unacceptable consequences: You could not have self-service pharmacies. As commerce was moving along, it was found that you could not find the K complete when the item was taken off the shelf.
  

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  If no time specified → imply a term into the K → acceptance within a reasonable time.
  
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  If reasonable time has lapsed—
  

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  Offeror can withdrawl offer at any time. Offeree can refuse the offer at any time; or if within the explicit/implicit (reasonable) timeframe, can accept the offer.
  

1. 
   Offer has to be complete with terms;
   
2. 
   It must be accepted in the mode stipulated.
   
3. 
   If no time for acceptance stipulated, it must be accepted in a reasonable time.
   
4. 
   If not, we consider the offer to have self-destructed and no longer open for acceptance.
   
5. 
   If prior to acceptance, seller communicates a revocation of the offer, there is now no offer for acceptance. They are free to do so.
   
6. 
   Accepting party must communicate acceptance in some reasonable way.
   
7. 
   It is sufficient to perform an action to be acceptance—if that is what the offer requires.
   

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  The promise you will leave the offer open for a fixed period of time is not an enforceable promise. Trumped by the right to revoke.
  
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  The vendor gave the right to accept the K up to a certain time frame. The purchaser gave nothing in return for that promise, and it was unenforceable. Other jurisdictions do allow firm offers to be enforced, but Canadian and English law does not. The only thing you can do is give something in return for the promise to leave the offer open OR put it under seal. [valuable consideration]
  
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  An acceptance after an offer has been revoked (or time has been revoked) counts as a counter-offer.
  

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  IF K is not accepted in mode of acceptance you require, no K is formed.
  

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  Generally, at common law, you would not be obligated to pay, for you cannot impose silence as a mode of acceptance.
  
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  Commercial Protection Statutes: unsolicited goods provide no obligation to pay.