Lesson 7 : Remedies of Breach of Contract

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REMEDIES FOR BREACH OF CONTRACT

1. Introduction

2. Damages

3. Quantum Meriut

4. Specific Performance

5. Injunction

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1. INTRODUCTION

• When one party breaches a contract, the

other party is entitled to be compensated

for that breach. This compensation is

called the remedy. The nature of the

compensation depends on numerous

factors such as:-

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a. the nature of the contract.

b. the nature of the breach

c. the extent of damages caused etc.

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• Remedies for breach of a contract are not meant to punish the party in breach. It is meant to put the parties in a position they would have been if the contract had been performed.

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3. DAMAGES

• Damages are a form of monetary compensation and are a common law remedy available to the plaintiffs as of right. The purpose of damages is to compensate the injured party for losses suffered. The amount of damages awarded would depend on the facts of the case itself.

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a. Liquidated Damages

• Sometimes the parties to a contract specify in the contract a fixed amount that is to be paid in the event of a breach of contract. This is known as an agreed damages clause. It is very common to have this clause in a building contract or a contract which is time sensitive where the parties agree that if the party who is to carry out the work is in delay, the other party would be entitled to claim S$X/day as liquidated damages.

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• The advantage of liquidated damages or agreed damages is that there is no need to prove the actual monetary value of the losses i.e. General damages.

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• However, the liquidated damages must be a genuine pre-estimate of the loss.. If it is too high or unreasonable, it will be considered to be a penalty and the law does not allow penalty clauses. It is against the principle of the law of contract and such a clause will be struck down..

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b. Mitigation

• Even though the party in breach is to compensate the injured party, the injured party as a duty to ensure that he takes steps to minimise the loss caused by the breach. This is called mitigation of loss. The injured party must take reasonable steps to reduce his loss once the other party has breached the contract.

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• If the injured party does not mitigate his

loss, the court making the award of the

damages may reduce his claim for

damages..

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EQUITABLE REMEDIES:

a. Quantum Meruit• The Latin expression quantum meruit means “as

much as he has earned”.

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• Some of these examples are:

i. where work has been done under a contract

which does not specify the price;

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ii. where some work had been done by one

party under a contract which was repudiated

by the defendant;

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iii. where work was done by one party and

accepted by another under a contract later

discovered to be void;

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iv.where there was part performance of a

contract (not amounting to substantial

performance) by one party which was

voluntarily accepted by the other;

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v. where the contract is frustrated but the other

party has enjoyed a valuable benefit.

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b. Specific Performance

• This is a remedy where the court will order one

person to perform his contractual obligations.

This is quite rare and it is not as off right. It is a

remedy, which would not be granted in a

situation:-

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i. where damages are an adequate remedy;

ii. where the contract breached is one involving personal services;

iii. where the performance of the contract would require the constant supervision of the court.

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c. Injunction

– This is an order of court restraining a person from

breaching his contract. Like specific performance, it

is an equitable remedy and is granted only in

circumstances where the court thinks it is fair and

reasonable to do so. It is not available as of right.

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d. Limitation Act

– If one party breaches the contract, the other party

must commence an action within six(6) years from the

date of the breach. This is called the ‘limitation

period’ and it is stipulated by the Limitation Act (Cap

163).

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– If the action is not brought within six years it will be

time barred and the injured party will have lost his

right to claim.

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– Once the action is started, it does not matter how long

it takes before the dispute is resolved.

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