Breach of contract essay

This is called the principle of pact suns servant. If either of the parties, due to an omission or commission, without a legal excuse, fail to live up to their contractual obligation they are liable for breach of contract. In the modern concept of our law breach of contract is divided into different categories in accordance with the behavior of the contractual parties. These forms are moral debtors, moral creditors, positive malpractice, repudiation and the prevention of performance. Bear in mind that these forms of breach can overlap and the innocent party will be entitled to any remedy in accordance to the specific arm of breach. 3 Thus the distinction is crucial. “These remedies are aimed at performance or fulfillment Of contractual obligations, or at cancellation and withdrawal from a contract, or at damages for loss causes by any form of the above mentioned breaches. “4 Thus an award of damages due to the failure of the debtor’s actions is aimed at a monetary amount that plays a role in the creditor’s patrimony. 2. Contractual Agreements In accordance with the scenario in question, different contractual agreements were established. The first agreement was between Albertan Motors and Easy Car Dealers concluded in Apollonian on 28 December 201 3 to purchase a gold Mercedes Benz 2012-model for REAR 000. “In terms of the agreement Albertan Motors would pay the purchase price before date of delivery and it would be Albertan Motors’ responsibility to collect the Mercedes Benz from Easy Car Dealers at their own expense on the 5th of January 2014.

A penalty clause stipulating a penalty amount of ROR 000 for breach of contract committed by either party was included into their agreement. ” The second agreement was between Albertan Motors and a company to collect the arches Mercedes Benz on the 2nd of January 2014. The company in question Was hired at a Cost of RE 000 to collect the Mercedes Benz On the 5th of January 2014 from the Easy Car Dealers’ showroom in Apollonian and deliver the vehicle to Albertan Motors in Albertan. The third agreement was between Albertan Motors and a customer, whom the Mercedes Benz was already sold to for a price of REAR 000.

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Furthermore a fourth agreement between Albertan Motors and the owner (at the time) of the white Mercedes Benz 2012-model for the purchase price of REAR 000. 3. Breach of Contract There are various forms of breach of contract. The main agreement in question is between Albertan Motors and Easy Car Dealers concluded in Apollonian on 28 December 2013 to purchase a gold Mercedes Benz 2012- model for REAR 000. When the company, hired by Albertan Motors, arrived at Easy Car Dealers’ showroom, they were informed that the vehicle in question was not available and sold to a third party.

Thus Easy Car Dealers failed to perform, perform properly and perform as agreed upon. The general rule is that the agreement is not terminated when the performance is prevented by either of the contractual parties, but the party that prevented the reference is liable for breach of contract in the form of prevention of performance. Thus Easy Car Dealers is guilty of breach of contract in the form of prevention of performance for making it impossible to conclude the obligations stipulated in the agreement by selling the Mercedes Benz to a third party.

Albertan Motors now has the choice to cancel the contract, regain the performance and claim damages for the non-compliance of the stipulated obligations in the agreement or maintain the contract, perform (the amount of REAR 00 that was paid) and claim damages from Easy Car Dealers instead f performance. 7 Prevention of performance and repudiation should not be confused with each other. Both are seen as anticipatory breach of contract due to the fact that both forms can be breached before the determined time of performance. Bear in mind that in theory it is sometimes difficult to distinguish between subjective prevention of performance and repudiation, prevention is caused on a negligent basis whilst repudiation (even though objective) requires an unequivocal intention to repudiate. 9 4. General Principles Concerning Claims for Contractual Damages In the law of damages certain requirements has to be met before Albertan Motors can instituted a claim for damages for the breach of contract. Firstly, Easy Car Dealers must have committed a breach of contract.

In the scenario Easy Car Dealers did commit breach by failing to uphold their end of the stipulated obligations, thus preventing the performance. Secondly, Albertan Motors must have already suffered actual patrimonial loss in a determined/ determinable amount as a result of breach with a nexus beјen the breach and patrimonial damages. As they did, Albertan Motors suffered a loss of REAR 000 they paid Easy Car Dealers for the gold Mercedes Benz 201 2-model. Lastly, Easy Car Dealers must be liable in law to compensate such loss suffered.

In terms of limitation of liability the damages must fall within the contemplation of the parties. 10 (This will be discussed later). A claim for damages as such can either be instituted as a remedy on its own or in concurrence with other remedies. These remedies are usually aimed at fulfillment of the contract of cancellation thereof. 11 Bear in mind that when these damages are evaluated it can be influenced on the basis if Albertan Motors wants to uphold or cancel the contract. If Albertan Motors wants to uphold the contract, he is entitled to the performance. 2 Cancellation on the other hand entitles Albertan Motors to restitution of what he has already performed. 1 3 Breach of contract has certain effects on the innocent party (Albertan Motors) patrimony, which may result in loss. To measure these effects a comparison is made between Albertan Motors’ current patrimonial position and the hypothetical patrimonial position prior to proper and timeout performance from Easy Car Dealers. One of the effects is that Easy Car Dealers’ failure to perform caused further expenses and losses, were Albertan Motors had to find another Mercedes Benz 2012-model at a higher price.

This reduced the margin Of profit. 5. Who can Claim and Quantification The way in which damages are calculated is usually expressed as an amount of money which is necessary to put the plaintiff in a hypothetical position as if the performance was properly executed. As if the contract was never concluded. Thus the relevant measure to calculate damages should be applied to the corresponding situation. Various measures may be used, for instance where the purchaser does not obtain delivery of the mere.

Albertan Motors did not obtain delivery, thus in theory the difference between the purchase price and the market value is used. 14 There are numerous factors to way in the approach of the evaluation of damages. Factors such as the form of breach and so forth. Thus the correct measure should be identified before evaluating damages. The ideal approach in the assessment of damages is to replace the unacceptable facets of the sum-formula with principles of the concrete concept of damages-15 Thus a comparative method tit a hypothetical element is indicated in the establishment of prospective loss and loss of profit. 6 A plaintiff who is prima facie entitled to specific performance may claim objective financial value of the performance. Damages as surrogate of performance can be described whereas the plaintiff (Albertan Motors) wants to uphold the contract and comply with his obligation when counter- performance on the side of Easy Car Dealers is no longer possible. In SEEPS Structural Engineering and Plating (Pity) Ltd v Inland Exploration Co (Pity) Ltd 7 brought doubt to mind about the correct position.

The court held that where the performance was not returned in the proper condition, a claim for specific performance may be instituted. In accordance with law of contract the measure of damages are described as positive interests. 18 “A fundamental principle of our law is that for a breach of contract the sufferer should be placed by any awards of damages in the same position as he/she would have occupied had the contract been performed. “1 9 As well if the breach of contract had not occurred. Negative interests is calculated whereby the contract had not been concluded.

There are four theories on positive and negative interests. All of these theories are present in the current facts. First, the ‘expectation interest’ the damages for the benefits which Albertan Motors would have had with proper performance (profit of ROR 000); secondly, the ‘reliance interest’ wasted expenditure incurred by Albertan Motors in the expectation that Easy Car Dealers would perform (hire of currier or RARER) or buy another Mercedes Benz 2012-model for RI 5 000 more; thirdly, ‘indemnity interest it represents Albertan Motors’ obligation to pay damages to a third party (buy another

Mercedes Benz modeled for RI 5 000 more) or (hire of currier or RARER) as a result of Easy Car Dealers’ breach; and, fourthly, ‘restitution interest’ benefits conferred by Albertan Motors on Easy Car Dealers in reliance on Easy Car Dealers’ promise to perform (profit of ROR 000). The protection of the first, second and fourth interests are considered as the principal purposes to follow when contractual damages are being rewarded. 20 Note these interests can overlap. The ‘expectation interest includes the ‘reliance interest.

The ‘reliance interest’ embraces the ‘restitution interest with a wider angle and also consists of wasted expenditure, opportunities forgone and consequential losses. Restitution has to be taken into account in the calculation of a plaintiffs damages after cancellation of a contract, because of the influence it has on the patrimonial position. 22 If Albertan Motors cancels the contract and claim the right to retain the performance, it constitutes the starting-point of the measurement of their loss.

Thus the loss will be the positive difference between the value of the performance he would have obtained and the market value of the performance he would have obtained from Easy Car Dealers upon fulfillment. 23 The general accepted view is that the approach of positive interests is used to evaluate damages. The reason being its actual and prospective loss. 24 Thus the position after the contract was fulfilled. It is also seen as the correct measure of damages when the contract is cancelled, the plaintiff is still placed in the position he/she would have been had there been no breach. 5 Negative interests are used to assess damages when the contract was cancelled because of an occurrence before or during the conclusion of a contract or cancellation of the contract due to a form of breach. 6 In Probe v Baker 27 the focus was placed on negative interests approach. The problem was that the plaintiff may be placed in a better position than the position occupied without breach. To avoid this, this approach is seen as the position before the contract was concluded than the hypothetical position of no contract.

In Hammer v Way refused to follow the position. The court stated that the only approach is the one of positive interests for breach due to cancellation. Mainline Carriers (Pity) Ltd v Jaded Investments CHIC declined both of the above. Without deciding on the correct approach, the court held hat lost expenditure can be claimed as both approaches. Cancellation is not a requirement for either of these approaches and the positive approach is most reasonable to use. It is clear that a person cannot always be liable for all damages resulting from his or her breach of contract.

Thus if Albertan Motors wants to enforces a contractual claim due to the breach thereof, he has to prove on a balance Of probability that the breach resulted into the loss. 30 In the event of special damages it refers to all damages excluding general damages and does not qualify for compensation. 31 Only if special circumstances were present at the inclusion of the contract can special damages be claimed. The parties had to foresee that the damages could set in.

Even if the parties could not foresee certain damages, it may have been within there contemplation. The test for liability in the case of special damages causes some problems. In Livery Countersigning the court held that certain allegations had to be made by the had knowledge over the special circumstances and, secondly, acted in accordance with it. The second allegations is referred to as the convention principle due to the fact that it deals with a presumed agreement between arties that damages will be payable in respect of loss of a specific kind. 3 The court in Shasta Investments (Pity) Ltd v Californians held that this is still the current position. Thus where Albertan Motors had to buy a different Mercedes Benz 2012-model: ‘therefore if I do not deliver the thing I have sold and the aggrieved party buys a similar thing at the ruling price which is in excess of the price originally agreed upon with me I must make good his loss. “35 Easy Car Dealers will be held liable for the difference.

In a contract of sale the purchaser will be entitled to the difference between he price it purchased and the value thereof once sold. 36 The value in question being established in accordance with the current market value. Calculation of market value is established in accordance with the place of delivery as stipulated in the contract. Thus, “the value as such place is the price at the nearest available market plus reasonable transport cost to the place where delivery should take place. 37 Thus the amount of RARER should be taken into account when damages are being rewarded. Where Albertan Motors decide to uphold the contract: If Albertan Motors does not rescind the agreement and claim specific reference, it will be rightful for Albertan Motors to claim the value of the object at the time of the action and will therefore not be restricted to the value at the time of delivery. Only if Easy Car Dealers can perform at the time stipulated, can Albertan Motors the value at such time.

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