Elements in a Contract 22
In deciding whether the plaintiff is entitled to damages for
a breach of contract the court will take into account two factors: -
i) Causation
ii) Remoteness
Causation
In order for the plaintiff to be awarded damages the
defendant must have caused the damage. The damage must be actual and tangible
as opposed to something that could or may have caused damage. It however need
not be the sole factor that caused the damage.
When looking into causation the courts will look into the
chain of causation or the sequence of events that led to the damage and in
order for the plaintiff to be awarded damages there must not be a break in the
chain of causation i.e. the damage must be a direct consequence of the
defendant’s actions.
In Monarch Steamship Co Ltd v Karlshamns Oljefabriker (1949)
the defendants’ ship was chartered to carry soya beans from Manchuria to
Sweden. The defendants in the contract had agreed to provide a seaworthy vessel
but the ship developed problems and there was a delay due to repairs in Egypt.
Once the repairs were completed the ship set sail to Sweden but by then the
Second World War had started and the Royal Navy ordered the ship to sail to
Glasgow instead.
The plaintiffs organized for the cargo to be shipped from
Glasgow to Sweden and brought an action against the defendants. The defendants
argued that that the ensuing war had broken the chain of causation but the
court ruled otherwise. It was not the war that caused the delay but the ship’s
un-seaworthiness and that it (the un-seaworthiness) was the dominant cause for
the delay.
It is worth comparing the decision in Monarch Steamship Co
Ltd v Karlshamns Oljefabriker (1949) with that in Quinn v Birch Bros (builders)
Ltd (1966). The plaintiff, in the latter case, was an independent subcontractor
who undertook plastering work for the defendants. The defendants had a
contractual obligation to supply the equipment that was necessary for the
subcontractor to carry out his work efficiently but failed to do so.
As a result, the plaintiff found a folded trestle and stood
on it to complete his work. The trestle gave way and the plaintiff was injured
in the accident that followed. The plaintiff sued.
The court held that it wasn’t the defendants’ breach of
contract that caused the accident but rather the plaintiff’s decision to use
unsound equipment.
The use of an item that was not in the terms of the contract
or the plaintiff’s choice to use an item that would not be otherwise used in
the manner that it was had broken the chain of causation and the defendant was
therefore not liable.
Remoteness
Once it is established that the defendant did indeed cause
the plaintiff damage by breaching a term of the contract, the courts will look
into the aspect of remoteness.
The rules with regards to remoteness in contract cases were
given in the leading case of Hadley v Baxendale (1854). The plaintiffs, mill
owners, commissioned carriers to ferry a crankshaft for repair. The mill could
only be operated with the crankshaft in place and until such time that the
crankshaft was replaced, the mill would remain idle. The carriers agreed to
return the crankshaft within a stipulated time but because of their negligence
the crankshaft was returned to the plaintiffs a week later than expected. The
plaintiff sued for the loss of profits incurred between the agreed time of
delivery and the actual time of delivery. It was held that in order for damages
to be awarded for a breach of contract: -
i) It must be damage arising from a breach of the terms of
the contract that may be considered reasonable and
ii) The damage should be in the contemplation of both
parties to the contract, at the time the contract was entered into, as a likely
result of a breach.
Because
the defendants were unlikely to contemplate the result of the breach as the
mill not being able to operate i.e. the second of the above two limbs, they
were not liable.
The fact that a crankshaft would cause a mill to come to
standstill was not something that would be within the contemplation of the
defendants and under normal circumstances it would be fair to say that the
plaintiffs, considering the importance of the crankshaft, would have had a
spare or would have made arrangements to acquire a temporary crankshaft until
theirs was returned.
Copyright © 2019 by Dyarne Ward and Kathiresan
Ramachanderam
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