BetterLawNotes-5 (2)

CONTRACT LAW

(i) This claim represents damages based on the expectation measure: the aim of such damages is to place D in the position he would have been in had the contract been performed (Robinson v Harman). Here, had the contract been performed, D would have received the £25,000 fee. Note that the claim is for damages and does not lie in debt. It would seem reasonable to assume that D’s entitlement to the fee would not have accrued until delivery of the manuscript at the earliest.

The significance of the claim being for damages is two-fold: first D must account for the cost of performance which he has been spared, although here it is unclear what costs there would be. Secondly, D will be under a duty to mitigate his loss (British Westinghouse v Underground Electric). Arguably, should D refuse the offer by OPP to publish the manuscript in the Idiots series, this will be viewed as a failure to take reasonable steps to minimise his loss. If so, the claim for £25,000 will be reduced by £5,000. On the other hand, D may argue that it would be reasonable to refuse the offer: for example, he may argue that publishing in the Idiots series might harm his academic reputation. The fact that OPP have already broken one contract with D would probably not, of itself, mean that D would be justified in refusing to deal with them further (see, eg, The Solholt).

(ii) It is important to note that OPP were not bound to publish the tort manuscript – the contract gave them an option. According to Lavarack v Woods, damages are to be calculated on the basis that OPP would have performed the contract in the manner most beneficial to them: this would mean that they would not have exercised the option thereby avoiding liability for the fee of £25,000. The task of the court is therefore not (as Lord Denning had proposed in Lavarack) to ask whether Dull might reasonably have expected that OPP would exercise the option. 

(iii) Where the claim relates to the hypothetical actions of a third party, rather than the defendant, D can recover damages representing the value of the chance lost (Chaplin v Hicks). If D can show on the balance of probabilities that he would have agreed to write an autobiography, damages will be assessed on the likelihood that GLL would have offered a contract and the fee they would have paid. For example, if the court is satisfied that there would have been a 50/50 chance of D securing a contract with a £30,000 fee, D will be awarded damages of £15,000 representing the loss of the chance caused by OPP’s breach of contract.

(iv) Damages for distress and disappointment are not generally recoverable in contract claims (Addis v Gramophone). This has been said to arise on grounds of policy rather than remoteness (Watts v Morrow). Such damages are, however, recoverable where a major or important object of the contract is to provide pleasure or peace of mind (Farley v Skinner). It seems difficult to argue that that would be the case here.

(v) The issue here is one of remoteness. Hadley v Baxendale establishes that OPP will be liable for loss which arises naturally from the breach (ie according to usual course of things) and for loss which the parties may reasonably be supposed to have had in their contemplation at the time of the contract as the probable result of the breach. The remoteness test in contract is thus stricter than the ‘reasonably foreseeable’ test in tort (Wagon Mound).

As regards the first leg, the loss would not appear to have arisen naturally. In most cases, breach of a publishing agreement will not lead to the breakdown of the author’s marriage and his liability to pay a lump-settlement to his former spouse. Nor is there anything to suggest that OPP would have contemplated such a loss: there appears no reason for them to have foreseen such an outcome as a probable result of any breach by them.

(vi) Until AG v Blake it was generally thought that damages for breach of contract were compensatory (ie loss-based) (see eg Surrey v Bredero). In Blake the House of Lords held that, exceptionally, the remedy for breach of contract may take the form of an account of profits. It is very unlikely though that an account would be ordered here. The HL in Blake emphasised the exceptional circumstances of the case which involved national security. Further the HL noted that Blake was in a position closely analogous to that of a fiduciary. D’s contract with OPP is  a more conventional commercial contract. The court tends to the view in such cases that any gain made by the defendant from his breach is an ‘adventitious benefit’ which the law allows him to keep (The Sine Nomine, Tito v Waddell).

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