Limiting Factors on Damages - Lecture 15

This limits the amount of damages actually recoverable.

There are four types of doctrines which operate to limit the amount of damages recoverable, what are they and explain them?

1. Mitigation → this doctrine means that C cannot recover damages for losses that they should have reasonably avoided

2. Causation → an independent act of a third party can break the chain of causation - the losses were not caused by breach

3. Contributory negligence

4. Remoteness → losses are too distantly connected to the breach

What are the two limbs required for mitigation?

1. positive duty to act reasonably to avoid losses

2. negative duty to avoid acting unreasonably in a way that make loss worse

Kaines (UK) v Osterreichische Warrenhandelsgesellschaft Austrowaren GmbH on the first limb of mitigation being a positive duty to act reasonably to reduce losses, what is the context and outcome?

Context → Contract for C to buy oil from D and there was an anticipatory breach by D and prices were fluctuating. C bought substitute 9 days later and C could not claim damages based on price C actually paid.

Outcome → The court argued that they had not taken the positive step to go out as soon as the oil prices had increased and that they had not received it.

Yetton v Eastwoods Froy Ltd on the first limb of mitigation being a positive duty to act reasonably to reduce losses, what is the context and outcome?

Context → C was a company managing director, wrongfully dismissed after a takeover, and the company had offered him a job at the same salary and he applied for other jobs but did not get them.

Outcome → The court argued that he acted reasonably by not agreeing to the contract-breaker’s offerr and looking at other job options.

The Flying Fish on the first limb of mitigation being a positive duty to act reasonably to reduce losses, what is the context and outcome?

Context → Navy gunboat collided with respondent’s ship and offered to help save the ship and the respondant refused help, the ship sank.

Outcome → HOL argued that the captain was only responsible for the ship sinking and not the ship’s unreasonable rejdction of help which left it open to losing cargo

Payzu Ltd v Saunders on the first limb of mitigation being a positive duty to act reasonably to reduce losses (cases where they accepted different terms from the contract-breaker), what is the context and outcome?

Context → C agreed to pay D installments for silk and C was late paying and D said that he would only deliver if C paid cash on delivery which was a breach of contract. C claimed expectation damages to reflect increase in market price above the contract price and it was reasonable for C to take account of all business considerations, but D’s responsibility was mitigated and C was able to pay cash for goods instead.

Outcome → The court held that they did not act reasonably, as reasonable people keep the costs down and it was a question of fact whether it was reasonable to accept a offer from the party in breach and it would not preclude an action for damages if there was loss sustained.

Holden Ltd v Bostock & Co Ltd on the second limb of mitigation being a negative duty not to increase losses, what is the context and outcome?

Context → Plaintiff brewers bought sugar from D and it contained arsenic. The brewers destroyed the beers.

Outcome → The brewers received compensation, since it was reasonable for them to recall the product and spend money on fliers to warn people and recall it, so they received compensation on that basis.

Bacon v Cooper on the second limb of mitigation being a negative duty not to increase losses, what is the context and outcome?

Context → C bought scrap metal from D and metal broke C’s machine. C spent £41k on a new machine part.

Outcome → Sometimes the replacement has to be an improvement

Esso Petroleum Co Ltd v Mardon on the second limb of mitigation being a negative duty not to increase losses, what is the context and outcome?

Context → Mardon kept trading with business, but kept trying to fix his business which led to it being worse and worse financially and there was a question if this was unreasonable.

Outcome → Continuing business was not unreasonable, and it was the only way he could recover his money and business, so it was unreasonable.

Compania Financiera Soleada SA v Harnoor Tanker Corp Inc, The Borag is a case where unreasonable steps are taken, what is the context and outcome?

Context → Ship has been detained for a long time, and had to spend money to get it released.

Outcome → The court concluded that it was not reasonable to use their overdraft for the full sum

British Westinghouse Electric & Manufacturing Co v Underground Electric Railways Company of London provides an approach to the effects on damages gained when mitigation is found, what does it say?

British Westinghouse case states that the claimant’s efforts to mitigate loss can be deducted from the damages

What are the following 3 components which can break the causal link and amount to causation?

1. independent act of a third party

2. Act of God - natural or unforeseeable external event

3. unreasonable act by claimant

Stansbie v Troman on the independent act of a third party breaking the causal link (causation), what is the context and outcome?

Context → Decorator left the house open and the thief burgled house, the decorator’s actions were not the direct cause of the theft. Decorator was under a contractual duty to guard the house whilst working, so the thief’s actions did not excuse him

Outcome → Protecting the house against intruders was part of this duty, so the intervention of a third-party thief did not break the chain of causation.

Monarch Steamship Co Ltd v A/B Karlsshams Oljefabriker on the act of God/unforeseeable event breaks the causal link (causation), what is the context and outcome?

Context → Breach of contract occurred as ship was unseaworthy, which caused long delays. Then, war broke out and the government ordered the ship to Glasgow and could not deliver the cargo because of this.

Outcome - The court argued that the breach was caused by the inability to deliver and if the ship had arrived on time, delivery would have been possible, so the losses are due to the ship not being ready on time.

Lambert v Lewis on the unreasonable act by the claimant breaking the causal link (causation), what is the context and outcome?

Context → Car owner knew that the trailer hitch was broken, leading to a serious accident

Outcome → This did not amount to compensation, as the car owner already knew that the hitch was broken.

Quinn v Burch Bros (Builders) Ltd provides a test/question for contributory negligence, what is it and what does it mean?

The question is “Did C’s negligent actions break the chain of causation?”

Hadley v Baxendale provides a two part test for remoteness (test for foreseeability), what is it?

There are two limbs of enquiry. Losses recoverable are:

1. implied knowledge what all reasonable people know and expect

2. whether actual knowledge was drawn to D’s attention

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd on applying the Hadly v Baxendale (test for foreseeability in relation to remoteness)

Context →C’s laundry company bought a boiler from D and installation was delayed. C sought damages for profits. D knew C needed a boiler for business.

Outcome → The court applied applied Hadley v Baxendale, such as the reasonable, foreseeable losses and this depended on what D knew and would D have foreseen this loss if they thought about possible breach

Parsons (livestock) ltd v Uttley Ingham & Co Ltd on applying the Hadly v Baxendale (test for foreseeability in relation to remoteness)

Anyone would have expected that if the storage was defective, the pigs will be sick in some way and there is no need to know the exact disease, the pigs will be sick in some way and suffer regardless.

Brown v KMR Services Ltd on applying the Hadly v Baxendale (test for foreseeability in relation to remoteness)

losses of the type that occurred were foreseeable, even though the scale/severity was not

The Achilles provides a counter-test for Hadley v Baxendale which is the ‘assumption of responsibility’ test, what does the test entail?

The test/question is “whether the loss was a type of loss for which the party can reasonably be assumed to have assumed responsibility.”

• we look at the context of the industry - IMPORTANT

• then apply the test and question, using that context to develop this

When do we use the Hadley v Baxendale test? or the Achilleas Test?

We apply the Hadley v Baxendale test GENERALLY.

John Gubbons case outlined that we use the Achilleas test in certain circumstances

• unless there is something in the CIRCUMSTANCES such as the nature of the contract, commercial ground or other SPECIAL circumstances, we use the Achilleas ‘assumption of responsibility’ test, rather than the Hadley v Baxendale test.