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Damages

Introduction
Main purpose: to compensate the innocent party for the
losses he has suffered as a consequence of the breach.

Not to punish the defaulting party: Milicent Rasalind


Danker [2011] MLJU 452

Puts the injured party back as close to the position he


would have been in had the breach never occurred

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s.76
A person who rightly rescinds a contract is entitled to
compensation for any damage which he has sustained
through the non-fulfilment of the contract

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Haji Ahmad Yarkhan v Abdul Ghani & Anor
AIR 1937 Nag 270
[T]hese words [through the non-fulfilment of the
contract] indicates [a] distinction when any
contract is avoided for breach, it remains operative as
to the past and so claims for restitution in respect of
acts of performance prior to the rescission are
precluded.

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1. When any contract is avoided for breach
it remains operative as to the past
claims for restitution in respect of acts of performance
prior to the rescission are precluded.

2. When it is rescinded for lack of free will (fraud etc)


the act has retrospective effect
the contract is rescinded ab initio
just as if it had never been in force
restitution is all that can be claimed

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Categories of damages
1. Pecuniary losses : financial and material losses
2. Non-pecuniary losses : non-financial loses, eg
physical pain, injury to feelings or mental distress
3. Liquidated damages : damages which are agreed and
fixed by the parties at the time they enter into the
contract as the sums payable in the event of a breach
4. Unliquidated damages : damages which are not fixed
in the contract and have to be assessed by the court
in the event of a breach

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5. Nominal damages = damages which are granted
where there is a breach of contract but the plaintiff
has suffered no loss or is unable to prove his actual
loss.
Eg purchaser refuses to complete the purchase of a
property and the vendor, subsequently, secures a new
purchaser at a higher price. Vendor has suffered no loss
from the breach. Court may award nominal damages
because of the breach

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6. Exemplary damages

Main purpose of damages is not to punish, but court


may award exemplary damages to punish D because of
his conduct leading to the breach
Dennis Sennyah [1963] 1 MLJ 95: breach of promise to
marry. Date of marriage had been fixed and expenses
had been incurred. Later, D refused to proceed with the
wedding. Court granted special damages for the
expenses incurred and, also, exemplary damages to
punish the defendant for his conduct in the breach.

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Note: To discuss the two broad categories only:

1. Pecuniary losses and

2. Non-pecuniary losses

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Pecuniary Loss
There are two types of interests are protected by a

grant of damages in the form of pecuniary losses:

Expectation loss (loss of profit)

Reliance loss (wasted expenditure)

You cannot claim for both

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i. Expectation Loss
Parties enter into contract with expectation that it will be
performed in accordance with the terms of the contract.
Thus, expectation loss puts the innocent party in the
position that he would have been in had the contract been
performed as agreed
Eg X agrees to buy a house form Y for RM500,000. Y later
refuses to complete the sale because the market price of the
house had risen to RM800,000. Had the contract been
performed as agreed, X would have obtained a house worth
RM800,000.Xs expectation loss is RM300,000.

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ii. Reliance Loss
Reliance loss/wasted expenditure puts the innocent
party in the position as though no contract had been
made.
Eg X agrees to build a garage for Y. In reliance on the
contract, C buys the raw materials needed for a garage. Y
then changes his mind and decides not to have a garage
at all. The reliance loss that X suffers from Ys breach of
contract is the cost of the raw materials as these are Xs
wasted expenses.

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Non-pecuniary loss
1. Physical loss, injury, inconvenience, discomfort
May be recovered if within the contemplation of the
parties as likely to result from the breach
Hobbs and Wife v The London and South Western
Railway Company
Damages awarded for physical inconvenience suffered
by P and his family, who were set down by Ds railway
company at the wrong station late at night. Had to walk
5 miles home in the drizzling rain as no available
transportation or accommodation.
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2. Injury to feelings and mental distress
No: Addis v Gramaphone
It would lead to unfounded claims, particularly since
injury to feelings is difficult to prove and to quantify
in monetary sense
Unless contract was entered into to provide mental
satisfaction, enjoyment or peace of mind : Jarvis v
Swan Tours
P booked 15-day winter sports holiday in Switzerland
that was advertised to have house-party and range of
activities
First week with 13 people and second desolate week
with inferior quality entertaintment

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Remoteness of Damage
Innocent party in a breach of contract is entitled to
claim damages for all the losses he has suffered which
are not too remote from the breach.
Hadley v Baxendale

If too remote, the plaintiff is not entitled to


compensation ie losses must be reasonably related to
the contract
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s.74 (1)
When a contract has been broken, the party who
suffers by the breach is entitled to receive, from the
party who has broken the contract, compensation for
any loss or damage caused to him thereby, which
naturally arose in the usual course of things from the
breach, or which the parties knew, when they made
the contract, to be likely to result from the breach of
it.

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Hadley v Baxendale lays down 2 types of damages which
may be awarded:
1. Damages which arise naturally or in the usual course of
things (1st limb) imputed knowledge (should know)
2. Damages which may reasonably be supposed to have
been in the contemplation of both parties at the time
when they made the contract to arise as result of the
breach (2nd limb) ie damages arising from special or
exceptional circumstances actual knowledge (must
know)

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s.74 (2)
Such compensation is not to be given for any remote

and indirect loss or damage sustained by reason of

the breach.

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Mitigation of damages
In considering the damages that should be awarded, court
takes into account whether P has taken reasonable steps to
mitigate his losses immediately upon breach.
Failure to do so can result in a reduction of damages

British Westinghouse Electric (HL)


First principle to compensate for loss is qualified by the
second, which imposes on a pl the duty of taking all
reasonable steps to mitigate the loss as a consequence of the
breach
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Three main principles of mitigation:

1. P will not be able to recover damages for avoidable


losses it should have avoided;

2. If P avoids a loss, damages are not recoverable for


that loss; and

3. Money spent in mitigating or attempting to mitigate


losses is recoverable.

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Kebatasan Timber Extraction v Chong Fah
A contracted to supply timber to R, to be delivered at the
site where R had erected a sawmill. Three lots delivered.
The second lot, instead of being delivered to the mill,
was dumped more than 500 feet from the mill. R bought
new timber elsewhere, as substitute of the second lot
and claimed for the cost of doing so. Damages of
$13,192.41.
Held R had a duty to take reasonable steps to mitigate
loss. Instead of spending money to buy new timber, he
should have arranged to haul the logs to the sawmill,
which would have cost about $1,000. Thus, he was only
awarded $1,000.

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s.75: Liquidated Damages
When a contract has been broken, if a sum is named in the
contract as the amount to be paid in case of such breach, or
if the contract contains any other stipulation by way of
penalty, the party complaining of the breach is entitled,
whether or not actual damage or loss is proved to have
been caused thereby, to receive from the party who has
broken the contract reasonable compensation not
exceeding the amount so named or, as the case may be, the
penalty stipulated for.
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Specific Performance
Introduction
An order of court directing D to perform according to
the terms of the contract he has made
SP involves the enforcement of a contract.
Therefore, there must be in existence a valid and
enforceable contract.
Court does not have jurisdiction to grant SP if no
contract was entered or contract is void or voidable
and have been avoided or contract is discharged before
trial of action (eg by frustration).
Equitable jurisdiction for granting SP is in Specific
Relief Act 1950.

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Contracts which may be specifically enforced: ss11-19
SRA

Contracts which cannot be specifically enforced: s 20

Discretion of court to grant SP

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1. Contracts which may be specifically
enforced
S11(1)(a): when the act agreed to be done is in the performance,
wholly or partly, of a trust
S11(1)(b)when there exists no standard for ascertaining the actual
damage caused by the non-performance of the act agreed to be done
S11(1)(c): Money not adequate relief

Note: s.11(2) : Rebuttable presumption that in a breach of contract to


transfer immovable property, money is inadequate compensation
and contract should be specifically enforced. Def to rebut
presumption
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Zaibun Sa v Loh Koon Moy
Purchaser claimed SP of contract for sale of land. There was
oral agreement that if vendor defaults, V to pay $5,000.
Trial J: Oral agreement proved that Vs breach could be
adequately relieved by compensation in monetary terms.
Therefore, this displaces presumption in section 11(2)
PC: Fact that there is a provision for liquidated damages does
not bar relief for SP. S11(2) to be read with s11(1)(c) ie money
not an adequate relief. On fact, land in question of particular
importance to purchaser since here was mining operations in
neigbouring land. Therefore, presumption in s11(2) was not
rebutted. SP granted.

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Sekemas Sdb Bhd v Lian Seng Co Sdn Bhd
Respondent (vendor) agreed to sell land to appellant
(purchaser). A defaulted in paying balance of purchase
price. R sued for SP of agreement ie that A complete the
purchase.

Held SP granted to R. A appealed on ground that


money was adequate compensation and SP ought not be
granted.

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SC: S20(1)(a) where non-performance can be adequately
relieved by compensation in monetary terms, no SP will be
granted.

S11(2) presumption that in contract for sale of movable


property, monetary compensation is not an adequate
remedy.

S20(1)(a) is of general application. S11(2) deals specifically


with contract for sale of land. Therefore, S11(2) prevails in
cases of contract dealing with SP of land. Court granted SP.

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Compensation in addition to/in substitution of SP
S18(1) grants power to the court to award damages in
addition to or in substitution of SP.

S18 applicable only where court has the power to grant


SP.

Also means that purchaser has claimed for SP.

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2. Contracts which cannot be specifically
enforced
S20(1)(a): money is not an adequate relief
S20(1)(b): Contract where constant supervision
required, Contract for personal service
S20(1)(c): Contract the terms of which the court
cannot find with reasonable certainty
S20(1)(g): Contract the performance of which
involves the performance of a continuous duty
extending over a longer period than 3 years from
its date
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Discretion of court to grant SP
S21(1) : jurisdiction of court to grant SP is
discretionary
S21(2): when court may exercise discretion not to
grant SP:
(a) when contract gives P unfair advantage over D.
(b) where performance of contract would involved
hardship on D which he did not foresee whereas its non-
performance would not involve hardship on P.
S21(3) : May exercise discretion to grant SP where P has
done substantial acts or suffered losses in consequence
of a contract capable of SP.
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INJUNCTIONS
Injunctions are preventive reliefs and provisions for
the granting of injunctions are contained in Part III of
Specific Relief Act 1950: ss50-55.

S50: Injunctions are granted at the discrtion of the


court

Injunctions may be permanent or temporar

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1. Temporary injunctions
S51(1) : temporary injunctions ie continue until a
specified time or until further order of court.

May be granted at any period of a suit

Purpose is to preserve status quo of parties pending


trial.

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2. Perpetual Injunction
s51(2)

Granted upon the merits of the suit.

Made at the hearing of the suit.

Provisions for perpetual injunctions also found in


Ss52-55.

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3. Prohibitory injunction : order of court to forbid
or restrain a wrongful act: s52
4. Mandatory injunction: s53: when to prevent the
breach of an obligation, it is necessary to compel
the performance of certain acts which the court is
capable of enforcing.
5. Mareva injunction to prevent D from defeating
a judgment which may be obtained against him
by removing assets out of jurisdiction or
dissipating them within jurisdiction. Must not be
abused in the sense that it should not be used to
pressurize D into paying or unjustly interfering
with Ds business.

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End