SOME PROBLEMS O F BREACH

OF CONTRACT
ONEof the most perplexing problems in the English law of contract
concerns the remedies which one contracting party has in the event
of the other’s failure to perform in accordance with the contract.
One reason for the difficulty is that discussions of t h i s problem are
often widely scattered in the books, with the result that very
different solutions are proposed for problems which appear to be
basically similar. At the same time precisely the opposite fault is
to be found, in the search for uniform concepts to solve problems
containing elements which are significantly dissimilar. The con-
ceptual apparatus which has been built up for these purposes is
formidable and confusing. Thus it is said that the effects of a
breach depend (at least sometimes) on whether it is “ fundamental ”
or ‘‘ goes to the root of the contract ”; on whether it “ substan-
tially ” deprives a party of what he contracted for; on whether
promises are ‘‘ independent ” or “ concurrent ”; on whether the
performance of one party’s promise is a ‘‘ condition precedent ” to
the liability of the other; or on whether the breach is one of ‘‘ con-
dition ” or only one of ‘‘ warranty.” N o doubt this kind of
analysis corresponds with, and is therefore necessitated by, the
language of the relevant cases and statutes. These materials have
been subjected to much acute and illuminating discussion’; and
there would be no point in adding to this. The object of this
article is rather to consider, in the context of the proposal to codify
the law of contract, whether a new approach can be made to these
problems, free from the vague and obscure conceptualism of the
present law, and based more directly on practical considerations.
This will involve in the first place an emphasis on the distinct
nature of the problems which may arise from defective perform-
ance ; secondly, a discussion of the practical effects of possible
remedies; and finally a discussion of the respective interests of the
parties in using (or in resisting the use of) one particular remedy as
opposed to another. It cannot of course be pretended that such an
approach will remove the difficulties of deciding individual cases in
a field which is “ characterised by indefinite gradations.” la But
this article will have amply served its purpose if it diverts discussion
of this subject from its present conceptual plane to a more practical
level.

1 Culminating in Lord Devlin’s recent article in [1966] C.L.J. 192.

I* Fuller and Braucher, Basic Contract Law, p. 617.
189
140 TEE MODERN L A W REVIEW VOL.30

1. DIFFERENT
“ RESCISSION
” SITUATIONS

The question whether a party can (‘rescind ” a contract arises in

a t least three different situations : where tender of defective per-
formance is rejected; where defective performance is actually
rendered: the party complaining of the defect may wish to return
it and to recover back his own performance, or he may simply
refuse to pay for it or to perform some other counter-promise; and
where defective performance is made in the course of a contract
involving continuing reciprocal obligations.
In the first case, where A tenders defective performance to B,
the question is whether B is justified in refusing to accept and pay
for it. If the contract is one for the sale of goods, the stock answer
varies according to whether the defect is qualitative or quantitative.
A qualitative breach is said to justify rejection if it amounts to a
breach of condition, but not merely if it amounts to a breach of
warranty 2; and this distinction is thought, a t least generally, to
reflect the seriousness of the defect in performance. But if the
defect is quantitative, rejection is justified in any event * (subject
to the de minimis principle): such a breach need not (‘go to the
root of the contract ” or be (‘substantial ” or seriously prejudice
the other party at all. Can this distinction be justified ? “radition-
ally it is said that it would cc force a new contract ” on the buyer
to make him take more, or less, than he contracted for (subject to
damages); but this may be as much the case where the defect is a
qualitative one which does not, under the present law, justify rejec-
tion. If there are practical commercial reasons for the distinction
they have not, so far as the present writer is aware, been stated in
any of the authorities on the subject.
In the second situation, where A’s defective performance has
actually been received by By the question whether B can repudiate
is again said to depend on the seriousness of the defect. This
criterion is applied where a contract to build is defectively per-
formed 5 ; and in contracts for the sale of goods B’s liability is
again said, a t least prima facie,0 to depend on whether A’s breach
is one of condition or one of warranty. But it seems odd to use
even the same verbal formula in this situation as in the first, for
actual performance by one party is liable to give rise to problems
(such as unjust enrichment) which are much less likely to occur
where performance has not yet been received. It is arguable that
there should be a sliding scale: the further performance has gone,
the more serious the defect has t o be to justify rejection. The
English law of sale may accept one end of this scale. Very serious
defects ((( fundamental ” breaches) may justify rejection where

2 Sale of Goods Act 1893, 8. 62 (1);cf. 8. 53 (1).

Ibid. 8. 30.
4 Cunliffe v. Harrison (1851) 6 Ex. 903, 906.
5 Hoenig v. Zsaaos [1953] 2 All E.R. 176.
6 i.e., subject to the limitations on the right to reject to be mentioned below.
MAn. 1967 SOME PROBLEMS OF BREACH OF CONTRACT 141

the right to reject for serious breaches (breaches of condition) has

been lost by acceptance or by passing of property.T But less serious
breaches (breaches of warranty) never justify rejection a t all. It is
at least arguable that in this last respect the law of sale should
follow the more flexible approach adopted in charterparty cases,
where it is recognised that such ‘‘ less serious ” breaches do justify
repudiation where the contract is still executory.8
The law of sale does of course recognise the importance of
execution as limiting the right to reject, e.g., by acceptance.”
But its provisions in this respect should be contrasted with the
rule in building cases, which absolves the owner from all liability
to pay for seriously defective performance unless a ‘(new contract ”
can be inferred from the ‘(voluntary ” acceptance of a benefit.e
The buyer who complains of defective performance is in a less
favourable position, for, even if clause 4 of the Misrepresentation
Bill becomes law, the “ acceptance ” required to bar his right to
reject need not amount to evidence of a “ new contract.” It is
arguable that these solutions are the wrong way round. The prob-
lems of unjust enrichment which arise from upholding a refusal to
pay are much more acute in a contract for work than in a contract
for goods, especially if the goods are in a returnable state. Even
where work has been “ voluntarily ” accepted, the remedy is not
for the contract price but for a reasonable s u m ; while (‘accept-
ance ” of defective goods gives rise to an action for the price, less
damages. There is, again, no very obvious reason for this
distinction.
Another bewildering set of inconsistencies emerges from a
consideration of the rules which determine the effect of breach on
the guilty party’s claim to some form of restitutionary relief (as
opposed to an action for the agreed sum). The insistence in Sumpter
v. Hedges lo that no such relief is available unless a (‘new
contract ” can be inferred is one of the greatest stumbling-blocks
to the sensible development of English law on this subject. Its
result may often be that the innocent party gets something for
nothing,ll while the opposite party is unduly penalised. There is,
for example, an element of penalty in the rule that a servant who
leaves in breach of contract or who is justifiably dismissed is not
entitled to his current pay 12; and recognition of this fact has led
in some common law jurisdictions to a refusal to follow the rule lS
7 Sale of Goods Act 1893, 8. 11 (1) ( c ) .
8 e.g., Hongkong Fir Shipping Go. L t d . V. Kawasaki Kisen Kaisha Ltd. [1962]
2 Q.R. 26, 56; cf. Restatement, Contracts, 8. 275, Comment (a).
Q Sumpter v. Hedges [1898] 1 Q.B. 673.
10 Supra.
11 It may be worth pointing out that in Eshelby V. Federated European Bank
19321 1 K.B. 423 the action was brought against a surety, so that the
6efendant was not enriched as a result of a decision which appears to treat
the builder with some harshness.
12 Boston Deep Sea Fishing ct Ice Co. v. Ansell (1888) 39 Ch.D. 339.
18 The leading authority in support of this refusal in Britton v. Turner, 6 N.H.
481 (1834).
142 THE MODERN LAW REVIEW VOL. 30

or its modification or abolition by statute.14 The element of

penalty grows, of course, the less serious the defect is, and the
further performance has gone. Both these factors were stressed in
the early development of the first common law mitigation of the
rule, that is, of the doctrine of substantial performance.” 15
Other existing mitigations are to treat the contract as (‘sever-
able ” l6 or to say that the defendant has waived ” the breach
((

and so can be sued for the entire contractual s u m , less damages.

The need for these, and further, modifications of the strict rule of
non-recovery becomes all the greater in view of the increasing
technological complexities involved in many modern contracts for
the execution of works or the manufacture of machinery.18 Exact
performance in such cases often becomes a practical impossibility.
In some kinds of contracts, the parties commonly provide their own
modification of the rule by stipulating for progress payments. This
practice tends to prevent the occurrence of really outrageous unjust
enrichment: even in Sumpter v. Hedges the defaulting builder
“ had received payment of part of the price.” l9
The unsatisfactory nature of the doctrine of that case may be
further illustrated by the apparently bizarre distinctions which
prevail where contracts for the carriage of goods by sea are partially
performed. Here it is well established that (1) there is no right to
freight pro rata where goods are delivered short of their agreed
destination; but that (2) there is such a right where part of the
goods is carried to that destination and that ( 8 ) there is a right to
the full freight (less damages) where the whole of the cargo is
carried to the agreed destination but in a damaged condition.2o It
could of course be argued that in the first case the cargo-owner has
not got any of the bargained-for benefit, while in the second case
he does get a quantifiable part of what he bargained for and in
the third the whole of what he bargained for less a quantifiable
deduction. But these are questions which. depend on the facts

14 See 43 Harv.L.Rev. 647. Merchant Shipping Act 1894, 8. 156 (reversing the
common law rule that “ freight is the mother of wages ”) appears to be based
in part of the same policy.
1s Thus in Boone V. Eyre (1785) 1 H.B1. 273n. Lord Mansfield stressed the
relatively unimportant nature of the defect; while Ashhurst J. in another
report (2 W.Bl. 1312, 1314 n.(t)) 8180 stressed th86 fact that the contract was
executed.
10 Ritchie V. Atkinson (1808)10 East. 295.
11 I n Clark v. West, 193 N.Y. 549, 86 N.E. 1 (1908) a;: author undertook “ to
totally abstain from the use of intoxicating liquor while writing a legal
textbook. The publishers undertook to pay him $2 per page plus an additional
$4 per page if he abstained. The author drank in moderation while writing
the book but the publishers knew this and did not object. Held, they had
waived the stipulation and were liable to pa9 $6 per page.
18 “ The simple and the u n e r m will call for different remedies from the multi-
farious and the intricate : per Cardozo J. in Jacob a? Young8 V. Kent, 129
N.E. 889, 890 (1921).
10 [1898] 1 Q.B. a t p. 673.
23 See Scrutton, Charterpartiee, 17th ed., 8 8 . 144-146 for a full statement of the
law on these points and for the supporting authorities.
MAR. 1967 SOME PROBLEMS OF BREACH OF CONTRACT 143

of individual cases. A person who contracts for goods to be carried

from Batavia to Rotterdam may not benefit at all if they are
discharged at Mauritius 21; but it does not follow that carriage to
a distant place where there is a market for the goods will not
benefit him simply because the place is not the precise one to which
it was agreed that the goods should be carried.22 On the other hand
cases are imaginable in which the carriage to the agreed destination
of part only of goods for use is not in fact beneficial at all.
Where the failure in performance is not due to breach but to
frustration, the rule of non-recovery has already been substantially
modified (though not wholly abrogated) by the Law Reform
(Frustrated Contracts) Act 1948; and it is arguable that these pro-
visions should be extended and applied so as to make some form of
restitutionary relief available where the failure is due to breach.
The distinction between frustration and breach is not so firmly
based on moral considerations as to justify the imposition of what
is in substance a penalty in the latter case. It is for example hard
to see why a builder who is disabled by a credit squeeze should
be more harshly treated than one who is disabled by supervening
illegality brought about by Government regulations. Perhaps the
line should be drawn according to whether the breach is " deliber-
ate ') or not,* though even this proposition may be too general.
A " deliberate ')breach may represent a perfectly honest attempt
to do the best to perform a contract in changed circumstances
falling short of frustration. Again, the case is put by Corbin 24 of
a workman who in breach of contract leaves his employer for a
better job but thereby does little or no harm to the employer. It
is by no means obvious that he should forfeit his current wages.
Perhaps the notion of acting with reasonable regard for the interests
of the other contracting party would provide a better criterion
than the idea of " deliberate " breaches.
There is a third '' rescission " situation which may arise where
a contract calls for continuous acts of performance on both sides.
This situation arises, typically, where one party commits a breach
of an instalment contract. In these cases there is usually no serious
problem of unjust enrichment since all the instalments except one
have been paid for, and even that one may be in an easily return-
able state. The problem is rather whether the innocent party is
to be forced to undertake risks substantially different from those
which he agreed to bear. Problems of this kind will be further
discussed below.

21 Vlierbloom v. Chapman (1844) 13 M. & W. 230.

22 I t is, for example, quite possible that the cargo-owner did get a benefit in
the circumstances of St. Enoch SS. Co. v. Phosphate Mining Co. 19161 2
K.B. 624 (phosphate rock carried from Florida and discharged at kuncorn
when delivery at Hamburg in accordance with the contract became ille al).
23 Cf. Restatement, Contracts, 8. 275 (a) and illustration; Bowen V . Ifiimbell,
23 Mass. 364, 89 N.E.549 (1909).
24 Contracts, s. 1123.
144 TEE MODERN LAW REVIEW VOL. 30

2. EFFECTS
OF REMEDIES
It is necessary to turn to remedies for defective performance. Here
“ remedies ” will be used in a broad sense to include a number of
possible courses of action (or inaction) which the party who wishes
to complain of defective performance may wish to take. These
include (1) legal action for damages; (2) refusal to perform, either
a t all or in accordance with the contract; ( 8 ) the return of the
defectively rendered performance or the refusal to accept it; and
(4) a legal action to recover back the performance already rendered.
The problem is to determine how the choice between these remedies
should be made. The general aim obviously should be to give the
innocent party the remedy which best protects his interests, so
long as this causes no undue hardship to the other party and is
not objectionable on other policy grounds. It is of course tempting
to stop here and so to leave the whole problem to the discretion of
the But it is unsatisfactory to give judges, and more
particularly lawyers advising clients, 80 little guidance.2s Two
important questions require careful investigation. What practical
effects will result from the grant of one remedy rather than the
other? What interest has one party in seeking (and the other in
resisting) one remedy rather than another? Where the agreed
performance is still physically possible, and the issue is between
specific performance and damages, these questions are a t any rate
raised in the discussions on the subject. Thus in suits for specific
performance the courts consider such factors as the cc adequacy ’’
of damages, though their views on this matter may be open to
But where the issue is between damages and (‘rescis-
sion ” (which also sometimes provides a kind of specific relief) the
question whether damages are an ‘(adequate ” remedy is hardly
ever squarely raised in the modern English cases on the subject.28
I n some of the nineteenth-century cases these problems were
approached in a much more satisfactory way, and this approach still
prevails in some common law jurisdictions. In Bradford v.
Williams 28 a charterer broke a time charterparty by failing to
provide cargo as agreed. It was held that the shipowner was
justified in throwing up the charterparty, as (‘no cross-action for
damages would have fully compensated him.”80 Such a cross-
claim might be defeated by proof that he had failed to mitigate the
loss; and he might find it difficult to secure substitute employment

23 Cf. Corbin, Contracts, 8. 691: “ I n ;he final analysis, the decision is not B
matter of law but one of conscience (Vol. 3A, p. 329) and ibid. at p. 248:
such questions are to be decided “ on the basiia of what the court thinks
justice requires.”
26 Cf. Wolff, 16 Cornell L.Q. 180 (1930).
2: For the present writer’s views on this question, see [1966] J.B.L. 211.
28 An exception is Maple Flock Co. Ltd. 9. Unimemal Furniture Products
(Wembley) Ltd. [1934] 1 K.B. 148.
29 (1872)L.R. 7 Ex. 259.
80 At p. 269.
MAR.1967 SOME PROBLEMS OF BREACH OF CONTRACT 145

for his ship for precisely the period during which the charterer
remained in breach. On the other hand in Simpson v. Crippin 81
it was held that a seller of coal by instalments was not entitled to
repudiate on the ground that the buyer had not, in the f i s t month,
collected the agreed monthly quantity. Blackburn J. said: ‘‘NO
sufficient reason has been urged why damages would not be a
compensation for the breach by the plaintiffs ’’ 32 (i.e., the buyers).
The approach of these two cases is entirely practical; the decisions
are based on the effectiveness of damages as a remedy 33 and not on
vague concepts such as the ‘‘ root ’’ of a contract. The same
practical approach explains the distinction between the two leading
cases of Bettini v. Gye 34 and Poussard v. Spiers,S5though the more
quotable parts of the judgments have obscured this fact.36 The
main reasons why the impresario in the f i s t case was not justified
in throwing up the contract was that the singer’s breach caused him
little prejudice, while the singer had, on the other hand, kept him-
self idle for three months in reliance on the agreement.3T But in
Poussard v. Spiers, the impresario was in precisely the sort of
difficulty which confronted the shipowner in Bradford v. Williams :
for how long, if held to the contract, should he hire a substitute? 38
In the books, the tendency is to lay stress largely on Blackburn J.’s
general statements, involving the well-known references to breaches
“ going to the root ” 89 of the contract; but it is submitted that
the practical considerations leading to the decisions deserve much
greater stress than they usually receive.
The discussion of the practical issues involved in these cases is,
it is submitted, along the right lines, though it may sometimes be
brief or even cryptic.qo It is not always clear just what factors the
judges had in mind when assessing the “ adequacy ” of one remedy
as opposed to another. A somewhat fuller discussion of these
matters may be found in the New York case of Donovan v. Aeolian
C O . ~The~ plaintiff bought from the defendant a piano which was
warranted new. Two years later she decided to resell it, and it was
then discovered that at the time of the original sale to her the piano
was five years old and had been rebuilt. Her action to recover
back the purchase price failed for a number of reasons, one of

31 (1872) L.R. 6 Q.B. 14.

82 At p. 17.
33 Cf. Restatement, Contracts, 8 . 275 (b).
34 (1876) 1 Q.B.D. 183.
35 (1876) 1 Q.B.D. 410.
313 The criticism of these caees by Gow, Mercantile and Industrial Laict of
Scotland, pp. 212-213, may be properly directed a t these passages, but not
(it is Submitted) a t the actual process by which the cases were decided.
37 (1876) 1 Q.B.D. 188, especially the last two paragraphs.
38 (1876) 1 Q.B.D. a t p. 415, especially the second paragraph.
39 (1876) 1 Q.B.D. a t DD. 188 and 415.
40 One woula, for example, like to know just what sort of factors would, in
Blackburn J.’s view, have made damages an inadequate remedy in Simpson v.
Crippin, supra.
41 270 N.Y. 267, 200 N.E. 616 (1936).
14% TEE YODEBN LAW REVIEW VOL. 30

which, in the words of Lehman J., was that the previous use of the
piano " affected its market value. It did not affect its tone. The
plaintiff used it as long as she wished. She was damaged only
because she paid for an old piano the price of a piano which was
warranted as new. For these damages she is entitled to compensa-
tion. By choosing the alternative remedy of rescission, the plaintiff
has obtained more than the damages which she has sufiered and
more than she is entitled to receive. "41a ...
The court here is
not concerned with vague concepts or mechanical distinctions, but
solely with the practical effect of granting one remedy rather than
another.
By the way of contrast, reference may be made to two cases
decided in England by one of the strongest Courts of Appeal in
history, consisting of Bankes, Scrutton and Atkin L.JJ. The first
is Re Moore 4 Landauer 42 where a buyer of tins of fruit stated to
be packed in cases of thirty tins each was held entitled to reject
the whole consignment on the ground that half the cases contained
only twenty-four tins each. He was so entitled in spite of the fact
that the seller tendered the whole quantity ordered and in spite of
a finding that there was no difference in value between t i n s packed
in cases of twenty-four and thirty tins. The structure of the judg-
ments of Bankes and Atkin L.JJ. is entirely abstract and " logical."
The term as to packaging was part of the " description " of the
goods within sections 18 and 80 ( 8 ) of the Sale of Goods Act 1898;
accordingly the seller had supplied contract goods mixed with goods
of a different description; hence it followed that the buyer could
reject. Only Scrutton L.J. gives a practical justification for the
result, but even that is hypothetical: " A man who has bought
under a contract thirty tins to the case m a y have sold under the
same description, and m a y be placed in considerable difficulty by
having goods tendered to him which do not comply with the
description undm which he bought or under which he has resold." 48
There was in fact no evidence that anything of this kind had hap-
pened. To repeat the words of Blackburn J. in Simpson v. Crippen,
" No sufficient reason has been urged why damages would not be a
compensation for the breach . . ."
There is not even in the reports
any trace of a " collateral " motive 44 which might explain, even
if it did not justify, the desire of the buyers to reject.
Two years later the same court decided Rowland v. D i ~ a l l . ' ~
This time there is not a single word in any of the judgments which
attempts to correlate the result with the actual loss suffered by
the plaintiff, or, in other words, to determine whether the plaintiff
would as a result of the court's decision obtain " more than the
damages which he has suffered." To show that this is a question
41a 200 N.E. a t p. 817.
-42 rigail a K.B. 519.
4a At p.-525 (italics supplied).
44 e.g., market fluctuations, discussed below.
43 [1923] 2 K.P 500.
3 1 ~ 1967
~ . SOME PROBLEMS OF BREACH OF CONTRACT 147

of great difficulty, it is worth restating the facts. The plaintiff was

a car dealer. In May 1922 he bought an Albert car from the defen-
dant for 2384. He then repainted the car and in July he resold it
to a Colonel Railsdon. In September the car was seized by the
police as it had (unknown to any of the above parties) been stolen.
The plaintiff thereupon repaid Colonel Railsdon the 2400 and sued
the defendant for the return of the E334. What had the plaintiff
lost ? Possible answers include : (i) E4OO; (ii) 2884 plus the cost
of repainting; (iii) the value of the car when it was seized (taking
into account on the one hand the repainting and on the other hand
any depreciation); (iv) E334 less an allowance for the benefit
derived by the plaintiff (and perhaps also by Colonel Railsdon)
from the use of the car; (v) the value of the car when it was seized,
less the same allowance. In (iii) and (v) there is the further compli-
cation that “ value ” might mean replacement value or the amount
for which the buyer could have resold: which of these is greater
depends on whether the buyer is a dealer or a private user. No
attempt is made to determine on which of these bases (or on what
other basis) the buyer’s loss ought to have been quantified. The
structure of the judgment is again entirely abstract and ‘(logical.”
Because the defendant was in breach of condition, therefore the
plaintiff was entitled to rescind, “ unless something happened to
change that condition into a warranty.’’ 46 There is no discussion
from a practical point of view of the question whether the plaintiff
ought (as Bray J. thought) to be “limited to his remedy in
damages.” It is indeed by no means clear just what the seller hoped
to gain by forcing the buyer to use this remedy, or whether the
buyer would have been 6‘ limited ” (i.e., worse off) had he put
forward such a claim. When the law as to remedies for defects of
title in goods was developing, in the nineteenth century, there was
nothing to suggest that the remedy for breach of warranty was an
inferior For in such an action the buyer may be able to
recover the purchase price plus any money spent on the goods 48-
that is, more than the buyer recovered in Rowland v. Divall.
Presumably the seller’s best hope in an action for breach of warranty
would be to argue that the damages should be based on the
“value” of the car when seized. Then if he had made a good
bargain he could keep the difference between the ‘‘ value ” and
the price. There is a statement in the Law Times report of Rowland
v. Divall on which such an argument could conceivably have been
based: ‘‘ The owner of the car had insured it against, inter alia,
theft. A claim having been put forward, the insurance com-
pany paid the owner the value of the car and took over the car
4fl At p. 503.
47 Thus Benjamin, Sale, 4th ed. (1888), states that in Eicholz v. Bannister (1864)
17 C.B.,(N.S.) 708 the buyer obtained restitution of the purchase price, and
adds: But there seems to be no reason to doubt that e,!t vendor would also
be liable for unliquidated damages for breach of warranty.
4 8 See Mason v. Burningham 119491 2 K.B. 545.
148 THE MODERN LAW REVIEW VOL. 30

themselves and then sold it to the plaintiff for €260.”49 Thus it was
the buyer and not the original owner who got the car in the end;
and perhaps the defendant wanted to rely on the figure of €260.
as evidence of the ‘‘value” of the car when it was seized. At
any rate he paid €260 into court49; but the Court of Appeal do
not tell us whether this would be the true measure of damages
for breach of warranty. In view of our ignorance on this vital
point, informed criticism of the actual result seems impossible.
In its Twelfth Report, the Law Reform Committee says 5 0 :
“I f it turns out that the seller has no right to sell, then, as
was decided in Rowland v. Divall ...
, there is a total failure
of consideration and the buyer can recover the full price of the
goods without any set-off for depreciation o r s 1 for any use
or enjoyment he may have had of the goods. We think this
is unjust and that the buyer should be entitled to recover no
more than his actual loss, giving credit for any benefit which
he may have had from the goods while they were in his
possession.”
With respect, the injustice of Rowland v. Divall is by no means
so self-evident that it can simply be asserted without argument ;
but setting that aside, the Committee’s own recommendation is
obscure and may, on some interpretations, create new injustices
and anomalies of its own.
What, for example, is meant by “ actual loss ” ? Does it mean
replacement value or the amount which the plaintiff could have
realised by resale; and for this purpose does it matter whether the
plaintiff is a private user or (as in Rowland v. Divall) a dealer ? Is
cc actual ” loss to be contrasted with, or may it include, conse-
quential loss? Or does it simply mean the loss recoverable in an
action for damages for breach of warranty ? Is ‘(giving credit . . .”
part of the process of assessing ‘(actual loss,” or is the ‘(actual
loss ’’ &st assessed and further credit then given? And for just
what is credit to be given? The f i s t of the two sentences quoted
in the last paragraph refers to two quite separate elements for
which there is not ‘(set-off ’) under the existing law: namely
depreciation ’) and c c use or enjoyment.” According to the
second of these sentences, credit is to be given “ for any benefit
which [the buyer] may have had from the goods ”: this appears
to refer to ‘‘ use and enjoyment ” without covering depreciation
merely through lapse of time. Yet if credit is to be given for
anything is it not ‘(depreciation ” rather than ‘(benefit ” which
ought to be taken into account? Suppose the car in Rowland v.
Diaall had been a taxi and that the buyer had in the four months
before it was seized made a net profit by its use of €200. Is it

43 129 L.T. 757. We are not told a.nywhere whether there was a “ market ” for
Albert cam.
50 Cmnd. 2958, para. 36.
51 Italics supplied.
MAR. 1967 SOME PROBLEMS OF BREACH OF CONTRACT 149

obvious that he should have to give credit for this sum in an

action against the seller ? On the other hand one can put the case
of a profit-earning chattel being in fact operated a t a net loss. It
seems that the risk of depreciation in such a case ought to be on
the buyer: but is that where the Law Reform Committee’s recom-
mendation pJts i t ? Again, if the buyer is a private user, how is
the “ benefit ” (if it is distinct from depreciation) to be assessed ?
One possible met,hod is to refer to the cost of hiring a car ; but this
would in effect force a hiring contract on a person who thought he
was buying-which may seem very much more unjust than the
decision in Rowland v. Divall. The trouble with these recommenda-
tions is that they share one basic fault with the reasoning of
Rowland v. Divall itself: they attempt to solve intricate and often
dissimilar problems by the use of a few overgeneralised concepts.
They do not, it is submitted, pay sufficient regard to the practical
effects of the proposed remedies in particular cases.

IN RESCISSION
8. INTERESTS
The foregoing discussion is meant to draw attention to what is, in
the present submission, the crucial issue in this branch of the law :
just what practical interest is at stake when a party seeks ‘‘ rescis-
sion ” of a contract? In some cases (such as Rowland V. Divall)
the problem is simply one of properly quantifying the amount of
monetary recovery. But outright rejection or refusal to pay for
defective performance raises more difficult problems. It calls for a
reconciliation of the clear commercial interests which one party
has in rejection and the other in a c c e p t a n ~ e . ~These
~ interests are
so obvious that they are in danger of being sometimes overlooked.
A buyer who has undertaken to pay cash on delivery will obviously
not want to pay for defective goods and be left to pursue his claim
for damages. Rejection combines, for him, all the advantages of
a specific remedy and self-help; it enables him to avoid the delays
of litigation as well as the risk that the seller’s credit may fail. If
the sale is on credit, the buyer’s interest in rejection is less strong,
since the damages can be set off against the price.53 But even here
an innocent party who wants to determine his precise liability
without recourse to legal proceedings runs the risk of quantifying
his damages wrongly; and he may also be prejudiced if some of
the loss he suffers as a result of having to accept defective
performance is regarded as too remote.
On the other hand, the party in breach may have equally strong
interests in acceptance: for example if the market has fallen, if he
has incurred expenses in making the defective performance, or if
the result of that performance has been to enrich the other party.55
52 For an excellent account, see Honnold, 97 0. of Pa.L.Rev. 457.
53 Sale of Goode Act 1893, s. 53 (1) ( a ) . For a similar rule in building contracts,
see Dakin d Go. Ltd. v. Lee [1916] 1 K.B. 566.
55 Restatement, Contracts, 8. 275 (c).
150 THE MODERN L A W REVIEW VOL. a0

The first of these interests will be more fully discussed below; but
at this stage it is worth stressing the distinction between the last
two. The expense of making a defective tender (e.g., at a distant
place) may be considerable but may not enrich the other contracting
party at all. It is obvious, also, that these two interests grow in
importance the further performance has gone.
The problem of reconciling, or compromising between, these
interests is a very difficult and delicate one. Can we, in attempting
to solve it, go beyond the usual generality that it is " unjust " to
compel a person to accept and pay for gomething which differs
" fundamentally " from that for which he bargained? It is sub-
mitted that something more can be said, and that the following
factors are relevant in shaping the law on this subject.

( 1 ) Consumers and Merchants

There is a strong case for saying that rescission is primarily a
consumer's remedy.5B A private consumer is often in a poor
position to resell and may therefore suffer considerable hardship if
he has to accept and pay for defective goods, especially if the defect
is not curable. On the other hand when goods not up to the con-
tractual standard are delivered to a merchant who has bought for
resale, he can often resell them without undue difficulty; and the
fact that he may on account of the defect get a lower price can be
allowed for by monetary compensation. The same may be true
where a commercial consumer buys raw materials, but probably
not where he buys machinery or other manufacturing plant.57 It
seems that businessmen are often satisfied with some form of
monetary adjustment, even if the breach is one of " condition "
as to quality or as to correspondence with the contractual descrip-
tion-so long as this does not result in a defect in documents which
have been used to finance the t r a n s a c t i ~ n . ~This
~ view is certainly
supported by the presence of " non-cancellation " clauses in some
of the agreements which have come before the courts.s9 It is also
forcibly stated by Scrutton L.J. in a number of cases. Thus when
Arcos Ltd. v. Ronaasen 65. Son was before the Court of Appeal he
said :
" The commercial mind and the legal mind are quite a t
variance as to the obligation of a seller and a buyer, the seller
having undertaken to supply described goods. . ..
The com-
mercial mind does not like rejection, very naturally, and is
inclined to take the view 'If I deliver something near the
description it can be put right by damages.' There have been
a whole series of cases in which the courts have been occupied
58 Llewellyn, 36 Col.L.Rev. 699, 712; 37 Col.L.Rev. 341, 388.
57 Llewellyn, 37 Col.L.Rev. at p. 369.
5s Cf. U.C.C., 8. 9-612 (2).
53 e.g., Montague L . Meye? L t d . v. Kivisto (1930) 142 L.T. 480; Smeaton
Hanscombe d Co. L t d . v. Sasson I . S e t t y , Son d Co. [1963] 1 W.L.R. 1468;
Hongkong Fir Shipping Co. v. Kawasaki Kisen Kaisha L t d . [1962] 2 Q.B. 26.
MAE.1967 SOME PROBLEMS OF BREACH OF CONTRACT 151

in telling the commercial man that if he wants to get this

interpretation he must put something to that effect in the
contract.” 80
But when the case came before the House of Lords, Lord Atkin
disagreed :
“ I do not myself think that there is any difference between
businessmen and lawyers on this matter. No doubt in business,
men often find it unnecessary or inexpedient to insist on their
strict legal rights. In a normal market if they get something
substantially like the specaed goods they may take them with
or without grumbling and with a claim for an allowance. But
in a falling market I find that buyers are often as eager to insist
on their legal rights as courts of law are ready to maintain them.
No doubt a t all times sellers are prepared to take a liberal
view as to the rigidity of their own obligations, and possibly
buyers who in turn are sellers may also dislike too much
precision. But buyers are not, as far as my experience goes,
inclined to think that the rights defined in the code are in
excess of business needs.”
It will be seen that a substantial shift of emphasis occurs in this
passage. The c c businessmen ” in the f i s t sentence become in the
end buyers (and perhaps even more narrowly, buyers who do not
buy for resale) on a falling market. Is it their view alone which
agrees with the law? It is hard to answer a question on which
Lord Atkin and Scrutton L.J. have expressed such opposing views;
and the answer to this particular question cannot in any event be
found by reading or analysing the law reports. But perhaps other
techniques now available can help us to find out what is the state
of the c c commercial mind ” on this question. Such a determination
is a t least one of the important factors which will have to be taken
into account in determining the future of the right to reject.

(22) Immaterial Defects

Under the present law there are some defects which give the right
to reject without any inquiry into their materiality: for example,
breach of the implied term as to correspondence with the contrac-
tual description.82 The Sale of Goods Act cannot be blamed for
this state of the law, which was settled before 1893.85 Should the
buyer have to show that the failure to comply with the description
impaired the commercial utility of the goods in a way which could
not be remedied by damages? The Uniform Commercial Code
imposes such a requirement where the contract is (in English

80 (1932)37 Com.Cas. 291, 292; cf. Green V. Amos Ltd. (1931) 39 L1.L.R. 229,
231; Hillas v. Arcos Ltd. (1931)36 Com.Cas. 353, 368.
61 [1933] A.C. 470, 480.
82 For a statutory statement of a similar rule, see Marine Insurance Act 1906,
8. 33 (3).
83 Bowes v. Shand (1877)2 App.Cas. 455.
152 THE MODERN LAW REVIEW VOL. 80

terminology) executed,Baor where it is an instalment contract

but where the contract is not for instalments and executory it gives
the buyer the right to reject “if the goods or tender of delivery
fail in any respect to conform to the contract.”BB Should English
law adopt such a wide view of the right to reject?
This problem arises in its most acute form where the party in
breach can show that his performance, though not in accordance
with the contract, was “ just as good.” In a contract for the sale
of goods the present position is that this does not affect the right
to repudiate. Thus in Bowes v. Shand Lord Blackburn said:
“ The parties have chosen, for reasons best known to themselves,
to say: We bargain to take rice, shipped in this particular region,
a t that particular time, on board that particular ship, and before
the Defendants [the buyers] can be compelled to take anything in
fulfilment of that particular contract it must be shown not merely
that it is equally good but that it is the same article as they have
bargained for.” 67
Where the contract is executory, this approach a t least does
not give rise to problems of unjust enrichment; and even where
the contract is wholly or partly executed these problems are not
too troublesome where the contract is for the sale of goods which
can be returned. But the extension of the same approach to other
cases may give rise to very great difficulties, which may be
illustrated by reference to the New York case of Jacob 4
Youngs v. Kent.6s The plaintiff agreed to build a house for
the defendant, the specifications calling for the use of ‘(Reading )’
pipe. The plaintiff inadvertently used other pipe and the owner
withheld the final instalment of the price ($3,500) unless
‘‘ Reading ” pipe was substituted. At this stage such substitution
would have necessitated the demolition of a, large part of the build-
ing. It was held that, if the pipe used was equal in quality, price
and value to c 6 Reading ” pipe the builder should recover his final
instalment, less damages. Normally these damages would be the
cost of completing the work in accordance with the contract. But
in this case the court rejected this measure as it would be ‘‘ grossly
and unfairly out of proportion to the good to be attained and
held that the correct measure of damages was simply the difference
in value between the contract work and that actually done. Thus
the owner would only get nominal damages; and this prompts the
question : how can he make sure that he will get what he contracted
for? One possibility is to stipulate “ by apt and certain
words ...that performance of every term shall be a condition of
6 4 8. 2-608.
0 5 8. 2-612.
63 8. 2-601.
6‘ (1877) 2 App.C88. 455, 480.
68 230 N.Y. 239, 129 N.E. 889, 23 A.L.R. 1429 (1921).
69 129 N.E. 889, 891.
70 Kessler & Sharp, Cases and Materials on Contracts, 546.
MAR. 1967 SOME PROBLEMS OF BREACH OF CONTRACT 158

recovery.”.ll It may also be that the difficulty only arises in the

particular circumstances of the case. The facts to be stressed are
the complex character of the entirety of the builder’s undertaking;
the practical impossibility of rectifying the breach at a reasonable
cost ; the inadvertent character of the breach; and the impossibility
of restoring to the builder the value of the work done. Thus, in
particular, the decision would not protect a builder who cc deliber-
ately ” departed from the specifications; nor would it normally
apply to contracts for the sale of goods. The most significant
difference between Jacob 8 Youngs v. Kent and the corresponding
English cases on building contracts appears to lie in the measure of
recovery for defective performance. In England this is generally
assumed to be the cost of putting the defect right.72 But this rule
has no compelling doctrine behind it, as can be seen by contrasting
it with the rule governing the measure of recovery for breach of
warranty of quality in a contract for the sale of goods: this is,
prima facie, the difference in value 75 and not the cost of remedying
the defect, where that is possible.

( 9 ) Abuse of the Right to Rescind

This problem is related to that of the immaterial defect. The term
cc abuse ” is of course to some extent question-begging. It is here
used to refer to the situation in which one contracting party uses
the fact of defective performance as an excuse for a refusal to
perform which is really based on quite a different motive; and of
course the obvious <‘ different motive ” is to be found in market
fluctuations. In Cunlifle v. Harrison a seller of wine delivered more
than the agreed quantity. It was held that the buyer was entitled
to reject ‘< although it may be that the refusal to take the wine
was not bona fide but grounded upon the fact that the wine had
fallen in price.” 74 Similarly, it was no doubt the fall in the timber
market which led in Arcos Ltd. v. Ronaasen 4 Son l5 to the buyers’
wish to reject goods which were found to be perfectly suitable for
the purpose for which the buyers intended to use them. Their
refusal to accept and pay for the goods was nevertheless upheld,
and it is impossible to assert categorically that this was wrong. But
it is unfortunate that the whole discussion was forced into con-
ceptual lines dictated by the Sale of Goods Act and so ignored the
important policy question involved : how should the loss resulting
from a falling market be affected by the fact that one of the parties
performs defectively ?
This problem arose again in the Hongkong Fir 76 case, where the

71 129 N.E. 889, 891.

72 It was 80 stated in Hoenig v. Zsaacs 119521 2 All E.R.176.
75 Sale of Goods Act 1893, 8. 63 (3).
74 (1861) 6 Ex. 901, 907.
75 1933 A.C. 470.
76 El9621 2 Q.B. 26.
VOL.30 6
154 THE MODERN LAW REVIEW VOL. a0

Court of Appeal, free from the rigid distinctions of the Sale of

Goods Act, was able to reach a result which was, in a sense, the
opposite to that in Arcos Ltd. v. Ronaasen c$-Sons. No doubt one
of the main reasons why the charterers were anxious to repudiate
the charterparty in that case was the fall in freight rates from
47s. to 24s. per ton. But the court decided in favour of the
owners, and it does not seem that this decision in any way increased
the financial burden of the charterers; if anything this burden was
alleviated by the owners’ breach, for while the ship was under
repair she was also, under the contract, ‘(off hire.” And yet the
situation remains one of great difficulty. On a falling market the
innocent party may have to pay what he now considers to be an
excessive amount. His indignation a t having to put up, at the
same time, with defective performance is certainly understandable.
The fact of defective performance in a continuing contract (such
as that in the Hongkong Fir case) is also liable to create uncertainty
as to the future. Some aspects of this problem in contracts of sale
are covered by the Uniform Commercial Code in its provisions with
regard to cc adequate assurance of performance y y 77 but there is no
similar provision in English law. If the defect relates to part only
of the contract, the innocent party may be in difficulty as to how
far he can go in obtaining a temporary substitute. He may, if held
to the contract, 5 d himself having to undertake new risks; and his
reluctance to do this when the risk of the market has already gone
against him is understandable. On the other hand it could be
argued that rejection on a falling market has an effect similar to
that of specific performance on a rising market. One reason why
a buyer of commodities is not allowed specific performance on a
rising market is that this would, in effect, swell his damages beyond
the measure available at law.78 It is arguable that he should not,
either, be allowed to cut his losses by rejecting where the market
has fallen.
( 4 ) Variation
This discussion,of the Hongkong Fir case raises a further possibility.
In that case, the contract expressly provided for suspension of the
charterers’ obligation during the periods of delay. Should breach
by one party sometimes, even in the absence of such a clause, entitle
the other to vary the contract rather than to discharge it entirely ?
For example, an instalment contract may provide for payment
after delivery. If the buyer defaults and is insolvent, the seller
may not be discharged; but it would be reasonable to say that he
need not make any more deliveries under the contract until the
arrears due from the buyer have been paid off, and that he should

7 7 8.2-609.
7s Buzton v. Lister (1746)3 Atk. 383, 384; c f . Re Schwabacher (1908) 98 L.T.
147 where specific performance of a contract for the sale of shares was
refused on this ground.
MAR.1967 SOME PROBLEMS OF BREACH OF CONTRACT 155

then only be bound to deliver for The view that some

breaches justify suspension as opposed to discharge is also widely
held in the United States thus it is said that a building con-
tractor may be justified in holding up work (but not in throwing
up the contract altogether) if a promised progress payment is not
made. Some of the hardships which the victim of a non-discharg-
ing breach may feel could be avoided by the use of this power of
suspending or otherwise varying the obligations of the other party.
An analogous problem is that of the curable defect. The Uniform
Commercial Code makes provision for this in the case of contracts
for the sale of goods by instalments*l; and to some extent the
English case-law on the subject also regards this factor as relevanLs2
It is a t least arguable that the right to reject should in a large class
of cases be made subject to giving the party in breach a reasonable
opportunity of curing the defect.8s Even in a contract between a
dealer and a private consumer, this solution would normally be
regarded as reasonable by both parties.
Lord Sumner once said, with masterly understatement : '' The
phrase 'goes to the root of the contract,' like most metaphors,
is not nearly as clear as it seems." .s4 The constant use of this and
similar phrases has been a grave impediment to the development of
the branch of the law of contract which has been discussed in this
article. The suggestions put forward here are largely tentative and
may well be controversial. No great merit for any particular
solution here suggested is, or need be, claimed. What matters
more, at the present time, is that attention should be paid to the
proper questions, and that the answers should be sought along
practical rather than conceptual lines.
G. H.TREITEL.'

70 See a suggestion to this effect in Ex p. Chalmers (1873) L.R. 8 Ch.App. 989.

80 Williston, Contracts, rev. ed., 8 . 869; Corbin, Contracta, E. 1253; Restatement,
Contracts, 8. 287.
8 1 8 . 2-612 (2).
82 I n that " likelihood of repetition " is msterial under the rule in the Maple
Flock case [1934] 1 E.B. 148.
8 3 Relief against forfeiture of leases and 8. 25 of the Hire-Purchase Act 1965
appear to be based on this notion.
6 4 Bank Line Ltd. v. Arthur Cape1 d Co. [1919] A.C. 435,459.
* M . A . , B.C.L. : Fellow of Magdalen College, Oxford; All Souls Reader in English
Law.