FACULTY OF LAW

TRI 2, 2015/2016

UNL1622 – CONTRACT LAW II

GROUP ASSIGNMENT PRESENTATION

REMOTENESS OF DAMAGES

GROUP MEMBERS• TINESHVAAR S/O BOONTINATHAN

• GUNASUNDARY D/O CHANDRAMOHAN

• NORA ENIRA BTE. SAHHARIL

• SUEBETHRA D/O ELIL ALAGAN

• MEERA D/O SEGARAN

INTRODUCTION• Remoteness is a set of rules whereby it limits the compensatory damages

where only losses which are cause by the breach can be claimed but outside of it is known as remote damage.

Malaysian Position English Position

s.74 of Contract Act 1950 Hadley v Baxendale

Note: s.74 is an adoption of the Hadley v Baxendale rule.

HADLEY V BAXENDALE“WHERE 2 PARTIES HAVE MADE A CONTRACT, WHICH ONE OF THEM HAS BROKEN, THE DAMAGES WHICH THE OTHER PARTY OUGHT TO RECEIVE…

SHOULD BE CONSIDERED ARISING NATURALLY, I.E. ACCORDING TO THE USUAL COURSE OF THINGS FROM SUCH BREACH OF CONTRACT ITSELF, OR, SUCH AS MAY REASONABLY BE SUPPOSED TO HAVE BEEN IN THE CONTEMPLATION OF BOTH PARTIES AT THE TIME THEY MADE THE CONTRACT AS THE PROBABLE

RESULT OF THE BREACH OF IT.”

First Limb : should be considered arising naturally, i.e. according to the usual course of things from such breach of contract itself.

Second Limb : such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it.

CONTINUE………….Plaintiff were mill owner in gloucester.

They engaged the defendant, a carrier to take a broken crankshaft to greenwich and asked for a new one.

Defendant (carrier) promised that it would be there for following day, but defendant had delayed in transporting the crankshaft.

Consequently, the replacement was not delivered when it should have been. The mill remain idle for a longer time.

CONTINUE…………. The Plaintiff sued for damages for the loss of profit that would have been

earned if the replacement of crankshaft available on time.

The Defendant (carrier) said that the only information given “the article to be carried was the broken shaft of a mill and that the plaintiffs were the miller of the mill.

The question raised by the plaintiff in this case was whether a defendant in a breach of contract case could be held liable for damages that the defendant was not aware would be incurred from a breach of the contract.

HELD:The plaintiff’s claim for loss of profits was rejected by the court on the ground that it was too remote.

It is because by the first limb, the loss suffered by the plaintiffs were not the natural consequence of the defendants breach, the court found that in a great majority of such cases, the mill owner would have probably have another shaft. While, under second limb, the loss of profits was not within the contemplation of both parties at the time they made the contract as the special circumstances of the mill not being able to proceed in the absence of the shaft was not communicated to the defendants.

VICTORIA LAUNDRY (WINDSOR) V NEWMAN INDUSTRIES LTD [ 1949] 2 KB 528

Newman industries ltd was meant to deliver a boiler for victoria laundry (windsor) ltd. The delivery was five months late. As a result of not having enough laundry capacity, victoria laundry lost a lucrative cleaning contract from the ministry of supply. Victoria laundry sued for the ordinary profit that it had forgone through not having the boiler on time. The question was whether it could also claim the extraordinary profit it would have made, had it been able to take advantage of the lucrative ministry of supply contract. This case’s fact and the fact of hadley v baxendale case’s fact are similar where because of a delay in delivery so, the plaintiff claim for loss of profits.

Note: The Hadley v Baxendale case facts is similar with this case’s fact also.

CONTINUE………… The court held that the defendant was liable for the

ordinary lost profits because they should have known, from their knowledge of the industry of the industry and particular information that was provided to it where the time was important for the plaintiff to get the material back and if it is fail to deliver a reasonable period of time then it would have resulted in business loss.

CONTINUE…………. Even though, this case’s fact is similar with the hadley v baxendale but as for

in this case the judge had allowed the claim because the judge had done a partial refinement to the existing rule.

)The refinement made by the judge was that the loss for which a plaintiff seeks to recover must, at the time of the contract whereby it must be reasonably foreseeable as liable to result from the breach. Reasonably foreseeable here means the knowledge which are possessed by the parties.

Knowledge can be further divide into two kinds which are the imputed knowledge and actual knowledge

CONTINUE……….

• IMPUTED KNOWLEDGE - As a reasonable person they would know the ordinary course of thing and consequently knows what loss is liable from result of breach of contract.

• ACTUAL KNOWLEDGE- It will be applied in special circumstances outside the ordinary course things whereby this kind of breach of contract would cause more loss.

SUMMARY

• Therefore, the rule of hadley v baxendale or know as remoteness is explained by the terms of reasonable foreseeability together with the reference of imputed knowledge whereby it embodies the first limb and actual knowledge whereby it embodies the second limb of the rule.

Section 74(Title)

• Compensation For Loss or Damage Caused by Breach of Contact

Section 74(1)First Limb

•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 which naturally arose in the usual course

Section 74(1)Second Limb

•The parties knew when they made the contract, to be likely to result from the breach of it.

SECTION 74(1) 1ST LIMB• That it provides compensation for loss which is naturally arose in the usual

course of things from the contract.

• This referring to losses which are normally expected when the contract is breached.

e.g. illustration (f)

BEE CHUAN RUBBER FACTORY SDN BHD V LOO SAM MOOI

• The plantiffs had entered into a contract with the defendant to sell a piece of land and to build house thereon for the defendant. The defendant had breached the contract by delaying by building finish of the house. So, the trial judge had awarded damages to the plaintiff at the rate of $100 for every month from the time delivery which was due on september 21, 1970 untill april 3, 1975 when delivery of the house was finally given. Later on, the federal court had also confirmed the trial judge’s decision and held that damages are recoverable for a breach of contract for delay in the completion of an ordinary dwelling house required for personal occupation. This damages which also include the reasonable cost of living accommodation or living elsewhere and storing furniture basically comes from the first limb of the rule in hadley v baxendale.

SECTION 74(1) 2ND LIMB• It have to be noted that it is difference from the common law counterpart which

requires the parties to have knowledge of the loss or damage likely to be result from the breach of contract.

• However, in most of cases it is said that the position of s.74 ( ) is pari materia or similar with the Hadley v Baxendale rule even though different phrase are used.

• Justified in the case of Teoh Kee Keong V Tambun Minig Co Ltd whereby the Federal Court judge had given his view that : “section 74(1) of the Contracts (Malay States) Ordinance 1950 is the statutory enunciation of the rule of Hadley v Baxendale.

CONTINUE………..• Limb provides for provided losses which the parties knew when they made

the contract, to be likely to result from the breach of it.

• These are the special losses which have already known or contemplated by the parties.

e.g. illustration (i)

THAM CHEOW TOH V ASSOCIATED METAL SMELTERS LTD

• In this case, the high court had held that the defendant’s failure to supply in a furnace which was capable of the requisite temperature constituted a breach of contract and awarded damages for loss of profits. When, it was appeal the federal court and the federal court judge also had stay with the high court decision.

SUMMARY• As for conclusion, s.74 (1) is an adoption of the Hadley v

Baxendale rule and it also have two limbs. There is no difference between the provision and the hadley v baxendale rule. Last but not least, this section have been applied in most of cases and it is really helpful in determining the loss for damages.

GIAN SINGH GURDUR SINGH V KEMPAS EDIBLE OIL SDN BHD

• The plaintiff in this case Is Gian Singh Gurdur Singh And Kempas Edible Oil Sdn Bhd Is The Defendant. The plaintiff was appointed as the transporter for the defendant and they entered into 3 year contract period of transportation through a letter dated 4 january 2015. The contract period was effective from 1 january 2005 to 30 december 2008. However, the defendant terminated the contract for the transportation services offered by the plaintiff via a letter on 7th november 2005 and contended that plaintiff’s service was poor and unsatisfactory. The plaintiff argued that the termination was not valid as his period of appointment as a transporter is fixed for three years and claimed for general damages.

CONTINUE……………ISSUE: Whether the plaintiff is entitled for the claim of damages?

The plaintiff had claimed for RM300, 000 as a result of loss of profits suffered during the period of seven weeks from 1st november 2005 to 31st december 2015.

By virtue of toeh kee keong v tambun mining company, the judge give his view that it is the plaintiff’s claim for loss of profit is a proper yardstick in considering the question of damages for breach of contract and the plaintiff’s loss is recoverable under s. 74 of the contracts act 1950 if it is not too remote or indirect and is within the contemplation of the parties.

HELD:

“i find the plaintiff’s loss of profit not too remote or indirect and was within the contemplation of the parties. however, given that the three year period is not an absolute period but subject to review yearly, i am of the view that the plaintiff is not entitled to claim for loss of profit for the entire duration of three years. the judge did not allow the plaintiff’s claim of damages for the period of three years as it was subject to review every year accordingly to s.74(1).” however, the judge was of view that the plaintiff had a chance to look for other transporting business elsewhere to abate his loss

• The rule or principle of remoteness was first introduce in the classic case of Hadley v Baxendale.

• s.74 (1) of the Contract Act 1950 is an adoption of the Hadley v Baxendale rule and it also have two limbs.

• To succeed in their claim, the plaintiff must show that the loss they has sustained was caused by the breach.

• However, the court will not award compensation to the plaintiff for all the losses he has suffered as consequence of the breach.

• Where the loss or damage is too remote , the plaintiff is not entitled to compensation.

CONCLUSION