MZUMBE UNIVERSITY
FACULTY OF LAW
(DEPARTMENT OF PUBLIC LAW)
PROGRAMME: LLB I
COURSE: LAW OF CONTRACT II
SUBJECT CODE: LAW 125
LECTURER: MR. KILONZO
TASK: GROUP ASSIGNMENT
GROUP NUMBER: NO.9
STREEM B.
1 ITAGA S. MASUKE 1236166/T.23
2 PROSPER ISACK SAMBAGI 1236132/T.23
3 EDWARD JUMANNE MLUGARE 15330013/T.23
4 RACHEL MUSSA LUCAS 1236099/T.23
5 ANDOCHIUS KARUGABA JONAS 1236148/T.23
6 YUSUPH JONH EMMANUEL 1236133/T.23
7 GRACE GODFREY MGHAMBA 1236102/T.23
8 MINZA CHARLES KITALIMA 1236104/T.23
9 ASHA O. BAKARI 1236218/T.23
QUESTION
(a) Damages for breach of contract must be such loss or damages as naturally arise in the usual
cause of things or which had been reasonably supposed to have been in the contemplation of
parties when they made a contract, as the probable result of the breach. Discuss
(b) ‘An order for specific performance is always discretional’.
TABLE OF CONTENT
INTRODUCTION
Briefly explanations of the proviso Section 73(1) of the Law of Contract Act, [Cap 345 R.E
2019]
MAIN DISCUSION
(a)The concept of Damages
Discussion on the damage resulting from the breach of a contract, which existed to the
remedy of such breach of contract
Conclusion
(a) Discussion to specific performance be a discretional of the court
Conclusion
REFERENCES
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INTRODUCTION
Section 73(1)1 of the law of contract provides compensation for loss or damage caused by the
breach of contract. When a contract has been broken, the party that suffers from such
infringement is entitled to receive compensation for any loss or damage resulting from such
infringement. Such compensation shall not be given for any remote and indirect loss or damage
sustained as a result of the breach, compensation for failure to discharge obligations similar to
those created by the contract. If an obligation similar to what was created in the contract has not
been discharged, any person who fails to discharge is entitled to receive the same compensation
from the party in default as if that person had contracted to discharge it and had broken his
contract.
It means that, the loss or damage resulting from the breach of a contract, consideration must be
given to the means that existed to the remedy of such breach of contract.
A contract is an agreement or promise made between two or more parties that the court will
enforce accordingly. In some cases the agreement or promises made in a contract are not kept by
a party or more parties. Therefore the situation is called Breach of Contract which means failure
to keep promises or agreement of a contract. Breach of contract is a legal course of action in
which a binding agreement is not honoured by one or another more of the parties.
The Latin maxim Ubi Jus, ibi remedium denote ‘‘Where there is a right, there is a remedy’’. So
in case for breach of contract, the aggrieved party would have one or more remedies against the
wrongdoer’s and one amongst remedy would be a suit for Damages.2
MAIN DISCUSION
Damages for breach of contract is common law remedy available as of right. It is designed to
compensate the victim for their actual losses a result of the wrongdoer’s breach rather than to
punish the wrongdoer.3 A victim will not necessarily recover every loss which flows from the
breach by the defendant, which means;
1
[Cap 345 R.E 2019]
2
Nditi, N., “General Principles of contract Law in East Africa,” DSM: DUP, 2002.
3
Moitra, A. C., “The Law of Contract and Specific Relief,” (5th Ed.), New Delhi: Universal Law Publishing Co.
Pvt. Ltd, 2005.
1|Page
‘Damages for breach of contract must be such loss or damages as naturally
arise in the usual cause of things or which had been reasonably supposed to
have been in the contemplation of parties when they made a contract, as the
probable result of the breach’.
General Damages: Are those which arise naturally in the usual course of things from the breach
itself. Another mode of putting this is that the defendant is liable for all that which naturally
follows in the usual course of things after the breach.4
When a contract has been breached, the party who suffers by such breach is entitled to receive a
recover or compensation from the party who has breached the contract. A compensation for any
loss or damage cause to him hereby, which naturally arose in the usual course of things from
such breach or which the parties know when they made the contract, to be likely to result from
the breach of it, such compensation is not to be given for any remote and indirect loss or damage
sustained by reasons of the breach. It evidenced in the case of Hadley vs. Baxendale.5 Were the
court held that;
‘Claimant was entitled only to ordinary damages and defendant was not
liable for the loss of profits because the only information given by Claimant
to Defendant was that the article to be carried was the broken shaft of a mill
and it was not made known to them that the delay would result in loss of
profits’.
Special Damages: Are those which arise on account of the unusual circumstances affecting the
plaintiff. They are not recoverable unless the special circumstances were brought to the
knowledge of the defendant; so that the possibility of the special loss was in contemplation of the
parties.
Where a party to a contract receives a notice of special circumstances affecting the contract, he
will be liable not only for damages arising naturally and directly from the breach but also for
special damages. Its accounted in the case of Simpson v. London & North Western Railway
Company.6 Were Plaintiff was a manufacturer, used to exhibit his samples of his equipment at
4
Nditi, N., “General Principles of contract Law in East Africa,” DSM: DUP, 2002.
5
Hadley vs. Baxendale. EWHC Exch J70 (1954)
6
Simpson v. London & North Western Railway Company,(1876).
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agricultural exhibitions. He delivered his samples to Railway Company to be exhibited at New
Castle. On the occasion he wrote “must reach at New Castle on Monday certain”.
On the account of negligence on the part of Railway Company, the samples reached only after
the exhibition was over. Plaintiff, claimed damages from Railway Company for his loss of
profits from the exhibition.
‘The court held that; the railway company was liable to pay these damages
as it had the knowledge of special circumstances, and must have
contemplated that a delay in delivery might result in such loss’.
Sections 73 and 747 of the law of Contract Act respectively emphasize in case of contracts,
parties may agree to payment of a certain sum on breach of the contract. When such stipulations
are made in the contract, they are known as liquidated damages. On the other hand,
unliquidated damages are awarded by the courts on an assessment of the loss or injury caused to
the party suffering such breach of contract.
Liquidated damages are specific damages that were previously identified by the parties in the
contract itself, in the event that the contract is breached. Liquidated damages should be a
reasonable estimate of actual damages that might result from a breach but if specified sum is
disproportionate to the damages, it is called penalty.8
The essence of liquidated damages is a pre estimate of damage, which is compensatory in nature
and the question is whether a sum is a penalty or liquidated damages is to be determined or
understood by the parties, at the time of contracting or entering into the contract, and not as at the
time of the breach.
The Contemplation of both parties here refers to the award of damages to the claimant would
not be something out of the ordinary or extra that was not determined by both parties in their pre
contract positions.9 In simple terms it means that if the contract was breached, the damages that
the claimants will receive would be those that were foreseeable (both parties knew while making
7
[Cap 345 R.E 2019]
8
Section 73(1) of Law of Contract Act
9
Thomas A. Diamond and Howard Foss, Consequential Damage for Commercial Loss: An Alternative to Hadley v.
Baxendale, 63 Fordham L. Rev 665 (1994)
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the contract that they have to pay to each other) in case the contract did not go right and one
party suffered loss.
Hadley & Anor v Baxendale & Ors10 it establish the rule by emphasizing that; a breaching
party is liable for all losses that the contracting parties should have foreseen. However, if the
other party has special knowledge that the party in breach does not, the breaching party is only
liable for the losses that he could have foreseen on the information available to them.
It simply means where two parties have made a contract which one of them has broken, the
damages which the other party ought to receive in respect of such breach of contract should be
such as may fairly and reasonably be considered either arising naturally, 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.11
Through Section 73 (1)12 it incorporates with the rule established in the case of Hadley13 to
emphasize the special circumstances under which the contract was actually made were
communicated by the plaintiffs to the defendants, and thus known to both parties, the damages
resulting from the breach of such a contract, which they would reasonably contemplate, would be
the amount of injury which would ordinarily follow from a breach of contract under these special
circumstances so known and communicated. It follows, therefore, that the loss of profits here
cannot reasonably be considered such a consequence of the breach of contract as could have
been fairly and reasonably contemplated by both the parties when they made the contract.
The important thing is that the damages should be such as May fairly and reasonably be
considered as arising naturally, according to the usual course of things, from such breach of
contract itself and the special circumstances, which perhaps, would have made it a reasonable
and natural consequence of such breach of contract.
10
[1854] EWHC J70
11
Thomas A. Diamond and Howard Foss, Consequential Damage for Commercial Loss: An Alternative to Hadley
v. Baxendale, 63 Fordham L.. Rev 665 (1994)
12
[Cap 345 R.E 2019]
13
[1854] EWHC J70
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The reason behind is that, in breach of contract actions, the non breaching party may recover
general damages which are the natural and probable consequence of the breach.14
In Kenford case,15 further settled view that in order to impose on the defaulting party a further
liability than for damages which naturally and directly flow from the breach, in the ordinary
course of things, arising from a breach of contract, such unusual or extraordinary damages must
have been brought within the contemplation of the parties as the probable result of a breach at
the time of or prior to contracting.
The notion is the party who breaching the contract is liable for those risks foreseen or which
should have been foreseen at the time the contract was made. It is not necessary for the breaching
party to have foreseen the breach itself or the particular way the loss occurred, rather, it is only
necessary that loss from a breach is foreseeable and probable.16
Even though the Ubi Jus, ibi remedium denote ‘‘Where there is a right, there is a remedy’’. The
law not silent on the limitation of such remedies as the following;
Remoteness; Under section 73(2)17 clear express that, the compensation should not b given for
any remote and indirect loss sustained by the reason of the breach. In the Ordinary damages,
when a contract has been breached, the party who suffers by such breach is entitled to receive a
recover or compensation from the party who has breached the contract. A compensation for any
loss or damage cause to him hereby, which naturally arose in the usual course of things from
such breach or which the parties know when they made the contract, to be likely to result from
the breach of it, such compensation is not to be given for any remote and indirect loss or damage
sustained by reasons of the breach.
It evidenced in the case of Hadley vs. Baxendale.18 Fact of the case, were the crankshaft broke
in the Claimant’s mill. He engaged the services of the Defendant to deliver the crankshaft to the
place where it was to be repaired and to subsequently return it after it had been repaired.
14
Kenford Co. v County of Erie. [1989] 73 NY2d 312, 319
15
Ibid
16
Ashland Mgt. v Janien. [1993] 82 NY2d 395, 403
17
[Cap 345 R.E 2019]
18
Hadley vs. Baxendale. (1954) EWHC Exch J70
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Due to negligence of the Defendant, the crankshaft was returned 7 days late. The Claimant was
unable to use the mill during this time and claimed for loss of profit. The Defendant argued that
he was unaware that the mill would have to be closed during the delay and therefore the loss of
profit was too remote. The court held that;
‘Claimant was entitled only to ordinary damages and defendant was not
liable for the loss of profits because the only information given by Claimant
to Defendant was that the article to be carried was the broken shaft of a mill
and it was not made known to them that the delay would result in loss of
profits’.
Causation; A person will only be liable for losses caused by their breach of contract. The
defendant’s breach need not be the sole cause of the claimant’s losses, but it must be an effective
cause of their loss. It is not enough if the breach merely provided the claimant with the
opportunity to sustain loss. The general rule is that where breach can be shown to be an actual
cause of the loss, the fact that there is another contributing cause will not prevent the existence of
causation.
In County Ltd v Girozentrale Securities,19 the plaintiffs’ bank agreed to underwrite the issue
of 26 million shares in a publicly quoted company. They sued the stockbrokers, and the main
issue in the case was whether the plaintiffs’ loss was caused by the defendants’ breach of
contract. In effect, the plaintiffs would not have suffered their loss if there had not been a
concurrence of a number of events, of which the defendants’ breach of contract was but one. The
Court of Appeal held that the brokers’ breach of contract remained the effective cause of the
plaintiffs’ loss; the breach did not need to be the only cause. The defendants were therefore liable
to pay damages.
CONCLUSION
Generally, an award of damages is the usual remedy for a breach of contract. It is an award of
money that aims to compensate the innocent party for the financial losses they have suffered as a
result of the breach. Damages for breach of contract are available as of right where the contract
19
County Ltd v Girozentrale Securities (1966)
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has been breached. The general rule is that innocent parties are entitled to such damages as will
put them in the position they would have been in if the contract had been performed.
B: SPECIFIC PERFORMANCE
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This is a right implemented at the court's discretion. The court will always assume that a breach
of contract related to immovable property cannot be compensated for in monetary terms. 20 This
assumption can be rebutted in court, however, and each case will be debated on its own merits to
meant discretion. In such cases, the court will look not at the letter of the law but at the substance
of the agreement being considered. Where specific time frames were mentioned in a contract, for
example, the court will need to determine several factors, including:
Whether the people involved intend to complete the transaction in a time frame that
would be considered reasonable.
Whether the fact that time is of the essence was expressed clearly.
Whether the suit for specific performance was filed within a reasonable time.
Suits for specific performance of contract are uncommon and seen as extraordinary remedies.
One example of an extreme case is someone being obliged to sell their house when they don't
want to. However, courts do admit that in cases in which one person intended to sell or buy a
property, a breach of contract cannot always be compensated for in monetary terms. This is
because each piece of real estate is unique, with its own set of benefits. 21 Therefore, it is difficult
to determine the exact amount of money lost by the party that did not breach the contract.
If a non breaching party decides to pursue specific performance as a remedy, they are unlikely to
be able to also seek monetary compensation. The laws between various states differ on this, but a
choice must generally be made between these two possible remedies.
In cases in which the property seller is able but unwilling to fulfill the contract's terms, the buyer
can file a lawsuit on the grounds of specific performance. The courts might be sympathetic to the
buyer's cause because every piece of land is unique, and financial compensation would,
therefore, not be adequate. The seller will then be ordered to adhere to the initial contract and sell
the land to the buyer.
20
Moitra, A. C., “The Law of Contract and Specific Relief,” (5th Ed.), New Delhi: Universal Law Publishing Co.
Pvt. Ltd, 2005.
21
Smith, J., “The law of contract,” 4 Editions, London: published by Sweet & Maxwell Limited, 2002.
8|Page
At its core, specific performance is an equitable remedy the courts provide, compelling a party to
a contract to carry out the specific obligations they initially agreed to. Instead of awarding
monetary damages for a breach of contract, the court orders the party to “perform” their
contractual obligations as they were initially set out.22
For instance, consider a situation where someone agrees to buy a unique artwork. If the seller
doesn’t deliver it, monetary compensation might not sufficient for the buyer due to the artwork’s
replace ability. In such cases, a court could mandate the seller to hand over the artwork as
originally agreed.
Specific Performance is not a remedy that is granted indiscriminately, while is a remedy which
given by the court in desecration of its own motion by considered different certain situations
where it is deemed appropriate. The decision to grant specific performance relief is never
automatic, the court always has an overriding discretion to refuse to grant and may take into
account many factors which would be relevant to the questions whether damages should be
awarded, and if so, in what amount.23
Unique Goods or Property: As in the artwork example above, when the subject of the contract
is unique (like rare collectables, antiques, or real estate), specific performance might be the only
suitable remedy.
Inadequacy of Monetary Damages: This is fundamental condition of any kind of equitable
relief. Accordingly the complaint must set forth fact show that the breach cannot be adequately
compensated from damages. The court might resort to specific performance if monetary damages
are insufficient to compensate the aggrieved party. Where the damages would only be nominal,
specific performance may be ordered to avoid one party being unjustly enriched.
The latter circumstance applied in Beswick v Beswick,24 where the claimant’s husband sold his
business to his nephew in return for an annual allowance to be paid to himself and, after his
death, to his widow once her husband died the nephew refused to make payments to the widow.
Despite the fact that the husband had clearly intended her to benefit from the contract, it was held
that the widow could not sue the nephew on her own behalf, because she was not a party to the
22
Hussein, S. M., “General Principal of Law of Contract,” Tanzania: Published by Law African LTD, 2013.
23
Donald Harris. Remedies in contract and Tort, London; George wie Defeld & Nicolson Ltd, of 1988
24
(1967) AC 58; 3 WLR 932
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contract. However, the widow was allowed to sue as the executor of her husband’s estate through
such circumstances were her husband suffered no loss, because he had died before the nephew
stopped paying the annuity, so damages would only have been nominal. It was clearly unjust for
the defendant to keep the entire benefit of the contract without himself performing much at all.
As a result, specific performance was ordered.25
Clear and Definite Contractual Terms: The contract terms should be clear and definite enough
for the court to enforce. If the facts at the time of hearing make it impossible for defendant to
perform his obligations, the court will not order him to perform. Contempt proceedings would be
absurd in these circumstances.
Thus if D promised to transform an item to P but later resold and transferred it to a bona fide
third-party who took it without notice of P 's prior interest, no order for specific performance
shall be ordered to D. In Robinson v Davison,26 a piano player was booked to perform, but was
ill on the day of the concert. He was sued for breach of contract, but it was held that the contract
had been frustrated when his illness made it impossible to perform there for order for specific
performance can could not be granted by the court.
There are certain circumstances in which specific performance might be ordered. For example,
specific performance will be enforced only in cases where the underlying contract was both fair
and equitable. Examples of specific goods that have been at the center of cases wherein the
courts have ordered specific performance include works of art, and products that were custom
made specific to the buyer’s request.
CONCLUSION
The courts approach the doctrine of specific performance is somewhat restricted and there are
many rules in place. These rules, seek to arbitrarily define who would be titled to an order and
who would not. Nonetheless, they forget the very nature of contract law in which, the parties are
free to contract on whatever terms that they choose however disadvantage outshot may be. In this
context specific performance as contractual remedy should be either move do remade more
widely available as the current approach is inherently unfair. What is certain is that the current
25
Elliot, C., & Quinn, F., “Contract Law,” (7th Ed.), England: Pearson Education Limited, 2009.
26
(1871) L R 6 ch 269
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position favors the contract breaker on the basis that they can avoid a contract that has become
more expensive to perform than damages would cost.
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REFERENCE
STATUTES
The Law of Contract Act, [Cap 345 R.E 2019]
CASES
Hadley vs. Baxendale.(1954) EWHC Exch, J70
Kenford Co. v County of Erie. [1989] 73 NY2d 312, 319
Ashland Mgt. v Janien. [1993] 82 NY2d 395, 403
Simpson v. London & North Western Railway Company,(1876).
County Ltd v Girozentrale Securities. (1966)
Beswick v Beswick. (1967) AC 58; 3 WLR 932
Robinson V Davison (1871) L R 6 ch 269
BOOKS
Thomas A. Diamond and Howard Foss, Consequential Damage for Commercial Loss: An
Alternative to Hadley v. Baxendale, 63 Fordham L.. Rev 665 (1994)
Donald Harris. Remedies in contract and Tort, London; George wie Defeld & Nicolson Ltd, of
1988
Catherine, E. & Frances Q. Contract law 7th Edition of 2009.
Elliot, C., & Quinn, F., “Contract Law,” (7th Ed.), England: Pearson Education Limited, 2009.
Hussein, S. M., “General Principal of Law of Contract,” Tanzania: Published by Law African
LTD, 2013.
Nditi, N., “General Principles of contract Law in East Africa,” DSM: DUP, 2002.
Smith, J., “The law of contract,” 4 Editions, London: published by Sweet & Maxwell Limited,
2002.
Moitra, A. C., “The Law of Contract and Specific Relief,” (5th Ed.), New Delhi: Universal Law
Publishing Co. Pvt. Ltd, 2005.
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