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giving notice that interest will be charged from the date of demand until payment (Civil Procedure Act, 1833, s. 4)
(g) On a judgment debt, interest at 4 per cent. runs until the judgment is satisfied (Judgments Act, 1838). This applies only to judgments of the High Court. County Court judgment does not carry interest (h) Where so provided by statute, e.g., Bills of Exchange Act, 1882
By agreement between the parties interest may be legally charged at any rate so agreed; but there is one very important exception. Under the Moneylenders Act, 1900, the Court may re-open all transactions with a moneylender if the interest or charges are excessive and the contract appears harsh and unconscionable, or is such that a court of equity would grant relief; and the court may award a sum which, under all the circumstances, seems to it to be fair, and may relieve the borrower from payment of the excess.
Breach of Contract.
The breach of a contract may or may not discharge it. If it does, the rights of the injured party are transformed into a new one the right to resort to the various remedies mentioned below. Where the whole contract is broken it is undoubtedly discharged; but, as a rule, where there is a partial breach only, the injured party cannot treat the contract as at an end, and is restricted to the remedy of an action for damages. The contract is not discharged by a partial breach unless it can be shown that the default is of such a nature as to destroy what the parties have agreed to be the essence of the contract. A case where partial breach was a discharge occurred where, in Cutter v. Powell (1795), an agreement was made to pay the mate of a ship a certain sum provided he did duty during the whole of a certain voyage. He died before the voyage was completed, and it was held that his representative could not recover anything, for he had not strictly carried out his contract and therefore no right of action had accrued.
Remedies on Breach. Where the contract as a whole is broken, the following remedies are available to the injured party— (a) To treat the breach as a discharge and refuse to perform his part
(b) To bring a claim for damages-either by action on his part or by way of counter-claim if the other party should bring an action against him
(c) To bring an action for a sum equivalent to the amount
of work he has done, where he has already carried out part of the agreement. This is called suing on a quantum meruit (for as much as has been merited or earned) (d) To bring an action for specific performance in certain
In the case of partial breach, if the failure to perform the one part of the contract goes to the foundation of the whole, then the injured party may be discharged from further performance of his part otherwise, as mentioned above, he is entitled only to seek damages for the particular breach. When the contract is easily divisible into several stipulations, as, for instance, to deliver consignments of goods at stated intervals, then in the event of the breach of one of the stipulations the rule would be that the remedy is an action for damages. If the stipulation should, however, amount to a condition, breach of this will, as a rule, entitle the injured party to avoidance of the contract; but it is often very difficult to determine whether a particular stipulation is a condition or merely a subsidiary promise, such as a warranty. If the latter, the remedy for any breach will be an action for damages.
Conditions in contracts may be concurrent or precedent, i.e., they may be worded in such a way that both parties have to perform their parts at the same time, or that one party is not bound to do anything until the other has fulfilled his promise. Where one party by his acts, or in any other way, shows that he has no longer any intention of carrying out his contract, although he may have broken only one term, the other party will have the right to avoid his part of the agreement and perform no more under it.
On an executory contract, no action can generally be brought for breach until the date agreed for performance. But if one party renounces the contract, even before the time for performance has arrived, the other party may treat the contract as terminated and may at once sue for damages. The leading case on this point is that of Hochster v. de la Tour (1853), where A had been engaged by B in April to act as courier and to commence the employment in June. B wrote to A in May and told him that he should not require his services, and A commenced an action forthwith. It was held that an action would lie, for, as LORD CAMPBELL said in the course of delivering judgment, Where there is a contract to do an act on a future day, there is a relation constituted between the parties in the meantime by the contract, and they impliedly promise that in the meantime neither will do anything to the prejudice of the other, inconsistent with that relation." Further, if the contract is renounced during performance, there is a right of action forthwith. In Cort v. Ambergate Railway Co, (1851), A agreed to supply B
with railway material at a fixed price, deliveries to be made by instalments on certain specified dates. When B had received several instalments he told A he should not require any more. A thereupon brought an action at once. It was held that he was entitled to succeed, and it was only necessary for him to show that he was willing to perform his part and it was not necessary to prove actual delivery of the material. Also, an action will lie if performance is rendered impossible by the act of one of the parties, as where he renders himself incapable of performing it.
"A party to a contract becoming aware of a breach of a condition precedent by the other is entitled to a reasonable time to consider what he will do, and failure to reject at once does not prejudice his right to reject if he exercises it within a reasonable time. During that time he is entitled to inquire as to the commercial possibilities, etc., to guide him as to what course to take." (SCRUTTON L.J. in Fisher Reeves and Co. v. Armour and Co. (1920).
In considering the question of suing on a quantum meruit, it should be borne in mind that when a person has agreed to carry out an entire transaction for a certain sum and the whole of the work is not performed, that party is not entitled to sue unless it has been so agreed beforehand, as was decided in Cutter v. Powell, cited above (page 64), or unless the default in completing the whole transaction was due to the defendant's act.
Liquidated Damages. Specified sums are often named in a contract which are to be paid by a party defaulting, and are usually styled in the contract" liquidated damages." Liquidated damages are such an amount as, in the opinion of the parties, will compensate for a breach of the contract. Amounts so mentioned in a contract may, however, be either liquidated damages or a penalty. A penalty is an amount in the nature of an imposition, which is inserted in the contract with a view of ensuring its performance. As a rule, the Court will award the amount agreed upon as liquidated damages as compensation in the event of a breach; but, where the sum appears to the judge, upon a consideration of the whole instrument, and not considering only what the amount has been termed by the parties, to be really a penalty, then only so much of the amount as will actually compensate for the loss sustained will be awarded. The point to be considered is whether the loss which has accrued to the plaintiff can or cannot be calculated in money antecedently to the breach. If so, then if it is a reasonable sum it will be regarded as liquidated damages, and if an unduly large sum has been fixed it will be looked upon as a penalty; but where the loss is of an absolutely uncertain amount the sum will be treated as liquidated
damages. The mere largeness of the amount fixed will not in itself be sufficient reason for holding it to be a penalty. Where a party covenants not to do a certain act, and, if he does it, to pay a certain amount, he cannot elect to do the act and pay the amount so fixed. It was decided, in the case of General Accident Assurance Corporation v. Noel (1902), that in such circumstances the injured party may elect either to recover damages or to have an injunction.
How Unliquidated Damages are Assessed.-Where no sum is mentioned in the contract, the amount of damages is left to the decision of the jury or judge, and is called "unliquidated damages." Damages are assessed so that the injured party should, as far as possible, be placed in the same position as if the contract had been performed, and prospective as well as incurred loss may be taken into account. This is, however, subject to certain considerations, as follows
(a) The damages should be such as may fairly and reasonably be considered as arising from such breach of the contract or such as may reasonably be supposed to have been contemplated by the parties at the time of making the contract as the probable result of the breach; that is, the damages must not be "too remote." This was the effect of the decision in Hadley v. Baxendale (1854). (b) In the case of special loss, if not falling under the foregoing rule, damages will only be awarded in respect of such loss if there has been an actual agreement in relation thereto, as laid down in Horne v. Midland Railway Co. (1873). If there are special circumstances connected with a contract which might be likely to give rise to special damages, the fact of notice having been given to one party by the other will not necessarily render him liable for special damages unless it can be shown. that he consented to become so liable.
Specific Performance and Injunction. These remedies are rarely applied in connection with mercantile contracts; but specific performance of a contract may be granted, in the case of, e.g., the sale of an objet de vertu (that is, an article of artistic merit) or a chattel which has a fancy value and for which damages would not compensate, and also under Section 52 of the Sale of Goods Act, 1893, q.v.
Discharge of Contract by Lapse of Time.
If there has been inordinate delay by both parties to a contract the inference may possibly be drawn that the contract has been abandoned; but, ordinarily, lapse of time does not put an end to contractual rights. It does, however, bar the remedy of an
action thereon. Although the remedy is barred, yet the contract remains in existence, so that a person having a lien will continue to have it. But there is an exception to this in the case of certain contracts relating to land, where the right is extinguished and not merely the remedy. The remedy of action is barred by what are known as the Statutes of Limitation, viz.,
(a) The Limitation Act, 1623, whereunder all actions on parol contracts shall be commenced and sued within six years next after the cause of such action or suit, and not after. (b) The Civil Procedure Act, 1833, whereunder any action. on a contract under seal must be brought within twenty years from the cause of action arising.
(c) The Real Property Limitation Act, 1874, whereunder on contracts relating to land, which will include the personal covenant in a mortgage deed, the right of action is barred after the lapse of twelve years. But, if there is a collateral bond by a third person, even though joined in the same instrument, the period as to the third person is twenty years. It has been held that judgments come within this Act.
An extension of time is allowed, e.g., if the party is an infant or non compos mentis (of unsound mind), and the six or twenty years will not commence to run until the attainment of majority or recovery of reason, as the case may be. Where, however, the time has once commenced to run, no subsequent disability will extend the time allowed wherein to bring the action. Further, if the defendant is beyond the seas (which does not include Ireland) or out of the jurisdiction when the cause of action arises, the statute does not run until the date of his return. Ignorance of a right does not prevent the statute from running, unless the ignorance was caused by the fraud of the defendant.
Acknowledgment of a debt, or part payment thereof, or payment of interest, revives the right of action; but such acknowledgment must now, by Lord Tenterden's Act (Statute of Frauds Amendment Act, 1828), be in writing and signed by the debtor; and it must be distinct and unconditional in its terms, and made before the commencement of the action. An acknowledgment or part payment to a party, not the creditor or his agent, is not sufficient to take the debt outside the statute. An acknowledgment by one of several joint debtors is not good against the others, except in the case of a mortgage, where an acknowledgment by one joint mortgagor binds the others.
Discharge of Contract by Merger and Estoppel.
Merger is the substitution of a higher grade of contract for a lower, e.g., a judgment for a simple contract debt; so that when