Week 4 Remedies

Week 4: Remedies
Q1: INSTALMENT CONTRACTS

Alex agrees to sell to David 10,000 woollen cardigans. It is agreed that they are to be delivered in
instalments of 1000 per week. The first 2 instalments which are delivered are fine but the next
two are defective in quality.
Advise David who wishes to return all the cardigans delivered and cancel the contract for the
remaining cardigans.
Reading: Sealy & Hooley 426-430

NOTE: You should read the case of REGENT OHG AISENSTADT V FRANCESCO OF
JERMYN STREET [1981] 3 All ER 327 in relation to answering this question
Instalment contracts are subject to different rules than those where payment is made at one time.
General rule: s.13(3) SOGO on severable contracts, subject to the s.32(3) SOGO exception
Q1: Is this a severable contract under s.33(2) SOGO, or a non-severable contract under s.13(3)
SOGO?
For s.33(2) SOGO to be satisfied, (i) the contract for sale of goods to be delivered by stated
instalments, (ii) which are to be separately paid for.
Here, (i) is satisfied. However, we do not know whether (ii) is, as we do not know if they were paid at
once upfront, or separately thereafter.
If this contract does not fall into ambit of s.33(2) SOGO, we are bound by general rule under s.13(3)
SOGO, which states that buyer can either accept all goods or reject all goods, subject to the s.32
SOGO exceptions.
Q2: What remedy does buyer want? – i.e. what’s available to him under s.33(2) and s.13(3)?
David would like to reject all of them.
s.13(3)
Under s.13(3), if one instalment is bad he could reject all of them. However, if he accepted some, will
be treated as accepting all the goods and lose the right of rejection. This rule is subject only to the s.32
exception.
Q.2.1: Does the s.32 exception apply here?
s.32(3) deals with mixed goods of a different description with those in the contract. However, here the
defect in quality is likely a merchantable quality problem, rather than one of description. Therefore,
the exception does not apply.
s.33(2)
Whereas under s.33(2), buyer maybe able to accept the good instalments and reject the bad ones.
Q2.2.:
In the alternative, he could reject all (not just the defective installments) but the breach has to be
sufficiently serious to amount to repudiation of contract.
In Munro v Meyer, 50% of the shipment of meat was adulterated. The court found as a question of
fact that this breach was sufficiently serious to amount to repudiation of the contract. However, in
Maple Flock, excess chlorine in 1.5/100 tons of flock was not considered to be serious enough for
buyer to reject the future instalments. It was found as a matter of fact that the future installments are
unlikely to be defective.
Therefore, David who wishes to reject all goods (including future instalments and those delivered) has
to argue that the contract is a non-severable one under s.33(2) SOGO.
Week 4: Remedies
Q2: DAMAGES FOR NON ACCEPTANCE

Arthur and Betty entered into a contract under which Arthur agreed to sell her some ginseng at
a price of HK$ 100,000 to be delivered on 15th April. On 10th April Betty informed Arthur she
no longer wanted the goods, the market price for ginseng on this date being HK$90,000. On
15th April the market price is HK$80,000. However, on 1st May the market price has risen to
HK$ 200,000.
a) Advise Arthur as to how much he can claim in damages from Betty.
b) In what way, if any, would your advice differ if Betty can produce evidence that Arthur could
not have supplied the ginseng on 15th April?
Reading:
Dobson Chapter 14 ; Sealy & Hooley Chapter 13 477-483-these chapters focus on the buyer’s
measure of damages for non-delivery but many of the principles apply in the analogous
situation where the seller is suing the buyer for non-acceptance.
Useful cases to look at CAMPBELL MOSTYN v BARNETT TRADING [1954] 1 LLOYDS REP
65 and BUNGE SA v NIDERA BV [2015] UKSC 43
a)
Amount Arthur can claim depend on when he has accepted the repudiation by Betty.
Had the anticipatory breach which occurred on 10th April been accepted by Arthur, he would have a
duty to mitigate his loss as of that day. Since the market appeared to be falling, Arthur was under a
duty to sell it right away in the falling market in order to mitigate his loss. Had he sold it on that day,
he would have received HK$90,000. And as such, he would be entitled to the difference between the
contract price (HK$100,000) and the market price, i.e. HK$10,000.
Had he accepted the actual repudiation which occurred on delivery date (15th April), and he would by
then be obliged to accept the repudiation, he would be entitled to difference between contract price
and the then market price (HK$80,000), i.e. HK20,000.
b)
That would depend on what evidence Betty has.
If the evidence was that since Arthur did not offload the shipment on 11th April thus Arthur’s goods
would not have reached him until 16th April, but if Arthur accepted the repudiation on 10th April, then
he would not be required to deliver anyway. The question of whether he would have been able to was
irrelevant.
However, if the evidence was that on 9th April, Arthur did not own any Ginseng, and no shipment
could possibly have arrived by 15th April, then Betty’s breach is irrelevant because Arthur wouldn’t
have been able to perform anyway. As such, Betty could have accepted the anticipatory repudiation
on the day.
=> Q: Calculation of damages
The traditional approach is that on 15th April (date the contract ends), damages are fixed and future
events which are known to the tribunal at the time of assessment. Changes in market price after the
contract ends are ignored.
If Betty could prove that Arthur would not have performed the contract irrespective of her breach,
then she would not have to pay damages.

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Week 4: Remedies

Q1: INSTALMENT CONTRACTS

Reading: Sealy & Hooley 426-430

Q2: DAMAGES FOR NON ACCEPTANCE

That would depend on what evidence Betty has.

=> Q: Calculation of damages

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