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Remedies
For Breach Of Contracts
What
is a breach of Contract? What are
the rights of the injured party and
the liabilities of the defaulting
party? These are some of the main
issues raised to an estate agent by
his clients. While an estate agent
shall not give legal advice to his
clients, it is important that he knows
the answers to the above questions.
A
breach of contract occurs when a party
to the contract, breaks an obligation
imposed on him, by contract. There
are two types of breach; one is by
repudiation and the other by way of
anticipatory breach.
Repudiation of a contract takes place
when a party to the contract, renounces
the contract, makes its performance
impossible or fails to perform his
obligation under the contract. An
Anticipatory breach, takes place when
a party, expresses an intention either
by word or conduct, before the time
for performance of his obligation
has arrived, that he does not wish
to perform its obligations pursuant
to the contract.
The innocent party may then accept
the breach, discharge the contract
and claim damages or seek to affirm
the contract. The courts prefer that
where damages are sufficient to compensate
the innocent party, he should not
be allowed to try and affirm the contract,
especially if it poses a greater detriment
to the defaulting party.
Remedies are the means by which the
default of one party is redressed.
The main forms of remedies available
to an injured party are damages, specific
performance and injunction. We shall
look at each of these remedies individually
and explore how they can be applied
when a breach takes place in different
contractual situations.
(A) DAMAGES
Damages refer to the monetary compensation
awarded by the court to compensate
the innocent party, so as to place
him, so far as money can, in the same
position, as if the contract had been
performed. There are two main forms
of damages an injured party may seek
the court to award, namely liquidated
and unliquidated damages.
Liquidated damages refer to the pre-estimated
damages agreed upon by both parties
to the contract e.g. interest payable
for late completion of a transaction,
as outlined in condition 8 of the
Law Society’s Conditions of
Sale 1994. Unliquidated damages refer
to the damages the court may award
at its discretion, taking into consideration
the loss suffered by the Plaintiff.
The Plaintiff, to claim damages in
an action for breach of contract must
prove that defendant’s breach
caused the loss suffered and the defendant
should have known the damage was a
probable consequence of his actions
and show the court he had taken all
measure to avoid or reduce the damage
caused i.e. mitigate his loss and
if he fails to do so, the damages
awarded may be reduced in account
of his contributory negligence.
What happen when the purchaser, two
weeks after executing the Sales and
Purchase agreement, refuses to proceed
with the purchase and the Vendor decides
to sue the Purchaser to recover his
loss? Assuming the purchaser has no
grounds to rescind the contract and
Vendor has received notice of the
recission from the Purchaser, the
Vendor may accept the recission, forfeit
the deposit and remarket his premises
immediately. In the event the Vendor
is able to find a purchaser, but,
at a lower sales price, then he shall
recover from the Purchaser the difference
in the sales prices (including the
forfeited deposit) and any loss of
interest as a result of the Purchaser’s
default.
This principle was applied in the
case of Alice Wee v Yeo Gek Lang,
where the purchaser failed to complete
the sale and the Vendor subsequently
sold the premises at S$22,000.00 lesser.
The Vendor sued and successfully recovered
the S$22,000.00 plus interest.
The same principle is applied where
the Vendor decides not to sell the
premises after executing the Sales
and Purchase agreement.
In the case of a Contract to lease
the premises, should the Tenant decide
to terminate a twenty-four month Tenancy
Agreement, let’s say after four
months, the Landlords remedy is in
recovering the rental loss for the
unexpired period (20 months) of the
lease.
Section 6 of the Limitation Act however
restricts the period within which
the Plaintiff must institute the action.
The main principle behind the limitation
period is that it would be unfair
to the defaulting party to have the
threat of a potential proceeding hanging
over him. As such actions founded
on contract have to be initiated within
6 years from the date the cause of
action accrued.
(B) SPECIFIC PERFORMANCE
Specific Performance in an order by
the court directing a party to perform
his obligations under the contract.
It is a discretionary remedy used
in cases when damages are deemed to
be an inappropriate form of remedy.
Specific performance is seen as an
appropriate remedy for a contract
in the sale of land as damages are
deemed as an inadequate remedy as
each property is unique. Both, the
Purchasers and Vendors use it to enforce
the obligations of the other party
to the contract.
Assuming, as in the example above,
if the Vendor decides not to proceed
with the sale, the Purchaser may decide
not to sue for the damages but compel
the Vendor to proceed with the sale,
by making an application to the court
to instruct the Vendor to proceed
with the sale.
In the case of Meng Leong Development
Pte Ltd v Jip Hong Trading Co Pte
Ltd, the Vendor refused to complete
the sale after the Purchaser had exercised
the Option to Purchase. The court
ordered the Vendor to complete the
sale.
(C) INJUNCTION
An injunction is an order of court
requiring a party to refrain from
an act he has agreed not to do. A
person who fails to abide by the terms
of an injunction may be found guilty
of contempt of court. An injunction
is a suitable remedy where a Landlord
seeks to restrain his tenant from
doing what he has covenanted not to
do. Assuming the tenant, despite the
Landlord’s instruction and in
breach of a covenant, has started
to erect a partition wall in the middle
of the living room. The Landlord may
restrain him by obtaining an injunction,
to prevent the tenant from proceeding
further with the erection of the partition
wall and to demolish it and restore
the living room to the condition it
was before the wall was erected.
While these are the main forms of
remedies available to the innocent
party, it is always advisable that
the parties in dispute make a concerted
effort to resolve their differences
amicably so they can arrive at a win-win
situation. Real estate agents should
try their best to achieve this when
their respective clients are in dispute.
..............................................................................................................
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Legal
issues commonly encountered.
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Ian
Chang LLB (Hons)
Aptus Law Corporation
Parkway Parade Office
For over 11 years, Ian Chang has
successfully represented thousands
of clients involving a wide range
of practice on conveyancing, litigation
and other legal issues.
[ more
on Ian Chang
] |
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