158 Chapter 5Discharge of contracts and remedies for breach
n When one of the parties repudiates the contract before the time for performance of the
contract is due this is known as an anticipatory breach.
n A party will be able to refuse to further perform the contract if a condition is breached.
n A party will not be able to refuse to further perform the contract if a warranty is
breached.
n Any breach of contract always allows the injured party to sue for damages.
n Substantial damages can only be claimed in respect of losses which fall within one of
the two rules in Hadley vBaxendale. Other losses are regarded as too remote.
n Hadley vBaxendale rule 1 allows damages for a loss if the loss arose naturally from
the breach of contract, in the usual course of things.
n Hadley vBaxendale rule 2 allows damages for a loss if the loss can reasonably be
supposed to have been within the contemplation of the parties when they made the
contract.Practice questions
1 Giles, a poultry farmer, agreed to supply Export Ltd with 5,000 turkeys. The contract said that
the turkeys were for export to Ruritania and had to meet Ruritanian health standards. The
contract price was £15,000. £5,000 was paid in advance and £10,000 was to be paid once
all the turkeys had been delivered. After 1,000 turkeys had been delivered the exporting of
turkeys was made illegal by a statute. Advise Giles of his legal position.2 TeaSell Ltd, a retailer of high class teas, contracted last year to buy one tonne of Darjeeling
tea from TeaGrow Ltd. The tea was to be delivered on 1 November. This year the weather in
Darjeeling has been very bad and the annual tea crop has been disastrous. TeaGrow Ltd had
expected to grow ten tonnes of Darjeeling but has only managed to harvest one tonne. On
1 September TeaGrow Ltd wrote to TeaSell Ltd, saying that it would not be able to supply
the tonne of Darjeeling tea which it had agreed to sell. The letter explained that TeaGrow Ltd
had no other existing contracts to sell the tea to anyone else, but that the price of Darjeeling
teas has increased so substantially that it would be able to get a much better price from
another buyer. Advise TeaSell Ltd of the following matters:(a) Whether TeaGrow Ltd has committed a breach of contract.
(b) Whether TeaSell Ltd could prevent the sale of the one tonne of Darjeeling tea to another
buyer.
(c) Whether TeaGrow Ltd could be ordered to deliver the one tonne of Darjeeling tea to
TeaSell Ltd, as agreed in the contract.
(d) If TeaGrow Ltd do not deliver the tea, whether a claim for damages could be made in
respect of the following losses:
(i) Ordinary business profits lost by TeaSell Ltd as a consequence of their not being able
to sell Darjeeling tea to regular customers.
(ii) The loss of a very profitable contract to sell Darjeeling tea to a specialist café.
(iii) Damages which TeaSell Ltd has had to pay because the lack of Darjeeling tea caused
TeaSell Ltd to breach a contract to sell tea to a tea shop.