A contract (according to Gibson 1997) is a lawful agreement made between two or more persons within the limits of their contractual capacity, with the serious intention of creating a legal obligation, communicating such intention, without vagueness, each to the other and being of the same mind as to the subject matter, to perform positive or negative acts which are possible of performance.
Contracting parties through agreement, breach and operation of law can terminate contractual agreements. This paper will focus on termination of contracts through breach. Breach of a contract involves conducts, which are inconsistent with proper performance of the agreement. It is a violation of a material fact of the agreement. The material fact breached should go to the root of the contract.
In Zimbabwe, the main remedies available for a breach or threatened breach are; specific performance, cancellation, interdict and damages. The Zimbabwean law unlike the English law allows or permits the plaintiff to choose his remedies provided he does not want to just enrich himself. Further, the plaintiff should not endeavor to enforce two inconsistent remedies.
This is enforcement or calling of enforcement of the exact performance by the injured party to a contract. Our law does not allow a party in breach of a contract to rid their default by paying damages but, allows the injured party to demand specific performance, which however, is subject to the discretion of the court as was decided in Farmers’ Co-operative Society v Berry 1912.
When there is breach going to the root of the contract the other party is entitled to cancel the contract. The injured party must elect within reasonable time whether to cancel or enforce the contract.
It is a prohibitory order of the court that prohibits a specified act or acts. It makes it mandatory for the concerned party to obtain from doing what has been mentioned in the order. The applicant should show beyond reasonable doubt that if the interdict is not given an irreparable harm would be done. It should show some urgency as was decided in Setlegelo v Setlegelo.
‘Damages for breach of contract are meant to put the injured party to the position he would have occupied had the contract been properly performed in so far as that can be done by payment of money and without undue hardship to the other party.’ Damages for breach are not meant to compensate the other party for what he has lost but for what the party should have gained had the contract been properly performed.
This paper will concentrate on damages to breach of contract and will give a critique of the approach taken by Zimbabwean courts towards the question of damages in breach of contract.
DAMAGES TO BREACH OF CONTRACT
These are monetary equivalents of specific performance. The fundamental rule in regard to award of damages for breach of contract is that the sufferer should be placed in the position he would have occupied had the contract been properly performed, so far as it can be satisfied by payment of money and without causing any hardships to the defaulting party as was decided in the case of Victoria Falls & Transvaal Power Co. Ltd v Consolidated Langlaagte Mines.
The General guidelines followed by the Zimbabwean courts in assessing appropriate damages include among others the:
Mitigation of losses by the injured party
Causation and remoteness of damages
Non award of damages for sentimental loss or injured feelings
MITIGATION OF LOSSES
In accordance with the principle that an award of damages must not cause undue hardship to the defaulting party, the plaintiff must mitigate his losses like what a reasonable man could do. The plaintiff is however, not expected to take unreasonable steps to mitigate his damages. This was cited in the case of Bulmer v Woollens Limited 1926, where the court held that Bulmer was entitled to damages for full amount of his loss, because the position of builder’s foreman was of totally different and subordinate character to his previous employment. As a result he was not obliged to take the post in order to mitigate the losses.
SCRUTINY OF CAUSATION AND REMOTENESS OF DAMAGES
To avoid undue hardship to the defaulting party a line must be drawn separating damages resulting from his breach for which he should be liable and damages which, although in the broad sense of the word are as a result of his breach, are so remote to extent that he should not be liable for them. This line is drawn when separating General (intrinsic) damages from Special (extrinsic) damages.
The courts insist that the damages should be direct rather than indirect. Direct damages are also known as general or intrinsic damages. They flow naturally and generally from the kind of breach of contract in question.
Indirect damages are special or extrinsic damages, which are only recovered in special circumstances attending the conclusion of the contract.
In Zimbabwe there is only one possible test that could be applied to decide whether special or extrinsic damages can be recovered for breach of contract. This test is the contemplation principle. The test applied under this principle is to check whether the contracting parties actually or presumptively foresaw that the breach of contract in question would result in the type of loss being sued for.
Case in point is that of Collective Self Finance Scheme (CFC) v Asharia (A) year 200 in which CFC contracted to buy a property from the respondent and paid a deposit. CFC later repudiated the contract and claimed return of the deposit. A, accepted cancellation and later sold the property to someone else for a lower price, and claimed damages for breach of contract. Included in the amounts claimed were claims for extra bond finance, loss of investment income and loss of interest on the original sale until property was subsequently sold. The court held, that:
i)What was being claimed was the normal contractual damage, i.e. that the respondent be put in the position in which he would have been had the contract been carried out
ii)That the first two items were claims for special damages. It had to be alleged and established that these amounts were within the contemplation of the parties. No such allegations were made, nor did the evidence support such allegations. The respondent was, however, entitled to claim interest on the agreed sale price.
Another case beside that quoted in the question (Victoria Falls & Transvaal Power Co. V Consolidated Langlaagte Mines) that helps to illustrate the concepts of General and Special damages and the concept of foreseeable and unforeseeable damages is that of United Air Charters V Jarman year 1994 in which Jarman breached his contract of employment. He was employed by Air Charter Company for a two year contract, in terms of which the company paid for certain training costs.
He had undertaken to repay a pro rata portion of those costs if he left before the two – year period was completed. He breached the contract by leaving before the two-year period was over. Air Charter Co. sought to recover special damages from him based on the fact that it would be impossible for them to find a replacement within three months and that the Company would lose certain revenue as a result.
The court held that even if the less rigorous contemplation principle was applied to decide the matter, the employee would not be liable as the parties had not foreseen or contemplated that the type of loss being claimed would result from the breach in question.
The lessons learnt from the above cases are that the courts do not have problems with the determination of general damages as these flow naturally from the breach in question. The valuation of general damages is on a pro rata basis i.e. value of the whole contract agreement less value of what has been performed.
The Zimbabwean courts use the contemplation principle to determine whether there are any special damages in a breach of contract. In both cases (United Air Charters v Jarman, Collective Self Finance Scheme v Asharia and Victoria Falls & Transvaal Power Co. v Consolidated Langlaagte Mines) the courts shot down some claims for special damages because the parties involved had not foreseen or contemplated that the type of losses that were being claimed would result from breaches before them.
NON-AWARD OF DAMAGES FOR SENTIMENTAL LOSS OR INJURED FEELINGS
The general rule in courts is that damages may not be claimed in an action on contract for sentimental loss or injured feelings. This was decided in an old case of Jockie v Meyer (1945) in which a Chinese Officer (J) on a British ship was first given a room for accommodation at Victoria West Hotel by (M) who on discovering that J was Chinese retrieved the keys from him and told him that the hotel was fully booked. J sued M for damages for injury of feelings that he suffered as the result of refusal of accommodation by M.
The judge of appeal dismissed the appeal by saying that damages cannot be awarded for injury of the plaintiff’s feelings.
It must be noted, however, that there are exceptions to this rule. For example where pleasure is to be obtained from proper performance is an important ingredient in the contract as when a photographer undertakes to take burial photos or when a travel agent makes specific representations about facilities and entertainments available at a hotel.
Case in point is that of Diesen v Samson (1971) in which Mrs D engaged S a professional photographer to take photographs of her wedding for 12 pounds and paid deposit of 2 pounds and she was given a receipt. When S breached his contract by failing to appear at the wedding or at the reception, Mrs D sued for damages for the resulting injury to her feelings. Court held that since the contract was not for commercial purposes, and that it affected Mrs D’s personal, social and family interest, damages could competently be awarded for feelings. In this case the assed damages were 30 pounds.
In short if there is breach of contract, and the contract is not a commercial one, if such breach affects plaintiff’s personal, social and family interests the courts will use their discretion in awarding damages for mental suffering should the courts think that in those particular circumstance the parties to the contract had such damages in their contemplation. In the case of Mrs D v S both parties obviously had in their contemplation that Mrs D would be enabled to enjoy such pleasure in the years to come.
1. Butterworths Digital Library, Zimbabwe Law Reports.
2. Volpe Peter, Commercial Law of Zimbabwe
3. Christie R. H, Business Law in Zimbabwe