Business Law: Contractual Breach and Damages Case Study Analysis

This case study analyzes a business law scenario involving Martha, an entrepreneur, and her contractual agreements with Roger and Chip. Martha purchased rocking horses from Roger but only received one instead of twelve, leading to a breach of contract. She also hired Chip for delivery, but he was late, further impacting her business plans. The assignment examines Martha's options for recovering damages, focusing on the types of damages she can claim, including restitution, reliance, and expectation interests. The solution applies legal principles to determine Martha's eligibility for each type of damage from both Roger and Chip, considering the remoteness of damage and their knowledge of her intentions. The analysis provides a clear conclusion on the potential recovery for Martha in both contractual disputes, offering insights into contract law and remedies for breach.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Issue
The issue is to give advice to Martha regarding her options to recover damages arising
out of the contractual breach by Roger. Martha also needs to be advised regarding her
contract with Chip.
Rule
An award of damages or compensation is the most common remedy for a case of breach
of contract. There are a few different types of damages that an aggrieved party can claim to
recover his loss from a breach of contract.
a) Restitution interest is awarded by a court in order to restore an aggrieved party his
position in which he would have been if the contract was performed as held in
Robinson v Harman1.
b) Reliance interest is awarded to an aggrieved party who is eligible to recover the
expenses made by relying upon the prevalence of the contract. As held in the case of
Anglia Television Ltd v Reed, the significance of the reliance interest is to restore the
position of the aggrieved party in which he would have been if there was no contract
at all2.
c) Expectation interest is awarded to an aggrieved party e where the breaching party e
new about the aggrieved party is intention to draw profit from such contractual deal
that has been subsequently breached as held in the case of Stirling v Poulgrain3.
The interests or damages that are awarded to the aggrieved party is calculated on the
basis of the remoteness of damage that signifies whether the aggrieved party had the remotest
1 Robinson v Harman 1 Ex Rep 850
2 Anglia Television v Reed [1971] 3 All ER 690.
3 Stirling v. Poulgrain [1980] 2 NZLR 402

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of idea about the particular breach that has caused loss to him, as held in the case of Hadley v
Baxendale4.
Application
Roger has breached the contract with Martha by not sending all of the 12 rocking
horses but only one, in spite of Martha paying for all the 12 horses. This makes Martha
entitled to the restitution interest and therefore shall be liable to recover the $100 that she had
paid for the 12 horses. Martha shall be eligible for a reliance interest from Roger as she had
made certain investments relying upon the prevalence of her contract with Roger. However
she shall not be entitled to recover expectation interests from Roger as he did not have any
idea about Martha’s intention to make profit out of their agreement. Therefore, Roger did not
have the remotest of idea about the loss/damage that Martha would be experiencing due to
the breach of contract.
Martha shall be eligible to recover restitution interest from Chip as he did not deliver
the horses on time; he came at 10:30 am instead of 7 as per the agreement. Martha shall also
be liable to recover expectation interest from Chip as he had known that Martha had an
intention to make profit from selling the horses at particular time in the local market.
However Martha would not be able to incur the expectation interest from Chip as she did not
make an expense due to the agreement she had with Chip.
Conclusion
Therefore Martha would be able to recover restitution and reliance interest from
Roger. She would also be successful in recovering restitution and expectation interest from
Chip.
4 Hadley v Baxendale [1854] EWHC Exch J70.

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Bibliography
Case laws
Anglia Television v Reed [1971] 3 All ER 690
Hadley v Baxendale [1854] EWHC Exch J70
Robinson v Harman 1 Ex Rep 850
Stirling v. Poulgrain [1980] 2 NZLR 402