Commonwealth v Amann Aviation Pty Ltd Free-Samples for Students

Questions: Discuss about the Case Study of Commonwealth v Amann Aviation Pty Ltd. Answers: In the case of Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, the probability of hypothetical legal conduct was considered by the High Court of Australia. A contract was entered between Amann and the Australian Commonwealth as per which the plaintiff, i.e., Amann was required to conduct an aerial surveillance of the north coast of Australia for a continuous period of three years, the period of which had to start after six months of the date of the contract. Amann spent a considerable sum of amount in preparation of the promised performance relating to the aerial coastal surveillance and even acquired specially equipped aircraft for undertaking his part of the contractual performance (Harder, 2010). When Amann started his surveillance on the promised date, the contract was repudiated by the Commonwealth. The repudiation of the contract was accepted by Amann and it claimed damages for the expenditure undertaken, which was wasted due to the repudiation of the contract (Swarb, 2015a). It could be clearly seen that Amann that within three years, Amann would not have been able to recoup the undertaken expenditure. The basis of claim of Amann pertaining to the totality of expenditure was based on the assumption that a renewal of contract would have taken place after three years (Harder, 2010). This particular case was an appeal made to the Full Court by the plaintiff. The reason for making the appeal was to set aside the ruling given by the trial judge, where the plaintiff was awarded fairly low damages. The appeal was only related to the aspect of determination of the amount of damages. This was because the defendant, i.e., the Commonwealth had already admitted that there had been a wrongful termination of the plaintiff (Harder, 2010). The legal issue in this case is related to the un-liquidated damages for a breach of contract on part of the defendant, where the plaintiff had relied upon the contract. The decision taken in this appeal was related to the question regarding, whether or not, the plaintiff deserved a higher amount of damages. R= Relevant Laws and Principles When one of the parties to a contract, fail to fulfill the obligations which were put on them through the drawn contract, it results in a breach of contract (Abbott, Pendlebury, Wardman, 2007). Whenever a breach of contract is established, the aggrieved party can make an application to the court of law for the recovery of damages, which is in the form of monetary compensation or equitable remedies, in form of rescission, injunction or specific performance (Latimer, 2012). As per section 349 of the Restatement of the Law: Contracts, 2nd ed. (1981), the injured party, as a substitute to the measures of damages regarding expectation damages, as contained in section 347, had the right to damages on the basis of reliance interest. This included the expenditures which were made while performance or while preparing for performance, and the amount of loss which can be proved by the party with reasonable certainty had to be deducted. In such case the injured party would have suffered, in case of performance of contract (Jade, 2017). In the case of Robinson v Harman (1848) 1 Ex Rep 850, Parke B held that the damages awarded for the breach of contract had to be in the form that the aggrieved party or the victim of the breach could compensate the loss of the contractual bargain (Swarb, 2015b). A question was raised in this case by Baron Parke, regarding the amount of damages which the plaintiff was entitled to recover. He highlighted that the rules given in the common law dictated that when a loss is sustained by a party, due to the breach of contract, the party was entitled to receive such an amount of damages, which would put the victim in the same position, so far as can be done with money, had the contract been performed (Civil Lawyer, 2011). In the matter of Hayes v Dodd (1990) 2 All ER 815, the plaintiff ran a motor repair business and he entered into a negotiation for buying a household workshop, along with a yard, which could be accessed through a narrow and inconvenient tunnel to the front of the property from the street and also had an access at the rear side of the property. He used two loans from the bank amounting to 65,000 and 55,000. He had to close his business after twelve months and his attempts at selling the property as a single unit were unsuccessful. A claim of 1,500 as damages was made for each plaintiff for the vexation and anguish. Though, it was held in this case that vexation and anguish could not be recovered as damages for breach of contract, until the object of the contract provided peace of mind or freedom from distress (Williams, 2013). Hence, the amount was not recoverable as it was a purely commercial contract (Swarb, 2016). Learned Hand C.J., in the case of L. Albert and Son v. Armstrong Rubber Co. (1949) 178 F 2d 182 stated that at the time when the performance could not have covered the outlay of the promise, the result imposes a risk of the contract of the promisee on the promisor. And so, the court did not agree with the notion that the default in performance by the performance should make him an insurer of the venture of the promisee (H2O, 2013). Lord Denning, in the case of Anglia Television Ltd. v. Reed (1972) 1 QB 60 held that a claim could be made for the expenditure thrown away by the plaintiff, when such individual had not suffered any loss of profits or in such case where the amount of profit can be established. So, a claim could be made either for the wasted expenditure or for the loss of profits (E-Law Resources, 2017). A= Arguments of the parties and Analysis In order to decide the matter on awarding the damages to Amann, a point was put forward by him, regarding the place he would have been, had the breach of contract not occurred. The case of Robinson v Harman was quoted, to establish that there was a need for putting Amann in such a position as he would have been in absence of the repudiation of contract by the Commonwealth (Australian Contract Law, 2013). The burden of proof was placed on the defendant by Amann. This was due to the fact that Amann had made reliance upon the terms of contract and had undertaken huge expenditures to support his contractual obligations. The case involved reliance loss and not the expectation loss (Australasian Legal Information Institute, 2017). However, as the case did not involve a term which could have satisfied Amann mentally, a claim to support the contentions made in Hayes v Dodd was not upheld and so, the damages were not awarded for mental peace. This was because the terms of this contract were such that it was based entirely on commercial activity (Australasian Legal Information Institute, 2017). Amann also contended that there was a clarity regarding the reliance of Amann on the terms of contract and that as per him, the contract would have been fulfilled. And believing this point, Amann had brought the purchased specially equipped aircraft. The application relating to the general principle involved a comparison between the actual and hypothetical state of affairs. Deane J held that for this case, the actual state of affairs is the non-performance and the hypothetical state of affairs is the performance of this contract, as per its terms. As the general principle can be clearly established in this case, it became crucial that the contention put forward by Amann was accepted (Australasian Legal Information Institute, 2017). The prospects of making a substantial profit by Amann were dependent upon the renewal of the contract. So, Amann supported his claims for profit, on the basis of this very prospect. Even though it was clear that a renewal could have been declined by the Commonwealth, the defendant could not establish that the same would have been done in reality (Jade, 2017). And the burden of proof that the same would have been decline was put by McHugh J. upon the Commonwealth. As the Commonwealth failed in establishing that the chances of not renewing the contract were higher than 50%, the majority of the High Court of Australia awarded the damages to Amann regarding the total expenditure made. The point worked in favor of Amann as he showed that the negotiating position of it would have been superior to that of its competitors, after three years of giving their services to the Commonwealth (Australasian Legal Information Institute, 2017). Initially, Amann was awarded a sum of $410,000 as damages, on the basis of the net profit which he would have attained upon the performance of the contract, which amounted to $819,099. It was established that the claims of Amann had to be reduced by one half, as the contingency of cancellation, covered under clause 2.24 had to be considered. But when Amann claimed that he was entitled to the full claims, due to his reliance upon the contract and the position in which he would have been after three years, the decision was changed (Australasian Legal Information Institute, 2017). The acceptance on part of Commonwealth that it had indeed breached the contract was further taken into consideration. After which, the Full Court acknowledged that the possibility of cancellation was only 20%, as per the quoted clause. And even though there was a 20% chance of such cancellation, it was held by the judges that the same was not required to be taken into consideration while assessing the amount of damages. And due to these reasons, Amann was awarded damages to the amount of $4,808,563s 80%. This amount was equal to $3,846,850, and part from this, an amount of $143,049 was also awarded to Amann in form of the termination payments to the employees. Hence, a total of $3,989,899 was awarded to him. He was also entitled to interest to the sum of 80 per cent of $4,695,563, and on all other payments, till the date of the judgment (Australasian Legal Information Institute, 2017). C= Conclusion and Court Outcome On these bases, it could be stated that establishing the breach of contract is easier in comparison to quantifying the amount of damages which have to be awarded to the aggrieved party. Hence, this is a delicate exercise and the same has to be done in a proper manner, before a demand is issued. Deane J held in this case that the general principle, which governed the assessment of compensatory damages, in both tort and in contract was that the plaintiff had to be awarded such a sum of money, which would represent an adequate and fair compensation, in so far as the money can, regarding the injury or loss sustained due to the wrongful acts of the defendant. Hence, the award of damages had to put the wronged party in such a position, where they would have been, in case such a breach of contract had not taken place, and instead, the contract had been performed (Jervis, 2015). References Abbott, K., Pendlebury, N., Wardman, K. (2007). Business law (8th ed.). London: Thompson Learning. Australasian Legal Information Institute. (2017). Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1992) 174 CLR 64 (12 December 1991). Retrieved from: https://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/HCA/1991/54.html?stem=0synonyms=0query=Commonwealth%20v%20Amann%20Aviation%20Pty%20Ltd Australian Contract Law. (2013). Commonwealth v Amann Pty Ltd: High Court of Australia (1991) 174 CLR 92. Retrieved from: https://www.australiancontractlaw.com/cases/amann.html Civil Lawyer. (2011). Expectation damages - Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64. Retrieved from: https://www.the-civil-lawyer.net/2011/11/expectation-damages-commonwealth-v.html E-Law Resources. (2017). Anglia Television v Reed [1971] 3 All ER 690. Retrieved from: https://www.e-lawresources.co.uk/cases/Anglia-Television-v-Reed.php H2O. (2013). L. Albert Son v. Armstrong Rubber Co. Retrieved from: https://h2o.law.harvard.edu/cases/2393 Harder, S. (2010). The Exculpation of Repudiating Parties by a Right to Terminate the Contract. Retrieved from: https://www.researchgate.net/profile/Sirko_Harder/publication/228169768_The_Exculpation_of_Repudiating_Parties_by_a_Right_to_Terminate_the_Contract/links/543685400cf2bf1f1f2bd67a.pdf?origin=publication_detail Jade. (2017). High Court of Australia. Retrieved from: https://jade.io/article/67658 Jervis, H. (2015). How do I calculate damages for breach of contract?. Retrieved from: https://legalvision.com.au/how-do-i-calculate-damages-for-breach-of-contract/ Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia Limited. Swarb. (2015a). Commonwealth of Australia v Amann Aviation Pty Ltd; HCA 12 Dec 1991. Retrieved from: https://swarb.co.uk/commonwealth-of-australia-v-amann-aviation-pty-ltd-hca-12-dec-1991/ Swarb. (2015b). Robinson v Harman; 18 Jan 1848. Retrieved from: https://swarb.co.uk/robinson-v-harman-18-jan-1848/ Swarb. (2016). Hayes v Dodd: CA 1990. Retrieved from: https://swarb.co.uk/hayes-v-dodd-ca-1990/ Williams, S. (2013). Transaction Or No Transaction?. Retrieved from: https://www.radcliffechambers.com/wp-content/uploads/2013/01/Simon_Williams_-_Prof_Neg_article.pd