ASSIGNMENT

“The concept of corporate governance has now become a serious concern among regulators of corporate law and regulations since the decision makers in the corporate sector are entrusted with the stewardship of the nation’s wealth and wealth creation not only directly for shareholders but also for all those affected by the corporation’s existence – the stakeholders.”

Discuss WHAT AND WHY there is a need for Corporate Governance. Please also make specific reference to the provisions of Malaysian Code of Corporate Governance and relevant provisions of the Companies Act on the duties and liabilities of directors and officers of the company to ensure Corporate Governance.

(20 Marks)

The Malaysian Code on Corporate Governance (Code) was developed by the Working Group on Best Practices in Corporate Governance (JPK1) and subsequently approved by the High Level Finance Committee on Corporate Governance. JPK1 was chaired by the Chairman of the Federation of Public Listed Companies. The members of JPK1 comprised a mix of private and public sector participation.

The Code was principally an initiative of the private sector. The need for a Code was inspired in part by a desire for the private sector to initiate and lead a review and to establish reforms of standards of corporate governance at a micro level. This was based on the belief that in some aspects, self-regulation was preferable and the standards developed by those involved would be more acceptable and thus more enduring.

The Code essentially aims to set out principles and best practices on structures and processes that companies may use in their operations towards achieving the optimal governance framework. These structures and processes exist at a microlevel which include issues such as the composition of the board, procedures for recruiting new directors, remuneration of directors, the use of board committees, their mandates and their activities.

The significance of the Code is that it allows for a more constructive and flexible response to raise standards in corporate governance as opposed to the more black and white response engendered by statute or regulation. It is in recognition of the fact that there are aspects of corporate governance where statutory regulation is necessary and others where self-regulation, complemented by market regulation is more appropriate.

The need for a code also results from economic forces and the need to reinvent the corporate enterprise, so as to efficiently meet emerging global competition. The world’s economies are tending towards market orientation. In market oriented economies, companies are less protected by traditional and prescriptive legal rules and regulations. Malaysia is no exception and the shift to a full disclosure regime, already underway in Malaysia, is such an example. Hence, there is a need for companies to be more efficient and well managed than ever before to meet existing and anticipated world-wide competition. The role of directors then increases in importance. The role of the board in hiring the right management, compensating, monitoring, replacing and planning the succession of senior management is crucial, as management undertakes the key responsibility for the enterprise’s efficiency and competitiveness. The role of the Code is to guide boards by clarifying their responsibilities and providing prescriptions, thereby strengthening the control exercised by boards over their companies.

The Malaysian Code on Corporate Governance (Code), first issued in March 2000, marked a significant milestone in corporate governance reform in Malaysia. It codified the principles and best practices of good governance and described optimal corporate governance structures and internal processes.

Since the release of the Code, the Malaysian corporate scene has made significant strides in corporate governance standards. The mandatory reporting of compliance with the Code has enabled shareholders and the public to assess and determine the standards of corporate governance by listed companies.

The Code is aimed at strengthening the board of directors and audit committees, and ensuring that the board of directors and audit committees discharge their roles and responsibilities effectively.

Duties and liabilities of directors and officers of the company to ensure Corporate Governance are:

Malaysia’s economy depends on the drive and efficiency of the companies. Therefore, the effectiveness of the board of directors in discharging their duties and responsibilities determines Malaysia’s competitive position. In other words, Company directors must be free to drive their companies forward, but they have to exercise that freedom within a framework of effective accountability.

A proper and efficient system of corporate governance is necessary in the companies in order to regulate the directors’ duties and preventing them from abusing their powers. Corporate Governance is the system by which business corporations are directed and controlled. It is necessary to ensure that company directors act in the best interests of their companies as well as ensuring the observance and compliance with all laws, regulations and codes of conduct and best practices.

Section 4 of the Companies Act 1965 (CA) defines director as:

“any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors of a corporation are accustomed to act and an alternate or substitute director”

Where a director is required to act bona fide in the interest of a company, he must act according to what he considers, not what a court may consider, is in the interest of the company : Re Smith and Fawcett Ltd (1942) Ch 304. The directors are the ones to determine what is best for the company. In Intraco Ltd v Multi-Pak Singapore Pte Ltd [1995] 1 SLR 313, the Court held that the proper test in determining whether the directors have acted bona fide was whether an honest and intelligent man in the position of a director in the whole of the existing circumstances, have reasonably believed that the transactions were for the benefit of the company.

Obligation of directors to act bona fide in the interest of the company

The law imposes on directors a certain trustees-like duties. This duties include:

To act for a proper purpose

To avoid conflict of interest

Not to have other interest fetter his discretion

To ensure that the interest of the members of the company is protected

To use reasonable diligence in the discharge of his duties.

Directors are required to exercise powers given to them for the proper purpose of the company. The purposes may be set out in the articles of association of the company. Therefore, directors are prohibited from exercising its powers for any collateral purposes or any act done for an impermissible purpose.

Whitehouse & Anor v Carlton Hotel Proprietary Ltd (1987) 162 CLR 285 Mr Whitehouse as a director allotted two class ‘B’ shares to each of the sons which had the effect of passing control of the company to them.

The company later passed a resolution that the class ‘B’ shares had never been issued by arguing that the power was exercised to achieve an impermissible purpose, namely to defeat the voting power of the existing shareholders by creating a new majority. The Court held that the articles of association does not authorise the exercise by Mr Whitehouse of that fiduciary duty for an impermissible and vitiating purpose.

A director who has entered into a contract with his company in breach of his fiduciary duties still remains accountable to his company for any profit which he or she derives from the breach.

This profit rule can apply in instances where even if there is no realistic possibility of conflict between the interest and duty but where the directors have made a profit : Queenland Mines Ltd v Hudson (1978) 3 ACLR 176.

Statutory Duties of Directors : Section 131 Companies Act (CA) 1965

This provision are designed to achieve a modification of the ‘no conflict rule’ by allowing a company to enter into transactions with directors provided their interest is disclosed to the board.

S131 CA provides that: “every director of a company who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company shall, as soon as practicable after the relevant facts have come to his knowledge, declare the nature of his interest at a meeting of the directors of the company.”

In a Singapore case of Yeo Geok Seng v PP [2000] 1 SLR 195, Yong CJ held that S156 Singapore CA(S131 Malaysian CA) was not confined to situations where the directors had a personal interest that conflicts with his duty but was wide enough to impose a duty of disclosure on a director who holds directorship in another company.

Statutory Duties of directors – Section 132 CA 1965

Section 132(1) CA 1965 sets out the director’s duties to act honestly.

Under S132(1), a director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office.

Also, under S132(5), this duties are in addition to and not in derogation of any written law or rule of law relating to the duty or liability of directors or officers of a company.

Therefore, the common law and equitable rules relating to directors are still relevant.

In Multi-Pak Singapore Pte Ltd v Intraco Ltd [1994] 2 SLR 282, the court held that the word 'honestly' does not mean that a director would only be in breach of duty if he had acted fraudulently. It means to act bona fide in the interests

of the company. In exercising their discretion, the directors should only act to promote or advance the interest of the company.

Duties of Skill and care

Section 132(1) CA also sets out the duty of the director to use reasonable diligence in the exercise of the duties of his office.

The duty of skill, care and diligence to be exercised by the directors were established in the leading case of Re City Equitable Fire Insurance Co Ltd [1925] Ch 407.

A director are under the duty to exhibit a degree of skill that is reasonably expected from a person with his knowledge and experience : Re City Equitable Fire Insurance Co Ltd

Re City Equitable [1925] Ch 407

A case where the liquidators of the failed insurance co sued the directors for negligence on 3 grounds:

1) they allowed the co to lend substantial funds on an unsecured basis to its chairman and GM

2) that they made improvident investments

3) that they paid dividends out of capital

Re City Equitable [1925] Ch 407

The Court held:

A director need not exhibit a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience.

A director is not bound to give continuous attention to the affairs of the co as his or her duties are of an intermittent nature to be performed at periodic board meetings.

Statutory Duties of directors – Section 132 CA 1965

S132(2) CA 1965 sets out the duty not to misuse information or position.

Under S132(2), an officer or agent of a company or officer of the Stock Exchange shall not make improper use of any information acquired by virtue of his position as an officer or agent of the company or officer of the Stock Exchange to gain directly or indirectly an advantage for himself or for any other person or to cause detriment to the company.

Hence, it is applicable to directors.

This provision can apply to information which is not confidential as held in McNamara v Flavel (1988) 13 ACLR 619 but only so long as the information is of a kind which equity would protect by injunction for breach of fiduciary duty.

S132 CA is sometimes regarded as a misuse of information by insiders.

Insider trading is in effect a misuse of unpublished information of a company by anyone in possession of such information which is not generally available.

Insider trading under Section 89 of the Securities Industry Act (SIA) 1983

Under Section 89E SIA, an insider (clearly includes a director) shall not, in respect of any information that is not generally available:

A) acquire or dispose of, or enter into an agreement with a view to the acquisition or disposition of such securities; or

B) procuring, directly or indirectly, an acquisition or disposal of such securities.

Other provisions relating to misuse of information

Section 132A CA

An officer, agent or employee of a corporation or officer of the Stock Exchange who in or in relation to a dealing in securities of the corporation by himself or any other person makes improper use to gain, directly or indirectly, an advantage for himself or any other person of specific confidential information acquired by virtue of his position as such officer, agent or employee or officer of the Stock Exchange which if generally known might reasonably be expected to affect materially the price of the subject matter of the dealing on a Stock Exchange shall, in addition to any penalty imposed under subsection (6), be liable to any person for loss suffered by that person by reason of the payment by him or to him of a consideration in respect of the securities greater or lesser, as the case may be, than the consideration that would have been reasonable if the information had been generally known at the time of the dealing.

Section 132C Companies Act 1965

Notwithstanding anything in a company's memorandum or articles, the directors shall not carry into effect any proposal or execute any transaction for -

(a) the acquisition of an undertaking or property of a substantial value; or

(b) the disposal of a substantial portion of the company's undertaking or property,

which would materially and adversely affect the performance or financial position of the company, unless the proposal or transaction has been approved by the company in general meeting.

New Sections 131A and 131B:

“Subject to section 131, a director of a company who is in any way, whether directly or indirectly, interested in a contract entered into or proposed to be entered into by the company, unless the interest is one that need not be disclosed under section 131, shall be counted only to make the quorum at the board meeting but shall not participate in any discussion while the contract or proposed contract is being considered at the board meeting and shall not vote on the contract or proposed contract.”

S131B provides that the directors have the power to manage or supervise the affairs of the company.

Directors’ duties under Corporate Governance Disclosure ;

Para 15.26 Disclosure pursuant to the Code,

A listed issuer must ensure that its board of directors makes the following statements in relation to its compliance with the Malaysian Code on Corporate Governance in its annual report:-

A) a narrative statement of how its listed company has applied the principles set out in Part 1 of the Malaysian Code on Corporate Governance to their particular circumstances; and

B) a statement on the extent of compliance with the Best Practice of Corporate Governance set out in Part 2 of the Malaysian Code on Corporate Governance which statement shall specifically identify and give reasons for any area of non-compliance with Part 2 and the alternatives to the Best Practices adopted by the listed issuer if any.

Para 15.27 Additional statements by the board of directors

A listed issuer must ensure that its board of directors makes the following additional statement in its annual report:-

A) a statement explaining the board of directors’ responsibility for preparing the annual audited accounts; and

B) a statement about the state of internal controls of the listed issuer as a group

PRESENTATION:

(10 marks)

Discuss the transfer of property and risks in goods and the remedies available to the unpaid seller.

Pursuant to section 47 of the Malaysia Sale of Goods Act 1957, notwithstanding that the property in goods may have passed to the buyer the unpaid seller of goods may have passed to the buyer the unpaid seller of goods under the law has lien on the goods or the right to retain he goods for the price while the seller is in possession of the said goods. For e.g. In the event the buyer becomes insolvent the seller has the right to stop the goods in transit after they have parted with the possession of them. The Act also allows for the resale of the said goods within the limitation of the Act. Section 48 of the said Act deals with the situation of part delivery i.e. the right of the seller to the remainder of undelivered goods and section 49 deals with termination of such lien.

It has to be noted that the freedom of contract or Lazier faire also means that a party may enter into transactions anywhere in the world which inevitably lead to conflicts of laws in some situations. Hence, at these times the Malaysian courts would have take into account international conventions etc to determine the rights, duties and remedies of the parties.

Many words when used as a phrase come to convey a specific meaning in a particular industry . One such phrase is “passing of title”.

The words “passing” and “title” are two very basic ordinary words. “Passing” is moving from one point to another or from one person to another. “Title” on the other hand refers to amongst others to ownership or evidence of ownership.

Yet the phrase “passing of title” has acquired a meaning of its own though not entirely unrelated to the original meaning of the words. It conveys a concept, which goes beyond the meaning of the ordinary words, used in isolation. It has become a topic by itself. It is a phrase which deals specifically with goods where the ownership is transferred.

The phrase is better understood in the light of an examination of the concept of ownership on the one hand and possession on the other. Unless a person is the creator of a product in which case the person would at the very outset be both the owner and be in possession of the product, an item of property is usually acquired by one person from another either as a gift or by purchase or through legal means.

Thus in the case of goods, the provisions in the Sale of Goods Act 1957 govern the acquisition and transfer of ownership. Under the Act “goods” mean every kind of moveable property other than actionable claims and money and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

When a person buys an item from another person two concepts are involved. One is the legal transfer of ownership of the goods, which is called “passing of title”. The other is the goods being physically passed over to the buyer, which gives possession.

Thus in a case where a person lends an item to another for temporary use, what happens is that the title or rather the legal ownership remains with the lender and the borrower of the item merely has possession.

Legal ownership or the transfer of the title only occurs when the owner transfers the ownership or title to the other person. Thus in an ordinary sale and purchase of goods situation the seller transfers ownership and also possession to the buyer. However as there may be a lapse of time between an agreement being reached and possession finalised, the question remains as to when title or “legal ownership” passes?

This depends on the nature of the transaction. Section 20 of the Sale of Goods Act 1957 provides that “where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial when the time of payment of the price, or the time of delivery of the goods, or both, is postponed.”

What is the significance of the passing of the title? Apart from giving the person who has acquired the goods their legal ownership, it has implications in terms of risk. Section 26 provides that “unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not.”

Of course where delivery is delayed through the failure of the buyer or seller, the risk factor may then shift to the person who is considered to be at fault. This is because the consequences of the risk may not have occurred if there was no delay.

It is because of these factors that a person who buys a car, which turns out to be stolen, will have to return it to the true owner. This is because the person who has sold the car did not have legal ownership in the first place. Of course the person who had obtained the car from another, whether a thief or someone else who bought it from the thief, may have paid him the money.

S.38 SOGA 1979

"The Seller of goods is an unpaid seller within the meaning of this Act-

(a) when the whole of the price has not been paid or tendered

(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise."

9.2 Rights of the Unpaid Seller

S.39 SOGA 1979

"(1) Subject to this and any other Act, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law -

(a) a lien on the goods or right to retain them for the price while he is in possession of them,

(b) in case of insolvency of the buyer, a right of stopping the goods in transit after he has parted with possession of them,

(c) a right of re-sale as limited by this Act.

(2) Where the property in the goods has not passed to the buyer, the unpaid seller has (in addition to his other remedies) a right of witholding delivery similar to and coextensive with his rights of lien and stoppage in transit where the property has passed to the buyer."

Saturday January 29th 2011

9. Remedies of the Seller

For a detailed review / revision of Remedies for Breach of Contract see:

Insite Contract: Remedies

9.1 The Unpaid Seller

S.38 SOGA 1979

"The Seller of goods is an unpaid seller within the meaning of this Act-

(a) when the whole of the price has not been paid or tendered

(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise."

9.2 Rights of the Unpaid Seller

S.39 SOGA 1979

"(1) Subject to this and any other Act, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law -

(a) a lien on the goods or right to retain them for the price while he is in possession of them,

(b) in case of insolvency of the buyer, a right of stopping the goods in transit after he has parted with possession of them,

(c) a right of re-sale as limited by this Act.

(2) Where the property in the goods has not passed to the buyer, the unpaid seller has (in addition to his other remedies) a right of witholding delivery similar to and coextensive with his rights of lien and stoppage in transit where the property has passed to the buyer."

9.2.1 The Seller enjoys "Real" and "Personal" Remedies

Real Remedies

Rights against the goods - Lien (ss.41- 43);

Stoppage in Transit (ss.44 - 46);

Retention and Re-sale as limited by the Act (s.48)

Personal Remedies

Rights against the buyer

Action for Price (s.49);

Action in damages for non-acceptance (s.50)

9.3 Real remedies of the unpaid seller

9.3.1 Lien : s.41 - 43

The seller's lien arises (a) where the seller is unpaid (b) the goods sold are not subject to credit provision (c) if credit was given, the credit period has expired (d) the buyer is insolvent and (e) the seller is in possession of the goods or part thereof.

(a) The parties may override the statutory lien by express provision.

(b) The buyer's insolvency while giving a right of lien does not necessarily repudiate the contract.

(c) The exercise by the seller of the lien does not rescind the contract but may be a prelude to resale under s.48(3) (Infra).

(d) The lien exists to secure payment of the price in respect of the particular goods. Any claim for expenses incurred in detaining the goods must be the subject of a damages claim unless there is express provision made that the expenses element be treated as part of the price - in which case the lien would extend to the expenses element.

(e) The rights of stoppage in transit underpin the lien rights.

(f) The lien rights will terminate (a) when he delivers the goods to a carrier for transmission to the buyer without reserving a right of disposal over the goods (b) when the buyer of his agent lawfully obtains possession of them (c) by waiver of the lien or right of retention.

9.3.2 Right of re-sale s.48

"(1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or retention or stoppage in transitu.

(2) Where an unpaid seller who has exercised his right of lien or retention or stoppage in transitu re-sells the goods, the buyer acquires a good title thereto as against the original buyer.

(3) Where the goods are of a perishable nature, or where the unpaid seller gives notice to the buyer of his intention to re-sell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may re-sell the goods and recover from the original buyer damages for any loss occasioned by his breach of contract.

(4) Where the seller expressly reserves the right of re-sale in case the buyer should make default, and on the buyer making default, re-sells the goods, the original contract of sale, is thereby rescinded, but without prejudice to any claim the seller may have for damages."

(a) If the seller had no right to re-sell (s.48(3)(4); buyer repudiation; unascertained good not appropriated to the contract) then the buyer will enjoy a claim against the seller in damages for non-delivery.

(b) A more subtle way of approaching the problem is for the buyer to waive the damages claim and treat the seller as if he were the buyer's agent to sell the goods and claim an account.

Benjamin ¶ 1204 p 722 3rd Edition .

(c) If the buyer repudiates his obligations under the contract (and this can include insolvency if the buyer shows he is unable or unwilling to pay) the seller can accept the repudiation, teat the contract as discharged, re-sell the goods (with title) and claim damages against the buyer for any loss occasioned thereby.

(c) If the buyer repudiates his obligations under the contract (and this can include insolvency if the buyer shows he is unable or unwilling to pay) the seller can accept the repudiation, teat the contract as discharged, re-sell the goods (with title) and claim damages against the buyer for any loss occasioned thereby.

(d) If the buyer has both property and possession the seller's claim must be for the price or damages - personal remedies against the buyer. The real remedies, rights against the goods, appear to have been lost.

(e) It would appear that when title and possession are vested in a buyer who later repudiates the contract, the seller cannot recover the goods, property does not revest in the seller. Property revests where the buyer validly rejects the goods or the parties rescind on ground of misrepresentation. The way around the problem would be to make express provision on resale to cover the situation where property and possession vest in the buyer. (Problems could arise under the Bills of Sale Act 1878)

(f) If a seller re-sells the goods he may retain deposits as well as the price paid by the new buyer. (provided no damages claim was made against the buyer for loss on the re-sale) If, on the other

hand, the seller chooses not to re-sell and claims damages the seller must take into account the deposit in the calculation of damages.

9.4 Personal Remedies of the Unpaid Selle

9.4.1 Action for the Price

S.49(1)(2) SOGA 1979

(1) Where under a contract of sale, the property in the goods has passed to the buyer, and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods.

(2) Where, under a contract of sale, the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay the price, the seller may maintain an action for the price, although the property in the goods has not passed, and the goods have not been appropriated to the contract."

(a) The right to sue for the price is independent of lien. In circumstances where the seller has been given judgment for the price he may still retain the goods by way of lien until he is actually paid. s.43(2)

(b) The action arises where the buyer has defaulted in paying for the goods.

(c) Under s.49(1) the seller may bring an action for the price only if the property has passed. (cf. s.49(2).) The contract must continue to remain in force. The seller must not have accepted a repudiation.

There is some support for the view that the seller may waive his right of retention of title, allow property to pass and bring an action for the price under s.49(1)

Napier v Dexters Ltd (1926) 26 Ll L. Rep at 63

(d) If the contract provides that payment is to be made on a day certain the seller may bring an action for the price on the expiration of the day certain. s.49(2).

Workman Clark v Lloyd Braziliano [1908] 1 KB 968

(e) The action for the price is an action on a liquidated sum. Advantage can therefore be taken of Ord. 14 RSC - Summary Judgment proceedings. (See also C.C.R. O.9)

(f) If it not possible to bring an action for the price under any of the heads indicated above the seller has to fallback on a remedy in damages for non-acceptance and non-payment under s.51.

Advantages of the 'price' action :

(a) Financial. The sum gained will invariably be higher than for damages.

(b) Where property has passed the seller is not under a duty to mitigate.

Additional remedies

The seller may be able to claim damages for special loss occasioned by the breach and be entitled to compensation for delay in acceptance of the goods under s.37.

s.37

"When the seller is ready and willing to deliver the goods, and he requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods : provided that nothing in this section shall affect the rights of the seller where the neglect or refusal of the buyer to take delivery amounts to a repudiation

Failure of the buyer to pay on time

Failure to pay on time is not, of itself, a repudiatory breach. If the seller resells the goods he may lay himself open tan action by the buyer for non-delivery under s.51. The new buyer ought to be protected from the consequences of nemo dat under s.48(2) and s.24 sale of Goods Act.

s.48(3)

"Where the goods are of a perishable nature, or where the unpaid seller gives notice to the buyer of his intention to re-sell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may re-sell the goods and recover from the original buyer damages for any loss occasioned by his breach of contract."

I f the property in the goods has not passed the seller will be able to pass title to the new buyer.

If the contract provided that the time of payment was a condition of the contract or 'of the essence' the seller may treat the buyer's refusal to pay as a repudiatory breach, treat the contract as at an end, sell to a new buyer (passing full title, since the buyer's title, if he had title, will revest in the seller) and claim damages for any loss occasioned by the buyer's breach.

9.4.2 The Action for Damages for Non-Acceptance of the Goods

S.50 (1)(2)(3) SOGA 1979

"(1) Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for non-acceptance.

(2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's breach of contract.

(3) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or (if no time was fixed for acceptance) at the time of the refusal to accept."

(a) General principles: The general principles applicable to damages claims can be summarised as follows:

1. Breaches of contract are actionable per se

2. The object of damages is to compensate

3. There is a requirement to mitigate loss

4. Damages can be recovered only for loss sustained

5. The loss must be caused by the breach.

(b) Mitigation: The distinction between breach and anticipatory breach is fundamental.

Braithwaite v Foreign Hardwood Co Ltd [1905] 2 KB 543

" If the buyer wrongfully repudiates the contract, the seller can accept the buyer's repudiation and then maintain an action even though he is unable to show that he had the capacity to perform the contract when the buyer repudiated it. On the other hand, this principle must be reconciled with another equally established rule, namely that a party is not precluded from relying upon one ground of repudiation merely because at the time he gave another and unjustifiable reason for repudiating."

Atiyah: 7th Edition.

See also Gebruder Metelman v NBR (1984)

(c) Calculation of damages : is laid down in s.50(3)(2)

s.50(3) Meaning of 'available market'.

A place where goods can be sold

Dunkirk Colliery v Lever (1878) 9 Ch D 20

Thompson v Robinson Gunmakers Ltd [1955] Ch 177

Charter v Sullivan [1957] 1 All ER 809 Jenkins LJ considered that since there was a distinction between contract price and market price there was only an available market where the market price was regulated by supply and demand. This would exclude markets where the goods were sold by reference to a fixed price in which case the available market rule is inappropriate and the question becomes one simply of the amount of lost profit made on the lost sale. Where there is no available market the measure will generally be the difference between the sale price and the value of the goods to the seller at the time of breach.