Tutorial Damages

Bellamy, a yacht builder, entered into a contract with Wonkru Inc to construct an eco-friendly yacht by a specified deadline. Bellamy subcontracted parts of the work and incurred additional costs for eco-friendly materials. Wonkru failed to make the first payment as agreed in the contract, leading Bellamy to terminate the contract. Bellamy is seeking advice on claiming remedies for the additional costs incurred and lost profits.

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Tutorial Damages

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‭TUTORIAL DAMAGES‬

‭ n‬ ‭25‬ ‭September‬ ‭2019,‬ ‭Bellamy‬ ‭,‬ ‭a‬ ‭luxury‬ ‭yacht‬ ‭builder‬ ‭entered‬ ‭into‬ ‭a‬ ‭yacht‬ ‭building‬
O
‭contract‬ ‭with‬ ‭Wonkru‬ ‭Inc.,‬ ‭a‬ ‭company‬ ‭wholly‬ ‭owned‬ ‭by‬ ‭Marcus‬ ‭Ong.‬ ‭Bellamy‬ ‭agreed‬ ‭to‬
‭construct‬ ‭and‬ ‭deliver‬ ‭a‬ ‭50‬ ‭metre‬ ‭eco-friendly‬‭yacht‬‭with‬‭a‬‭serial‬‭number‬‭FB256‬‭to‬‭Wonkru‬
‭Inc.‬‭The‬‭agreed‬‭price‬ ‭for‬‭the‬‭yacht‬‭was‬‭RM18‬‭million.‬‭It‬‭was‬‭also‬‭agreed‬‭for‬‭Wonkru‬‭Inc.‬‭to‬
‭pay the first instalment of 10% of the price due on 17 October 2019.‬

‭ o‬ ‭design‬ ‭and‬ ‭build‬ ‭a‬ ‭superyacht,‬ ‭Bellamy‬ ‭informed‬ ‭Marcus‬ ‭that‬ ‭they‬ ‭need‬ ‭at‬ ‭least‬ ‭three‬
T
‭years‬‭to‬‭complete‬‭the‬‭yacht‬‭but‬‭Marcus‬‭insisted‬‭the‬‭yacht‬‭must‬‭be‬‭completed‬‭and‬‭delivered‬
‭on‬‭30‬‭November‬‭2021.‬‭Marcus‬‭had‬‭intended‬‭to‬‭charter‬‭the‬‭yacht‬‭to‬‭the‬‭state‬‭government‬‭in‬
‭conjunction with Visit Malaysia 2022.‬

I‭n‬‭order‬‭to‬‭speed‬‭up‬‭the‬‭building‬‭of‬‭the‬‭said‬‭yacht,‬ ‭in‬‭November‬‭2019,‬‭Bellamy‬‭had‬‭verbally‬
‭promised‬ ‭Skyhall‬ ‭Ship‬ ‭Builder‬ ‭to‬ ‭(the‬‭SSB)‬‭subcontract‬‭parts‬‭of‬‭the‬‭building‬‭process‬‭while‬
‭retaining‬ ‭ultimate‬ ‭responsibility.‬ ‭The‬ ‭SSB‬ ‭would‬ ‭be‬ ‭responsible‬ ‭for‬ ‭tank‬ ‭tester,‬ ‭vibration‬
‭analysis‬ ‭and‬ ‭painting.‬ ‭Bellamy‬ ‭had‬ ‭also‬ ‭purchased‬ ‭eco-friendly‬ ‭material‬ ‭fibre-reinforced‬
‭plastic‬ ‭(FRP)‬ ‭from‬ ‭Sifeng‬‭Yacht‬‭Supplies.‬‭Though‬‭the‬‭process‬‭of‬‭building‬‭yacht‬‭using‬‭FRP‬
‭required‬ ‭more‬ ‭skilled‬ ‭labour‬‭and‬‭knowledge‬‭compared‬‭to‬‭steel,‬‭aluminium‬‭or‬‭polyethylene,‬
‭FRP‬‭composite‬ ‭material‬‭provided‬‭better‬‭return‬‭of‬‭investment‬‭on‬‭account‬‭of‬‭their‬‭longer‬‭life,‬
‭recyclable‬ ‭and‬ ‭have‬ ‭no‬ ‭adverse‬ ‭effects‬ ‭on‬ ‭the‬ ‭marine‬ ‭ecosystem.‬ ‭This‬‭has‬‭resulted‬‭in‬‭an‬
‭increase of 20% from the initial cost planned.‬

‭ y‬‭17‬‭October‬‭2019,‬‭Bellamy‬‭had‬‭not‬‭received‬ ‭any‬‭payment‬‭for‬‭the‬‭agreed‬‭first‬‭instalment‬
B
‭i.e‬‭RM1.8mil.‬‭After‬‭several‬ ‭demands‬ ‭made‬‭for‬‭the‬‭payment,‬‭Bellamy‬‭eventually‬‭terminated‬
‭the contract on 22 January 2020.‬

‭ ellamy‬ ‭comes‬ ‭to‬ ‭you‬ ‭for‬ ‭an‬ ‭advice‬ ‭on‬ ‭the‬ ‭likelihood‬ ‭of‬ ‭success‬ ‭in‬‭claiming‬‭the‬‭available‬
B
‭remedies. Bellamy wishes to claim for:‬

i‭)‬ ‭ ost of purchasing FRP (and the 20% increase of expenditure); and‬
C
‭ii)‬ ‭Loss of profit‬
‭TUTORIAL DAMAGES‬

‭1.‬ T‭ o what extent can the person who caused the loss be held responsible‬
‭where the injured party suffers financial loss and sues him for damages‬
‭for breach of contract?‬

‭2.‬ ‭What is the impact of the English case‬‭Hadley v Baxendale‬‭(1854)‬

‭3.‬ ‭What is a test of foreseeability?‬

‭4.‬ W
‭ hat is the degree of knowledge imposed on the defendant to‬
‭determine whether the damage/loss lies within the contemplation of his‬
‭mind?‬

‭5.‬ W
‭ hat is the significance of the English case‬‭Victoria‬‭Laundry v Newman‬
‭Industries‬‭(1949) to the principle of remoteness?‬‭What is the key‬
‭principle of the case?‬

‭6.‬ W
‭ hat is your understanding on the principle/concept of limitations on‬
‭recovery of damages in contract law? (Limitations of liability and‬
‭reasonableness)‬

‭7.‬ F‭ or all your answers above (QS 1-6), support them with the Malaysian‬
‭cases.‬