0. Introduction Flashcards
What is the only accepted rationale for awarding damages in case of a breach of contract?
While it is possible to imagine other rationales for awarding damages, for example to punish the contract breaker, the only accepted rationale is compensation.
Will a breach of contract be assumed to have caused loss?
A breach of contract will not be assumed to have caused loss. Loss must be proved by adduction of evidence, but is not strictly limited to financial loss. Where no loss can be shown, the claimant will still win the case, but will receive nominal damages. (usually £2)
What is the standard of proof for proving loss?
The usual one in civil litigation - the balance of probabilities. In other words, the claimant must show that it is at least more likely than not that the loss has been sustained.
What are the two alternative strategies for quantifying loss?
a) Expectation loss (also referred to as performance loss)
b) Reliance loss
What is expectation loss?
This is loss of bargain; loss of the benefit the claimant would have received if the contract had been performed in accordance with its terms rather than breached.
- Often this will take the form of the net profit which the claimant stood to make.
- In addition, the claimant may recover
- for physical loss
- for distress
- for the loss of a chance to gain
- The difficulty of assessing damages is not regarded as a bar to their award; a court, using a very full measure of discretion, will put a figure on the loss.
What is reliance loss?
Reliance loss is expenditure incurred by the claimant in performing the contract which has been wasted as a result of the breach.
What does the rule against double recovery say?
Double recovery means claimaing the same loss twice over, which is not allowable. Typically this occurs when expectation and reliance perspectives to quantification get mixed up.
What does the rule of causation say?
In order to be recoverable as damages, loss must have been caused by the breach of contract.
Furthermore, rules of remoteness apply. The loss must either have arisen from the breach in the natural course of events, or must have been foreseeable to the defendant at the time the contract was entered into.
What is the ‘duty’ to mitigate?
Loss which might have been avoided or recouped had the claimant taken reasonable steps to mitigate it will not be deemed in law to have been caused by the defendant’s breach. However, the word ‘duty’ is somewhat misleading, since it is not a duty which can be enforced.
What is contributory negligence?
Provided the defendant’s breach of contract has caused the claimant’s loss, that loss will be fully compensated even though the claimant’s own conduct has contributed to the loss. The generally accepted reason for this is that the claimant has bargained for due performance, and that a reduction in damages would interfere with the contractual allocation of risk. The principle does not sit altogether happily with the ‘duty’ to mitigate.
Further remedies I:
Termination
In certain circumstances, the injured party may terminate the contract for breach, withholding future performance and foregoing the defendant’s future performance. This remedy is only available where an important term of the contract (a condition, as opposed to a warranty) has been breached. Termination may be combined with an action for damages to the extent necessary to compensate the claimant fully. It is not necessary to bring a court action in order to terminate a contract.
Further remedies II:
Rescission
The rescission of a contract involves undoing it to restore the parties to the position they were in before they entered into it. Rescission therefore differs from termination because it operates retrospectively upon the contract as well as prospectively. It is available where the formation of the contract was vitiated, eg. by the making of a misrepresentation by one party to the other. Certain potential bars to rescission are recognised by the law.
Further remedies III:
Termination in sales of goods cases
Contracts for the sale of goods may be terminated for breach of condition. Be aware that in this context termination may resemble rescission. For example, where faulty goods are supplied in breach of condition, termination of the contract may involve returning the goods to the seller and recovering the price paid for them.
Further remedies IV:
Specific performance
Specific performance is an order from the court directing the defendant to perform the contract. It is a discretionary remedy, and in principle it is used only when it is not possible fully to do justice by making an award of damages.
There may be several reasons why damages would not fully compensate the claimant, or would not uphold the claimant’s just and reasonable expectations. In particular, contracts for the sale of land are frequently ordered to be specifically performed, because the courts have traditionally considered that land is unique; the award of damages may well not enable equivalent land to be purchased, and would therefore be insufficient compensation. Goods may be regarded in the same way if they appear unique. Contracts for personal services are not specifically performable, since the court will not order parties to maintain personal relations.
The power to order specific performance originates in the court’s equitable jurisdiction, and is therefore limited by considerations peculiar to equity. There are several such considerations, tending to reflect equity’s concern with fairness and practicality. By contrast, a claim for damages is a matter of common law, and is granted as a matter of right once a cause of action and loss are proved.
Further remedies V:
Injunctions
A prohibitory injunction is an order enforcing a negative undertaking in a contract. In other words it restrains a defendant from acting in breach of contract by doing what he has promised not to do. Contracts for personal services are again treated differently from other contracts; their breach will not be directly restrained by the grant of an injunction.
A mandatory injunction orders the defendant to undo what he has done in breach of contract. It tends to be a drastic remedy, and a strong case must be made that nothing less (eg. the award of damages) will do justice.
Further remedies VI:
Restitutionary remedies / quasi-contract / unjust enrichment
Essentially, these are remedies beyond contract. They exist to allow justice to be done where a contract fails to award rights (and therefore a remedy), or for some reason has been discharged, or no contract has ever come into existence. In any of these circumstances, a remedy may be available if one party would otherwise be unjustly enriched at the expense of the other. Attempts have been made to account for these remedies as arising in a way akin to contractual remedies, by reference to the presumed intentions of the parties (hence the label “quasi-contract”), but the attempts are by no means generally accepted as convincing.
