Chapter 13 PT 4

Question 1

The nature and purpose of contractual damages:

Answer 1

1) Innocent parties should be placed in the position they would have been in had the obligation been properly performed or made.

2) Aim → place the innocent party in his fulfilment position

Question 2

Contractual damages

Answer 2

1) Are measured according to the plaintiff’s positive (expectation) interest and include a loss of profit.

2) Positive interest looks forward as it aims to place the person in the position they
would have been in if the performance had been performed properly and fully.

Question 2

Application of this rule gives rise to two financial positions:

Answer 2

1) The actual position that the plaintiff is now in and

2) The hypothetical position the plaintiff would have been had there been no breach

Question 3

Delictual damages

Answer 3

1) Are measured according to the plaintiff’s negative (reliance) interest and are restricted to out-of-pocket losses.

2) Negative interest is backward and aims to place the person in the position they had
been in if the contract had never been entered into

Question 4

Requirements for a damage claim:

Answer 4

A plaintiff who wishes to claim damages for breach of contract must prove the following:
1)A breach of contract has been committed by the defendant.

2) The plaintiff has suffered a financial or patrimonial loss.

3) There is a factual causal link between the breach and the loss.

4) As a matter of legal causation, the loss is not too remote a consequence of the breach.

Question 5

Financial Loss:

Answer 5

1) Actual loss: no nominal damages.
2) Financial or patrimonial loss.
3) Future loss: the once-and-for-all-rule.
4) Application of the difference rule: a more concrete approach.
5) Market value approach.
6)Financial benefits flowing from breach

Question 6

Causation:

Answer 6

1) The financial loss must have been caused by the breach

Question 7

The guidelines for the inquiry into the causation were set out in International Shipping v Bentley, which entails a 2-stage process:

Answer 7

1) Factual causation: Firstly, one asks whether, as a matter of fact, the breach
causally contributed to the loss in question

2. Legal causation: Secondly, if the previous answer was yes, one asks whether, as a
   matter of law, the causal connection between the breach and the loss is
   sufficiently close that the party in breach can be held responsible

Question 8

Apportionment of Damages:

Answer 8

1) The innocent party must prove that the breach caused the loss.

Question 8

Thoroughbred Breeders Association v Price Waterhouse

Answer 8

1) The Apportionment of Damages Act does not apply to damages in contractual
breaches, which means that the innocent party must merely prove that the breach was a cause of the loss and not the main cause.

2) The damages also won’t be adjusted to reflect the portion of loss it occurred as the full amount will be owed.

Question 9

Mitigation Rule:

Answer 9

1) The courts allowed for the mitigation rule, which means that the innocent party cannot claim damages that could have been prevented by the innocent party who suffered the loss.

2) The courts expect the innocent party to act as a reasonable person in the circumstance.

Question 10

Penalty Clauses:
Contracts usually set out clauses to deal with breaches and usually take the following forms:

Answer 10

1) Pre-estimate of damages: This is when parties already have an amount set for
damages, which is a rough estimate of what the damages would be in case of breach.

2) Penalty clauses: This clause does not estimate damages but rather deters breaching a contract. It provides for payment of an amount when there is a breach.

3) Forfeiture clauses: These clauses provide that the breaching party forfeits the right to
restitution of any performances already made in the event of a breach

Question 11

Other remedies – an Interdict:

Answer 11

A remedy used to prevent the breach or to protect ancillary rights from a contract.

Question 12

Used in three situations:

Answer 12

1) As a form of specific performances;
2) In the protection of ancillary rights; and
3) To prevent 3rd parties from unlawfully interfering with contractual rights.

Question 13

To succeed the following requirements must be met:

Answer 13

1) A clear right must exist;

2) Injury must be shown; and

3) There should be no other ordinary remedy that will protect the innocent party.