Contract - Remedies

Question 1

Aim of damages for breach of contract

Answer 1

compensate the claimant for the damage, loss or injury they have suffered as a result of the defendant’s breach. Not intended to be punitive.

Question 2

Damages where the claimant has not suffered any loss from the breach

Answer 2

nominal damages only

Question 3

nominal damages

Answer 3

a token amount (a very small amount eg £1), which are awarded to acknowledge that there has been a breach of contract in a case where no other remedy is available

Question 4

Aim of compensation

Answer 4

to protect the innocent party’s ‘expectation’ interest – putting them in the position they ‘expected’ to be in.

Question 5

3 methods for calculating the expectation interest

Answer 5

cost of cure
diminution in value
loss of amenity

Question 6

usual method of calculating the expectation interest in contracts involving defective works

Answer 6

cost of cure

Question 7

What does the cost of cure represent?

Answer 7

the cost of substitute or remedial work required to put the claimant in the position they would have been in had the contract been properly performed

Question 8

How must the claimant act in relation to the defective works?

Answer 8

reasonably (eg cannot demolish and rebuild for aesthetic reasons)

Question 9

diminution in value =

Answer 9

the difference in value between the performance received and that promised in the contract

Question 10

Why was loss of an amenity established?

Answer 10

because a consumer should have an available remedy where their loss is not economic in value, but nevertheless has a value to them

Question 11

When would it be ‘unusual, if not impossible’, for damages to be awarded for loss of amenity?

Answer 11

in a commercial setting

Question 12

the reliance interest only allows recovery of

Answer 12

wasted expenditure

Question 13

a party may recover pre-contract expenses as part of their reliance interest as long as the expenses were within

Answer 13

the reasonable contemplation of the parties that it would be wasted as a result of the defendant’s breach

Question 14

Reliance losses

Answer 14

losses incurred prior to breach

Question 15

3 methods for compensating the claimant

Answer 15

expectation interest, reliance interest or restitution interest

Question 16

Types of loss with special rules

Answer 16

Loss of reputation
Loss of chance
Mental distress

Question 17

Are damages awarded in relation to mental distress, anguish or annoyance caused by breach of contract?

Answer 17

generally NO

Question 18

General rule for remedying loss of reputation

Answer 18

damages will not be awarded

Question 19

mental distress may be compensated if a major object of the contract was to provide

Answer 19

pleasure, relaxation and peace of mind

Question 20

For loss of reputation, if awarded, damages will likely be reduced to

Answer 20

the claimant’s financial loss

Question 21

The loss of an opportunity is recoverable in damages if

Answer 21

the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition

Question 22

Damages for loss of chance will be calculated using which interest?

Answer 22

the expectation interest

Question 23

Where the chance of winning or obtaining the benefit is 50% or greater, the claimant should seek to recover their expectation loss…

Answer 23

in full and they will succeed if this can be proved on the balance of probabilities

Question 24

Can you obtain damages on behalf of another?

Answer 24

The general rule is that damages cannot be recovered on behalf of another party / for losses suffered by another party

Question 25

test for factual causation in contract

Answer 25

whether the defendant’s actions were a dominant or effective cause of the loss

Question 26

Limb 1 - Hadley v Baxendale test for remoteness

Answer 26

If the loss is deemed a normal type of loss which would follow from the breach, then it will be recoverable

Question 27

Limb 2 - Hadley v Baxendale test for remoteness

Answer 27

the claimant will have to establish that the particular defendant had sufficient actual knowledge of the particular and special circumstances to be aware of the risk of those losses

Question 28

To satisfy remoteness, the claimant must prove that the defendant had what level of knowledge?

Answer 28

the defendant had sufficient actual knowledge of the particular and special circumstances to be aware of the risk

Question 29

What level of mitigation is required from the innocent party?

Answer 29

injured party should take 'reasonable steps' to minimise the effect of the breach

Question 30

Is there a duty to mitigate one’s losses?

Answer 30

No but the claimant will not be able to recover losses which are due to their own failure to behave reasonably after the breach

Question 31

The question of what steps are 'reasonable' is one of

Answer 31

fact

Question 32

Under Payzu v Saunders, reasonable steps to mitigate may, in some circumstances, include accepting the

Answer 32

performance offered by the defendant under a new contract even when that performance amounts to a breach of the original contract

Question 33

There is no duty to mitigate a claim for a payment of a debt because

Answer 33

it is payable as a contractual right rather than as damages

Question 34

the claimant can only claim his reliance interest if the contract would have enabled him to recoup those expenses

Answer 34

had it been properly performed

Question 35

Burden of proof for reliance interest

Answer 35

on defendant to prove that the claimant would not have recouped the expenditure had the contract gone ahead

Question 36

the 'no windfall' principle

Answer 36

no award of damages can put the claimant in a better position than it would have been in had the contract been performed

Question 37

Function of the restitution interest

Answer 37

in an exceptional case, the court can require the defendant to account to the claimant for benefits received from a breach of contract

Question 38

What must the claimant show in order to deprive the defendant of their profit under the restitution interest?

Answer 38

The claimant must show that they have a 'legitimate interest' in depriving the defendant of their profit

Question 39

a total failure of consideration

Answer 39

where one party has provided something of value under the contract but has received nothing in return

Question 40

When does restitution apply?

Answer 40

where there has been an unjust gain, rather than actionable loss.

Question 41

Alternative approach to remoteness from Transfield

Answer 41

ask whether in objective terms the defendant had 'assumed responsibility' for the loss in question

Question 42

CRA remedy where trader had no right to supply the content

Answer 42

right to a refund

Question 43

Remedy for non-conforming goods under CRA

Answer 43

Short-term right to reject (within 30 days); Right to a repair/replacement OR Right to a price reduction/final right to reject, if the above is: a) Impossible/disproportionate, or b) Has been tried once and the goods still don’t conform, or c) Trader has failed to repair/replace

Question 44

Remedy for non-conforming digital content

Answer 44

Right to a repair/replacement

Question 45

Digital content causes damage to device/other content =

Answer 45

Right to repair or compensation

Question 46

Non-conforming contracts for services =

Answer 46

Right to repeat performance

Question 47

liquidated damages clause

Answer 47

stipulates a certain sum which is to be payable on a particular breach of contract.

Question 48

When would the parties strike down a liquidated damages clause?

Answer 48

where a liquidated damages clause requires the party in breach to pay an excessive sum such that it becomes a 'penalty'

Question 49

if a liquidated damages clause is struck out by the Court, the claimant will only be entitled to ?

Answer 49

'unliquidated' damages

Question 50

burden of proof for penalty clauses

Answer 50

burden of proof is on the person alleging that the clause is a penalty

Question 51

A clause will be a primary obligation if it

Answer 51

furthers the commercial objective of the contract - a primary obligation is not a penalty clause

Question 52

A clause will be a secondary obligation if it

Answer 52

is triggered by breach of contract to compensate the innocent party

Question 53

Makdessi 2-stage test for a penalty clause

Answer 53

1. What (if any) legitimate business interest is served and protected by the clause? 2. Is the detriment imposed to protect that interest extravagant, exorbitant or unconscionable?

Question 54

When will be harder for the party paying liquidated damages to challenge the clause?

Answer 54

if they have equal bargaining power and independent legal advice when contracting

Question 55

A secondary obligation clause will not be a penalty if it

Answer 55

protects a legitimate business interest and imposes a detriment which is not disproportionate to protect the legitimate interest

Question 56

An order for specific performance is only awarded in

Answer 56

exceptional cases

Question 57

A prohibitory injunction

Answer 57

a court order restraining a party from breaching a negative term

Question 58

An order for specific performance or a prohibitory injunction will not be granted if

Answer 58

damages are an appropriate and adequate remedy

Question 59

What kind of remedy are specific performance and prohibitory injunctions?

Answer 59

discretionary and equitable

Question 60

Specific performance will not be awarded for breach of what kind of contract?

Answer 60

employment contracts

Question 61

For other contracts involving services, specific performance will not be awarded if there has been

Answer 61

a breakdown of trust and confidence between the parties, or if the court would need to consider subjective opinions regarding performance

Question 62

specific performance cannot be awarded for:

Answer 62

breach of employment contracts, if it would cause undue hardship, breakdown of trust and confidence between parties in service contracts, if the breach is not binding on both parties

Question 63

To show that damages are inadequate in the specific performance context, it will need to be proved that

Answer 63

the subject matter of the contract is unique or irreplaceable, or that an award of damages would be ineffective to provide adequate compensation

Question 64

Prohibitory injunctions are granted only where

Answer 64

just and convenient

Question 65

Formalities for a guarantee

Answer 65

A guarantee must be in writing and signed by the guarantor

Question 66

An indemnity

Answer 66

a promise to reimburse someone in the event that they suffer a stated loss

Question 67

Formalities for an indemnity

Answer 67

An indemnity is not subject to any particular formalities

Question 68

What is the aim of an award of damages based on the expectation interest in contract law?

Answer 68

It puts the innocent party in the position they would have been in had the contract been properly performed.

Question 69

In what circumstances will damages for loss of chance be awarded?

Answer 69

Damages will be awarded for loss of chance if the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition

Question 70

What principle emerged from the court’s decision in C & P Haulage v Middleton regarding reliance interest?

Answer 70

An innocent party cannot recover expenses that would have been wasted whether or not the breach of contract occurred

Question 71

short-term right to reject non-conforming goods is available to a consumer for how many days?

Answer 71

30 days

Question 72

default mechanism for calculating expectation loss in a contract for defective works

Answer 72

cost of cure