Contract Remedies

Question 1

Contract remedies plan

Answer 1

Termination of contract for breach
- occurs when: party fails to perform contractual obligations, fails to reach contract’s standards, unlawfully repudiates the contract
- consequences of breach depends on type of term breached:
1. condition - sue for damages and/or repudiate the contract
2. warranty - sue for damages only
3. innominate term - sue immediately or wait until performance date, then sue

Compensatory damages:
1) Liquidated damages
- both parties have fixed a proper, fair amount in contract, courts can enforce it
- courts won’t enforce a penalty clause when it’s not a proper reflection or merely seeks to punish D for minor breach (amount exceeds the breach)

2) Unliquidated damages
- no fixed amount in contract - courts will fix amount based on actual loss
- courts look at:
1. Remoteness of loss - what consequence should be compensated for and how much compensation should be paid - Hadley v Baxendale
2. Mitigation of loss - injured party must take reasonable steps to reduce loss, but there’s no duty to take unreasonable action (burden is on D to show failure to mitigate) - Pilkington v Wood
3. Expectation loss - aims to put C into position they would be in if contract was properly performed (covering lost profits and difference in value)
- reliance loss covers expenses spent in preparation for a contract - Angela TV v Reed

Equitable remedies:
1) Specific performance
- discretionary remedy where court orders a party to fulfill contractual obligations (rarely granted as courts are reluctant to compel action - difficult and impractical) - Dyster v Randall and Sons
- when damages are inadequate eg for unique goods or services
- courts consider fairness and won’t grant if it causes undue hardship

2) Rescission
- place parties back into position they were in before entering contract (as if it never happened)
- available where contract is voidable as a result of vitiating factor
- eg Misrepresentation Act 1967
- right to rescind may be lost where: C affirms the contract, 3rd party acquires the rights of goods, time has lapsed, rescission is impossible

Question 2

Hadley v Baxendale

Answer 2

Remoteness

Test established for recoverable loss:
1. Foreseeable by a reasonable person having knowledge of the ordinary circumstances
2. Foreseeable by a reasonable person who has knowledge of special circumstances which had been communicated to D

Question 3

Pilkington v Wood

Answer 3

Mitigation of loss

Duty to mitigate did not require C to embark on a complicated litigation against a 3rd party

Question 4

Angela TV v Reed

Answer 4

Reliance loss

Damages can include loss of profits if they were reasonably foreseeable at time of contract if

Question 5

Dyster v Randall and Sons

Answer 5

Specific performance

Sp was not granted is damages are an adequate remedy