Damages-FS Flashcards
What is the primary aim of awarding damages in contract law?
To compensate the injured party for their loss by putting them in the position they would have been in if the contract had been properly performed — not to punish the breaching party.
What is the expectation measure in contract law?
It’s a method of calculating damages based on the benefit the claimant expected to receive from full performance of the contract.
List the three methods used to calculate damages under the expectation measure.
- Cost of cure – cost of remedial works
- Diminution in value – reduction in value due to breach
- Loss of amenity – loss of enjoyment or functionality
In what type of contracts is the cost of cure most commonly used?
In contracts involving defective or substandard performance, especially in building or service work.
When will the court reject a claim for cost of cure damages?
When the remedial action taken is unreasonable, such as replacing a whole structure for minor defects purely for aesthetic reasons.
What principle did the case McGinn v Waltham Contractors (2017) reinforce?
That damages for cost of cure must reflect reasonable costs; excessive or disproportionate repairs may not be compensated in full.
How would a court likely assess damages if a client hired a service provider and the outcome had minor defects?
By awarding the cost necessary to fix the defects, assuming the claimant’s response was reasonable — applying the cost of cure.
In a contract where decorative elements were incorrect (e.g., wrong national symbol on an order), which damages measure is most appropriate?
Cost of cure, because the case involves defective performance that can be remedied through replacement to meet the original specification.
What is the diminution in value mechanism for calculating damages?
It assesses the difference in value between the contracted-for performance and the actual performance delivered, providing compensation for the shortfall in value.
When is diminution in value used as a damages measure?
When a defective or incomplete performance does not justify the cost of full repair or replacement, but still causes a measurable reduction in value.
What is the primary aim of awarding diminution in value damages?
To place the injured party in the financial position they would have been in if the contract had been properly performed, by compensating for the value gap.
Give a general formula for calculating diminution in value damages.
Contract value – Value of performance actually received = Diminution in value (amount awarded in damages).
Why might a court prefer diminution in value over cost of cure?
If the cost of cure would be disproportionate or unreasonable relative to the breach, especially when the defect does not affect the overall utility significantly.
In a case where a builder delivers a structure smaller than agreed, what is likely to be the preferred measure of damages?
Diminution in value, especially where the defect doesn’t warrant full reconstruction but reduces the property’s worth.
How would a court assess damages if a service provider completed only part of the contracted service?
By comparing the value of the partial performance to the full contracted price and awarding the shortfall as damages
What is the ‘loss of amenity’ mechanism in calculating the expectation measure of damages?
It refers to awarding modest damages where the performance fails to meet the claimant’s personal preferences, even though the value of the subject matter is not diminished.
In what type of situation would a court prefer awarding loss of amenity damages over the cost of cure?
When rectifying the defect would be disproportionately expensive relative to the benefit gained, and the issue lies in personal preference rather than loss of value.
Why might a court refuse to award the cost of cure for a minor breach of contract?
Because it may be deemed unreasonable if the cost of remedying the breach is excessively high compared to the actual harm suffered.
Why are damages for loss of amenity generally not awarded in commercial contracts?
Because commercial transactions are assessed on economic value, not on individual preferences or subjective satisfaction.
What is the ‘no windfalls’ policy in the context of contractual damages?
It ensures that the claimant does not receive more in damages than they would have gained had the contract been performed, avoiding unjust enrichment.
When assessing expectation damages, why do courts consider events after the breach?
To prevent awarding damages that would place the claimant in a better position than if the contract had been fulfilled.
What is likely to happen if a claimant argues for large profits that would have been made had a project succeeded, but evidence shows the project would likely have failed regardless?
The court will likely award nominal damages, as compensating for hypothetical profits would create a windfall.
If a homeowner receives slightly different materials than contracted (e.g. darker glass), which damages calculation method is most appropriate when value is unaffected?
Loss of amenity, as the dissatisfaction stems from unmet personal preference, not a decrease in value.
When is the reliance measure used instead of the expectation measure in contract law?
When it’s too speculative to calculate the expectation measure, making it impossible to assess loss through cost of cure, diminution in value, or loss of amenity.
