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Flashcards in EXAM NOTES - Remedies Deck (30)
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what is the general structure for a remedies question

1. Terms
2. Breach
3. Condition/warranty/innominate term
4. Valid liquidated damages clause?
5. If not, unliquidated damages
6. Limiting factors


what counts as a breach of condition?

a breach that goes to the root of the contract Poussard v Spiers


what is the rule for time clauses and conditions?

- not automatically a condition
- but if C has stressed their importance they're more likely to be considered one
- Schuler v Wickman


how do courts decide if a breach is of warranty or condition?

- Hong Kong Fir v Kawasaki
- if courts are unwilling to classify as condition or warranty at outset
- may treat it as an innominate term
- breach of IT will have same effect as breach of condition
- if deprives innocent party of “substantially the whole benefit” of the contract


what is a liquidated damages clause

A sum set out in the contract that must be paid on breach.
- Not payable if the court holds it is a penalty clause instead


test for penalty clause?

Dunlop Pneumatic Tyre v New Garage
- Terminology is inconclusive
- Does it aim to intimidate the other party?
- Must be a “genuine pre-estimate of loss… set at the time of contracting”


how do courts determine a "genuine preestimate of loss"

o Is stipulated sum extravagantly greater than largest possible loss based on the breach?
o If breach is by non-payment of money, is the stipulated sum payable greater than the original sum owed?
o Is the same sum payable for a number of possible breaches, some of which are serious and others minor?


what situations are unlikely to be penalty clauses

o Actual damage and LDC amount are similar – McAlpine v Tilebox
o An acceleration of payment clause is not a penalty clause – The Angelic Star
o Money paid as a deposit can usually be kept if the paying party breaches (Howe v Smith) even if it is far more than the loss resulting from the breach
-----though not if the size of the deposit is unreasonable Workers Trust v Dojap (25% deposit when 10% was normal)


what principle do the courts follow in finding unliquidated damages?

- Compensatory in nature – not aimed at punishment e.g. Robinson v Harman


how can unliquidated damages be calculated?

- expectation damages
- reliance interest
- restitution damages


how does expectation damages work generally?

- C should be placed in same situation as if the contract had been performed Robinson v Harman
- Work out with difference in value: position he would have been in minus position he is actually in


How does reliance interest work?

- Claim back any money spent before the breach; i.e. in reliance on the contract
- Works if expectation damages are too speculative to be calculated (McRae v Commonwealth Disposals)
- Treated relatively broadly – can claim back all costs wasted by D’s breach: Anglia TV v Reed


what determines whether C gets expectation or reliance interest damages?

- C has an “unfettered choice” between reliance and expectation loss – Anglia TV v Reed


how can C get restitution damages?

- Where there is no loss to V but D has enriched themselves through their wrongful behaviour; V can claim for D’s profits instead – AG v Blake
- But V must show exceptional circumstance to the case and:
o Legitimate interest in depriving D of his profits
o Other remedies are inadequate


what other kinds of damages can be claimed for

- mental distress if pleasure/relaxation/peace of mind are the whole purpose of the contract (Jarvis v Swan Tours) or a major purpose (Farley v Skinner), unless it is a commercial contract (Hayes v Dodd)
- loss of reputation – Malik v BCCI
- loss of chance – Chaplin v Hicks if V has lost something tangible


what factors limit damages that will be awarded

1. causation
2. remoteness
3. contrib neg
4. mitigation


how does causation limit damages

- Court takes a “common sense” approach Galoo v Brights
- Breach must be a “dominant or effective” cause of loss Galoo v Bright
- Court considers NAI ; Lambert v Lewis
o As long as they are not foreseeable Monarch v Karlshamms


how does remoteness limit damages

- Two stage test from Hadley v Baxendale. V may claim for all loss:

o Arising naturally in the usual course of things
 I.e. not unlikely to occur The Heron II

o Within the reasonable contemplation of both parties when they made the contract as being the probable result of the breach


how does 'reasonable contemplation' work for limiting damages?

 Must be contemplated by BOTH parties – Victoria Laundry v Newman

 Both parties must contemplate that the loss would be “not unlikely” to occur (The Achilleas)

 or alternatively must both contemplate the loss would be substantially likely to occur in the event of a breach Balfour Beatty v Scottish Power


how does mitigation limit damages?

- V will be unable to claim for losses resulting from a failure to mitigate loss
- V just needs to take reasonable steps to mitigate – British Westinghouse v Underground Electric
- V may have to accept the breach if it is the most effective remedy for his problem Payzu v Saunders


how does the court view C's attempts to mitigate?

- Mitigation is not “weighed in nice scales” i.e. the court just looks to see if V has done what is reasonable, not necessarily perfect – Banco de Portugal v Waterlow
- Mitigating party is not expected to sue people to mitigate their loss – Pilkington v Wood


how does contrib neg limit damages

- Where C’s fault has contributed to the loss he has suffered then the amount of damages he can recover may be reduced
- Vesta v Butcher – only applicable where D’s breach is BOTH a breach of contract and tortious negligence


what principles underly equitable remedies?

- discretionary
- clean hands
- delay defeats equity
- can't cause undue hardship on D


What equitable remedies are available?

- Specific performance
- injunction Evening Standard v Henderson
- rescission
- rectification


how does specific performance work?

- Unusual and hard to get because court would often have to supervise D’s SP – Cooperative Insurance v Argyll Stores
- Won’t be granted if damages is appropriate and adequate Adderley v Dixon
- Won't be granted if it will cause undue hardship Patel v Ali
- Won't be granted for breach of contract of personal services e.g. employment De Francesco v Barnum


What are the different measures of expectation interest?

Ruxley v Forsyth
1) cost of cure - normal measure for defective work (Birse v Eastern Telegraph) but not if it is unreasonable.
-- or if the defect is aesthetic only McGlinn v Waltham
2) diminution in value
3) loss of amenity (Ruxley) but unlikely in commercial contracts Regus v Epcot Solutions


Why is C unlikely to get restitution damages?

- Awarded in Esso v Niad
- but courts have made it clear since that it is a very high bar to get over
- Sine Nomine - not exceptional enough
- Experience Hendrix v PPX - is the subject as special or sensitive as national security? If not, unlikely to be exceptional enough
- WWF v WWF must be very exceptional


Give an example of a breach of warranty

Bettini v Gye
- root of the contract was to perform as an opera singer for three months
- missing 6 days of rehearsals did not go to the root of that


What must a liquidated damages clause satisfy to be binding

1) must be incorporated in the contract
2) must be appropriately constructed (Dunlop v New Garage)
3) must comply with UCTA but ONLY IF AN EXEMPTION CLAUSE
4) Must comply with UTCCR but ONLY IF A CONSUMER CONTRACT if so consider reg 5(1)


should limiting factors be considered for an award of nominal damages?

NO - if they're being discussed elsewhere.
- as the damages are only nominal there is no point defending them