Remedies Flashcards
(44 cards)
What is the aim of damages for breach of contract?
To compensate the claimant for the damage, loss or injury they have suffered as a result of the defendant’s breach. This means putting the innocent party in the same position post-breach that they should have been in had the contract been performed.
If not suffered loss the damages recoverable are purely nominal (£1) - to acknowledge that there has been a breach of contract in a case where no other remedy is available.
What is an expectation interest?
Putting the claimant in the position they ‘expected’ to be in.
What are the three mechanisms for calculating the expectation interest?
- Cost of cure
- Diminution in value
- Loss of amenity
Calculating damages in some instances can be difficult.
What is the cost of cure?
Represents 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.
Claimant must act reasonably in relation to the defective works (e.g. if they demolish a whole building and put up an entirely new building based on aesthetics their remedy was limited to the costs which would have been incurred for remedying the defects in the original building)
What is diminution in value?
The difference in value between the performance received and that promised in the contract.
Ruxley v Forsyth
A pool built 6 feet deep but was supposed to be 7.5 feet deep.
Court held the cost of cure would be unreasonable because the expense to rebuild the pool would be out of proportion to the benefit to be obtained (and the claimant did not intend to rebuild it).
Diminution in value was £0 - the pool had the same value at 6ft vs 7.5ft.
Calculated based on loss of amenity - reflecting the non-economic loss of pleasure the claimant suffered in not getting the pool he contracted for. - not likely in a commercial setting.
What is loss of amenity?
Loss of amenity is awarded to reflect the non-economic loss of pleasure the claimant suffers for the breach of contract.
Fairly rare - and very unlikely to be awarded in commercial cases.
How are expectation damages calculated?
Calculated by finding the difference between expected profit and actual profit.
Expectation damages = expected profit - actual profit
What is the reliance interest?
This allows the claimant to recover the expenses which have been incurred in preparing for, or in part performance of, the contract which have been rendered pointless by the breach.
This aims to put the claimant in the position they would have been in had they never contracted.
When will the reliance interest be used?
Relevant where expectation damages are highly speculative.
Reliance losses are incurred prior to breach NOT as a consequence.
What are the special types of loss
- Mental distress
- Loss of reputation
- Loss of chance
Damages for mental distress
Generally not awarded for breach of contract (e.g. no award for humiliating dismissal from employment).
Exceptions:
1) Cases involving contract whose purpose was the provision of pleasure, relaxation and peace of mind
2) Cases where major object (though not the whole purpose) of the contract was to provide pleasure, relaxation and peace of mind.
Damages for loss of reputation
General rule is that damages will not be awarded for loss of reputation.
Exception:
Damages have been awarded for financial loss which was suffered due to an inability to obtain alternative employment due to employers breach of the implied term of trust and confidence - having worked for a corrupt bank negatively influenced his employment prospects.
Damages for loss of chance
The loss of an opportunity is recoverable in damages if the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might come to fruition. Otherwise opportunity would be speculative.
Chance must be “real and substantial” - more than 50%.
When can damages be recovered?
Can only be recovered if they are caused by the breach.
Cannot be recovered if they are too remote from the breach.
Damages can be reduced if the claimant has failed to take reasonable steps to mitigate its losses.
What is causation for damages?
Claimant must establish a causal link between the defendant’s breach of contract and its loss in order to recover damages. Must assess:
Factual causation: ‘common sense approach’, defendant’s breach should be a dominant or effective cause of the loss if that loss it to be recoverable.
Legal causation: Must not be any break in the chain of causation. In particular intervening acts - if the intervening event was ‘likely to happen’ it will not break the chain
- a customer using an obviously broken coupling was treated as breaking the chain.
Remoteness of damage
Not all losses flowing from a breach of contract are recoverable, the test is from Hadley v Baxendale. Damages should:
1) Loss of a type ordinarily and naturally arising from the breach
- not based on actual knowledge of the particular parties - looks at the ‘usual course of things’ and what loss is liable to result from a breach of contract in that ‘usual course’. If is deemed a normal type of loss - then will be recoverable under the first limb
if not:
2) the particular defendant had sufficient actual knowledge of the particular and special circumstances to be aware of those losses
What is mitigation?
Where one party has suffered loss resulting from the other party’s breach of contract, the injured party should take ‘reasonable steps’.
Technically no obligation to mitigate, but losses attributable to a failure to do so are not legally recoverable. The claimant will not be able to recover the losses attributable to the failure to mitigate.
What steps are reasonable is one of fact.
Has been held it may include accepting performance under a new contract even when that performance amounts to a breach of the original contract - if defendant’s offer of performance remains the best substitute then it would be unreasonable not to go to that source.
What is the restitution interest?
It represents the interest a claimant has in the restoration to them of benefits which the defaulting party has acquired at their expense - for a breach of contract.
There are exceptional cases where the court can require the defendant to account to the claimant for benefits received from a breach of contract
BUT common law damages for breach of contract cannot be awarded for the purpose of depriving the defendant of profits made as a result of the breach (other than in exceptional circumstances)
e.g. using state secrets to right a book and make £££
- awarded for egregious breach of terms that were known to be fundamental and strictly non-negotiable
Note: An innocent party cannot recover expenses that would have been wasted whether or not the breach of contract occurred
When will restitution interest be awarded?
Not clear but this is what is gleaned:
- inadequacy of other remedies
- claimant has a legitimate interest in depriving defendant of their profit
- an efficient breach will not alone justify (a breach which puts the breaching party in a better position than if there had been no breach)
What is total failure of consideration?
Occurs where one party party has provided something of value under the contract but has received nothing in return - in such circumstances the court may use the principles of restitution to prevent a party from benefitting from the lack of consideration.
Restitution will operate to reverse the unjust enrichment of one of the parties.
What is a restitution claim?
Arises when there is a total failure of consideration.
What are the thee remedial options to a consumer under the CRA 2015?
- Short term right to reject
- Right to repair or replacement
- Right to a price reduction or the final right to reject
What is the short term right to reject?
Short term right to reject is available to the consumer for 30 days. Running from the time:
(i) ownership has passed; and
(ii) the goods have been delivered; and
(iii) in cases where the trader is required to install the goods or take other action to enable the consumer to use the goods, the trader has notified the consumer that steps have been undertaken
