Remedies (Contract) Flashcards
What is the aim of damages in contract?
To compensate the innocent party for the loss suffered as a result of the breach of contract
What is the difference between expectation loss & reliance loss?
Expectation loss: the claimant’s position as it is compared to the position the claimant should have been in had the contract been properly performed (ie. loss of bargain)
→ Damages should bridge this gap
Reliance loss: claiming just for expenses incurred because of reliance on the contract (where loss of expectation is too speculative)
[Think of expectation loss as looking forwards & reliance loss as looking backwards]
Can damages for distress / disappointment be awarded in contract?
Only where the sole or main aim of the contract was to have a good time / peace of mind (eg. if a holiday ruined, wedding)
What is the principle of remoteness of loss in damages claims?
Whether a particular type of loss would have been in reasonable contemplation of the parties at the time of the contract as being a likely consequence of the breach
- If particular loss was inevitable / natural consequence of breach, parties deemed to have had it in their reasonable contemplation at the time of contract, ie. damages recoverable
- For any other type of loss, depends on what the defendant actually knew at the time of the contract → damages are recoverable only if they knew of special circumstances making the loss a likely consequence of the breach
Nb. If the type of loss is not too remote, the extent of loss is irrelevant
How can you establish if a loss is too remote in a damages claim?
- Is the particular loss an inevitable / natural consequence of the breach?
Yes: damages for the loss are recoverable
No: go to stage 2 - Did the defendant know of special circumstances making the loss a likely consequence of breach?
Yes: damages are recoverable
No: loss is too remote
What is the claimant’s duty to mitigate a loss in a damages claim?
Claimant should take reasonable steps to mitigate (ie. reduce) their loss
→ Losses resulting from a failure to mitigate (ie. which could reasonably have been avoided are not recoverable)
- The onus is on the defendant to show a failure to mitigate
- If reasonable attempts to mitigate have failed to reduce loss, so long as claimant has acted reasonably, can claim for the loss
- If the defendant’s offer of substitute performance is the best available offer, refusal of this offer may be deemed a failure to mitigate
How are damages quantified?
Quantification = translating the loss in financial terms
Usually straightforward
- If work is defective, normal measure of loss is the cost of putting it right (cost of cure)
- If goods are defective, normal measure is difference in value between goods as they are & goods as they were expected to be
But sometimes trickier - Ruxley Electronics v Forsyth: swimming pool 5 inches out - no difference in value but £20k to put it right
- Forsyth only awarded £2.5k for the ‘loss of amenity’ because was issue of personal preference, not critical for some reason
- Cost of cure was out of proportion to the benefit obtained by remedying
What is the difference between a liquidated damages clause and a penalty clause?
Liquidated damages: dictates amount claimant will get regardless the amount of the loss loss
- If it has been incorporated into the contract, will be binding
- Usual rules about measure of damages, remoteness, mitigation don’t apply - claimant receives the fixed sum
Penalty: an attempt to pressure a party to perform the contract because the sum stipulated is exorbitant, unconscionable
- Penalty clauses are unenforceable → court will assess damages in the usual way (measure of damages, remoteness, mitigation apply)
Will a liquidated damages clause be binding?
Yes, so long as it has been incorporated properly
How does the court decide whether the clause is a specified damages clause or a penalty clause?
The clause will be a penalty if it imposes a detriment out of all proportion to any legitimate interest of the innocent party in the enforcement of the contract
(eg. ParkingEye v Beavis: B parked in P carkpark, overstayed & argued £100 charge was penalty → P needed mechanism for incentivising people to leave on time & £100 proportionate to the legitimate interest of P requiring B to leave on time)
What are the four limitations on the awards of damages?
I. The type of loss (eg. damages for distress/disappointment not always recoverable)
II. Remoteness (loss must be natural consequence of breach or D knew at time of contract of special circumstances making likely consequence of breach - otherwise not recoverable)
III. Mitigation (losses which could have reasonably been avoided no recoverable)
IV. Specified damages (losses limited to amount specified - but if penalty clause damages assessed in usual way)
What are the usual measure of loss?
Difference in value (for defective goods)
Cost of cure (for defective services)
Loss of amenity - only where no difference in value & cost of cure out of all proportion to loss sustained
Are penalty clauses enforceable?
No - they are unenforceable & damages are assessed in the usual way
What is the principle of causation in a damages claim?
The claimant must prove there is a causal link between the breach & the loss
→ Causation established if the defendant’s breach is the dominant or effective cause of the loss
Is there a novus actus interveniens?
- By the claimant: only if they have been negligent
- By a third party: not if the event was likely to happen anyway
What is the remedy of specific performance?
An equitable remedy available if damages are not adequate
Compels the defaulting party to perform
Limitations:
- Not granted for contracts of services like employment contract (because relationship between parties has broken down so inappropriate to make them work together)
- Awarded only at the discretion of the court when it is just & equitable to do so (eg. has the claimant acted fairly? Would specific performance cause disproportionate hardship to the defendant?)
