Remedies for Breach

Question 1

What are the 4 aspects of damages?

Answer 1

1. Causation
   The breach must be the effective/dominant cause of the loss (Monarch SS v Karlshamns)
2. Remoteness
   The losses must not be too far removed from the breach
3. Mitigation
   Innocent party must have taken all reasonable steps to mitigate his loss. If not, the damages recoverable will be reduced by the amount he could have saved if he mitigated properly
4. Assessment
   To put injured party back in the position as if the contract had been performed properly

Question 2

What is the test used to determine remoteness for damages?

Answer 2

Hadley v Baxendale
First Limb: Losses that arise naturally due to the usual course of things e.g., business, involves actual and imputed knowledge
Second Limb: Losses that were in reasonable contemplation of both parties when forming the contract, involves actual knowledge only
Interplay of 4 factors in Hadley v Baxendale:
1. Usual course of things: Ordinary business practices
2. Imputed and Actual Knowledge: Person who has actual knowledge of the loss due to breach will be liable to pay more damages
3. Probability of occurrence: Defendant must know that the probability of loss due to breach is “very likely” and a “serious possibility”
4. Type of damage: Defendant has to know type/kind of damage, no need to know exact damage

Question 3

What are the types of pecuniary losses and how are they claimable?

Answer 3

Expectation Loss:
Loss of profit which injured party would have gained if the contract had been performed properly
Value contracted for - Value actually received

Reliance Loss:
Wasted expenditure due to injured party relying on the contract and performing his obligations, which results in expenses

Amount Claimable:
Expectation Loss only
Net Expectation Loss (Expectation Loss less expenses) + Reliance Loss
Reliance Loss only (if injured party did not make a bad bargain)

Question 4

What are some types of non-pecuniary losses and are they claimable?

Answer 4

Distress, hurt feelings, loss of reputation, etc
Generally not claimable unless
1. Aim of contract is to provide enjoyment, and breach causes distress (Jarvis v Swan Tours)
2. Important purpose of contract is pleasure/relaxation, but breach causes distress (Farley v Skinner)
3. Distress arises from physical discomfort or inconvenience caused by the breach (Perry v Sidney Phillips)
4. Breach results in “loss of amenities” (Ruxley Electronics v Forsyth)
5. Breach results in “loss of genetic affinity” (ACB v Thompson Medical)

Question 5

When is a Liquidated Damages Clause (LDC) enforceable?

Answer 5

If LDC is a genuine pre-estimate of loss, it is enforceable, regardless of whether the actual loss is greater or less than the amount specified in the LDC.

If LDC is a penalty, it is not enforceable. If actual loss is greater than amount specified in LDC, injured party can claim either actual loss or LDC specified amount. If actual loss is less than LDC specified amount, injured party can only claim actual loss.

Question 6

How to determine if LDC is a genuine pre-estimate of loss or a penalty?

Answer 6

A LDC is more likely to be a penalty if
1. The amount specified is extravagant and unconscionable as compared to the greatest conceivable loss
2. The LDC specifies a single lump sum which is payable on occurrence of any serious/trifling breach
3. The contractual obligation is to pay a fixed sum, but the amount specified in the LDC is larger than that.
4. Labels are relevant but not conclusive.
5. Even if the loss is difficult to estimate, LDC can still be a genuine pre-estimate of loss.

Question 7

What are the types of equitable remedies?

Answer 7

1. Specific Performance: Court orders a party to perform his obligations as stated in the contract
2. Injunction: A court order requiring a party to abide by a negative covenant in a contract
3. Refund: Full amount of loss claimable

Question 8

What principles govern specific performance?

Answer 8

1. Not a personal services contract
2. Mutuality exist; no minors
3. Damages are not an equitable remedy
4. Court does not have to supervise specific performance on an on-going basis
5. Not a contract to lend money
6. Not cause severe hardship to performer

Question 9

What are the two types of injunctions and how are they different?

Answer 9

1. Prohibitory Injunction:
   Court orders party to restrain defendant from performing an act he contractually agreed not to do (preventive)
2. Mandatory Injunction:
   Court orders party to restore what defendant had performed when he contractually agreed not to do
   (restorative)

Question 10

What is the condition to claim a refund?

Answer 10

Total failure of consideration