Topic 10 - Remedies

Question 1

What is the purpose of damages in the law of contract?

Answer 1

To compensate the claimant for the damage, loss or injury suffered due to the defendant’s breach

Punishing the defendant is not the aim of awarding damages.

Question 2

What are nominal damages?

Answer 2

A token amount awarded to acknowledge a breach of contract when no other remedy is available, typically a very small amount like £1

Nominal damages are awarded even if the claimant has not suffered any actual loss.

Question 3

What does compensating the innocent party mean?

Answer 3

Putting the innocent party in the same position post-breach that they would have been in had the contract been performed

This is often referred to as protecting the innocent party’s ‘expectation’ interest.

Question 4

What are the three mechanisms for calculating expectation interest?

Answer 4

• Cost of cure
• Diminution in value
• Loss of amenity

These mechanisms help in assessing the damages in breach of contract cases.

Question 5

What is the reliance interest?

Answer 5

A measure allowing the claimant to recover expenses incurred in preparation or part performance of the contract rendered pointless by the breach

It is backward looking and aims to put the claimant in the position they would have been in had they never contracted.

Question 6

What types of loss have special rules in contract law?

Answer 6

• Loss of reputation
• Loss of chance
• Mental distress

These types of loss have specific rules for calculating damages.

Question 7

What is the general rule regarding damages for mental distress in contract law?

Answer 7

Damages for mental distress are typically not awarded in breach of contract cases

The court usually focuses on economic loss.

Question 8

What is the expectation measure of damages designed to do?

Answer 8

Put the claimant in the position they would have been in had the contract been performed

This means compensating for actual losses incurred due to the breach.

Question 9

What situation would lead to reliance losses being relevant?

Answer 9

When expectation damages are highly speculative

Courts prefer to award reliance losses in these cases.

Question 10

What does the term ‘cost of cure’ refer to?

Answer 10

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

It is often used in cases involving defective works.

Question 11

What is the primary focus of the reliance measure?

Answer 11

To recover wasted expenditure incurred prior to breach

It does not cover all expenditure, only that which is deemed wasted.

Question 12

What is the general rule regarding damages for mental distress in breach of contract cases?

Answer 12

Damages for mental distress, anguish, or annoyance are generally not awarded in breach of contract cases.

Exceptions exist for contracts aimed at providing pleasure, relaxation, or peace of mind.

Question 13

What are the exceptions to the general rule against awarding damages for mental distress?

Answer 13

Compensation may be awarded in:
* Contracts aimed at pleasure, relaxation, and peace of mind (Jarvis v Swan Tours [1973] QB 233)
* Contracts where a major object was to provide pleasure or relaxation (Farley v Skinner (No. 2) [2001] UKHL 49).

Question 14

What is the general rule regarding damages for loss of reputation?

Answer 14

Damages for loss of reputation are generally not awarded.

Question 15

Under what conditions can damages for loss of chance be recovered?

Answer 15

If the lost chance is:
* Quantifiable in monetary terms
* There was a real and substantial chance that the opportunity might have come to fruition.

Question 16

What was the significance of the case Chaplin v Hicks [1911] 2 KB 786 regarding loss of chance?

Answer 16

The court held that the claimant could be compensated for the loss of the chance of winning a competition.

Question 17

What is the general rule regarding recovering damages on behalf of another party?

Answer 17

Damages cannot be recovered on behalf of another party.

Question 18

What are the key factors that limit recoverable damages in breach of contract cases?

Answer 18

Damages must be:
* Caused by the breach
* Not too remote from the breach
* Mitigated by the claimant.

Question 19

What is factual causation?

Answer 19

Whether the breach has caused the loss suffered by the claimant.

Question 20

What is legal causation?

Answer 20

Whether the defendant should be held responsible for the loss caused by its breach.

Question 21

What is the concept of novus actus interveniens?

Answer 21

An intervening event that breaks the chain of causation.

Question 22

What are the two parts of the Hadley v Baxendale test for remoteness of damage?

Answer 22

1. Losses that arise naturally from the breach
2. Losses that were in the contemplation of both parties at the time of the contract.

Question 23

What did the court decide in Hadley v Baxendale regarding the mill owner’s losses?

Answer 23

The losses were not recoverable as they did not arise naturally from the breach and the defendant was not aware of the special circumstances.

Question 24

What is the obligation of the injured party regarding mitigation of losses?

Answer 24

The injured party should take reasonable steps to minimize the effect of the breach.

Question 25

What does the case Payzu v Saunders [1919] 2 KB 581 illustrate regarding mitigation?

Answer 25

Accepting a new contract's performance may be a reasonable step to mitigate losses.

Question 26

What constitutes a repudiatory breach by the defendant in a contract?

Answer 26

A repudiatory breach occurs when the defendant leads to the impression that the claimants are in financial difficulties, resulting in the refusal to make further deliveries.

Question 27

What was the defendant's offer after the repudiatory breach?

Answer 27

The defendant offered to continue supplying the claimants under a new contract at the same price and terms, with the exception that payment was to be made in cash on delivery.

Question 28

What were the claimants seeking in terms of damages?

Answer 28

The claimants sought damages based on the difference between the market price of silk and the contract price due to a rise in market price.

Question 29

What did the court hold regarding the claimants' duty to mitigate their loss?

Answer 29

The court held that the claimants should have mitigated their loss by accepting the defendant's offer.

Question 30

What principle did Banco de Portugal v Waterlow & Sons establish regarding a claimant's actions?

Answer 30

The claimant's actions should not be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty.

Question 31

Is there a duty to mitigate a claim for liquidated damages?

Answer 31

No, there is no duty to mitigate a claim for a payment of a debt, including liquidated damages.

Question 32

What is the reliance interest in contract law?

Answer 32

The reliance interest allows the claimant to recover expenses incurred in preparing for or partially performing the contract rendered pointless by the breach.

Question 33

What was the 'no windfall' principle in contractual damages?

Answer 33

No award of damages can put the claimant in a better position than they would have been if the contract had been performed.

Question 34

What does the restitution interest represent?

Answer 34

The restitution interest represents the interest a claimant has in the restoration of benefits acquired by the defaulting party at the claimant's expense.

Question 35

What did the House of Lords decide in Attorney-General v Blake regarding breach of contract?

Answer 35

In exceptional cases, a claimant can recover profits made by the defendant from a breach of contract.

Question 36

What are the criteria for ordering an account of profits in breach of contract cases?

Answer 36

* The remedies must be inadequate * The claimant must have a legitimate interest in depriving the defendant of profit.

Question 37

What is an 'efficient breach'?

Answer 37

An efficient breach is a breach that is cynical and deliberate, enabling the defendant to enter a more profitable contract elsewhere.

Question 38

What was the outcome in E_xperience Hendrix LLC v PPX Enterprises Inc_ regarding restitution?

Answer 38

The court refused to order an account of profits, determining it was not an exceptional case as per Blake.

Question 39

What does total failure of consideration mean in restitution law?

Answer 39

A total failure of consideration occurs when one party provides something of value but receives nothing in return.

Question 40

What is the traditional approach to remoteness set out in Hadley v Baxendale?

Answer 40

A party can recover damages that arise naturally from the breach or that were contemplated by both parties at the time of the contract.

Question 41

What was the ruling in Transfield Shipping Inc v Mercator Shipping Inc regarding remoteness?

Answer 41

The House of Lords ruled that the defendant had not assumed responsibility for losses related to the subsequent charter due to the specific industry's norms.

Question 42

What was the key question for remoteness in contract according to Lord Hoffman?

Answer 42

Whether in objective terms the defendant had 'assumed responsibility' for the loss in question.

Question 43

What is the principle described by Lord Hoffman regarding remoteness in contract?

Answer 43

Whether the defendant had 'assumed responsibility' for the loss in question ## Footnote This principle contrasts with the 'normal' losses under Hadley v Baxendale.

Question 44

What was the outcome of the case regarding Transfield's liability?

Answer 44

Transfield was not liable for the reduction in the rate of hire for the full duration of the subsequent charter. ## Footnote This was due to evidence that it was not normal in the specific industry for a party to pay for such losses.

Question 45

What does the Consumer Rights Act 2015 regulate?

Answer 45

Contracts between businesses and consumers. ## Footnote It includes implied terms and regulation of unfair terms.

Question 46

What are the three remedial options available to consumers when goods are non-conforming?

Answer 46

* The short term right to reject * The right to repair or replacement * The right to a price reduction or final right to reject

Question 47

What is the duration for the short term right to reject goods under the Consumer Rights Act 2015?

Answer 47

30 days from the time of ownership transfer and delivery. ## Footnote This includes situations where the trader is required to install the goods.

Question 48

Under what conditions is the right to repair or replacement available?

Answer 48

Unless repair or replacement is impossible or disproportionate. ## Footnote Disproportionate means unreasonable cost relative to other remedies.

Question 49

What happens if the consumer exercises the final right to reject within 6 months?

Answer 49

The consumer is entitled to a full refund with no deduction for use, except for specified goods like motor vehicles. ## Footnote This is applicable if ownership has passed within the specified time.

Question 50

What remedial options are available when digital content is non-conforming?

Answer 50

* The right to repair or replacement * The right to price reduction

Question 51

What does section 46 of the Consumer Rights Act 2015 state regarding damage caused by non-compliant digital content?

Answer 51

Consumers are entitled to repair or compensatory payment for damage to their device or other digital content. ## Footnote This applies if the trader did not exercise reasonable care and skill.

Question 52

What are the two remedial options available to consumers for non-conforming services?

Answer 52

* The right to require repeat performance * The right to a price reduction

Question 53

What must a supplier do under the right to require repeat performance?

Answer 53

Provide repeat performance within a reasonable time and without significant inconvenience to the consumer.

Question 54

What is a liquidated damages clause?

Answer 54

A clause stipulating a certain sum payable on a particular breach of contract.

Question 55

Give an example of a liquidated damages clause.

Answer 55

If Company A returns a hired van late, they will pay £160 for each day it is late.

Question 56

Why might a party include a liquidated damages clause in a contract?

Answer 56

To fix the amount due for breach without uncertainty in proving damages.

Question 57

What is a penalty clause?

Answer 57

A liquidated damages clause that requires the party in breach to pay an excessive sum, making it unenforceable.

Question 58

What is the default approach of courts regarding liquidated damages clauses?

Answer 58

Courts generally support parties' agreements but can intervene if a clause is deemed a penalty.

Question 59

What is a penalty clause?

Answer 59

A penalty clause is a liquidated damages clause requiring the party in breach to pay an excessive sum, making it a penalty and thus unenforceable.

Question 60

What is the first step in the Makdessi test?

Answer 60

Determine if the clause is a primary or secondary obligation.

Question 61

What characterizes a primary obligation in a contract?

Answer 61

A primary obligation furthers the commercial objective of the contract.

Question 62

What characterizes a secondary obligation in a contract?

Answer 62

A secondary obligation is triggered by breach to compensate the innocent party.

Question 63

How does a clause become a penalty under the Makdessi test?

Answer 63

If it imposes a detriment disproportionate to any legitimate interest of the innocent party.

Question 64

What are the two steps to determine if a clause serves a legitimate business interest?

Answer 64

* Identify the legitimate business interest served by the clause * Assess if the detriment imposed is extravagant, exorbitant, or unconscionable.

Question 65

What is the general principle regarding the enforceability of penalty clauses?

Answer 65

If parties have negotiated a contract on equal terms with professional advice, it is hard to challenge liquidated damages as penalties.

Question 66

What are the two remedies other than damages for breach of contract?

Answer 66

* Specific performance * Prohibitory injunctions.

Question 67

Define specific performance.

Answer 67

An order issued by the court requiring the defendant to fulfill obligations under a positive term of the contract.

Question 68

What is a prohibitory injunction?

Answer 68

A court order restraining a party from breaching a negative term.

Question 69

When will specific performance or a prohibitory injunction not be granted?

Answer 69

If damages are an appropriate and adequate remedy.

Question 70

What must be proved for damages to be inadequate in the context of specific performance?

Answer 70

The subject matter of the contract is unique or irreplaceable.

Question 71

What does it mean that specific performance and prohibitory injunctions are discretionary remedies?

Answer 71

The court considers all relevant circumstances without clear criteria for granting them.

Question 72

What is the principle of 'clean hands' in equitable remedies?

Answer 72

A claimant must not be in breach of contract or act dishonestly to succeed in obtaining an equitable remedy.

Question 73

What happens if specific performance would cause undue hardship to the defendant?

Answer 73

Specific performance will not be awarded.

Question 74

For which type of contracts is specific performance not awarded?

Answer 74

Contracts of employment.

Question 75

What is the significance of the case Adderley v Dixon (1824) regarding remedies?

Answer 75

It established that specific performance or prohibitory injunctions will not be granted if damages are adequate.

Question 76

What is the nature of guarantees and indemnities?

Answer 76

Both are ways for C to support A's obligations to B and provide additional protection.

Question 77

What is a positive term in a contract?

Answer 77

A term requiring a party to do something.

Question 78

What is a negative term in a contract?

Answer 78

A term requiring a party not to do something.

Question 79

What is a guarantee?

Answer 79

A promise by a party to ensure that another party carries out its obligations, or a promise to fulfill those obligations itself if that other party does not do so. ## Footnote Example: C guarantees to B that if A fails to pay the loaned sum when due, C will pay the loaned sum on demand.

Question 80

What is an indemnity?

Answer 80

A promise to reimburse someone in the event that they suffer a stated loss. ## Footnote Example: Party C agrees to indemnify Party B from any losses which arise from the failure to recover the sum loaned to Party A.

Question 81

How does a guarantee differ from an indemnity in terms of obligation?

Answer 81

A guarantee is dependent on the original obligation of the primary party, while an indemnity is a primary obligation that stands independently. ## Footnote C's obligation under a guarantee ceases if A's obligation ceases, while an indemnity remains in place.

Question 82

What happens to a guarantee if the contract between A and B is set aside?

Answer 82

C's obligation under the guarantee will also cease. ## Footnote This is because a guarantee is dependent on A's obligation.

Question 83

What happens to an indemnity if there is a change to the contract between A and B?

Answer 83

An indemnity would remain in force. ## Footnote In contrast, a guarantee would almost always be discharged.

Question 84

What formalities are required to execute a guarantee?

Answer 84

It must be in writing and signed by the guarantor. ## Footnote This is not required for an indemnity.

Question 85

Can both a guarantee and an indemnity be given at the same time?

Answer 85

Yes, both can be given in relation to the same obligation. ## Footnote This provides greater protection for the party owed the obligation.

Question 86

What is one advantage of an indemnity over a claim for damages?

Answer 86

It can be drafted to avoid some of the rules of causation, mitigation, remoteness, and proof that might limit a claim for damages. ## Footnote The drafting of the indemnity should be detailed.

Question 87

What is the primary purpose of guarantees and indemnities?

Answer 87

To support an obligation and provide additional protection to the party owed the obligation. ## Footnote In the context of a loan, this means ensuring repayment.