Damages - Lecture 14

What are expectation damages?

Expectation damages are the usual remedy for a breach of contract.

These expectation damages aim to protect performance interest and designed to put you in the financial position you would be in, if the contract was properly performed.

Addis v Gramophone on there being no punitive damages for breach of contracts, what is the context and outcome?

Context → Employer gave the employee notice, but installed a replacement abruptly. This was a breach of contract by the employer.

Outcome → HOL outlines that the person would only get compensation for financial losses such as the wage the person lost, BUT don’t get damages for hurt or injured feelings.

What is disgorgement? And is AG v Blake the only exception? And how is disgorgement damages measured?

Disgorgement is giving up a wrongful gain to your victim.

This is extremely exceptional and there is one English case which is AG Blake.

Disgorgement is measured not by what you lost, but what you gained.

What is the general principle regarding damages not taking the defendant’s profit from a breach?

The general principle is that -

C is compensated for their loss.

D is not required to disgorge their wrongful gain from breaching (which could exceed C’s loss).

AG v Blake is a case which confirmed that English law has recognised disgorgement in an exceptional case, what is the case and outcome?

Context → Blake was a spy and escaped prison, wrote a book which betrayed the UK and he received a lot of money from it. Though he wasn’t allowed to profit from the book.

Outcome → Ruled in favour of the UK government, since it was a breach of contract not to reveal official searches and HOL ruled that a wrongdoer shouldn’t be allowed to profit from his wrongdoing.

Parsons (Livestock) Ltd v Uttley Ingham & Co on actual loss for not receiving the thing you contracted for and lost opportunities from not being able to use it, what is the context and outcome?

Context → Farmer buys food storage to be installed with the ventilator shut and this led to the death of 254 pigs. Defendant argued the farmer’s claim was too remote. Farmer claimed damages on two grounds -

1. value of the dead pigs

2. loss of expected profit from selling pigs if they had not been killed

Outcome → The death of the pigs was a natural result of feeding the pigs mouldy food within the first limb of Hadley v Baxendale. There was no need to consider whether the death by e-coli was in the reasonable contemplation of the parties under the second limb.

What are the two approaches of measuring loss compared to promised performance (in different types of cases)? And how do we decide between these approaches?

The two approaches are -

1. Diminution in value → compare performance given to market value of promised performance

2. Cost of cure → or cost of paying for a substitute

We decide between diminution in value and cost of cure through -

• if the thing you wanted is what you wanted and it wasn’t monetary, you will get cost of cure - you will get the thing you intended to get

• if the performance was purely financial, then it is diminution of value

• To distinguish, you have to see whether the interest in performance was PURELY financial or whether they wanted the said

Mertens v Home Freeholds on building contracts likely to receive cost of cure, what is the context and outcome?

Context → Builders breached the contract, by not completing to a required stage.

Outcome → Court outlined that measures of damages in a building case like this would likely be cost of cure, since “what it costs C to complete the house as it was originally intended”

Radford v de Froberville on whether the court will award diminution in value or cost of cure, what is the context, outcome and importance?

Context → C sold a plot of land to D, with D covenanting in the contract to build a wall on her side of the boundary. D failed to build the wall and sold her land to a third party. C claimed damages for breach of contract amounting to the cost for C to build the wall on his side of the boundary himself

Outcome → Cost of C carrying out work on his own land is the ‘cost of cure’ damages, plus it was reasonable for C to get what they wanted and the amount for building the wall was reasonable.

Tito v Waddel on whether the court will award diminution in value or cost of cure, what is the context, outcome and importance?

Context → The island was denuded by companies for phosphate mining and there were reserves. The soil of the island was stripped away and the companies left the island as inhospitable rocks. The people who lived there wishes to claim damages, the comapnies breaches the covenant which promises to reinstate the land in an appropriate way.

Outcome → The court concluded that they can’t claim diminution in value, since it was very small and did not receive cost of cure, since the parties did not intend to put soil back onto the land which affected by phosphate mining, so non-pecuinary loss cannot be compensated in this case

What is refered to as negotiating damages? And in what circumstances is negotiating damages used?

This is where damages are calcuated through the price C and D would agreed for C to release D from their obligation

Negotiating damages is used in instances where diminution of value and cost of cure doesn’t seem to apply properly

Wrotham Park Estate Co Ltd v Parkside Homes Ltd on negotiating damages, what is the context and outcome?

Context → The estate sold land, and there was a covenant which required not building on a part of it. A later developer breached the covenant by building on the prohibited land.

Outcome → The estate was awarded negotiating damages of 5% of the developer’s profits.

• Diminution of value was not relevant as the land wasn’t less due to there being houses on it

• cost of cure is irrelevant, since you can’t knock down other people’s houses

• hence negotiating damages were opted

One Step (Support) Ltd v Morris-Garner on negotiating damages being limited and exceptional, what is the context and outcome?

Context → D sold the business to C, then D breached the non-compete clause by competing with them. C sought damages on several grounds - either disgorgement, negotiating damages or compensation.

Outcome → Court concluded negotiating damages are limited and exceptional, only in cases where someone has infringed a property right, you cannot simply use them in a non-compete clause because it is hard to calcuate

• it was concluded that this was a normal case of financial loss and diminution of value is more relevant

What is the general principle regarding non-pecuinary losses and compensation?

Generally English contract law does not award damages for non-pecuniary (non-financial) losses.

Farley v Skinner on non-pecuinary loss, what is the context and outcome?

Context → C bought a country house near an airport to relax and specifically asked if there would be aircraft noise and at the house, airplanes circled densely overhead. C sued for breach of contract, since D has been employed to survey the land for noise prior to buying his country house.

Outcome → C won damages for non-pecuinary loss and HOL applied that the purpose of the contract was for pleasure and peace of mind to enjoy it, the noise created physical inconvenience for C to enjoy the country house.

What are the three exceptions where there may be compensation for non-pecuinary loss?

1. loss of amenity damages

2. contract whose purpose is enjoyment or avoiding distress

3. distress due to physical injury, inconvenience or discomfort

What does loss of amenity mean?

Ruxley v Forsyth outlines that the consumer surplus can also amount to loss of amenity, why is that?

This is where C suffers because performance is not as good as what C bargained for, but it is impractical to fix it and C is not worse off.

Ruxley v Forsyth recognised consumer surplus as a non-financial loss they were willing to compensate through loss of amenity, since it was a subjective loss where C does not get what they want

Ruxley Electronics and Construction Ltd v Forsyth as a case for loss of amenity, what is the context and outcome?

Context → C contracts to build a swimming pool for D and contract required depth of 7 feet 6 inches, but it was 6 feet and still suitable for use. The value of the property was not reduced and the cost to deepen it would be £21,500.

Outcome → HOL upheld award of £2,500 for loss of amenity, neither diminution in value or cost of cure but in between.

• Cost of cure wasn’t appropriate damage, since the expenditure would be out of proportion for benefit obrained (D was not willing to pay £21,500 since it was unreasonable)

The second exception to no compensation for non-pecuinary loss is that the object of the contract was enjoyment, peace of mind or avoiding distress, what are the three requirements/tests for it according to Farley v Skinner?

1. the object of the contract included pleasure/peace of mind

2. promisee suffered physical inconvenience from the breach

Then …

• A major or important object of the contract is to give pleasure, relaxation or peace of mind (you have to prove that it is MAJOR/IMPORTANT)

Jarvis v Swan’s Tours Ltd on the 2nd exception (the object of the contract being enjoyment or peace of mind), what is the context, outcome and ruling?

Context → C bought 15-day ski holiday over Christmas, and it was bad in the first week. The brochure in which the holiday was advertised made several claims about the provision of enjoyment relating to house parties, a friendly welcome from English speaking hotel owner, a variety of ski–runs, afternoon tea and cakes and a Yodler evening.  Many of these either did not go ahead or were not as described.

Outcome → At trial, the judge awarded him £30 damages on the basis that he had only been provided with half of what he had paid for

Ruling → Where a contract is entered for the specific purpose of the provision of enjoyment or entertainment, damages may be awarded for the disappointment, distress, upset and frustration caused by a breach of contract in failing to provide the enjoyment or entertainment.

Watts v Morrow (comparing to Farley v Skinner) in relation to the 2nd exception - object of the contract being enjoyment - what is the context and outcome?

Context → C bought a holiday house and the surveyor’s report didn’t disclose defects, therefore C had to make expensive repairs.

Outcome → Court said there was no damages for distress, worry or inconvenience and it was better suited to diminution in value. They argued this because for it to be damages for distress and etc, it has to be the MAIN or SOLE purpose of the contract, the surveyor’s contract was not designed to provide peace of mind, pleasure.

Why is it distinguished from Farley v Skinner? → In Farley, C emphasised very clearly how IMPORTANT peace and quiet was for him, making it a SIGNIFICANT purpose of the contract and knowledge of the surveyor.

The third exception is distress due to physical injury/inconvenience/discomfort, how does it relate to Farley v Skinner?

Farley v Skinner → The third category includes aircraft noise, but not mere disappointment

Anglia TV v Reed is the leading case in reliance damages, what is the context, outcome and ruling?

Context → Actor withdrew from a television production, they were unable to find a replacement which amounted to the TV production losing money.

Outcome → The claimant could not quantify the loss profits as it was too speculative, so they claimed wasted expenditure both before and after the contract was signed.

Ruling → The parties may elect to claim reliance loss and recover expenses incurred in an abortive transaction, as opposed to putting them in the position if the contract had been performed.

C & P Haulage v Middleton on reliance damages, what is the context and outcome?

Context → D rented a workshop from C on a 6 month rolling license. D did lots to improve the premise. C wrongfully repudiated the license. D claimed expenditure on premises. C rejected the claim for wasted expenditure.

Outcome → It was concluded that D wouldn’t be compensated for the money they spent because D would be BETTER off when the contract properly performed would have resulted in him losing money instead

Ruling → Reliance damages don’t let C escape the effect of a bad bargain

How are reliance damages distinct from damages?

C can choose to claim either expectation damages or reliance damages

C would not get more in reliance losses than they would get under expectation damages.

If C were to lose the money anyway even before the reliance damages, they couldn't gain that money back

CCC Films v Impact Quadrant Films on reliance damages, what is the conclusion?

The case concluded that if C would still have lost money if it was properly performed, they wouldn’t get compensation for their reliance losses.