Remedies

Damages

Definition (AO1)

• Financial compensation for loss caused by breach of contract

• Common lay remedy - so always available for breach

• Damages are compensatory

• Not punitive

• If C suffers no less than nominal damages (damages in name only) are awarded (although very rare) - sometimes done to formally end a contract.

Damages - General principle

Definition (AO1)

Object of damages is to put innocent party in the position they would have been in if the contract had been properly performed.

Rather than to punish the D.

Damages - General principle

Case (AO3)

(Jackson v Horizon Holidays)

Things to consider regarding damages

1. Measure of damages

2. Loss

3. Mitigation of damages

Measure / Assessment of damages

Principle (AO1)

Object of damages is to put innocent party in the position they would have been in if the contract had been properly performed.

Ways to assess value of damages

1. Expectation loss - Loss of the bargain (contract)

2. Reliance loss - Loss of expenses

Not possible to recover both - to prevent double recovery by C

Expectation Loss

Definition (AO1)

WHAT WAS EXPECTED

Damages awarded to compensate for loss of value of contractual benefit:

• Value of benefit to C if contract was properly performed

  MINUS

• Value of (any) benefit actually received by C

Expectation Loss - Considerations

(AO2)

1. Difference in value

2. Difference between contract and market prices

3. Loss of profit / Loss of further contracts

4. Speculative losses - loss of chance (rare)

Expectation Loss

Case (AO3)

(Ruxley v Forsyth)

Swimming pool 9” too shallow

No effect on value / or of usefulness.

Would cost £21,000 to remedy which almost the same as cost to build the pool.

Only £300 awarded

Reliance Loss

Definition (AO1)

Where C claims damages to recover costs incurred in reliance on the proper performance of contract (which does not happen) and includes wasted expenditure. (expenses)

Does not apply if C is seeking reliance loss to rescue himself from a bad bargain

Reliance Loss

Case (AO3)

(Angila TV v Reed)

D (reed) in breach of contract to appear in film produced by C (Angila TV)

C claimed production expenses up to date of breach.

Expenses included: staff wages, camera equipment, set, sound, script writer wages.

Couldn’t predict film’s success so Expectation loss would not have worked.

LOSS - Considerations

1. Types of loss recoverable

2. Extent of loss recoverable

Types of Loss

C may claim damages for:

• Personal injury - Physical

• Damage to property

• Loss of profit (most common)

Extent of loss (Causation)

Definition (AO1)

C must prove:

• Loss caused by D’s breach of contract (but for)

  AND

• Loss not too remote. (remoteness of damage)

Extent of loss - But for

Definition (AO1)

‘But for’ Test - Would C have suffered loss if it had not been for D’s breach of Contract?

Yes - Loss not recoverable

No - Loss recoverable

Extent of loss - But for

Case (AO3)

(Stansbie v Troman)

Contract for D to decorate C’s premises

D given key but failed to lock premises resulting in a burglary.

C could claim for value of stolen property
Would not be able to claim if burglar entered by breaking a window or entering in a way that was not the door.

Extent of loss - Remoteness of damage

Definition (AO1)

D should not be liable for loss which is too remote from D’s breach of contract.

C may recover damages for loss which was reasonably in the contemplation (known) of the parties at the date of the contract:

• Loss which was a natural consequence (not remote) of D’s breach of contract

• Which D should reasonably have contemplated (objective)

  AND / OR

• Loss which was not a natural consequence of D’s breach but whcih was within the parties’ actual knowledge (subjective)

Extent of loss - Remoteness of damage

Case (AO3)

(Hadley v Baxendale) - No Reasonable contemplation

Mill case with no spare crankshaft.

C was unable to claim as D did not know that there was no spare crankshaft and so damage was not foreseeable.

(Victoria Laundry v Newman) - Some reasonable contemplation

D contracted to sell and deliver a boiler to C and knew C wanted it for immediate use in their laundry.

Boiler was delayed 5 months

C sued for loss of profits including loss of profits from lucrative government contracts.

C was successful for loss of profits but not for loss of government contracts as D did not have them in reasonable contemplation

Mitigation of Loss by C

Definition (AO1)

Where C claims damages for loss caused by D’s breach of contract

• C must take all reasonable steps to minimise loss

  SO

• C may not recover for loss which C could reasonably have avoided

A C need not take unreasonable steps, and is entitled in cases of anticipatory breach to wait and see if actual breach occurs rather than suing immediately.

If C’s reasonable steps increase loss then he can recover this

Mitigation of Loss by C

Case (AO3)

(British Westinghouse v Underground Electric Railway)

Defective turbines were delivered.

C obtained replacements that were more efficient than the original and paid for themselves in a short time.

This was takin into account by reducing the C’s damages accordingly

Liquidated Damages

Definition (AO1)

Agreed Damages which are fixed in advanced (at formation of contract)

Where contract contains term identifying a stipulated sum to be paid in the event of a breach by either party:

• The court will award such agreed damages

  UNLESS

• The term is a penalty - Not enforceable (extravagant compared to maximum possible loss that could have flowed from breach, wording is inconclusive or sum of money is paid for wide variety of reasons)

i.e. Credit card contracts contain terms of a set fee charged for late payment or going over an ‘agreed’ credit limit

Courts consider - Proportionality between agreed sum / actual loss

• Is the penalty Reasonable protection of legitimate commecial interests of parites

CRITICAL QUESTION IS IF CLAUSE IS A PENALTY

Liquidated Damages

Case (AO3)

(ParkingEye Ltd v Beavis)

D contract with C - 2 hours free parking

Clear notice of £85 charge for exceeding 2 hours

D exceeded 2 hours

C could claim for the £85 as seen as a reasonable protection of their legitimate commercial interests in maintaining the car park

Penalty Clause

Definition (AO1)

A secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation

Can be relied up if:

• Not disproportionate

• Applies to primary obligation

• Both business and consumer contracts

Equitable Remedies of Injunctions & Specific Performance

Definition (AO1)

• Used when damages are not adequate

• Equitable remedies supplement rather than compete with common law remedies

• Not available in every single case

• Only available if relevant common law remedy is insufficient to protect the C or compensate for the wrong he suffered.

• Always discretionary

Types of equitable remedies

• Specific performance

• Injunctions (more likely in tort)

• Rescission

• Rectification

Specific Performance

Definition (AO1)

An order by the court,

Requiring a contracting party,

To perform a positive contractual obligation

Court has discretion whether to make an order