Contract Law – Damages and Remedies

These flashcards cover key concepts related to damages and remedies in contract law, including definitions, principles, and notable case law to aid in exam preparation.

Damages

Money awarded to a claimant as compensation for loss or injury suffered due to a breach of contract.

Loss of Expectation

The right of the innocent party to claim damages reflecting the benefit they would have received if the contract had been performed.

Nominal Damages

Small amount of money awarded when no actual loss has been suffered, usually between £5 - £10.

Cost of Cure

Damages awarded to a claimant to cover the cost of putting defective work right.

Consumer Surplus

Damages awarded for loss of enjoyment or comfort when a contract's purpose is to provide pleasure.

Reliance Loss

Damages claimed for expenses incurred in reliance on the contract, typically when expectation loss is too speculative.

Primary Obligation

The main duty each party agrees to perform under the contract.

Secondary Obligation

Legal consequences arising after a breach of a primary obligation, such as the duty to pay damages.

Remoteness Rule

Losses must be within the reasonable contemplation of the parties at the time of the contract as probable results of a breach.

Imputed Knowledge

Assumed knowledge of losses that naturally arise from a breach, meaning the defendant is expected to know about them.

Actual Knowledge

Specific knowledge of unusual losses that the defendant must have at the time of contracting to avoid remoteness.

Mitigation

The obligation of the claimant to take reasonable steps to minimize their losses after a breach.

Contributory Negligence

The principle that a claimant's damages may be reduced if their own fault contributed to the loss.

Liquidated Damages

A specified damages clause that establishes in advance what amount will be paid in the event of a breach.

Penalty Clause

A clause intended to put pressure on the party to perform, which is unenforceable under contract law.

Specific Performance

A court order requiring a party to fulfill their contractual obligations.

Injunction

An equitable remedy ordering a party to either do something or refrain from doing something under the contract.

Restitution

A remedy preventing one party from being unjustly enriched at the expense of another.

Contract of Guarantee

A contract where one person agrees to pay another's debt if they default, which must be evidenced in writing.

Indemnity

An undertaking to reimburse another party for a loss incurred, which operates regardless of breach.

Breach-Date Rule

The principle that damages are generally assessed at the time of breach.

Penalties vs. Liquidated Damages

Penalties are unenforceable and intended to deter breach, while liquidated damages are enforceable and pre-set.

Damages for mental distress and dissapointment

The court has awarded damages for mental distress in situations where one of main objects of the contract was to have peace of mind.

Distinguishing types of Remoteness

Losses are generally recoverable if they fall into one of two categories: 1. Those naturally arising from the breach (imputed knowledge); or 2. Those specially communicated and known by the defendant as probable results of the breach (actual knowledge).

Exemptions and Limitations of Specific Performance and Injunctions

These equitable remedies are typically not granted where: 1. Damages would be an adequate remedy; 2. The contract involves personal services; 3. There is a need for constant court supervision; 4. It would cause undue hardship to the defendant; or 5. The claimant has not acted equitably.

Scope of the Duty to Mitigate

The claimant is required to take all reasonable steps to reduce their loss, but is not expected to embark on complex or costly litigation, or to take steps that would prejudice their business reputation. Failure to mitigate will prevent recovery of losses that could have been reasonably avoided.

Enforceability of Liquidated Damages vs. Penalty Clauses

Liquidated damages clauses are enforceable as they represent a genuine pre-estimate of loss, establishing certainty within the contract. Penalty clauses, however, are unenforceable because their primary purpose is to punish a breach, not to compensate for a genuine loss.