Nominal, Speculative and Liquidated damages

What is the goal of damages and what can they be awarded for?

They seek to compensate the C and put them back in their pre-contractual position.

They can be awarded for:

Expectation loss: here the aim is to put C into the financial position they would be in if the contract was completed

Reliance loss: C can claim for payments made in advance

Restitution: Makes D give up unjust profits made at the C’s expense.

What are the different types of damages?

1. Nominal: When no loss is suffered. It is a symbolic amount

2. Speculative: Breach hasn’t happened yet or loss is difficult to quantify.

3. Liquidated: When the contract states an amount to be paid for breach.

4. Compensatory (different flashcard set): Most common. C is compensated for a loss caused by breach.

1. Nominal Damages

These are awarded when there was a breach but no actual loss has been suffered. (Staniforth v Lyall). Usually a symbolic amout of money.

Morris Garner v One Step: Nominal damages should only be awarded when there are issues in calculating losses.

To help calculate the amount of damages to be awarded, the courts introduced the Wrotham Park Award (Wrotham Park v Parkside Homes)

This held that damages should be calculated based on what would have been reasonably agreed between the parties.

The SC tightened the Wrotham Park Award by saying they should only be given when there are issues in establishing loss, and when it is a just response to a breach.

2. Speculative Damages

This covers situations which haven’t happened yet or the loss is difficult to quantify.

In contract law, mental distress cannot be claimed for.

Addis v The Gramophone: C was fired and replaced. He could claim for his loss of earnings, but not embarrassment.

However, damages can be awarded if the entire purpose of the contract was for pleasure. (Jackson v Horizon Holidays)

Speculative damages can also be awarded for ‘loss of amenity’ (loss of being able to do something, e.g. use facilities.)

Ruxley Electronics and Construction v Forsyth: C contracted D to build a swimming pool. The pool was 10% shallower than she wanted. This was held to be loss of amenity so speculative damages could be awarded.

3. Liquidated damages

This is awarded when the amount of damages to be paid is outlined as a term in a contract. This only works if it is a proper account of the loss suffered (it must be fair).

Usually this is financial, but it doesn’t have to be.

If an amount outlined in a term is deemed unfair, it is called a penalty (not legally enforceable).

Parking Eye v Beavis: C argued a fine was a penalty rather than a fair term. Courts disagreed, so the fine was enforceable.

This case also demonstrated terms that the party must demonstrate that the clause was not ‘extravagant’ or ‘unconscionable’, and that it upheld a legitimate interest for it not to be considered a penalty.

How are liquidated damages awarded?

On a Quantum Meruit basis. There are 3 ways this can be done:

1. If no amount is specified, a reasonable amount will be awarded (URDC v Powell)

2. If the circumstances imply an additional agreement

• Steven v Bromley: Steven had to carry steel for a specified rate. He was then asked to carry additional items. Because another agreement was implied, he could claim for this.

3. When the other party breaches their side of the agreement/prevents the other party fulfilling their obligations. (De Barnady v Harling)