8. Damages Flashcards
When can an innocent party claim damages from the other contracting party?
If the other party breaches ANY term of the contract
Two ways of measuring the appropriate level of damages
- Expectation Loss
- Reliance Loss
Expectation Loss
Claimant is compensated for their lost expectation (benefit which the claimant would have obtained had contract been properly performed) when goods turn out to be fake, when good are not delivered, when goods are not accepted
Reliance loss
When an expectation cannot be made (forecasted future success, e.g.), will look at cost of ‘getting to that point’
Can a claimant get damages for mental distress and disappointment?
Generally, no, but when the main objects of the contract is to have peace of mind (ie. hospitality and holiday contracts) - potentially
Remoteness of Damage rule: Contractual Damages
A party will not be awarded damages for loss which is too remote a consequence of the breach. Remoteness means that the loss must have been within the reasonable contemplation of the parties at the time of the contract as being a probable result of the breach; Hadley v Baxendale (1854)
Two limbs of remoteness of damage rule
Limb 1: Loss which arises naturally from the breach will normally be within the parties’ reasonable contemplation
Limb 2: Unusual loss will be within the parties’ reasonable contemplation only if the special circumstances which give rise to the loss are known to both the parties at the time the contract is made
How might damages be limited?
- Failure to mitigate by claimant
- If breach is negligent, contributory negligence
- Specified Damages and Penalty Clauses
Specified (liquidated/agreed) Damages Clause
genuine attempt to pre-estimate the loss which is likely to be caused by the breach. Is binding, and the sum specified will be paid regardless of the actual loss. Usual rules of measure of damages (remoteness, mitigation) do not apply.
Penalty Damage Clause
Specified / Liquidated Damages clause can be a penalty if it is a secondary obligation (triggered by a breach) and imposes penalty out of ALL proportion
– attempt to put pressure on a party to perform the contract, unenforceable. Court can assess damages in usual way and use principles
- Claimant may want to argue clause is a penalty if their loss is greater than the amount stated (therefore, it would be unenforceable)
Action for an agreed sum
Straightforward claim for an amount due when one party has not met the obligation that they pay a definite sum of money to the other
Conditions to pursue action for an agreed sum?
The duty to pay must have arisen (ie. If specified date by which the payment reaches, this must have passed )
When does the right to terminate the contract arise?
1) Breach of condition (particularly important term)
2) Very serious breach of an innominate term (repudiatory breaches)
If one party breaches a condition of the contract, must the innocent party terminate it?
No, they have a choice to affirm the contract or discharge it
If an innocent party opts to terminate a contract, what is the effect?
Future obligations will be discharged. Innocent party can sue for damages or loss suffered. Must communicate to other party
Order for Specific Performance
Order of the court which requires party to perform its contractual obligations
Consequence of a party failing to comply with an order for specific performance
Contempt of court
Can an individual pursue both specific performance and damages?
Yes
Restrictions on the availability of specific performance as a remedy
- Normally only awarded if damages are inadequate
- Only granted if it is just and equitable to do so
- rarely used for service contracts
When are injunctions not an appropriate remedy?
- If it would compel someone to do something they cannot be ordered to do in specific performance (like employment)
- If the court believes party does not have clean hands etc. (other equitable maxims)
Aim of Restitution
To prevent one party being unjustly enriched at the expense of the other
Two potential claims in restitution
- Total failure of consideration (recovery of money)
- Compensation for work done or goods supplied (Quantum Meruit)
How are restitutionary damages determined
By assessing the ‘gain made’ by the defendant
Non-Pecuniary Losses: what are they?
Things which cannot be assessed in financial terms easily
Pecuniary Loss: Examples
Loss which translates into financial terms
- eg. amount of lost profits or amount of damage to a property (determines the award of damages easily)
Remoteness of Damage
Damage must have been in the reasonable contemplation of the parties at the time of the contract as being a likely consequence of the breach
- for those which would not be inevitable losses in the event of breach, whether this loss is too remote will hinge on what the defendant actually knew at the time of the contract
If physical injury is not too remote (is in the contemplation of the parties), need the extent of the injury also have been anticipated
No, the extent of the loss is irrelevant
Mitigation of loss: How do the legal / evidential burdens operate
- Burden of showing the claimant has failed to mitigate is placed on defendant
If a claimant has tried (and failed) to mitigate their loss, can they claim for the full amount?
Yes, they must have taken reasonable steps to mitigate though - this will be a question of fact for the court
Different methods of awarding damages?
- Consumer Surplus / loss of amenity
- Difference in value
- Cost of Cure
- Distress and disappointment
- Nominal
When will the court award consumer surplus damages / loss of amenity damages?
If there is no difference in value but the cost of cure is out of all proportion
What are nominal damages, when would they be awarded?
Damages awarded when the claimant has not suffered any loss, but the court wants to acknowledge that the contract has been broken (will be a small sum such as 10GBP)
