Breach Flashcards
Is there always a right to damages when a contract is breached
Yes unless there is an effective exemption or limitation clause
Is a contract always terminated when it is breached
No. It remains in force unless it is a repudiatory breach
What options do you have when there is a repudiatory breach
Can select to end contract or continue with it
Types of terms and effect of breaching them
Condition- goes to root of contract- repudiatory breach
Innominate term- could be major or minor depending on seriousness of consequences of breach.
Warranty - less important. Compensated by damages. Not fatal to performance as a whole
When is the breach of an innominate term repuditory
If it deprives the innocent party of substantially the whole benefit which it was intended he should obtain from the contract
What type of term is an oral term which is implied using importance attached test
Likely to be a condition going to root of contract
What is an anticipated repuidiatory breach
Before performance but after entering into contract one party rejects their obligations
What are your options if the other party commits an anticipated repuditory breach
Renounce and claim damages or affirm
Types of remedies available for breach of contract
Compensatory damages for expectation loss Damages for Non-pecuniary loss Debt claim Restitution Specific performance Termination if repuditory breach Repair or replace Wasted expenditure damages
How are damages for breach of contract measures
Compensatory damages for expectation loss to put in position as if contract was fulfilled. Difference between what they got and what they expected to get
Losses following naturally from breach or In contemplation of parties at time of contracting. Type of loss not extent
Can you get damages for breach of contract if there is no loss suffered
Yes but only nominal damages
Can you get damages for non- pecuniary loss due to breach of contract
Only if obtaining pleasure, peach etc was main (not sole) objective of contract
Or
Distress due to physical inconvenience or discomfort directly caused by breach
Can pleasure or peace ever be the major objective of a commercial contract
Unlikely. Major objective of commercial contracts is usually to make profit
How is recovery of loss due to breach of contract limited
Remoteness
Contributiory negligence
Mitigation
At what point are damages for breach of contract assessed
At date of breach
Can damages for breach of contract be reduced if subsequent events are known to the court at the date of hearing
Yes
Can you chose to have a repair or replacement instead of damages for expectation loss
Only if cost is reasonable and not out of proportion to benefit obtained. Intention to actually repair is relevant or if CRA applies
Right of repair or replacement under CRA
Non confirming goods or digital content
Incorrectly installed goods if installation was traders responsibility
Only when repair or replacement is not disproportionate to other remedies
Can damages for wasted expenditure be recovered following breach of contract
Only if expense would have been recouped had the contract not been breached. Assume it would have been and D must prove otherwise
Remoteness as it applies to breach of contract
Losses in contemplation of parties when contracting
Or
loss fairly and reasonably following naturally from the breach
Type of loss in contemplation not extent
What is mitigation
Innocent party cannot recover for any loss which he failed to take reasonable steps to minimise
Can you get damages if mitigation wipes out any loss from breach of contract
Only nominal damages
What are agreed damages clauses
When the contract sets out how much damages are to be paid
Are agreed damages clauses enforceable
Yes as long as they’re not penalties. If they’re penalties courts will award damages on normal principles instead
Do you have to pay an agreed damages clause even if it is more or less than the actual loss
Yes
How to spot a penalty clause disguised as an agreed damages clause
A single sum payable in every situation is likely to be a penalty as it’s less likely to be a proper estimate of loss
are penalties ever payable
Yes if due on an event other than a breach of contract
Disposits are lost and usually unrecoverable unless unreasonable
Effect of undue influence on contract
Voidable
What is actual undue influence
Wrongful exercise of influence over one party by the other
How do you demonstrate actual undue influence
Must prove it was not the exercise of free will
What is presumed undue influence
Protected relationships and a transaction calling for explanation
What relationships are not protected (presumed undue influence)
Husband and wife
Customers and bank
When can a contract be voidable due to undue influence exercised by a third party
Actual or presumed undue influence
And
Third party is agent for contracting party
Or
Contracting party had actual or constructive knowledge of the undue influence
When does a bank have actual or constructive notice of the undue influence of a third party
Wife is security for husbands debts or vice versus for unmarried relationships of which lender is aware
Not on notice if made to husband and wife in joint names unless really only for husband
On notice if wife is director, secretary or shareholder of husbands business
What must a bank do once on notice of undue influence to prevent it becoming voidable
Take reasonable steps to check it has been explained to the wife- get confirmation from solicitor
Requirements to find misrepresentation
False fact or misleading conduct (not opinion or future intention unless not honestly held)
Induced to enter contract (subjective)
Would influence reasonable person (objective)
Consequence of misrepresentation
Voidable
Can an opinion ever be misrepresentation
If the person is in a stronger position to know the truth their opinion might infer fact
Are half truths or encouraging false beliefs a type of misrepresentation
Yes
Can silence be misrepresentAtion
No. There is no general duty in pre contract negotiations to disclose all material facts known
If a statement is true when it is made but later becomes false is that misrepresentation
Yes if the change of situation is not disclosed
Can statement of future intentions be misrepresentation
Not if they later change their mind but it would be misrepresentation if they never held the intention at all
Can misrepresentation be conveyed through a third party
Yes is they told the third party in the knowledge they would pass it on
Three types of misrepresentation
Negligent
Fraudulent
Innocent
What is fraudulent misrepresentation
No honest belief in truth. Knew it wasn’t true or was reckless (didn’t care)
What is negligent misrepresentation
Honestly believed it was true but didn’t fulfil duty to use reasonable care and skill to check and then it turned out to be false
What is innocent misrepresentation
Honestly believed it was true and belief was based on reasonable grounds
What are the two types of negligent misrepresentation
Common law negligent misstatement - need to establish Ds negligence
S2 MA 1967 - D must establish they were not negligent. Use this when there is a contract
Remedies for misrepresentation
Voidable
Put in position as if it never happened
Recission.
Sometimes damages for innocent or negligent instead of recission
Damages for wasted expenses for negligent or fraudulent
Recover profit that would have been made had another contract been entered into - fraudulent
Can you request damages for innocent or negligent misrepresentation
No this is the judges choice
Remoteness test for damages from misrepresentation
Recover all losses regardless of foreseeability. Only intervening act would break chain
Can contributory negligence reduction award for misrepresentation
Only for innocent or negligent misrepresentation
Bars to recission following misrepresentation
Affirmation
Bona fide third purchaser
Restitution impossible
Court decide to award damages instead (innocent and negligent only)
what is the test to determine if it was a representation
common intention of parties when the contracted. if intention is unclear consider:
skills/knowledge of parties
verbal statement repeated in writing
clear that statement was important
invited to verify it
lapse of time between statement and contracting
what is misrepresentation
untrue statement from one party to the other which induced them to enter into contract (written, oral or conduct)
is silence misrepresentation
not usually - no obligation to disclose before contracting unless:
fiduciary relationship
utmost good faith contract
silence positively distorted what was said
was true when you said it but then circumstances change- you must tell them of change
are damages always available for misrepresentation
not for innocent misrepresentation but can still terminate contract
what can you get damages for in claim for misrepresentation
for financial loss caused by misrepresentation. all consequential loss. remoteness doesn’t apply.
what is negligent misstatement
statement was honestly held but not on reasonable grounds
what is fraudulent misrepresentation
knew it wasn’t true or reckless not caring if it was true or not
remedy for misrepresentation
voidable contract
what is recission
the mutual restoration of all benefits to place both people back in pre-contract position
when is recision barred
affirmed contract, undue delay, bona fide purchaser, impossible to restore property
when does time run from regarding undue delay to bar recission
time runs from when misrep should have been discovered not when it actually was disovered unless fraudulent misrep then runs from when it was discovered.
what kind of breach of contract allows termination
breach of condition or serious breach of innominate term
if you terminate contract can you change your mind later
no
if you affirm instead of terminate contract can you still get damages
yes
2 ways a non-defaulting party can enforce contract against a third party
guarantee and indemnity
difference between indemnity and warrantie
indemnities allocated known risk
warranties allocate unknown risk
what is an indemnity
third party agrees to reimburse one party for any loss under contract. primary obligation so no need for written evidence
what is a guarantee
if they don’t pay then I will
must be signed by guarantor and evidenced in writing before you try to enforce it or it will be void
what are reliance loss damages
when they claim for expenses incurred instead of loss expectation
cost of cure
cost of putting it right
expectation loss
difference between what you go and what you expected
does extent of loss need to be in contemplation of parties when contracting
no only type of loss
what is a specified damages clause
a genuine pre-estimate of loss. must pay even if real loss is higher or lower
how to tell if a clause is a penalty clause
disproportionately high. out of all proportion to any legit interest of the innocent party in enforcement.
can you claim for extra loss that occurred only through your efforts to mitigate loss
yes as long as you acted reasonably
what is an action for an agreed sum
a debt action for fixed amount plus interest. equitable remedy. no need to show loss or remoteness
what will specific performance not be used
if disproportionate hardship caused to D
if C doesn’t have clean hands
not for service contracts
equitable. discretionary - only awarded if just and equitable
restitutionary damages
based on gain of D not loss of C
when is restitution used
to prevent one party being unjustly enriched at expense of other. where one party performs but there is a total failure of consideration by the other.
what is the doctrine of complete performance
requires contractual obligations to be completed precisely and exactly. no need to pay if not precise and exact (unless already paid then cannot recover money)
exceptions to the doctrine of complete performance
divisible obligations (agree payment for sections of contract then paid for sections completed) wrongful prevention (prevented for completing then pay for what's done) voluntary acceptance of part performance substantial performance (cost of rectifying cannot be more than 1/14 of contract price)
When will negotiating damages be awarded
Only when there is no financial loss other than the chance to negotiate a release fee
Eg loss of chance to negotiate a release fee from a restrictive covenant that was later breached
How much is awarded when negotiated damages are won
A reasonable sum based on a hypothetical negotiation
How much money can you claim when the other party voluntarily accepted your part performance
A reasonable sum in restitution for work done
How are damages assessed for misrepresentation
On a tortuous basis for all consequential loss. Remoteness is not an issue. Measure of damages is to put them in position as if misrep had never happened
Can you get both damages and recission in respect of the same instance of misrep?
Yes they can be awarded together
Is recission always available for misrep
It is not available as a right but it is always potentially available - it is up to discretion of the court
Are damages available for mistaken identity
No, the only remedy for mistaken identity is for the court to declare the contract void
What are consumer surplus damages
They are the difference between how much pleasure/ enjoyment/ utility you will obtain from an item and how much you paid for it
Eg market value of house £100k but I will pay £150k because I really want it. Consumer surplus is £50k
When are consumer surplus damages awarded
When there is non pecuniary loss from breach of contract to quantify the loss of enjoyment or utility that would have been obtained from proper performance of the contract
