Breach Flashcards
Remedies
Contract remedies are primarily damages but also include
- Restitution
- Specific performance
- Quantum meruit
- Rectification
- Rescission
- Injunctive relief
Damages
- Definition: the monetary compensation for a wrong suffered in a civil case.
- Section 2 Civil Liability Act 1961 holds that contributory negligence can operate to reduce the recovery of damages in respect of a breach of contract.
Nominal damages
awarded where plaintiff established that they suffered a breach of a legal right and suffered a loss
Contemptuous damages
awarded where court accepts that plaintiff suffered, but his behaviour is such that it signals its disapproval for his conduct, usually accompanied by a refusal to award plaintiff
Punitive/exemplary damages
awarded where ct wishes to punish d because of his conduct and is usually awarded on public policy grounds. Garvey v Ireland: p was arbitrarily and wrongfully dismissed and was awarded exemplary damages. Kennedy v AIB: d’s action was both a tort and a breach of contract so could take advantage of the best remedy. Conway v INTO: p offered exemplary damages for breach of constitutional rights. Therefore, cases are limited to when there is a tort or breach of constitutional rights beside the breach of contract.
Aggravated damages
additional damages awarded where the conduct of d merits it or where the wrongdoer repeats the wrong after the commission of the original wrong.
Compensatory damages
designed to put p in the position he would have been in had the contract been performed. In negligence, this is when p is put in the position had the tort not been committed. These can be divided into: (i) general damages for pain and suffering; and (ii) special damages for pecuniary (financial) loss e.g. loss of earning, damages to property and medical treatments etc. General damages for mental distress and inconvenience are recoverable under Irish law but the level of damages is modest.
Assessment of loss
Q1 What is the loss suffered?
Q2 Did the breach of contract cause the loss?
Q3 Foreseeability of loss
Q4 Did the plaintiff contribute to the loss?
Q1 What is the loss suffered?
Heads of Loss 1: calculating baseline loss
Plaintiff may only recover for his own loss as seen in Alfred MacAlpine.
Golden Victory
Estimate the damages at the time the breach occured
Losses are measured/calculated by either
- An expectation measure (future looking)
- A reliance measure (retrospective looking)
Expectation measure
Is a comparison between p’s current position and the position if the contract had been performed correctly: Robinson v Harman. Expectation incudes loss of profits and the cost of cure i.e. the cost of remedying the defect: Ruxley v Forsyth. Speculative losses are not included i.e. damages for loss of opportunity: Hawkins v Rogers. When expectation losses cannot be proven, try a reliance measure.
Reliance measure
Puts the plaintiff in the position he was before the contract was made. Anglia Television: should not be double recovery i.e. for reliance loss (restore them to their original position and compensate for their losses) AND restitution loss i.e. the return of goods delivered under contract before the breach (restore them to their original position and compensate them for the gains of d rather than losses of p). Here, loss of opportunity is considered by cts: Hawkins v Rogers: where the injured party’s performance interest is affected in an intangible way (loss of chance/opportunity) or where lack of performance includes loss of opportunity, damages will be awarded for this potential value, discounted by its probability: Blackpool and Flyde Aero Club v Blackpool.
Heads of Loss 2: Loss due to distress
Damages awarded for a negative experience. There is a traditional common law rule against damages for distress, disappointment etc
Jarvis v Swan Tours
Damages are not awarded for emotional distress unless the contract was one of pleasure. This UK case did award for a disappointing holiday, and this was followed in Ireland: Scaife v Falcon Leisure.
Kelly v Crowley
Publican who was not awarded a pub licence as it is not reasonably foreseeable that lack of a pub licence would cause distress. Social occasions, recreation and stress for inconvenience are reasonably foreseeable.
Hoston v Payne
Social occasions, recreation and stress for inconvenience are reasonably
foreseeable. For example, cramped accommodation.
Dinnegan v Ryan
Damages awarded for a wedding lunch.
Heywood v Wellers
Contract for peace of mind also awarded damages
Sun Life Assurance
Breach of insurance contract: aggravated damages awarded for mental distress
Smith v Huey
Damages were not awarded for a conveyance as mental distress was not reasonably contemplated by the parties.
Q2 Did the breach of contract cause the loss?
Loss can be either legal loss or factual loss. Factual loss is the ‘but for’ test; and legal causation required the breach of contract to be the direct cause of the loss. Factors include: did p have a duty to prevent the act occurring? How likely and reasonable was the intervening act to happen?
Q3 Foreseeability of loss
The purpose of foreseeability is to consider the remoteness of damage assessed as follows (Hadley v Baxendale):
(i) that damages would fairly and reasonably be considered to arise from the breach of contract (objective test); and
(ii) damages which reasonably would have been in the contemplation of both parties when making the contract as a probable result of the breach (subjective test).
Victoria Laundry
This test was affirmed in Victoria Laundry i.e. the aggrieved can only recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach. This limits the damages to the injured party.
Q4 Did the plaintiff contribute to the loss?
If you are a victim, you have a positive duty to mitigate your losses when a breach occurs as held in Brace v Calder.
Bord Iascaigh Mara
The owners of a ship who abandoned it could not subsequently claim for damages for deterioration.
Cullen v Horgan
Where a contract for delivery of goods was breached, the plaintiff has the duty to find an alternative.
Lennon v Talbot
Motor dealership agreement was wrongfully terminated; they turned down other subsequent offers. The award of damages was not reduced because they acted reasonably in the circumstances.
MCB v Philips
If someone other than d wants to rent the asset the subject of the contract breach, you should take the opportunity.
Payru v Saunders
If the new offer from d is prejudicial or substantially different from those of the breached contract, not obliged to contract again.
When damages are agreed: penalty/liquidated damages/acceleration clause
Rationale: contracts may contain an agreed damages clause, rather than leaving the damages to the assessment by courts (on the basis of the criteria above). These can either be characterised as a penalty clause or a liquidated damages clause.
Liquidated damage clause
Guess or estimate at what the potential loss will be if a breach occurs and are legal. This provides an exception to the general rule against penalties, as well as where there is a commercial justification for the penalty.
Dunlop Pneumatic Tyre v New Garage
This case established the test. Here the amount charged was disproportionate to all possible consequences of the breach. The amount should be the same regardless of the nature and extent of damage.
The test was recently modified IN THE UK by Cavendish v El Makdessi
This case replaced Dunlop with a modern test that reflects the fact that in some circumstances, parties have a legitimate commercial interest in enforcing the performance of contractual obligations which go above and beyond compensation for any identifiable commercial losses they may suffer as a result of the breach, or the deterrence of a breach of contract. In the construction context, this new test requires a consideration of the commercial justification for the liquidated damages clause at the time the contract was entered into, and whether it is out of all proportion to the employer’s legitimate commercial interest in the works completing on time.
ParkingEye v Beavis dwelled on Cavendish facts
Provisions in the agreements protected the buyer’s legitimate interest in enforcing the non-compete restrictions so that goodwill was protected and this was critical to its value. Here, UK SC was unanimous that the doctrine of penalties should not be abolished, but rejected the traditional test set down in Dunlop that a clause will be a penalty if it is not a genuine pre-estimate of loss and is extravagant or unconscionable, or if its purpose is to deter a breach of contract. It was held that the correct approach in commercial cases was to have regard to the nature and extent of the innocent party’s (e.g. the employer’s) interest in the performance of the obligation that was breached as a matter of construction of the contract.
ParkingEye v Beavis test
The test is that a penalty clause whose purpose is to punish the contract breaker is likely to be an unenforceable penalty clause. On the other hand, a clause that is intended to deter a breach of contract is less likely to be a penalty clause, even if it does not represent a genuine pre-estimate of loss. In order to determine whether or not a clause is a penalty, the key is to consider whether the liquidated damages clause is out of all proportion to the employer’s legitimate interest in enforcing the contractor’s obligations under the contract. If it is, it will be penal and unenforceable. ParkingEye involved an 85 pound charge which was perceived as a deterrent for overstaying the 2 hour parking limit. There was however a clear legitimate interest in imposing this charge e.g. preserving traffic management system and efficient use of the parking space in the surrounding outlets and their users by deterring long stays. The charge was not out of proportion and therefore not penal.
Penalty clauses
Seek to punish breaches and are illegal. This clause will normally provide for the payment of a sum of money in the event of a breach of contract. In deciding whether or not a commercial provision constitutes a penalty clause, consideration is given as to whether the payment represents a genuine pre-estimate of loss or probable loss by reason of the breach.
ACC Banks v Friends First
Sets out the Irish position which requires a genuine pre estimate of loss.
Irish Telephone rentals
A clause was held to be a penalty clause as it did not attempt in any consistent way to identify actual loss
Schiesse International
Sum of damages provided for in the clause was the same regardless of the damage caused by the breach of contract i.e. here an employee had to repay an employer for training if they left employment within 3 years of leaving was held to be a penalty clause as it applied regardless of the employee’s departure date.
Sheehan v Breccia & ors and Flynn & Anor v Breccia
These cases have reassessed the Irish position on penalty clauses. The cases take into account the recent decisions by the UK SC which is a departure from the traditional test applied both in the UK and Ireland. Edgeworth Capital (Luxembourg) S.A.R.L: UK HC held that the rule against penalties did not apply to a fee payable for the provision of financing, because the fee was payable in various circumstances, not just in the event of a breach. The decision demonstrates that the rule against penalties only applies in the event of a breach of a contractual duty owed to the other party.
Restitution - AG v Blake
leading case. Blake was a former member of the secret service who became a double agent (UK and Soviets). He was brought to prison and escaped and published a book on his story. The British Crown brought an action for all the profits made on the book, including those profits he had not already received, arguing that the principle of restitution should apply. Ct held that in exceptional cases, when the normal remedy is inadequate to compensate for the breach of contract, ct can order d to account for all profits even where no tangible benefits received under a contract: Fibrosa v Fairbain
Anglia Television v Reed:
Reed played Mike Brady in the Brady bunch and he was asked by Anglia to play another role in a film called ‘The Man in the Wood’ from which he withdrew just before filming was about to start. Anglia claimed for wasted expenditure because loss of profits was too uncertain. Reed argued that damages could not be claimed when incurred before a contract that was wasted. Held: expenditure incurred before a contract was thrown away can be claimed so long as it was within the reasonable contemplation of the parties.
Specific performance
Equitable remedy, not where damages are an adequate remedy, and not for contracts of personal service or where contract requires court supervision. Remember: can also be refused on equitable grounds (like hardship).
Quantum Meruit
Dealt with in discharge of contract
Rectification
Equitable remedy, where written document does not reflect prior agreement.
Rescission
Equitable remedy, available in a limited number of circumstances e.g. mistake and misrepresentation (see Misrepresentation).
Injunctive relief
Equitable remedy
