Chapter 4 - Remedies for Breach of Contract Flashcards
What is the main remedy for a breach of contract?
The main remedy for a breach of contract is damages.
What must a claimant prove to recover damages?
The claimant must prove that:
* Loss has been suffered.
* The loss is a result of the defendant’s breach.
* The loss is not too remote a consequence of the breach.
What is the object of awarding damages in contract law?
The object of awarding damages is to compensate the claimant for their loss, not punish the defendant.
If a claimant has not suffered any loss as a result of the defendant’s breach, what kind of damages will they be awarded?
They will be awarded nominal damages, usually around £5–£10.
What happened in the case of Obagi v Stanborough (Developments) Ltd?
The defendant broke a term of the contract but it was shown this did not cause the claimant any loss. The judge awarded nominal damages of £5 and ordered the claimant to pay the defendant’s costs.
What is the normal aim of the court in assessing damages?
To place the claimant in the same position with respect to damages as if the contract had been performed. This was stated in the case of Robinson v Harman.
What are expectation loss damages?
Damages that compensate for the loss of the benefit which the claimant would have obtained had the contract been performed properly.
In the context of damages, what is meant by cost of cure?
The cost of putting the work right. With contracts for services, the basic rule is that the amount of damages awarded will be the cost of cure.
What happened in the case of Ruxley Electronics v Forsyth?
Ruxley built a pool for Forsyth but it was shallower than specified in the contract. The court decided not to award the full cost of cure, as it was unreasonable in relation to the benefit to be obtained, instead awarding a sum for ‘loss of amenity’ and ‘consumer surplus’.
What are reliance loss damages?
Damages that cover the expenses incurred in reliance on the contract. These may be sought if the loss of expectation is too speculative.
What happened in Anglia Television v Reed?
Anglia hired Reed to star in a TV play but he refused to carry on with the contract. Anglia abandoned the project. As they didn’t know if they would have made a profit, Anglia claimed damages for wasted expenditure, including costs incurred before the contract was concluded.
What happened in Omak Maritime Ltd v Mamola Challenger Shipping Co (The Mamola Challenger)?
Omak broke a contract to charter a vessel from the owners, who terminated the contract. They had already incurred expenses preparing for modifications to the vessel. They re-chartered the vessel at a higher rate and earned more over the 5 years than they would have under the original charter. The High Court held the owners could not recover damages for the wasted expenditure as they had not suffered any loss.
Can a claimant recover damages for a lost opportunity in contract law?
Yes, the court may award damages for a lost opportunity. One example of this is the case of Chaplin v Hicks where the claimant lost the chance to audition for a talent contest due to an organiser error.
Are damages for mental distress and disappointment usually awarded in contract law?
No, these damages are not usually awarded in contract law but may be awarded when one of the main objects of the contract is to have peace of mind.
What happened in the case of Jarvis v Swans Tours?
Jarvis went on a disappointing package holiday. The court awarded him damages for distress and disappointment as one of the main objects of the contract had been enjoyment.
What was decided in Farley v Skinner?
It was decided that the sole object of the contract need not be to provide pleasure, enjoyment or peace of mind to award damages for mental distress and disappointment. It is sufficient if this is an important object of the contract.
Why does the remoteness rule exist in contract law?
To prevent unfair results by making a party responsible for all the loss that might follow their breach of contract.
What is the remoteness rule in contract law?
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. This was established by the case of Hadley v Baxendale.
What are the two limbs to the remoteness rule?
- Limb 1: Loss arising 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 giving rise to the loss are known to both parties at the time the contract is made.
When should a party be told about special circumstances that might lead to unusual loss in the event of a breach of contract?
They should be told before the contract is finalised as this knowledge may affect the terms of the contract, for example, the price.
What happened in Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc?
Balfour Beatty sued Scottish Power for the full loss suffered following an interruption in the electricity supply which happened during a construction project requiring a continuous pour of concrete. As Scottish Power did not know about the continuous pour they were not liable for the loss.
What happened in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd?
Victoria Laundry, a laundry and dyeing business, purchased a boiler from Newman Industries which was delivered late. They claimed for loss of ordinary profit and loss of profit on lucrative dyeing contracts. Newman Industries were liable for the ordinary profits, which were reasonably foreseeable, but not the highly lucrative contracts, as they did not know about this special circumstance.
What happened in Koufos v C Czarnikow Ltd, The Heron II?
The House of Lords disapproved of the phrase ‘reasonably foreseeable’ being used in the context of the remoteness rule, as in Victoria Laundry Ltd v Newman Industries Ltd. The remoteness test in contract is not the same as in tort. The House of Lords reinstated the phrase ‘within the reasonable contemplation of the parties’ from Hadley v Baxendale.
Why are the remoteness tests different in contract and tort law?
In contract law, you can take steps to recover for unusual loss by telling the other party about it before the contract is made. In tort law, you usually cannot do this.
What degree of probability is needed for loss to be within the reasonable contemplation of the parties, as decided in The Heron II?
Whether the loss in question is of a kind that the defendant, when they made the contract, ought to have realised was not unlikely to result from the breach.
What happened in Parsons (Livestock) Ltd v Uttley Ingham Ltd?
Parsons, pig farmers, bought a hopper from Uttley Ingham who installed it incorrectly. The pigs’ food became mouldy, the pigs contracted a rare disease and died. Uttley Ingham ought to have foreseen that the pigs might become ill due to the breach and were liable for the loss of the pigs, even though the specific illness and death of so many was not contemplated.
What did the court decide in Parsons v Uttley Ingham in relation to the remoteness rule?
If the defendant can contemplate the type of loss as a serious possibility, then all loss of that type is recoverable, even though the extent of the loss could not have been contemplated.
What happened in Brown v KMR Services Ltd?
Brown, an underwriter, sued their agent for losses arguing the agent had failed to warn them about the dangers of joining high-risk syndicates. The Court of Appeal decided that although the losses were of a far greater magnitude than contemplated, they were of the same type as those that were contemplated and so were not too remote.
How did Brown v KMR Services Ltd help to reconcile the decision in Parsons v Uttley Ingham with the decision in Victoria Laundry v Newman Industries?
By distinguishing between different types of loss, with loss of ordinary business profit being different in kind to loss flowing from a particular contract with very high profits.
What is the test for remoteness in contract law?
Loss will not be too remote if, at the time the contract was made, it was a kind that would have been within the reasonable contemplation of the parties as being not unlikely to result from a breach.
What happened in Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas)?
Transfield chartered a ship from Mercator, who were late returning it. Due to the volatile market conditions, Transfield lost the opportunity to re-charter the ship at a lucrative rate. The House of Lords decided the loss of profit from the lucrative re-charter was too remote.
What were the differing opinions of the judges in The Achilleas?
Lord Hoffman felt that the charterers had not assumed the risk of the owner’s losses, considering the type of contract and commercial background, but Lord Rodger of Earlsferry took a more orthodox approach based on Hadley v Baxendale.
