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Business Law (Focus Areas) > Chapter 7 > Flashcards

Chapter 7 Flashcards

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1
Q

What can the innocent party do when a party breaches a contract?

A

He has the right to sue the party.

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2
Q

What is given to the plaintiff when the defendant breaches a contract?

A

Remedies.

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3
Q

Explain the types of remedies.

A

Monetary remedy- monetary compensation

Non-monetary remedy- enforcement of right owed to the plaintiff

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4
Q

What is the purpose of monetary remedy? (who, what)

A

To compensate the injured party with damages.

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5
Q

What is the purpose of non-monetary remedy? (what, how)

A

To enforce the rights of the plaintiff by ordering the defendant to perform his contractual obligations or to stop breaching terms of the contract.

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6
Q

When there is a breach of contract, what is the main objective of giving remedies?

A

To restore the parties’ position to where it would have been if the contract had not been breached.

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7
Q

When there is a breach of condition, what is the plaintiff entitled to? (2)

A

(1) Terminate the contract and sue for damages; or

(2) Accept the breach and claim damages

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8
Q

When there is a breach of warranty, what is the plaintiff entitled to?

A

Claim damages.

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9
Q

When there is a breach of innominate terms, what is the plaintiff entitled to?

A

(1) Terminate the contract and sue for damages if he was substantially deprived of the whole benefit of the contract
(2) Claim damages if the consequences of the breach is not serious

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10
Q

What are the types of monetary remedies? (2)

A

(1) Damages

(2) Quantum Meruit

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11
Q

Damages are a form of ____. It is a _____ remedy available to the plaintiff ______.

A

Monetary compensation, common law, as of right.

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12
Q

What is the purpose of damages?

A

To compensate the injured party for losses suffered.

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13
Q

What is the amount of damages awarded?

A

It depends on the facts of the case.

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14
Q

What must the plaintiff prove to claim damages?

A

That he had suffered loss quantifiable in monetary terms.

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15
Q

What is the rule on damages that the Court is governed by?

A

As far as possible, the injured party should be placed in the position that he would be in if the contract was carried out.

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16
Q

What is the rationale behind damages?

A

To compensate the plaintiff and not punish the defendant.

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17
Q

What are the rules to damages? (2)

A

(1) market rule

(2) rule in the Victoria Laundry case

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18
Q

Where does the market rule apply?

A

In contracts for the sale of goods where there is an available market.

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19
Q

What are the damages awarded under the market rule? (what, when)

A

The difference between the market price and the contract price at the time of the breach of contract.

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20
Q

What are the damages awarded under the market rule when the seller breaches the contract? Is the market price higher or lower?

A

The difference between the contract price and the market price of the substitute goods bought by the buyer. Higher.

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21
Q

How does a seller breach a contract?

A

Fail to deliver goods.

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22
Q

What are the losses of a buyer in such a breach?

A

Buyer has to buy more expensive substitute goods.

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23
Q

What are the damages awarded under the market rule when the buyer breaches the contract? Is the market price higher or lower?

A

The difference between the contract price and the market price of selling the goods to another buyer. Lower.

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24
Q

How does a buyer breach a contract.

A

Fail to take delivery of the goods.

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25
Q

What are the losses of a seller in such a breach?

A

Seller has to resell goods at a lower price

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26
Q

What are the damages awarded under the rule in the Victoria Laundry case? How?

A

The Court awards damages which arise naturally from the breach. If these losses are common knowledge between the parties, even if it was not specifically mentioned.

27
Q

When does the Court NOT award damages under the rule in the Victoria Laundry case? What is the exception?

A

The Court does not award special damages unless the parties are aware of the special circumstances, at the time of making the contract.

28
Q

Asides from the rules on damages, what else can be applied under damages?

A

Agreed damages clause.

29
Q

What is the Agreed damages clause? How does it help the parties?

A

Parties may include a clause in the contract stating the amount of damages to be paid in the event of a delay or a breach. The dispute can be resolved without going to Court as this is time consuming and expensive.

30
Q

What are the types of Agreed damages clauses? (2)

A

(1) Liquidated damages

(2) Penalties

31
Q

Under the liquidated damages clause, when will the plaintiff be awarded damages?

A

When the agreed sum is a genuine pre-estimate of the loss likely to be suffered when there is a breach of contract.

32
Q

What does the plaintiff NOT have to prove in order to be awarded the agreed sum?

A

The plaintiff does NOT need to prove the actual amount of loss suffered.

33
Q

What if the actual amount of loss suffered is less than the agreed sum?

A

The plaintiff will still be awarded the agreed sum.

34
Q

What if the actual amount of loss suffered is more than the agreed sum?

A

The plaintiff will still be awarded the agreed sum and not be allowed to claim more than this.

35
Q

Are clauses enforceable under the liquidated damages clause?

A

Yes, once a breach of contract has been proven.

36
Q

Are clauses enforceable under the penalties clause?

A

No, if the agreed sum is excessively harsh that it aims to punish the offender for the breach instead of compensate the plaintiff for his loss.

37
Q

What does the plaintiff have to prove under the penalties clause?

A

The actual amount of loss suffered.

38
Q

How does the Court consider an agreed sum to be excessively harsh?

A

If the agreed sum is excessively higher than the greatest loss in the contract.

39
Q

What if the agreed sum is NOT excessively higher than the greatest loss in the contract.

A

If the plaintiff can prove his actual loss, he may claim the agreed sum.

40
Q

How did mitigation come about?

A

Although damages are a remedy available to the plaintiff as of right, the law requires the plaintiff should mitigate his loss.

41
Q

How can a plaintiff mitigate his loss?

A

Take reasonable steps to reduce his loss once the defendant has breached the contract.

42
Q

What happens if the plaintiff is unable to show that he tried to mitigate his loss?

A

The plaintiff is not deprived of his right to damages. However, the amount of damages awarded to him will be reduced.

43
Q

What is the second type of monetary remedies?

A

Quantum Meruit

44
Q

What does Quantum Meruit mean?

A

As much as one deserved/has earned.

45
Q

When is the Quantum Meruit basis used?

A

In certain situations where it is more appropriate for the injured party to recover compensation from the default party on this basis rather than on a contract basis.

46
Q

What are these certain situations? (5)

A

(1) Work has been done under a contract which does not specify the price
(2) Contract was repudiated after some work has been done
(3) Contract discovered to be void after some work has been done by one party and accepted by another
(4) Part performance by one party and voluntarily accepted by another.
(5) Valuable benefit received under a frustrated contract.

47
Q

Under the Quantum Meruit basis, what happens in these situations?

A

The party who has performed is entitled to be paid a reasonable price.

48
Q

What is reasonable?

A

It depends on the facts of the case.

49
Q

What are non-monetary remedies?

A

They are equitable remedies given when the damages is an inadequate remedy

50
Q

What is the requirement for parties to rely on an equitable remedy?

A

Must have clean hands and conduct in relation to the contract should be without fault.

51
Q

What are the equitable remedies available?

A

Specific performance and injunction.

52
Q

What is specific performance?

A

A court order commanding a person to perform their contractual obligations.

53
Q

When is specific performance order available? (2)

A

(1) where it is fair and reasonable

(2) at the discretion of the court

54
Q

Why is an order of specific performance given?

A

To enforce a positive obligation owed to the plaintiff.

55
Q

When is an order of specific performance granted? (2)

A

(1) If the court decides that damages are an inadequate or inappropriate remedy
(2) If the contract involves unique, unusual and not easily replaceable things.

56
Q

What are examples of these unique, unusual and not easily replaceable things?

A

Land, antique, vintage cars.

57
Q

How are these unique, unusual and not easily replaceable things in terms of money?

A

No amount of monetary compensation would enable the buyer to obtain an identical item.

58
Q

What if these unique, unusual and not easily replaceable things are replaceable?

A

Damages would be an adequate remedy.

59
Q

When is an order for specific performance NOT granted? (3)

A

(1) Damages are an adequate remedy
(2) The contract breached involves personal services
(3) Performance of the contract requires constant supervision of the Court.

60
Q

Why is an order for specific performance NOT granted when performance of the contract requires constant supervision of the Court?

A

The Court does NOT have the time and resources

61
Q

What is injunction?

A

A court order restraining a person from breaching a negative obligation in his contract.

62
Q

When is an order of injunction granted? (2)

A

(1) If the court decides that damages are an inadequate or inappropriate remedy
(2) Where it is fair and reasonable to make such an order

63
Q

What is the other category of remedies that an injured party can apply for?

A

Statutory remedies- remedies under the particular statute involved

Business Law (Focus Areas) (10 decks)

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