Chapter 8 Damages & Equitable Remedies Flashcards
What is the purpose of damages
The purpose of damage is to place the injured party as far as money can do it. Essentially attempting to place the injured party in a position that he would be in, if the contract was performed successfully.
What are the four factors to determine if loss can be recovered as damages
- Causation in fact [but for] test
- Remoteness [Hadley V Braxendale] Two Limb Test
- Mitigation
- Assessment
Describe the concept of Causation in fact
The concept states that for damages to flow, loss must have been caused by the breach.
Use the ‘but for’ test. Plaintiff would not have suffered the loss ‘but for’ the breach of contract by the Defendant.
Describe the concept of remoteness
Once Causation in fact has been established, it brings about unlimited scenarios for remote losses.
Therefore, for losses to flow into recoverable damages, the loss but be proximate and not remote,
What are the five factors brought about by Hadley V Braxendale
- Usual Course of Things
- Imputed Knowledge
- Actual Knowledge
- Probability of damage’s occurrence
- Type of damage
What is the case study for actual knowledge.
The case on Victoria Laundry V Newman industry.
Court held that Newman industry had imputed knowledge that losses will occur due to late delivery. [1st limb]
However, the court also stated that Newman industry did not have actual knowledge about Victoria Clothing’s special contract. Hence they are not liable for the second limb.
What is the first limb in the test of Hadley V Braxendale?
The first limb is for normal losses
What is the first limb in the test of Hadley V Braxendale?
The first limb is for normal losses
- Losses brought about by the natural occurrence of the breach of contract
- Once defendant has imputed knowledge of what happens naturally after a breach as well as the type of damage, he does not need to know the extent of the damage
What is the second limb in the test of Hadley V Braxendale
The second limb is for abnormal losses.
- Losses arising from special circumstances.
- Such damage may reasonably be supposed to have been within reasonable contemplation by both parties when they made the contract.
- Once defendant has actual knowledge of what happens in special circumstances and of the type of loss. He does not need to be aware of the extent of that loss
Describe the concept of usual course of things
Knowledge of ordinary practices as well as demands of the injured parties industry is considered to be the usual course of things. Accordingly, loss arising from normal business falls within the 1st limb
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Describe the case study for usual course of things
Koufus V Czarnikow.
Koufus tried to defend by saying that he did not have actual knowledge of fluctuations in Czarnikow’s industry. However, the court held that Koufus must have imputed knowledge of the ordinary practices of Czarnikow’s industry.
Describe the case study for usual course of things
Koufus V Czarnikow.
Koufus tried to defend by saying that he did not have actual knowledge of fluctuations in Czarnikow’s industry. However, the court held that Koufus must have imputed knowledge of the ordinary practices of Czarnikow’s industry.
Describe the case study for Actual Knowledge [besides Hadley V Braxendale]
The case study is on Victoria Laundry V Newman industry. The court held that Newman industry was liable for normal losses as it had imputed knowledge that losses would ensue in late deliveries.
However, Newman industry could not be liable for special losses as it had no actual knowledge of Victoria Laundry’s special contract.
Describe the case study for Actual Knowledge [besides Hadley V Braxendale]
The case study is on Victoria Laundry V Newman industry. The court held that Newman industry was liable for normal losses as it had imputed knowledge that losses would ensue in late deliveries.
However, Newman industry could not be liable for special losses as it had no actual knowledge of Victoria Laundry’s special contract.
What is the general rule of mitigation?
The general rule of mitigation states that the injured party should have taken all reasonable steps to mitigate the loss.
What is the difference between mitigation rule and legitimate interest rule?
Mitigation rule: Injured party should have mitigated his loss through any reasonable steps available to him
Legitimate interest rule: If the injured party has a legitimate interest to safeguard, he is allowed to incur additional expenses against the guilty party and affirm the contract.
What is the general rule taken for assessment of damages?
The general rule is that the injured party should be placed in the same financial position that he would be in, if the contract was performed.
However, the guilty party should not be punished disproportionately.
What is the difference in expectation loss and reliance loss?
Expectation loss: Loss that the injured party faces as a direct result of the breach of contract
Reliance loss: Waste expense incurred by the injured party in preparation to fulfil his obligations in the contract. These expenses are now rendered wasted after contract has been breached.
How does one calculate losses?
If losses are calculated inclusive of expenses, then you have to decide between reliance loss or expectation loss.
If losses are calculated exclusive of expenses, then you can claim for both reliance and expectation loss.
What is the general rule regarding non-pecuniary losses
For non pecuniary losses such as those of hurt feelings. The court would generally not award any damages or compensation. HOWEVER, if the subject matter or focus of the contract were to deliver relaxation, then the court will award damages for non-pecuniary losses.
Case study on: Jarvis V Swan Tours. Swan Tours promised a relaxing trip package to Jarvis. However, the trip turned out horrendous and Jarvis sued Swan Tour. The court held that Swan Tour’s promise was to provide a relaxing experience, which it breached. This allowed Jarvis to sue for non-pecuniary losses.
For liquidated damages clause, what is the case study to determine if the clause is a genuine pre-estimate of loss or a penalty?
What is the test about?
Case study: Dunlop Pneumatic V New Garage.
The test has three parts
- If the stipulated sum in LDC is extravagant & unconscionable compared with the greatest conceivable loss from the breach. Then it is most likely a penalty
- If the stipulated sum in LDC is a lump sum regardless of possible breaches. Then it is most likely a penalty
- If LDC is stated to be a penalty, it is most likely a penalty
What would happen if a LDC is construed as a penalty and sum stipulated is more than actual loss suffered?
LDC is not enforceable, the injured party can only obtain damages for actual loss suffered
What would happen if LDC is construed as penalty, but stipulated sum is less than actual loss from breach?
LDC is enforceable, the injured party can choose to claim the LDC and recover no more than the full amount
OR
Injured party can sue for breach of contract and recover damages in full whilst avoiding the clause.
What if LDC was construed as a genuine pre-estimate of loss.
If LDC is construed as a genuine pre estimate of loss, then LDC is enforceable. Then injured party can only claim amount stipulated in LDC.
