Chapter 8 Damages & Equitable Remedies

Question 1

What is the purpose of damages

Answer 1

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.

Question 2

What are the four factors to determine if loss can be recovered as damages

Answer 2

1. Causation in fact [but for] test
2. Remoteness [Hadley V Braxendale] Two Limb Test
3. Mitigation
4. Assessment

Question 3

Describe the concept of Causation in fact

Answer 3

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.

Question 4

Describe the concept of remoteness

Answer 4

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,

Question 5

What are the five factors brought about by Hadley V Braxendale

Answer 5

1. Usual Course of Things
2. Imputed Knowledge
3. Actual Knowledge
4. Probability of damage’s occurrence
5. Type of damage

Question 6

What is the case study for actual knowledge.

Answer 6

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.

Question 7

What is the first limb in the test of Hadley V Braxendale?

Answer 7

The first limb is for normal losses

Question 8

What is the first limb in the test of Hadley V Braxendale?

Answer 8

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

Question 9

What is the second limb in the test of Hadley V Braxendale

Answer 9

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

Question 10

Describe the concept of usual course of things

Answer 10

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
‘

Question 11

Describe the case study for usual course of things

Answer 11

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.

Question 12

Describe the case study for usual course of things

Answer 12

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.

Question 13

Describe the case study for Actual Knowledge [besides Hadley V Braxendale]

Answer 13

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.

Question 14

Describe the case study for Actual Knowledge [besides Hadley V Braxendale]

Answer 14

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.

Question 15

What is the general rule of mitigation?

Answer 15

The general rule of mitigation states that the injured party should have taken all reasonable steps to mitigate the loss.

Question 16

What is the difference between mitigation rule and legitimate interest rule?

Answer 16

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.

Question 17

What is the general rule taken for assessment of damages?

Answer 17

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.

Question 18

What is the difference in expectation loss and reliance loss?

Answer 18

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.

Question 19

How does one calculate losses?

Answer 19

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.

Question 20

What is the general rule regarding non-pecuniary losses

Answer 20

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.

Question 21

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?

Answer 21

Case study: Dunlop Pneumatic V New Garage.

The test has three parts

1. 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
2. If the stipulated sum in LDC is a lump sum regardless of possible breaches. Then it is most likely a penalty
3. If LDC is stated to be a penalty, it is most likely a penalty

Question 22

What would happen if a LDC is construed as a penalty and sum stipulated is more than actual loss suffered?

Answer 22

LDC is not enforceable, the injured party can only obtain damages for actual loss suffered

Question 23

What would happen if LDC is construed as penalty, but stipulated sum is less than actual loss from breach?

Answer 23

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.

Question 24

What if LDC was construed as a genuine pre-estimate of loss.

Answer 24

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.

Question 25

What are equitable remedies

Answer 25

Equitable remedies are when compensation through damages are not adequate.

They can be split into specific performance as well as injunction.