Contract 3.1: Remedies

Question 1

What is the aim of damages in contract?

Answer 1

• Compensate C for loss suffered
• Not punish D
• Put IP in pos would’ve been in had contract been properly performed

Question 2

What types of damages may be awarded (general)?

Answer 2

Expectation Loss: Put IP in pos had contract been properly performed

Reliance Loss
- Expectation damages are too speculative to measure
- puts parties in place had contract never been entered (compensates for expenses incurred in prep for or reliance on contract being performed)

Non-Monetary losses
- for physical injury
- MAYBE loss of amenity or reputation

Nominal Damages
- if no actual loss proven

Question 3

How might expectation damages be calculated?

Answer 3

Loss of alternative is starting point

May also consider (especially in construction)
- How much it would take to cure a defect; or
- Diff in value between what was provided and what should have been provided

Question 4

What are the different types of unliquidated damages?

Answer 4

• Expectation Loss
• Cost of Cure
• Reliance Loss
• Loss of amenity

Question 5

Can damages for loss of reputation ever be claimed?

Answer 5

• Can be awarded for example is stigma of having worked for past organisation is preventing someone finding new job

Question 6

When are damages assessed?

Answer 6

At date of breach, unless party not aware of breach

Question 7

How is remoteness of damages assessed in contract?

Answer 7

D resp for losses in contemplation of parties- losses foreseeable at date of contracting:

• A. Loss arising from natural course of things (normally occur in business D + B operate) = foreseeable
• B. D had knowledge of special circms outside ordinary course when contract made (obj test) = foreseeable

Question 8

How is causation of damage assessed for damages in contract?

Answer 8

• Factual causation: But for breach, loss wouldn’t have occurred- breach must be main/effective cause of loss - Legal causation: No intervening cause breaking chain

Question 9

Is contributory negligence available in contract as defence?

Answer 9

Only if liability is same in contract and tort (breach involves a duty to take care)

Question 10

How are damages assessed in contract for sale of goods?

Answer 10

If good not delivered or do not conform
- difference in price paid and cost of replacement (if more)

If buyer wrongfully refuses to accept delivery
- difference between contract price and market price (as would resell)

Question 11

What are liquidated damages and penalty clauses? When are they enforceable?

Answer 11

Liquidated damages clause
- if set amount
- valid if genuine pre-estimate of loss
- enforceable without proof
- not subject to causation, remoteness and mitigation

Penalty clause
- penal in nature and normally struck out by court
- if viewed as extravegant, unconcionable or exorbitant
- Party trying to rely on it must prove that clause protects a legitimate business interest and that the charge is proportionate to protect that interest (must be compensatory)

Question 12

What are the formalities for indemnity /agreements and guarantees?

Answer 12

Indemnity
- no formalities

Guarantees
- must be in writing

Question 13

What is the difference between debt claims and damages claims?

Answer 13

Debt claims there is no need to consider remoteness or causation + no duty to mitigate

Question 14

When are equitable remedies available?

Answer 14

• Granted at discretion of the court
• Used when damages are not adequate

Question 15

What are defences to claims for equitable remedies?

Answer 15

• Unconscionable behaviour: C does not have clean hands
• Waiver
• Unreasonable delay in enforcing claim
• Applicant not given consideration (valid contract)
• Cause excessive hardship to D

Question 16

When can restitution be used?

Answer 16

IP must show a legitimate interest in preventing the party in breach from keeping any profit (eg enriched at their expense)

Examples:
- Goods/services provided when there was no contract
- Money paid by mistake
- Contract has been rescinded with outstanding sum remaining with wrong party
- Property transferred under threat or pressure

Question 17

What rights do consumers have in relation to defective products?

Answer 17

• Right to reject defective goods within 30 days after they were supplied, for full refund
• If consumer does not reject goods in period, right to require trader to repair or replace them at their expense
• If repair or replacement is not successful, too expensive or cannot be carried out within a reasonable time and without causing the consumer significant inconvenience = a right to require trader to reduce the price or to reject the goods in return for a refund (subject to deduction for any use that the consumer has made of them)

Question 18

What remedies are there for breach of contract?

Answer 18

• Compensatory damages
• Specific Performance
• Injunction
• Restitution

Question 19

What are the different ways of calculating expectation interest

Answer 19

1. Cost of Cure: cost of substitute/remedial work required - C must act reasonably 👷‍♂️💊
2. Diminution in value: difference in value between performance received & performance promised 🏠📉
3. Loss of Amenity/mental distress: where loss is not in economic value, but still has value to them (only pleasure, peace of mind, relaxation contract) (only C2B)

Question 20

How is expectation interest calculated?

Answer 20

Expected profit + expenses incurred

Question 21

What is reliance interest and when is it used?

Answer 21

Putting C in position they would’ve been in had contract never been entered into
- used where expectation damages are highly speculative 🤷‍♀️
- recover preparation expenses 🤓
- expenses prior to breach 👷💥

Question 22

What are the wasted cost requirements for reliance interest?

Answer 22

• C would’ve recouped those expenses had contract been properly performed
• D must prove this wouldn’t be the case

Question 23

What losses have special rules and exceptions?

Answer 23

1. Mental Distress: damages not awarded unless a major object of contract 📝was to provide pleasure, relaxation & peace of mind 🧘‍♀️
2. Loss of Reputation: damages not awarded unless an 🧑‍🍳 employment contract contains implied term of trust and confidence such that employer must carry out work in honest way 😇
3. Loss of Chance: recoverable in damages if lost chance is quantifiable in monetary terms & there was a real chance opportunity may have come to fruition (gameshow) 🎰

Question 24

Can damages be recovered on behalf of another?

Answer 24

No

Question 25

What is a liquidated damages clause?

Answer 25

Stipulates a certain sum payable on particular breach

Question 26

How are liquidated damages clauses interpreted?

Answer 26

Starting point = upheld

Courts intervene will strike it out where it’s a
- penalty clause ⚽️,
AND
- C will be entitled to unliquidated damages 💵

Question 27

What is the case on reasonable mitigation?

Answer 27

Supplier wrongly thought Buyer hadn’t paid for silks and so asked for cash on original terms but broke the contract in so doing. Buyer refused and sued Supplier including increase in silk price. Buyer could not claim for increase in price as should have mitigated loss by taking Buyers up on their offer.

Question 28

What is specific performance and when is it awarded?

Answer 28

• Requires D to carry out its obligations under a positive term of the contract 🤲
• May be combined with damages if loss
• Only used in exceptional cases, where damages are not an appropriate/adequate remedy 💵❌
• Equitable principles apply ⚖️

Question 29

What is an advantage of specific performance?

Answer 29

Breach of SP has more severe consequences than breach of contract

Question 30

When will specific performance not be awarded?

Answer 30

Not awarded where:
- it would cause undue hardship 🤒
- no consideration given even by deed 💰

Not awarded for breach of:
- employment contracts, 🧑‍🍳
- constant court supervision required 👨‍⚖️
- contract not binding on both parties 📝↔️

Question 31

What is a prohibitory and interim prohibitory injunction?

Answer 31

• Prohibitory Injunction: court order restraining a party from breaching a negative term
• Interim: temporary order to protect a party until a matter reaches trial

Equitable principles apply, only granted where
- Just and convenient, AND
- damages not appropriate

Question 32

What is the effect of not complying with an injunction?

Answer 32

Be in contempt of court

Question 33

What limiting factors are there on damages?

Answer 33

1. Causation: factual (dominant cause) and legal (no NAIs that break chain)
2. Remoteness: loss of a type ordinarily and naturally arising from breach; and if losses are too unusual, D must have had sufficient actual knowledge to be aware of risks of these losses
3. Mitigation: injured party should take reasonable steps to minimise effect of breach - no obligation to but losses attributable to failure to do so aren’t recoverable

Question 34

What is restitution and the requirements for it?

Answer 34

Prevent one party being unjustly enriched at expense other (not available in every case unjust enrichment)

• Claim due breach of contract, or where no contract came into existence.
• Inadequacy of other remedies
• C has legitimate interest in depriving D of their profit

Question 35

Explain the different types of restitution

Answer 35

(1) Recovery of money paid where been total failure of consideration (payee done nothing supposed to do in contract or what done is useless)
- C can use restitution to get money back
- C can also bring claim of damages if any loss

(2) Compensation for work done/goods supplied
- Contract broken by 1 party and other party done work: choice of damages (loss of profit) or restitution of a reasonable sum of money on a quantum meruit basis (compensation is based on how much time spent on work), or
- Contract was never formed but done work: restitution of a reasonable sum on quantum meruit basis

Question 36

Explain restitutionary, traditional and negotiating damages

Answer 36

Traditional Damages: Typically compensate C for their loss (expectation or reliance loss).

Restitutionary Damages: Focus on gains made by D rather than losses suffered by C. Not compensatory (awarded based on benefit to D from the breach, not necessarily reflecting C loss)

Negotiating damages: Compensation for lost opportunity to negotiate. ONLY awarded when no financial loss

Question 37

What are the implications of a guarantee?

Answer 37

Promise by G to ensure that A carries out his obligations or step in a do them if A doesn’t
- G’s obligation ceases when A’s does
- If contract between A & B changes G will be discharged
- Guarantee must be in writing and signed by G

Question 38

What are the implications of an indemnity?

Answer 38

Promise by I to reimburse B if they suffer loss because of A.
- I’s obligation does not ceases when A’s does
- If contract between A & B changes it will be remain

Question 39

When can you get damages for distress and disappointment?

Answer 39

ONLY C2B contracts where main purpose was to have peace of mind or relaxation

Question 40

Where there has been no loss but you have lost a chance to to negotiate a release fee in relation to a restriction in a contract, what remedy would you use?

Answer 40

Restitutionary damages

Question 41

Define anticipatory breach of contract

Answer 41

Occurs when one party to a contract clearly indicates (either through words or actions) that they will not fulfill their contractual obligations before the performance is due. This type of breach happens before the deadline for performance, allowing the non-breaching party to take action before the actual breach occurs

Question 42

Define ‘Loss of Bargain’

Answer 42

• The loss a party suffers when they do not receive the benefits they expected from a contract due to the other party’s breach (diff between the position the non-breaching party is in after the breach and the position they would have been in had the contract been properly performed)
• Example: If a contractor agrees to sell a car for $10,000, but then breaches the contract, and the buyer has to purchase a similar car for $12,000 from another seller- buyer’s loss of bargain would be $2,000

Question 43

In a case where two students were intoxicated, one rode a Rent-a-Scoot e-scooter and invited the other to hop on, resulting in a crash. The second student is making a negligence claim against the first student. Will the defence of voluntary assumption of risk succeed?

Answer 43

• Yes, the defence of voluntary assumption of risk is likely to succeed (Morris v. Murray [1991]) if the second student had full knowledge of the risk and the intoxication was evident.
• Since the e-scooter is not classified as a motor vehicle under s149 Road Traffic Act 1988, the defence applies. - The success of the defence depends on the circumstances- first student’s level of inebriation + whether the second student understood the extent of the risk.

Question 44

When can a party claim reputation damage?

Answer 44

A party can claim reputation damage when a breach of contract or wrongful conduct causes harm to their standing, credibility, or goodwill within their industry, community, or customer base. It’s not physical or financial damage, but it relates to the impact on a company’s or individual’s public image and their ability to attract customers or partners due to a tarnished reputation.

To claim reputation damage, the party must show:
- Direct link between the breach & reputational harm.
- The harm was reasonably foreseeable at the time of entering the contract.
- The damage to reputation has resulted in tangible losses, such as a decline in business, customers, or profitability.