Contract 6 - Remedies Flashcards
What is the purpose of damages in the law of contract?
To compensate the claimant for losses caused by the breach of contract, not to punish the defendant.
What is the expectation interest in contract law?
The position the innocent party would have been in if the contract had been fulfilled.
What are the three mechanisms for calculating the expectation interest?
- Cost of cure
- Diminution in value
- Loss of amenity
Define ‘cost of cure’.
The cost to fix or replace work required to put the claimant in the position they would have been in had the contract been properly performed.
What is ‘diminution in value’?
The difference in value between the actual result and what was promised.
In which case was the concept of ‘loss of amenity’ established as a valid measure of damages?
Ruxley v Forsyth (1996).
What does ‘loss of amenity’ compensate for?
Non-economic losses, such as lack of enjoyment or satisfaction when the outcome doesn’t meet expectations.
Fill in the blank: Expectation damages aim to put the claimant into the position they _____ have been in if the contract had been performed.
expected
What is the reliance interest in contract law?
A measure allowing the claimant to recover expenses incurred in preparing for or partly performing the contract that became pointless due to the breach.
In Anglia TV v Reed (1972), what type of damages did the claimants seek?
Expenses already incurred, including fees for a director and stage manager.
True or False: Damages for emotional distress are generally awarded in breach of contract cases.
False.
What is a liquidated damages clause?
A clause that sets a specific amount to be paid if a contract is breached.
What distinguishes a penalty clause from a liquidated damages clause?
A penalty clause requires payment of an excessive sum and is unenforceable.
What is the principle of restitution interest?
Compensation to restore benefits gained by the breaching party.
In which case did the court allow recovery of profits from a breach due to unjust enrichment?
Attorney-General v Blake (2001).
What does the law of restitution address?
The unjust enrichment of the defendant at the expense of the claimant.
What is the significance of the case Hadley v Baxendale?
It established the standard for recoverable damages based on natural consequences or foreseeability.
What are the two criteria for recovering damages as per Hadley v Baxendale?
- Arising naturally from the breach
- Foreseeable by both parties at the contract’s formation
What did the House of Lords conclude in Transfield Shipping Inc v Mercator Shipping Inc regarding liability for late redelivery losses?
Liability may depend on the industry’s standards.
What is the burden of proof in determining if a clause is a penalty?
The burden is on the person alleging that the clause is a penalty.
In Cavendish Square Holdings BV v. Talal El Makdessi, what was the court’s ruling regarding the clauses invoked by Cavendish?
The clauses were primary obligations, not penalties.
What legitimate interest did ParkingEye have in the case ParkingEye Ltd v. Beavis?
Managing the car park and deterring overstays.
What was the key case related to the fairness of parking charges?
ParkingEye Ltd v. Beavis [2015] UKSC 67
This case addressed the legitimacy of parking charges in relation to overstaying in a car park.
What was the court ruling in ParkingEye Ltd v. Beavis regarding the £85 charge?
The £85 charge was not a penalty and was proportionate to its purpose.
The court recognized ParkingEye’s legitimate interest in managing the car park.
What are primary obligations in the context of liquidated damages?
Not penalties.
Primary obligations are the initial responsibilities outlined in a contract.
What are secondary obligations and when are they considered valid?
Valid if they protect a legitimate business interest without imposing an excessive burden.
Secondary obligations arise when a party must fulfill an obligation due to the primary obligation being unmet.
What are two other remedies available in the case of breach of contract besides damages?
- Orders for specific performance
- Prohibitory injunctions
What is specific performance?
A court order directing a party to fulfil its obligations under a positive contract term.
This remedy requires a party to take a specific action rather than merely paying damages.
What are the consequences of disobeying a court order for specific performance?
Severe consequences, including contempt of court and possible imprisonment.
What is a prohibitory injunction?
A court order restraining a party from breaching a negative term.
This type of injunction prevents a party from engaging in specified actions.
Are specific performance or prohibitory injunctions always available remedies?
No, they are not granted if damages are an appropriate and adequate remedy.
When is specific performance generally considered as a remedy?
When the subject matter of the contract is unique or irreplaceable.
What equitable principles apply to the granting of specific performance?
- The conduct of the claimant
- The action must be brought with reasonable promptness
What are the limitations on awarding specific performance?
- Will not cause hardship on the defendant
- Not awarded for breach of contracts of employment
- Not for contracts needing constant court supervision
- Not for non-binding contracts
What must be true for prohibitory injunctions to be granted?
They must be ‘just and convenient’.
What does the court consider when deciding whether a remedy is a prohibitory injunction or specific performance?
The substance of the proposed remedy, not the superficial wording.
What is the definition of a guarantee?
A promise by C to ensure A fulfills their obligation to B or to fulfill it on A’s behalf.
What is the key point regarding C’s obligation in a guarantee?
C’s obligation is defined by A’s obligation and cannot exceed it.
What is the definition of an indemnity?
A promise by C to reimburse B for any specific losses resulting from A’s failure to meet an obligation.
What is a key difference between a guarantee and an indemnity?
In a guarantee, C’s obligation is dependent on A’s obligation, while in an indemnity, C’s obligation is independent.
What happens to C’s obligation in a guarantee if A’s obligation ends?
C’s obligation under a guarantee also ends.
What happens to C’s obligation in an indemnity if A’s obligation ends?
C’s obligation under an indemnity still stands.
What formalities are required for a guarantee?
Must be in writing and signed by the guarantor.
What are indemnities capable of existing in?
Indemnities can exist in a two-party scenario without a third party.
What is an example of an indemnity in a two-party scenario?
A agrees to deliver goods to B and indemnifies B against losses from late delivery.
