Contract 8: Remedies

Question 1

What is the aim of damages in contract?

Answer 1

• Damages are compensatory and seek to should be calculated to put innocent party back in the position they would have been in had the contract been performed properly

Question 2

What types of damages may be awarded (general)?

Answer 2

Expectation Damages
- to put party in place as if contract had been performed

Reliance Interest
- if expectation damages are too speculative to measure
- puts parties in place had contract never been entered

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

Nominal Damages
- if not 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
- The difference in value between what was provided and what should have been provided

Question 4

Can damages for loss of amenity ever be claimed?

Answer 4

• Damages for injury to feelings not usually awarded
• Loss of amenity is exception if the sole purpose of contract was enjoyment and injured party is consumer

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

Can only recover damages which are not too remote at the time contract was entered

Must:
- fairly and reasonable be considered to arise naturally from the breach; or

• have been in reasonable contemplation of both parties to the contract as a probable result of breach

Question 8

How is causation of damage assessed for damages in contract?

Answer 8

Only liable for losses caused by their breach (effective cause)

Intervening Act
- only if it could not have reasonable have been expected

Two Effective Causes of loss
- party in breach still liable

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

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

• There is no need to consider remoteness or causation
• There is 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

When will a guarantee cease to be effective?

Answer 15

If not in writing

if obligations under primary contract are varied or discharged

Question 16

When will specific performance be used / not used?

Answer 16

Used
- if monetary damages not enough
- unique goods (land, paintings)

Not used
- causes undue hardship (compel someone to work for someone)
- if innocent party has any obligations outstanding
- it would require court supervision

Question 17

What are defences to claims for equitable remedies?

Answer 17

• Unconscionably behaviour: claimant does not have clean hands
• Waiver
• Unreasonable delay in enforcing claim (delay defeats equity)

Question 18

When can restitution be used?

Answer 18

Innocent party 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 19

What rights do consumers have in relation to defective products?

Answer 19

• 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 the 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)