Contract: damages, other remedies, termination, frustration Flashcards
What are nominal damages?
Awarded when theres a breach but no loss, to recognise breach (£10 ish)
Not worth bringing claim where no loss as C will have to pay Ds legal costs
Damages: how are losses as a result of breach established?
- Expectation loss=compare Cs position as is with the position they’d have been in if the contract had been fully performed
- Reliance loss=Where loss of expectation to speculative, C just claims for expenses incurred because of reliance on the contact being performed
How are damages quantified
Aim: to put the claimant in the same position, so far as money can, as they would have been in had the contract been performed
Eg.
□ Cost of cure UNLESS unreasonable in relation to benefit to be obtained
□ Difference in value
□ Loss of amenity/consumer surplus (if contract is for amenity
What are the types of loss recoverable?
Pecuniary losses (can be assessed in financial terms)
□ loss of profit
□ damage to property
Non pecuniary losses- (cant easily be assessed in financial terms
□ Disappointment/mental distress IF objects of contract was to provide pleasure or peace of mind (eg. Holiday/wedding contracts)
What is remoteness
The loss must have been within the reasonable contemplation of the parties at the time of the contract as being a probable result of the breach:
1. Is the loss an inevitable/natural consequence of breach?
2. Did the D know of special circumstances making the loss a likely consequence of the breach?
As long as loss isn’t too remote, the extent of the loss is irrelevant
What is mitigation?
C must take reasonable steps to mitigate the loss caused by the breach (even if steps failed/increased loss)
Where is the burden of proof for mitigation?
Burden on D to show C failed to mitigate their loss
What is a specified damages clause? (aka. liquidated damages clause)
Clause stating the amount of compensation which will be paid if theres a particular breach
ENFORCEABLE regardless of actual loss
What is a penalty clause?
An attempt to put pressure on a party to perform the contract because the sum is disproportionately high
UNENFORCEABLE: Court assess damages in usual way
How to decide if a clause is a specified damages or penalty clause?
- Only penalty if provides an exorbitant alternative to ordinary damages.
- Is the clause penal and is it a genuine pre-estimate of loss?
- Does the clause impose a detriment on the contract breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the contract.
What remedies can make the defendant perform the contract?
- Action for an agreed sum
- Specific performance (equitable)
- Injunction (equitable)
What is an action for an agreed sum also known as?
Action in debt/action for the price
What is an action for an agreed sum and the conditions to bring it?
- Suing for a fixed amount of money owed (+accrued interest for late payment)
- Conditions:
□ Money must be owed
□ Date for payment must have fallen due
Does the C have to prove loss for an action for an agreed sum?
No
What is specific performance?
An order of the court which requires a party to perform its contractual obligations.
What is the effect of failure to comply with an order for specific performance?
will be contempt of court.
When wont specific performance be granted?
When:
□ Damages are an adequate remedy
□ For sale of goods (more common for sale of land)
□ Contracts requiring continuous supervision by the court
□ Contracts involve services eg employment(bc rely on trust)
□ If its not just and equitable to do so (equitable remedy)
What is an injunction
Restrains D from doing what they agreed not to do
When wont an injunction be granted?
if the effect would be to compel D to do acts they couldn’t be ordered to do by specific performance
Types of injunction
Prohibitory-forbids a person doing particular act
Mandatory-requires breach to be put right
Which remedies which make the defendant perform the contract are equitable?
Specific performance
Injunction
What is restitution?
Prevents one party from being unjustly enriched at the expense of the other.
When will restitution be awarded?
Where contract/no contract inc:
1. £ paid under contract + total failure of consideration =Can bring an action in restitution to recover money if payee in breach
2. Done work for/supplied goods dnd wants to be compensated, eg:
□ Where contract broken
□ Where contract never formed (common in building work)
□ Quantum mereit-reasonable sum for work done
What are restitutionary damages/when can they be awarded?
Based on gain made by D not loss to C
Can be awarded: for ‘negotiating damages’ to compensate the C for the notional loss of the opportunity to bargain where that was the only loss
How can a non defaulting party claim against a 3rd party?
- Guarantees
- Indemnities
What are guarantees?
a contract under which one person (the guarantor) guarantees that if another person (the debtor) does not pay back money owed then the guarantor will pay the money instead.
formalities for creating guarantees
MUST be evidenced in writing or are void
Contract itself need not be written but must be some written evidence of the transaction existing before the creditor seeks to enforce the contract
What are indemnities
Creates a primary obligation- where one party promises to reimburse pound- for- pound the other party in respect of a particular loss arising under the contract.
Do and guarantees indemnities have to be in writing?
Guarantees-yes
Indemnities-NO
When can a party terminate a contract?
- Breach of condition
- Very serious breach of innominate term (repudiatory breach)
If there has been a breach of a condition or v serious breach of an innominate term, what does the non defaulting part have a choice to do?
- Affirm (treat as ongoing, is a bar to termination)
- Discharge (treat breach as having bought contract to an end)
What is the doctrine of complete performance?
Generally, performance of contractual obligations must be exact and precise
What are the exceptions do the doctrine of complete performance?
- Divisible obligations
- Substantial performance
- Wrongful prevention( of allowing someone to complete contractual obligations)
- Voluntary acceptance of part performance.
What are divisible obligations?
Where parties agreed payments for distinct part/stage of work-each part treated like a separate contract
=May be able to recover for some work
What is substantial performance?
Where work completed by slightly defective and cost of remedy is under 1/14th contract price=entitled to price less cost of remedy
What is wrongful prevention
Can recover damages for loss of profit or a reasonable amount for the work done (is a claim in restitution).
What is voluntary acceptance of part performance?
□ Entitled to a reasonable sum for work done
□ Party must have genuine choice to accept part performance
□ where a trader delivers less goods than contracted to supply, and consumer decides to accept them then the consumer must pay for them at the contract rate.
What is frustration
Exception to general rule of complete performance (EXACT and PRECISE performance) (used as defence to non complete performance)
What are the elements of frustration?
An unforeseen event
Beyond control of either party
Rendering performance impossible or radically different
Frustration: meaning of ‘unforeseen’?
Something beyond ordinary risks that the parties can be treated as having taken on board when entering the contract.
Eg. The unforeseen event would be the sinking of a ship NOT a hurricane
What will NOT be classed as beyond the control with the parties?
‘Self-induced frustration’
Any act by a party which contributed to the event will prevent the contract from being frustrated
Frustration: what will make performance impossible of radically different?
- Government intervention
- Unavailability of a specific person crucial to the contract
- Unavailability of a specific thing vital to contract
- Illegality (eg. change of law/outbreak of war)
- Destruction of the subject matter
- Non-occurrence of a fundamental event (that’s the foundation of the contract)
Factors to determine whether unavailability of a specific person crucial to the contract will frustrate it?
- Length of contract
- Length of the period of absence (NOT short periods of illness)
- Whether the contract must be performed by that particular individual or whether a substitute can do the work
Can delay frustrate a contract?
Will probably mean breach of express term. Relevant factors include:
1. whether the contract provides for what should be the consequences of the delay;
2. likely length of the delay
3. any time set in the contract for the obligations to be performed;
4. if the contract is resumed after the delay, whether it is radically different from the contract the parties had originally made
What is a restriction on the doctrine of frustration?
‘Force majeure’ clause in contract to cover events outside control of parties and what should happen in the event.
May be subject to reasonableness test if B2B
Whats the effect of frustration?
Contract automatically terminated at time of frustrating event-both parties released from future obligations, neither parties in breach
How does frustration effect money?
- Money that has been paid can be recovered
- Money that should have been paid need not be paid
- At the courts (very wide) discretion, expenses incurred in performance of the contract can be recovered
- If one party has conferred a valuable benefit on the other before the frustrating event, court may order the recipient to pay a sum the court considers just but not exceeding the value of the benefit the court may order a just sum to be paid.
Frustration: rules for court ordering that expenses incurred in performance of contract can be recovered out of the total sums paid/payable before the event.
If the expenses incurred are less than the total pot of money available under the proviso, the most the payee can recover is the amount of expenses.
If payer has incurred higher expenses than they payee, then they can cancel each other out and the court unlikely to award any expenses
