contract law (remedies and discharge) Flashcards
what is the aim of awarding damages?
compensate C
what are the 2 main ways of awarding damages?
1) expectation interest
2) reliance test
what is the normal way of awarding damages?
expectation interest = put innocent party in same position post-breach that they should have been in, if the contract was performed properly. (forward-looking)
what are the 3 different ways that expectation interest can be measured?
1) cost of curing defective performance
2) difference in value between performance receive and that promised; or
3) loss in amenity: sum represents that the performance received is less valuable to the innocent party than that promised, even if economic value is the same
what is the reliance test?
it is back-ward looking and aims to put C in position as if they had never contracted. more likely to be used when expectation measure is hard to calculate
what type of expenditure does the reliance test allow recovery of?
only allows recovery of wasted expenditure (not all expenditure)
when do you use cost of cure to calculate damages?
normally for defective works as represents cost of substitute or remedial work required to put C in potion they would have been in had the contract been properly performed
C must act reasonably in relation to defective works
when do you use loss of amenity to calculate damages?
available remedy when their loss is not economic in value, but nevertheless has value to them.
in commercial setting, it is unusual if not impossible for damages to be awarded via loss of amenity
what expenses does the reliance test allow a claimant to recover?
allows them to recover expenses which have been incurred in preparing for, or in part performance of, the contract which have been rendered pointless by the breach.
what is the general rule to damages for mental distress, anguish or annoyance?
they are generally not recoverable.
however, exception is may be recoverable where the whole, or perhaps a major purpose of the contract is to provide pleasure, relaxation and peace of mind
are damages awarded for loss of reputation?
general rule is no they will not be awarded
when can you claim for damages for loss of chance?
if lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition.
what is the percentage that you must prove in order to get damages for loss of chance and what is the burden of proof?
chance of obtaining a benefit is 50% or greater, C should seek to recover their expectation loss in full in the usual way, and they will succeed if this can be proved on the balance of probability
what is the 2 part test in Hadley v Baxendale in relation to damages cannot be recovered for loss which are ‘too remote’?
it sets out what is deemed ‘too remote’
losses which neither:
1) arise naturally according to the usual course of things from the contract; nor
2) were or should have been in the contemplation of both parties
does an innocent party need to mitigate their losses?
you cannot recover losses which would have been avoided if the party had taken reasonable steps to mitigate its loss.
is there a duty to mitigate a claim for a payment of a debt (liquidated damages)?
no there is no need because this amount is payable as a contractual right and not as damages
what is the exceptional basis of ‘restitution interest’?
it is the measure of damages on the basis of restoring to the C a benefit which the defaulting party acquired at their expense.
when does a restitution interest claim arise?
it arises when there is a total failure of consideration
what are the 3 remedies available under consumer rights act 2015 for non-conformance?
1) short term right to reject
2) right to repair or replace
3) right to a price reduction or the final right to reject
how long is the final right to reject for consumer rights act and how should the price be calculated?
final right to reject is 6 months and there should be a full reruns with no deduction for use (unless it is a car or other statutory item)
what are the 3 things (only need to prove 1) that should be shown in order to get right to price reduction or final right to reject under consumer rights act 2015?
if right to repair or replace is:
a) impossible / disproportionate; or
b) has been tried once and the goods still dont conform; or
c) trader has failed to repair/replace
what are the 2 remedies available for contracts for digital media?
1) right to repair or replace
2) right to price reduction
if digital content causes damage to device / other content = what is the remedy?
right to repair or compensation
what is the remedy if trader has no right to supply digital content?
right to a refund within 14 days
what are the 2 remedies available for contracts for service?
a) right to require repeat performance
b) right to a price reduction
what is a liquidated damages clause?
a clause which stipulates a certain sum which is to be payable on a particular breach of contract
what is a penalty clause? do the courts uphold these type of clauses?
it is a liquidated damages clause which requires the party in breach to pay an excessive sum, such that it becomes a penalty.
court doesnt uphold a penalty clause
how do you assess if a clause is a penalty clause?
1) is the clause primary or secondary obligation?
2) if secondary, clause will be penalty if it imposes a detriment out of all proportion to any legitimate interest of the innocent party in the performance of the primary obligation
when do you use the remedy of specific performance?
requires D to carry out its obligations under a positive term of the contract
when would you use a prohibitory injunction?
it is a court order restraining a party from breaching a negative term
when is specific performance and prohibitory injunction an appropriate remedy?
when damages are not an appropriate remedy = they are discretionary and equitable remedies
what is the consequence of breach of specific performance and prohibitory injunction?
breach can be punished as contempt of court
what is a guarantee?
it is a promise by a party to ensure that another party carries out its obligations, or a promise to fulfil those obligations itself if that other party doesn’t do so
what is an indemnity?
it is a promise to reimburse someone in the event that they suffer a stated loss
what is the key difference between a guarantee and an indemnity in terms of C’s obligations?
guarantee: if party A’s obligations cease so do C’s
indemnity: if party A’s obligations cease, C’s remain in place
what are the 4 exceptions to when a performing party is entitled to payment when an obligation hasn’t been completely performed?
1) one party accepts partial performance (can get as much as they deserve)
2) one part has substantially performed contract (subject to deduction for cost of remedying defect)
3) some contracts are divisible and party is entitled to payment on each party (look at intention of the parties)
4) party is prevented from completing performance by other party’s default (can sue for damages for breach of contract or claim as much as they deserve)
how can you discharge a contract by agreeing to do so in a new binding contract?
the new contract must be supposed by consideration (unless effected by a deed)
what is a condition precedent?
a condition that must be satisfied before any rights come into existence
what is a condition subsequent?
a condition providing for termination of contract and discharge of obligations outstanding under contract upon the happening of a specific event
what is a repudiatory breach?
where one party has breached a term of the contract which is either a condition, or an innominate term which is treated as a condition, entitling the other party (in principle) to treat contract as terminated
what is an anticipatory breach?
where a party indicates they will not perform their contractual obligations in a advance of the date of performance
is a party obliged to terminate upon a repudiatory breach?
no they can either affirm or terminate (have a choice)
if a party chooses to terminate upon a repudiatory breach - what damages can they seek?
seek damages not only arising from specific breach but also loss of the contract caused by termination of the contract as a whole
what happens if a party affirms upon a repudiatory breach?
obligations under the contract remain in place
what are the 3 ways frustration arises?
1) performance is impossible
2) performance is illegal
3_ parties common purpose is frustrated
what type of obligation does frustration discharge?
discharges future obligations (irrespective of the parties’ wishes)
if a party received a non-monetary benefit prior to the frustrating event = how are damages assessed? (2 part test)
1) identify and value the benefit conferred; and
2) make an assessment of a just sum to be paid by that party for the benefit
