contract law (remedies and discharge)

Question 1

what is the aim of awarding damages?

Answer 1

compensate C

Question 2

what are the 2 main ways of awarding damages?

Answer 2

1) expectation interest
2) reliance test

Question 3

what is the normal way of awarding damages?

Answer 3

expectation interest = put innocent party in same position post-breach that they should have been in, if the contract was performed properly. (forward-looking)

Question 4

what are the 3 different ways that expectation interest can be measured?

Answer 4

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

Question 5

what is the reliance test?

Answer 5

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

Question 6

what type of expenditure does the reliance test allow recovery of?

Answer 6

only allows recovery of wasted expenditure (not all expenditure)

Question 7

when do you use cost of cure to calculate damages?

Answer 7

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

Question 8

when do you use loss of amenity to calculate damages?

Answer 8

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

Question 9

what expenses does the reliance test allow a claimant to recover?

Answer 9

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.

Question 10

what is the general rule to damages for mental distress, anguish or annoyance?

Answer 10

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

Question 11

are damages awarded for loss of reputation?

Answer 11

general rule is no they will not be awarded

Question 12

when can you claim for damages for loss of chance?

Answer 12

if lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition.

Question 13

what is the percentage that you must prove in order to get damages for loss of chance and what is the burden of proof?

Answer 13

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

Question 14

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’

Answer 14

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

Question 15

does an innocent party need to mitigate their losses?

Answer 15

you cannot recover losses which would have been avoided if the party had taken reasonable steps to mitigate its loss.

Question 16

is there a duty to mitigate a claim for a payment of a debt (liquidated damages)?

Answer 16

no there is no need because this amount is payable as a contractual right and not as damages

Question 17

what is the exceptional basis of ‘restitution interest’?

Answer 17

it is the measure of damages on the basis of restoring to the C a benefit which the defaulting party acquired at their expense.

Question 18

when does a restitution interest claim arise?

Answer 18

it arises when there is a total failure of consideration

Question 19

what are the 3 remedies available under consumer rights act 2015 for non-conformance?

Answer 19

1) short term right to reject
2) right to repair or replace
3) right to a price reduction or the final right to reject

Question 20

how long is the final right to reject for consumer rights act and how should the price be calculated?

Answer 20

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)

Question 21

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?

Answer 21

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

Question 22

what are the 2 remedies available for contracts for digital media?

Answer 22

1) right to repair or replace
2) right to price reduction

Question 23

if digital content causes damage to device / other content = what is the remedy?

Answer 23

right to repair or compensation

Question 24

what is the remedy if trader has no right to supply digital content?

Answer 24

right to a refund within 14 days

Question 25

what are the 2 remedies available for contracts for service?

Answer 25

a) right to require repeat performance
b) right to a price reduction

Question 26

what is a liquidated damages clause?

Answer 26

a clause which stipulates a certain sum which is to be payable on a particular breach of contract

Question 27

what is a penalty clause? do the courts uphold these type of clauses?

Answer 27

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

Question 28

how do you assess if a clause is a penalty clause?

Answer 28

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

Question 29

when do you use the remedy of specific performance?

Answer 29

requires D to carry out its obligations under a positive term of the contract

Question 30

when would you use a prohibitory injunction?

Answer 30

it is a court order restraining a party from breaching a negative term

Question 31

when is specific performance and prohibitory injunction an appropriate remedy?

Answer 31

when damages are not an appropriate remedy = they are discretionary and equitable remedies

Question 32

what is the consequence of breach of specific performance and prohibitory injunction?

Answer 32

breach can be punished as contempt of court

Question 33

what is a guarantee?

Answer 33

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

Question 34

what is an indemnity?

Answer 34

it is a promise to reimburse someone in the event that they suffer a stated loss

Question 35

what is the key difference between a guarantee and an indemnity in terms of C’s obligations?

Answer 35

guarantee: if party A’s obligations cease so do C’s
indemnity: if party A’s obligations cease, C’s remain in place

Question 36

what are the 4 exceptions to when a performing party is entitled to payment when an obligation hasn’t been completely performed?

Answer 36

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)

Question 37

how can you discharge a contract by agreeing to do so in a new binding contract?

Answer 37

the new contract must be supposed by consideration (unless effected by a deed)

Question 38

what is a condition precedent?

Answer 38

a condition that must be satisfied before any rights come into existence

Question 39

what is a condition subsequent?

Answer 39

a condition providing for termination of contract and discharge of obligations outstanding under contract upon the happening of a specific event

Question 40

what is a repudiatory breach?

Answer 40

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

Question 41

what is an anticipatory breach?

Answer 41

where a party indicates they will not perform their contractual obligations in a advance of the date of performance

Question 42

is a party obliged to terminate upon a repudiatory breach?

Answer 42

no they can either affirm or terminate (have a choice)

Question 43

if a party chooses to terminate upon a repudiatory breach - what damages can they seek?

Answer 43

seek damages not only arising from specific breach but also loss of the contract caused by termination of the contract as a whole

Question 44

what happens if a party affirms upon a repudiatory breach?

Answer 44

obligations under the contract remain in place

Question 45

what are the 3 ways frustration arises?

Answer 45

1) performance is impossible
2) performance is illegal
3_ parties common purpose is frustrated

Question 46

what type of obligation does frustration discharge?

Answer 46

discharges future obligations (irrespective of the parties’ wishes)

Question 47

if a party received a non-monetary benefit prior to the frustrating event = how are damages assessed? (2 part test)

Answer 47

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