Damages Flashcards
Identyfing recoverable types of loss; calculating the amount of damages; and advising on the limitations to recovery of damages
What are Nominal Damages
When a claimant has not suffered any loss, but the court awards a small sum representing reconvention that the contract has in fact been broken.
What are substantial damages
These are intended to compensate the claimant for loss suffered and not to just acknowledge the fact that the contract has been broken.
How do we set about identifying what someone’s loss is as a result of breach of contract?
- The normal rule in contract is to look at the claimant’s position as it is, and compare it with the position the claimant would have been in if the contract had been performed. This is known as ‘EXPECTION LOSS’ as the claimant has essentially lost the full benefit of the bargain they struck.
- Occasionally a claimant decides not to claim for loss of bargain or loss of profits and instead just claims for expenses incurred because of reliance on the contract being performed. This is known as ‘RELIANCE LOSS’.
The circumstance in which a party claims reliance loss may arise where the profits they hope will materialise from the contract are too speculative.
What are the types of loss recoverable and explain them
Pecuniary losses- they are the consequence of breach that can be ‘put right’ i.e remedied by an award of damages. So, if you can establish that you would have made £6,000, is obviously the right amount to award you.
Non-pecuniary loses- this will normally be awarded in limited circumstances, such as one of the objects of the contract was to provide pleasure or peace of mind and as a result the loss is mental distress, or disappointment. For example holiday contracts.
What happens in situations where the losses suffered by the claimant may have been very improbable or unpredictable, in which case It would have been unfair to make the defendant responsible for all of them.
This is known as remoteness of loss and it hinges on whether a particular type of loss would have been in the reasonable contemplation of the parties at the time of the contract as being a likely consequence of the breach.
if a certain loss would be an inevitable or natural consequence of the breach then the parties will be deemed to have had it in their reasonable contemplation at the time of the contract.
How is remoteness of loss determined?
Is the particular loss an inevitable/natural consequence of breach if YES then damages for the loss are recoverable.
If NO- did the defendant know of any special circumstances making the loss a likely consequence of the breach? if yes then damages are recoverable.
if No then loss is too remote.
When a claimant suffers a loss can he just sit back and watch the damages add up?
No, the claimant must take reasonable steps to mitigate the loss caused by the breach.
What happens if a claimant does not take reasonable steps to mitigate their losses
Then the claimant will not be allowed to claim for any part of the damage that was due to their failure to take reasonable steps to mitigate their loss.
Where does the burden of showing that the claimant has failed to mitigate their loss placed?
Upon the defendant and the defendant may find this difficult to establish.
What happens if the claimant does take reasonable steps to mitigate their losses but their reasonable attempts to mitigate have failed to reduce their loss, or even increase it?
A claimant who has acted reasonably can claim for their loss, even if their reasonable attempts to mitigate have failed.
If the work is defective how are damages quantified?
it is the cost of putting it right, the cost of reinstatement known as the ‘THE COST OF CURE’.
If the goods are defective how are damages quantified?
The starting point if the difference in value between the goods as they are and the goods as they were expected to be.
What is a specified damages clause? (Liquidated damages Clause)
`There is where there is a pre-estimate to the loss that is likely to be caused by the breach. Such clause is binding and the sum specified is the amount that will be paid regardless of the actual loss the claimant has suffered.
The usual measure of damages, remoteness and mitigation do not apply. The claimant t may receive more or less than the loss actually suffered.
What is a penalty clause?
A penalty may be defined as an attempt to put pressure on a party to perform the contract because the sum stipulated is extravagant or otherwise disproportionately high.
A clause is an unenforceable penalty if it imposes a detriment that is out of all proportion to the innocent party’s legitimate interest in enforcing the contract.
The test focuses on fairness and proportionality, not just compensation.
It applies only to secondary obligations (arising on breach), not primary terms.
Is the penalty clause enforceable?
No it is not, the court is free to assess damages in the usual way and usual principles of measure, of damages, remoteness and mitigation will apply.
What are the three mechanisms for calculating the expectation measure?
1) Cost of cure, (2) Diminution in value, and (3) Loss of amenity.
What does the ‘cost of cure’ mechanism involve?
It reflects the cost of substitute or remedial work required to fix defective performance and restore the claimant’s expected position.
n the case of McGinn v Waltham Contractors (2017), why was the claimant’s full cost of cure not awarded?
Because the demolition and rebuild were for aesthetic reasons and deemed unreasonable; the court limited the award to reasonable remedial costs.
What was the expectation measure awarded in the Pat and Gary bespoke furniture example?
£100, representing the cost to remedy the defective drawers and wardrobe, despite the original cost being £500.
In which type of contracts is the cost of cure typically applied?
In contracts involving defective work, where remedial action can restore the promised outcome.
What is the second mechanism used to calculate the expectation measure of damages in contract law?
The diminution in value, which calculates the difference between the value of performance promised and the value actually received.
How does the diminution in value mechanism work in assessing damages?
It measures the monetary difference between what was promised in the contract and what was actually delivered.
In the Guildford Swimming Club example, what were the promised and actual performances, and how were damages calculated?
Gallagher Brothers promised to build a 25-metre pool for £2,500 but only built a 22-metre pool. At £100 per metre, the diminution in value was £300, which the court awarded as damages.
Jim agreed to pay £100 for cleaning 100 windows (£1 each). Wally cleaned 60 windows, what is the value of Wally’s actual performance calculated? and what is Jim’s expectation measure using diminution in value, and why?
Wally cleaned 60 windows, so his actual performance is valued at £60.
his expectation loss is £40 – calculated as the promised value (£100) minus the received value (£60). This represents the loss in value due to the incomplete performance.
