Damages

Question 1

Why does the court prefer damages to specific performance?

Answer 1

• Most contracts are bargains and if we give financial damages for what the innocent party would have had, there is not usually any harm
• The courts don’t want to make people do specific things
• It is a lot easier to just get damages – lots simpler
• Considered adequate compensation

Question 2

What is the purpose of damages?

Answer 2

To compensate the plaintiff’s loss, not to punish the breaching party
- Ruxley Electronics
- Marlborough District Council

Question 3

What are the three measures of damages?

Answer 3

Expectation, reliance, restitutionary

Question 4

What is the primary measure of damages?

Answer 4

Expectation

Question 5

How do you quantify expectation loss?

Answer 5

Calculated using the market value
- J & B Caldwell Ltd v Logan House Retirement Home Ltd

Question 6

What is diminution of value?

Answer 6

Barry v Davies
- Diminution of value = difference between what is promised and what is supplied

Question 7

Should the innocent party always be able to get cost of cure? Case + reasoning?

Answer 7

No - Ruxley
- If the cost of fixing is disproportionate to the cost of benefit to be obtained, it is unreasonable to award cost of cure.

Question 8

What is cost of cure subject to?

Answer 8

The reasonableness test.
If the subject matter is not readily substitutable, cost of cure may be appropriate, subject to the reasonableness test.

Question 9

If the subject matter is not readily substitutable, what may be appropriate?

Answer 9

Cost of cure.

Question 10

What is the restitutionary measures / Account of Profit?

Answer 10

• Gains made by the breaching party
• Normally idea is to compensate injured party, not punishing breaching party
• But in exceptional cases, court may find the only way to do the injured party justice is to order the breaching party to give the injured party profits it had made

Question 11

What are the general limits on damages?

Answer 11

1. The innocent party cannot end up in a superior position than if no breach had occurred
   - Bloxham v Robinson - no double recovery
2. Damages for mental distress, anxiety, frustration etc not usually available
   - Bloxham v Robinson
   - Jarvis v Swan Tours
3. No exemplary/punitive damages
   - Ruxley Electronics & Constr. Ltd v Forsyth
   - Whiten v Pilot Insurance

Question 12

What is NZ’s position on punitive damages?

Answer 12

• We don’t punish people
• But other jurisdictions do – see Whiten

Question 13

What is the date for assessing loss? When the market value changes over time, when do we asses the loss to the injured party?

Answer 13

General rule:
- Loss is normally assessed at the date of breach.
- McElroy
BUT
- The court at its discretion may fix a later date for the assessment of loss to achieve a fair and just outcome.

Question 14

What is remoteness in regards to damages?

Answer 14

• Innocent parties must show the breach caused the loss
• The remoteness test: the plaintiff must prove that the damages are not too remote a consequence of the defendant’s breach of contract.

Question 15

Reasons for the remoteness test?

Answer 15

• If the loss is not foreseeabile – liability may not be fair
• Remoteness test encourages foreseeability, restriction of liability, insurance, and allocation of risk responsibility

Question 16

What kind of knowledge do you need in the foreseeability test?

Answer 16

Imputed or actual knowledge

Question 17

Summary of remoteness/foreseeability test?

Answer 17

1. Was the loss reasonably foreseeable as a result of the breach?
2. what knowledge was possessed by the parties?
   - Actual or imputed needed

Question 18

What is mitigation?

Answer 18

• The mitigation rule requires the claimant to take reasonable steps after the breach to limit or reduce his/her loss caused by the defendant’s breach.
• The loss that could have been avoided by taking reasonable steps is not recoverable in damages.

Question 19

Do courts like to find mitigation?

Answer 19

No. Situation where contract breaker is saying they should pay less damages, courts don’t look too favourably on this