Damages Flashcards
What is the primary aim of damages in contract law?
To compensate the claimant by placing them in the position they would have been in had the contract been performed, not to punish or deter
How do contract law damages differ from tort law damages?
Contract law addresses commercial losses (e.g., lost profits), while tort law typically addresses physical or property loss. Contract damages are not punitive
What is the “expectation interest” in contract damages?
It refers to the benefit the claimant expected from the contract. Damages aim to deliver the value of that benefit, including anticipated profits
What key principle was established in Robinson v Harman (1848)?
The claimant should be placed in the same position (financially) as if the contract had been performed—this supports the expectation measure of damages
What are the two measures of expectation damages?
- Cost of Cure - the cost to fix the breach
- Difference in Value - the loss in value of the breach
What did Ruxley Electronics v Forsyth (1996) establish about reasonableness in damages?
Damages must be reasonable and proportionate. The court may refuse the cost of the cure if it exceeds the benefit gained, preferring a difference in value.
When is expectation damages difficult to calculate?
- When the cost of fulfilment is disproportionate.
- When expected profits are too uncertain, in which case reliance measures may be used.
What is the reliance measure of damages, and when is it used?
It compensates for expenses incurred in reliance on a contract. Used when expectation losses are uncertain or unquantifiable
Can a claimant recover both expectation and reliance damages?
No. Courts prevent double recovery. The claimant typically recovers net profit (expectation) or reliance costs, not both
What are restitutionary damages, and when are they awarded?
They prevent unjust enrichment by returning gains made by the breaching party. Used in rare cases of exceptional breach or public interest
What did Attorney General v Blake (2001) establish?
Restitutionary damages may be awarded where the claimant has a legitimate interest in preventing the defendant from profiting from a breach
What two-limb test for remoteness was established in Hadley v Baxendale (1854)?
1) Losses arising naturally in the usual course (imputed knowledge)
2) Losses foreseeable and contemplated by both parties at the time of contract (actual knowledge)
What is the ‘loss of chance’ principle and which case supports it?
If a claimant loses a real and valuable chance due to breach, they may recover damages. Supported by Chaplin v Hicks (1911)
What is the principle of mitigation in contract law, and who bears the burden of proof?
Claimants must take reasonable steps to reduce their loss after a breach.
However, there’s no duty to mitigate—only avoidable losses are unrecoverable. The defendant bears the burden of proof, and courts interpret the mitigation defence narrowly (Banco de Portugal v Waterlow)
What are the limits of the mitigation principle, especially regarding claimants in financial hardship?
Claimants are not required to take unreasonable steps, and poverty doesn’t reduce damages
How do courts distinguish between a penalty clause and a liquidated damages clause?
As per Dunlop v New Garage, a penalty is extravagant or disproportionate and unenforceable. A liquidated damages clause is a genuine pre-estimate of loss and enforceable. Courts assess the intent at the time of contracting
When will courts grant specific performance or injunctions in contract law?
Specific performance is granted when damages are inadequate (e.g., unique goods, land), but not where constant supervision is needed or performance is impossible (Co-op v Argyll). Injunctions are often used to enforce negative covenants, but won’t be granted if the claimant acted inequitably, delayed, or seeks indirect specific performance (Shepherd Homes v Sandham)
