Damages Flashcards
Give an overview of damages and some of the main considerations
Main remedy for breach of contract
Aim – to compensate innocent party for loss as a result of the breach
Type of loss – not all types of loss are recoverable
Remoteness – loss must not be too remote
Measure of damages – consider loss of expectation and loss of bargain
Mitigation – reasonable steps must be taken to mitigate the loss
Specified damages – in commercial contracts, parties may agree in advance what the damages should be for a certain breach
What damages will a claimant receive if there has been no loss?
Damages are available for all breaches of contract, but if there has been no loss the
claimant will be awarded only nominal damages.
The aim of damages is to address loss of expectation/bargain. What is meant by this?
Normal way to identify loss
Consider where the innocent party expected to be, financially speaking, if the contract had been properly performed
- Damages bridge that gap
Example - A bought a Ming vase from B for £50,000; it was a fake worth £1000, and a real one would be worth £60,000
- A would be awarded £59,000 damages
What types of loss are there for damages?
1) Reliance loss
- Where it is difficult to show loss of expectation (too speculative), the innocent party can cut their losses and go for wasted expenditure that is not too remote
- Someone withdraws from a film role and a substitute cannot be found; damages awarded for the sunk costs
2) Distress/disappointment
- Only awarded if the main aim of the contract was for the innocent party to have a good time
- Ie where a holiday is ruined, you might claim damages under this head
Explain the principle of remoteness
You can recover for any loss which is a natural/inevitable consequence of the breach
Where something isn’t an inevitable consequence of the breach, consider what D knew at the time of the contract
- Should D have foreseen the particular loss as being a likely/probable consequence of the breach?
As long as the type of loss is not too remote, extent of loss is irrelevant
How can damages be quantified?
1) If work is defective, normal measure of loss is cost of cure – cost to put it right
2) With defective goods, normal way is loss in difference in value between the goods as they are and as they were expected to be
3) Ruxley v Forsyth
- F was a consumer, looking for a swimming pool with a 7ft 6’ deepend, but it was built with a 6ft 9’ deepend
- It was still safe and made no difference to the value
- Cost of cure was £21,500 – HL held this was out of proportion to F’s loss
- F was awarded for £2500 for loss of amenity – a personal preference hadn’t been satisfied
Explain the principle of mitigation
Non-defaulting party must take reasonable steps to reduce their loss
They will not get damages for any loss that could reasonably have been avoided
D has the onus to show failure to mitigate
What is the effect of a specified/agreed damages clause?
If parties agree how much one will get if there is a particular breach, this amount is exactly what the claimant will get, whatever the actual loss
Specified damages clause = genuine attempt to pre-estimate loss likely to be caused by a breach
What happens if a specified/agreed damages clause states an extremely high/unreasonable amount?
If the stated amount is exceptional or exorbitant, so it has the effect of penalising the defaulting party, the specified ‘penalty’ clause will be void
- Claimant will then get ordinary and unliquidated damages
- They will then look at remoteness etc
