EXAM NOTES - Remedies

Question 1

what is the general structure for a remedies question

Answer 1

1. Terms
2. Breach
3. Condition/warranty/innominate term
4. Valid liquidated damages clause?
5. If not, unliquidated damages
6. Limiting factors

Question 2

what counts as a breach of condition?

Answer 2

a breach that goes to the root of the contract Poussard v Spiers

Question 3

what is the rule for time clauses and conditions?

Answer 3

• not automatically a condition
• but if C has stressed their importance they’re more likely to be considered one
• Schuler v Wickman

Question 4

how do courts decide if a breach is of warranty or condition?

Answer 4

• Hong Kong Fir v Kawasaki
• if courts are unwilling to classify as condition or warranty at outset
• may treat it as an innominate term
• breach of IT will have same effect as breach of condition
• if deprives innocent party of “substantially the whole benefit” of the contract

Question 5

what is a liquidated damages clause

Answer 5

A sum set out in the contract that must be paid on breach.

- Not payable if the court holds it is a penalty clause instead

Question 6

test for penalty clause?

Answer 6

Dunlop Pneumatic Tyre v New Garage

• Terminology is inconclusive
• Does it aim to intimidate the other party?
• Must be a “genuine pre-estimate of loss… set at the time of contracting”

Question 7

how do courts determine a “genuine preestimate of loss”

Answer 7

o Is stipulated sum extravagantly greater than largest possible loss based on the breach?
o If breach is by non-payment of money, is the stipulated sum payable greater than the original sum owed?
o Is the same sum payable for a number of possible breaches, some of which are serious and others minor?

Question 8

what situations are unlikely to be penalty clauses

Answer 8

if:
o Actual damage and LDC amount are similar – McAlpine v Tilebox
o An acceleration of payment clause is not a penalty clause – The Angelic Star
o Money paid as a deposit can usually be kept if the paying party breaches (Howe v Smith) even if it is far more than the loss resulting from the breach
—–though not if the size of the deposit is unreasonable Workers Trust v Dojap (25% deposit when 10% was normal)

Question 9

what principle do the courts follow in finding unliquidated damages?

Answer 9

• Compensatory in nature – not aimed at punishment e.g. Robinson v Harman

Question 10

how can unliquidated damages be calculated?

Answer 10

• expectation damages
• reliance interest
• restitution damages

Question 11

how does expectation damages work generally?

Answer 11

• C should be placed in same situation as if the contract had been performed Robinson v Harman
• Work out with difference in value: position he would have been in minus position he is actually in

Question 12

How does reliance interest work?

Answer 12

• Claim back any money spent before the breach; i.e. in reliance on the contract
• Works if expectation damages are too speculative to be calculated (McRae v Commonwealth Disposals)
• Treated relatively broadly – can claim back all costs wasted by D’s breach: Anglia TV v Reed

Question 13

what determines whether C gets expectation or reliance interest damages?

Answer 13

• C has an “unfettered choice” between reliance and expectation loss – Anglia TV v Reed

Question 14

how can C get restitution damages?

Answer 14

• Where there is no loss to V but D has enriched themselves through their wrongful behaviour; V can claim for D’s profits instead – AG v Blake
• But V must show exceptional circumstance to the case and:
  o Legitimate interest in depriving D of his profits
  o Other remedies are inadequate

Question 15

what other kinds of damages can be claimed for

Answer 15

• mental distress if pleasure/relaxation/peace of mind are the whole purpose of the contract (Jarvis v Swan Tours) or a major purpose (Farley v Skinner), unless it is a commercial contract (Hayes v Dodd)
• loss of reputation – Malik v BCCI
• loss of chance – Chaplin v Hicks if V has lost something tangible

Question 16

what factors limit damages that will be awarded

Answer 16

1. causation
2. remoteness
3. contrib neg
4. mitigation

Question 17

how does causation limit damages

Answer 17

• Court takes a “common sense” approach Galoo v Brights
• Breach must be a “dominant or effective” cause of loss Galoo v Bright
• Court considers NAI ; Lambert v Lewis
  o As long as they are not foreseeable Monarch v Karlshamms

Question 18

how does remoteness limit damages

Answer 18

• Two stage test from Hadley v Baxendale. V may claim for all loss:

o Arising naturally in the usual course of things
 I.e. not unlikely to occur The Heron II

o Within the reasonable contemplation of both parties when they made the contract as being the probable result of the breach

Question 19

how does ‘reasonable contemplation’ work for limiting damages?

Answer 19

 Must be contemplated by BOTH parties – Victoria Laundry v Newman

 Both parties must contemplate that the loss would be “not unlikely” to occur (The Achilleas)

 or alternatively must both contemplate the loss would be substantially likely to occur in the event of a breach Balfour Beatty v Scottish Power

Question 20

how does mitigation limit damages?

Answer 20

• V will be unable to claim for losses resulting from a failure to mitigate loss
• V just needs to take reasonable steps to mitigate – British Westinghouse v Underground Electric
• V may have to accept the breach if it is the most effective remedy for his problem Payzu v Saunders

Question 21

how does the court view C’s attempts to mitigate?

Answer 21

• Mitigation is not “weighed in nice scales” i.e. the court just looks to see if V has done what is reasonable, not necessarily perfect – Banco de Portugal v Waterlow
• Mitigating party is not expected to sue people to mitigate their loss – Pilkington v Wood

Question 22

how does contrib neg limit damages

Answer 22

• Where C’s fault has contributed to the loss he has suffered then the amount of damages he can recover may be reduced
• Vesta v Butcher – only applicable where D’s breach is BOTH a breach of contract and tortious negligence

Question 23

what principles underly equitable remedies?

Answer 23

• discretionary
• clean hands
• delay defeats equity
• can’t cause undue hardship on D

Question 24

What equitable remedies are available?

Answer 24

• Specific performance
• injunction Evening Standard v Henderson
• rescission
• rectification

Question 25

how does specific performance work?

Answer 25

• Unusual and hard to get because court would often have to supervise D’s SP – Cooperative Insurance v Argyll Stores
• Won’t be granted if damages is appropriate and adequate Adderley v Dixon
• Won’t be granted if it will cause undue hardship Patel v Ali
• Won’t be granted for breach of contract of personal services e.g. employment De Francesco v Barnum

Question 26

What are the different measures of expectation interest?

Answer 26

Ruxley v Forsyth

1) cost of cure - normal measure for defective work (Birse v Eastern Telegraph) but not if it is unreasonable.
- - or if the defect is aesthetic only McGlinn v Waltham
2) diminution in value
3) loss of amenity (Ruxley) but unlikely in commercial contracts Regus v Epcot Solutions

Question 27

Why is C unlikely to get restitution damages?

Answer 27

• Awarded in Esso v Niad
• but courts have made it clear since that it is a very high bar to get over
• Sine Nomine - not exceptional enough
• Experience Hendrix v PPX - is the subject as special or sensitive as national security? If not, unlikely to be exceptional enough
• WWF v WWF must be very exceptional

Question 28

Give an example of a breach of warranty

Answer 28

Bettini v Gye

• root of the contract was to perform as an opera singer for three months
• missing 6 days of rehearsals did not go to the root of that

Question 29

What must a liquidated damages clause satisfy to be binding

Answer 29

1) must be incorporated in the contract
2) must be appropriately constructed (Dunlop v New Garage)
3) must comply with UCTA but ONLY IF AN EXEMPTION CLAUSE
4) Must comply with UTCCR but ONLY IF A CONSUMER CONTRACT if so consider reg 5(1)

Question 30

should limiting factors be considered for an award of nominal damages?

Answer 30

NO - if they’re being discussed elsewhere.

- as the damages are only nominal there is no point defending them