Part 2: Damages Flashcards
What are damages?
Money payment made by the party in breach of the contract.
The exact amount of money is decided by the court.
Damages is common law remedy.
The innocent party is to be placed in the same position, with respect to damages, as if the contract had been performed.
What are nominal and contemptuous damages?
Nominal - small amount awarded in situations where there has been a breach of contract but the loss is minimal / non-existent
Contemptuous - may be awarded if claimant was correct in bringing a cloak but was wasting everyone’s time suing (e.g awarded a penny)
What are pecuniary and non-pecuniary damages?
Pecuniary - aim to compensate injured party for financial loss
Non-pecuniary - aim to compensate for mental distress or loss of enjoyment
What are pecuniary damages?
Aim to compensate injured party for financial loss. The exact sum that claimant can recover is calculated by loss.
There are four main categories:
1. Loss of bargain / expectation loses
2. Loss of amenity
3. Speculative loss
4. Reliance loss
In relation to pecuniary loss, what are loss of bargain / expectation loss?
The aim of these damages is to put claimant, financially, into a portion that they would have been in had the contract been performed.
For example, sale of goods. The court aim to give injured party what they should have had and therefore compensated for cost of replacement.
Market value rule - if the price has decreased and the buyer can find them cheaper - the damages are reduced.
In relation to pecuniary loss, what are loss of amenity?
This category relates to when it is difficult to asses or decide how to quantify (measure) loss.
CASE: Swimming pool built but not to the depth specified. Defendant refused to pay and was sued. Held that the pool could still be used, albeit with less enjoyment.
Damages were limited to compensation for his loss of enjoyment (loss of amenity)
Court felt that cost for rebuilding the pool would have been excessive.
In relation to pecuniary loss, what are speculative losses?
This is when the court have to estimate what the claimant might have received if the contract had been honoured.
CASE: Claimant did not receive enough notice for an interview. Court held it was difficult to assess damage but awarded £100 for the loss of opportunity.
Damages of this kind are called speculative and not always recoverable due to the uncertainty involved.
In relation to pecuniary loss, what are reliance loss?
This is when it is impossible to accurately quantify what the loss of bargain has actually cost.
Instead, damages based of “reliance” being the sums spent by the injured party in reliance on the other party fulfilling obligations.
Sometimes called ‘consequential loss’ - losses that have been incurred as a consequence of relying on other party’s original promise.
CASE: Actor of film pulled out last minute and no replacement could be found. Profit was uncertain so instead, claimant awarded reliance loss which totalled the money spent on preparations of the film.
What are non-pecuniary damages?
Damages relating to mental distress and loss of enjoyment.
Traditionally courts reluctant to award damages under this heading, however two exceptions refined in CASE: Farley v Skinner
- Where the object of the contract is to provide pleasure, peace of mind or freedom from distress - damages recoverable.
CASE: surveyor failed to report on noise from aircrafts. Purchaser of house allowed to recover damages for his enjoyment of the house.
- Where the breach causes physical inconvenience and discomfort which leads to mental suffering - damages recoverable.
CASE: surveyor negligently failed to disclose a number of defects in property. Damages awarded was different between value given and value of the property with defects.
Damages also awarded for “distress and inconvenience” but limited.
Physical discomfort must be something more “tangible” than feelings of disappointment when claiming damages.
In relation to non-pecuniary damages, what are the three key rules of mental distress?
- Where a predominant object of a contract is for mental satisfaction (e.g holiday) damages can be awarded for mental distress
- Damages can be awarded for mental distress where physical inconvenience has been suffered as a result of the breach
- Damages can be awarded for mental distress where the breach has caused the loss of pleasurable amenity which was important object of the contract.
How can damages be claimed?
If the claimant is to be awarded damages, they must show:
- There was a breach
- That the breach caused the loss complained of
- That the loss was not too remote from the breach
- They attempted to mitigate the losses that they are claiming.
In relation to claiming damages, what is causation?
It is whether the breach actually caused the loss claimed for.
CASE: claimant tried to recover costs of equipment that he had installed in rented garage which he tried to take with him when left but contract provided “any fixtures are left”.
Losses resulted from nature of contract and not breach.
In relation to claiming damages, what is remoteness?
The basic rule is that a person in breach will be liable only for losses:
- A reasonable person would have anticipated as being likely or reasonably foreseeable, result of the breach
- The defendant had been “specifically warned” about by the claimant.
All other losses will be “too remote” from the breach for them to be liable.
CASE: claimant sued for loss of profits when defendant took too long to fix mill. Held defendant not liable because loss was not reasonably foreseeable and he did not know that claimant only had one mill.
The remoteness rule often referred to as two-limb test which covered both direct damages and special / consequential damages.
In relation to remoteness of damages, what is the two-limb test?
Limb 1: Direct loss
Losses that may fairly and reasonably be considered as arising from the breach
Limb 2: Special loss
Losses that may reasonably be supposed to have been in contemplation of both parties at the time they made the contract as the probable result of the breach because of the special circumstances known to them.
CASE: Breach was a late delivery of a boiler to the laundrette. The laundrette lost:
- profits for usual business (recoverable as they were reasonably foreseeable)
- chance of a particularly well-paid contract (not recoverable as not reasonably foreseeable and not enough to the attention to defendant at the time of entering contract)
What are the summary of rules for remoteness?
The remoteness of damage main rule is:
“The defendant is only liable for those losses they should reasonably have contemplated as likely result of their breach at the time contract was made”
The questions to ask as to establishing whether losses were within a party’s reasonable contemplation, are:
1. Would a reasonable person have anticipated the losses as being likely, or reasonably foreseen, the result of the breach? If not:
2. Had the defendant been specifically warned about these losses by the claimant?
The rules should not be followed if they will produce an outcome that does not reflect the expectation or interaction which the parties could reasonably be said to have had.
