remedie

Question 1

4

damages

Answer 1

1. If there is a breach of contract, the usual remedy available to the innocent party is damages to compensate them for their loss.
2. As damages are in their nature compensatory, they are not designed to be punitive, that is, to punish the party who has breached the contract, nor will the claimant recover more than they have lost.
3. If the claimant has suffered no loss, damages are still recoverable but they will be** nominal**.
4. The measure of damages should be calculated to put the innocent party back into the position they would have been in** had the contract been performed properly**

Question 2

5

types of damages

Answer 2

a. expectation interest
b. reliance interest
c.non-monetary losses
d.punitive damages
e.nominal damages

Question 3

expectation interest

Answer 3

1. Expectation damages are also referred to as** damages for loss of bargain.** In the case of construction contracts, for example, the expectation interest in a contract can be determined by either**
   (1) how much it would take to cure the defects, or (2) the difference in value between what was actually provided and what should have
   been provided under the terms of the contract.**

Question 4

3

reliance interest

Answer 4

1. If expectation interest damages are too speculative to measure (for example, it cannot be shown with sufficient certainty what profits would have been made if the contract had been performed), the innocent party may elect to recover damages based on a ‘reliance’ measure, rather than an expectation measure.
2. Reliance damages compensate the innocent party for any expenses incurred in reliance on the contract up to the time of breach.
3. This measure aims to put the parties back into the position they would have been in if they had never entered into the contract

Question 5

3

non-monetary losses

Answer 5

1. As well as monetary loss, damages can be awarded for physical injury, as long as the loss is not too remote from the breach of contract. However, damages for injury to feelings, such as mental distress, will not usually be awarded.
2. The exceptions to this rule are damages to reflect loss of amenity where the sole purpose of the contract was enjoyment, for example, the provision of a holiday. This type of loss will occur** only if the injured party is a consumer.**
3. Damages may also be awarded for loss of reputation, for example, if the innocent party is having difficulty finding alternative employment due to the stigma of having worked for an organisation that was exposed as dishonest

Question 6

punitive damages

Answer 6

Punitive damages (that is, damages to punish the party in
breach) are generally not awarded in contract cases.

Question 7

nominal damages

Answer 7

Nominal (token) damages (for example, £1) may be awarded if
a breach is established but no actual loss is proven.

Question 8

When Are Damages Assessed?

Answer 8

The general rule is that the assessment of damages should take place as at the date the contract is breached. This is because on that date the innocent party has the opportunity to seek an alternative to the contract.

Question 9

5

Remoteness

Answer 9

1. Not all losses flowing from a breach of contract will be recoverable by the innocent party. If the loss is too remote, the courts will not allow recovery.
2. The damages awarded should:
   * Fairly and reasonably be considered to arise naturally from the breach, or
   * Have been in the** reasonable contemplation **of both parties to the contract as a probable result of the breach.
3. Remoteness is considered as **at the time the contract was entered **into, not when the breach occurred.
4. Look carefully to see whether the innocent party has entered into **unusual, one-off **arrangements that are not within its normal course of business and of which the party in breach was not aware when the contract was entered into.
5. Losses from arrangements such as these are likely to be too remote, as they could not be said to arise naturally from the breach. They will not be in the contemplation of both parties because the other partywas not aware of them. Contrast this with losses arising from** the normal course of business**, which are more likely to be recoverable.

Question 10

4

causation

Answer 10

1. The party in breach will be liable only for losses caused by their breach. The test is whether the breach of contract was an ‘effective cause’ of the loss
2. An intervening event which could** reasonably have been expected** will not break the chain of causation, and the party in breach will still be liable for the loss.
3. If the breach is one of two effective causes of the loss, the party in breach will still be liable for the loss.
4. If the innocent party’s loss is caused **partly by an intervening act **by a third party, the courts may sometimes still award damages for that loss against the party in breach of contract

Question 11

3

Contributory Negligence

Answer 11

1. If the innocent party has also been negligent, and this negligence has contributed to their loss, does the
   innocent party’s contributory negligence provide a partial defence for the party in breach?
2. Case law has identified three different types of contractual obligation in which this question might arise:
   * When the breach of contract is a breach of a strict contractual duty which does not depend upon a duty to take care;
   * When the breach of contract is of a contractual obligation to take care, but there is no corresponding duty independent of the contract (for example, a duty in tort); and
   * When liability is the same both in contract and in tort (so there would be a duty in tort even if there was no contract).
3. contributory negligence is only available as a defence in the last case. **

Question 12

4

Measure of Damages

Answer 12

1. The measure of damages when looking at expectation interest can be either the diminution in value, the cost of remedying the defect, or, more unusually, the value of loss of amenity.
2. In Contracts for the Sale of GoodsIn the case of contracts for the sale of goods, the Sale of Goods Act 1979 provides the following:
   (1) If the buyer has a breach of contract claim for non-delivery or rejects goods because they do not conform to the contract, the measure of damages is the estimated loss resulting directly and naturally from the seller’s breach of contract.
   (2) If there is an available market for the goods, the starting point for calculating the buyer’s damages is the difference between the contract price and the market or current price of the goods at the time when they ought to have been delivered.

(3) Similar rules apply if the seller tries to deliver the goods and the buyer breaches the contract by wrongly refusing to accept delivery.

4. Remember the rules provided above are just a starting point. If the innocent party has suffered further losses, then they may be able to claim them as long as they are not too remote.

Question 13

Mitigation

Answer 13

When seeking damages, the innocent party must have taken
reasonable steps to mitigate (that is, minimise, and certainly
not increase) their loss. An innocent party cannot recover
losses that are a direct consequence of failure to mitigate
their loss.

Question 14

4

liquidated damages

Answer 14

1. In many cases the parties to a contract will attempt to pre-determine what damages may be payable in the event of a breach by including a clause to this effect in their contract. Such clauses are known as liquidated damages clauses.
2. A valid liquidated (or set/agreed) damages clause is based on a genuine pre-estimate of the innocent party’s loss. It will be enforceable by the courts
3. penalty clauses are penal in nature.
   The courts will strike out clauses which they view as a penalty. If the clause is struck out, the party relying on it instead will have to rely on normal unliquidated damages.
4. A term requiring payment of a specified sum on breach will be seen as a penalty clause if it imposes a detriment** out of proportionton** the obligation breached.

Question 15

3

Indemnities

Answer 15

1.A contract will sometimes provide that one party will ‘indemnify’ the other against losses arising from a breach.
2.The exact effect of an indemnity will depend how it is drafted, but it may be possible to word it so that the innocent party can recover losses free from the limitations under the rules on remoteness, mitigation, or even causation.
3.Another sort of indemnity is a promise to accept responsibility if a third party does not perform certain obligations—for example, an obligation to pay a debt. This sort of indemnity is often hard to distinguish from a guarantee, but unlike a guarantee it need not be in writing

Question 16

4

guarantees

Answer 16

1.A guarantee is a promise by A (the guarantor) to ensure that another person (B), who is a party to a contract (the primary obligation), will perform their obligations
2.must be in writing
3.It is different from an indemnity because the guarantor’s promise
is a ‘secondary’ obligation. The ‘primary’ obligation is B’s (the contracting party’s) obligation.
4. If the primary party’s (B’s)obligations are varied or discharged in any way, then the guarantee will cease to have effect and the guarantor can rely on the same defences that are available to the primary party.

Question 17

2

equitable remedies

Answer 17

1. Whilst damages at common law are available as of right, equitable remedies are granted at the discretion of the court if damages are perceived to be inadequate.
2. Equity is seen as “the gloss on the common law” and the remedies it provides are a direct response to the fact that damages may not always be an adequate remedy.
   1.specific performance
   2.injunction
   3.recission

Question 18

5

specific performance will not be granted if:

Answer 18

• It would cause undue hardship to the party in breach;
• The consideration agreed in return for the performance to be ordered is inadequate, coupled with some other factor such as undue hardship or unfairness to the defendant;
• There is no mutuality (this means that a court will not compel the party in breach to perform if the innocent
  party has any obligations of their own still outstanding);
• The contract is for employment or similar personal services, as the law will not put an individual in a position that they are forced to work for someone; and
• The order would requiresupervision by the courts

Question 19

2

injunction

Answer 19

1. An injunction is the opposite of specific performance: instead of compelling the party in breach to perform their contractual obligations, an injunction requires them not to breach the contract
2. Usually it is granted to prevent breach of a negative term (a contractual promise not to do something) and restricts certain behaviour by the party in breach

Question 20

recission

Answer 20

1. Rescission is the cancellation of a voidable contract.
2. The parties are left as though the contract had never been made.
3. The grounds for rescission must have occurred either before
   or at the time the contract was entered into. Grounds for
   rescission are things such as duress and misrepresentation

Question 21

3

defences to equitable remedies

Answer 21

1. Unconscionable behaviour by the claimant (where the claimant does not have ‘clean hands’);
2. Waiver; and
3. Unreasonable delay in enforcing the claim (sometimes referred to by the old name of ‘laches’), according to the principle that ‘delay defeats equity’.

Question 22

3

REMEDIES UNDER THE CONSUMER
RIGHTS ACT 2015

Answer 22

• A right to reject defective goods within 30 days after they were supplied, in return for a full refund;
• If the consumer does not reject the goods, or if the 30-day period has passed, a right to require the trader to repair or replace them at the trader’s expense; and
• If the repair or replacement is not successful, too expensive, or cannot be carried out within a reasonable timeand without causing the consumersignificant inconvinience, a right to require the trader to reduce the price, or to reject the goods in return for a refund (subject to a deduction for any use that the consumer has made of
  them).

Question 23

4

restitutional remedies

Answer 23

1. Restitution is primarily based on preventing unjust enrichmentwhen one party has acquired a benefit at the expense of the other in an unjust manner, for example, by mistake, duress, or undue influence.
2. Restitution may be available as an alternative to contractual damages, but only once the contract has been set aside
3. Generally, restitution will be awarded only in exceptional circumstances in which other remedies (damages, specific performance, or injunctions) are inadequate.
4. In contrast to damages, restitution is about repayment of
   wrongful gains, rather than compensation for loss, on the basis that wrongdoers should not profit from their wrongdoing.

Question 24

3

REQUIREMENTS FOR RESTITUTIONAL REMEDIES

Answer 24

1. Restitution can be awarded to an innocent party to repay a benefit gained by the other party. The innocent party must show a legitimate interest in preventing the party in breach from keeping any profit. The party against whom the award is made must have been unjustly enriched, and so the court will consider the following questions:
   * Was a party enriched or benefited?
   * Was the enrichment at the expense of the other party?
   * Is the enrichment unjust?
   * Are there any defences?

2.Restitutionary remedies can be in the form of either money or property, such as an order that the party in breach return any gain to the innocent party.

3.If restitution is required in relation to services, a monetary award known as **quantum meruit **can be made, requiring payment of reasonable remuneration for work undertaken. If goods have been supplied rather than services, the award is known as quantum valebat: reasonable payment for the value of the goods.

Question 25

Examples of unjust enrichment

Answer 25

• Work, services, or goods provided when there was no contract (but restitution may not be available if the contract was void for illegality, at least if the contract involves serious illegal conduct);
• Total failure of consideration by one party—for example, if the contract is terminated before that party has done
  anything at all in performance of the contract;
• If an entire contract is not performed in full (so no payment is due), the innocent party voluntarily accepts partial performance but no price is agreed, so there is no consideration and, therefore, no new contract
• Money paid by mistake;
• Rescission of a contract when there is an outstanding sum of money remaining with the wrong party;
• A transfer of property under threat or pressure; and
• One party’s use of a relationship of trust and confidence to unduly influence the other party to transfer property.

Question 26

Account of Profits

Answer 26

In very exceptional cases, if damages awarded under normal principles are not available or will not compensate the innocent party for their loss, the court may instead order, as a restitutionary remedy, that the party in breach account to the innocent party for the profits that they have made