Remedies

Question 1

What is the default approach to compensating the innocent party in a breach of contract?

Answer 1

The default approach to compensating the innocent party in a breach of contract is to put them in the same position post-breach that they should have been in had the contract been performed. This is sometimes referred to as protecting the innocent party’s ‘expectation’ interest.

Question 2

What is the measure of damages for breach of contract based on expected profit and actual profit?

Answer 2

The measure of damages for breach of contract based on expected profit and actual profit is the difference between the expected profit and the actual profit.

Question 3

What is the purpose of an award of damages for breach of contract?

Question 4

What is the reliance interest in assessing damages for breach of contract?

Answer 4

The reliance interest is an alternative basis for assessing damages in breach of contract cases. It allows the claimant to recover the expenses incurred in preparing for or partially performing the contract, which have been rendered pointless by the breach. This measure aims to put the claimant in the position they would have been in had they never contracted.

Question 5

Are damages for mental distress generally awarded in relation to breach of contract?

Answer 5

No, damages for mental distress, anguish, or annoyance caused by breach of contract are not generally awarded. The general rule is that damages will not be awarded in relation to mental distress. However, there are exceptions to this rule in limited situations where the whole or a major purpose of the contract is to provide pleasure, relaxation, and peace of mind.

Question 6

What are the two limbs of the Hadley v Baxendale test for recoverable losses?

Answer 6

The first limb of the Hadley v Baxendale test considers losses that would naturally follow from the breach and are usually known risks. The second limb considers losses that were communicated to the defendant at the time of contracting and were reasonably supposed to have been in the contemplation of both parties.

Question 7

What is the purpose of calculating the expectation interest in a breach of contract?

Answer 7

The purpose of calculating the expectation interest in a breach of contract is to determine the sum of money needed to put the innocent party in the position they would have been in if the contract had been properly performed. This reflects the principle of compensating the innocent party for their loss.

Question 8

What are the three mechanisms for ascertaining the expectation interest in assessing damages?

Answer 8

The three mechanisms for ascertaining the expectation interest in assessing damages are the cost of cure, diminution in value, or loss of amenity.

Question 9

Under what circumstances can damages be awarded for loss of reputation?

Answer 9

The general rule is that damages will not be awarded for loss of reputation. However, in certain cases, such as when an employee’s employment prospects are adversely affected by the way their former employer’s business was run, damages for loss of reputation may be awarded.

Question 10

What is the rationale behind the remoteness rules in contract law?

Answer 10

The remoteness rules in contract law limit recoverable losses to those that a contracting party would or should have been aware of as likely to flow from the breach. This is based on the intention of the parties and the risks they accepted upon entering into the contract.

Question 10

When might the court award damages to compensate the ‘reliance interest’ instead of the ‘expectation interest’?

Answer 10

The court might award damages to compensate the ‘reliance interest’ when it is not possible or appropriate to award damages based on the ‘expectation interest’. This approach puts the claimant in the position they would have been in had they never contracted in the first place.

Question 11

When can damages be awarded for loss of chance?

Answer 11

Damages for loss of chance can be awarded if the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition. The courts are reluctant to treat the loss as too speculative and will award damages based on the expectation interest, even if the precise quantification of loss may not be straightforward.

Question 12

What factors are considered when calculating the cost of cure in a breach of contract?

Answer 12

When calculating the cost of cure in a breach of contract, the claimant must act reasonably in relation to the defective works. In some cases, the court may limit the award to the costs that would have been incurred in remedying the defects in the original building if the claimant acted unreasonably.

Question 13

What are the limitations of the reliance interest in assessing damages for breach of contract?

Answer 13

The reliance interest only allows recovery of wasted expenditure, not all expenditure. If the expenditure is not wasted and can be used for another purpose, it cannot be recovered. Additionally, reliance losses are losses incurred prior to the breach, not those incurred as a consequence of the breach.

Question 14

What are the limiting factors that can affect the actual damages awarded?

Answer 14

The limiting factors that can affect the actual damages awarded are causation, remoteness, and mitigation.

Question 14

What is the significance of mitigating losses in a breach of contract?

Answer 14

Mitigation is important in a breach of contract as the injured party should take reasonable steps to minimize the effect of the breach. Failure to mitigate may result in losses that are not legally recoverable.

Question 15

What is the alternative method for calculating the expectation interest in a breach of contract?

Answer 15

An alternative method for calculating the expectation interest in a breach of contract is by reference to the difference in value between the performance received and that promised in the contract. This is known as the diminution in value approach.

Question 16

What are the principles of causation, remoteness, and mitigation in relation to recoverable damages?

Answer 16

Causation: The claimant must establish a causal link between the defendant’s breach of contract and its loss in order to recover damages. Remoteness: Not all losses flowing from a breach of contract are recoverable. The law draws a line dictating which loss is recoverable and which is not. Mitigation: Damages can be reduced if the claimant has failed to take reasonable steps to mitigate their losses.

Question 17

What is the difference between factual causation and legal causation in relation to damages in a breach of contract?

Answer 17

Factual causation refers to establishing that the defendant has caused the loss suffered by the claimant. Legal causation refers to ensuring there are no unlikely, intervening acts that break the chain of causation.

Question 18

What is the reliance interest in assessing damages for a breach of contract?

Answer 18

The reliance interest allows the claimant to recover expenses incurred in preparing for or partially performing the contract that have been rendered pointless by the breach.

Question 19

What is the significance of factual causation in determining recoverable damages?

Answer 19

Factual causation refers to whether the breach by the defendant has, as a matter of fact, caused the loss suffered by the claimant. In contract law, the courts adopt a ‘common sense approach’ to determine factual causation, considering whether the defendant’s breach was a ‘dominant’ or ‘effective’ cause of the loss.

Question 20

What is legal causation and how does it impact the recoverability of damages?

Answer 20

Legal causation refers to whether the defendant should be held responsible for loss that has been caused by its breach, even if factual causation is established. If there is an intervening event that breaks the chain of causation, the claim may fail. However, if the intervening event was ‘likely to happen’, it generally will not be treated as breaking the chain of causation.

Question 21

What is loss of amenity and when is it awarded as part of the expectation interest?

Answer 21

Loss of amenity refers to the non-economic loss of pleasure or value that the innocent party suffers as a result of not receiving what was promised in the contract. Loss of amenity damages may be awarded when there is a non-economic loss that has value to the claimant. However, in a commercial setting, it is unusual for damages to be awarded for loss of amenity.

Question 22

What factors are considered in calculating the expectation interest in assessing damages for breach of contract?

Answer 22

The expectation interest can be calculated by considering the cost of curing the defective performance, the difference in value between the performance received and that promised, or the loss in amenity. These factors determine the economic value of the performance and aim to put the innocent party in the same position they would have been in if the contract had been performed.

Question 23

What is the rule of remoteness of damage in contract law?

Answer 23

The rule of remoteness of damage in contract law states that not all losses flowing from a breach of contract are recoverable. The law draws a line dictating which loss is recoverable and which is not. This rule was established in the case of Hadley v Baxendale, where two limbs were identified: loss of a type ordinarily and naturally arising from the breach, and loss that the parties contemplated at the time of making the contract as the probable result of the breach.

Question 24

What are some examples of losses that can be caused by a breach of contract?

Answer 24

Some examples of losses that can be caused by a breach of contract include mental distress, loss of reputation, and loss of a chance (e.g., a chance to win a new client or compete in a competition).

Question 25

What is the significance of the defendant’s knowledge at the time of contracting in determining recoverable losses?

Answer 25

The defendant’s knowledge at the time of contracting is significant in determining recoverable losses. If the defendant knew or should have known about certain risks or circumstances, the losses associated with those risks or circumstances may be recoverable.

Question 26

What is the foundation of the law on remoteness of damage in contract?

Answer 26

The foundation of the law on remoteness of damage in contract was set out by Baron Alderson in the case of Hadley v Baxendale. The case established two limbs: loss of a type ordinarily and naturally arising from the breach, and loss that the parties contemplated at the time of making the contract as the probable result of the breach.

Question 27

What is the purpose of mitigation in a breach of contract?

Answer 27

The purpose of mitigation is for the injured party to take reasonable steps to minimize the effects of the breach. Failure to mitigate may result in losses that are not legally recoverable.

Question 28

What are the factors considered in calculating the expectation interest in assessing damages for breach of contract?

Answer 28

The expectation interest can be calculated by considering the cost of curing the defective performance, the difference in value between the performance received and that promised, or the loss in amenity. These factors determine the economic value of the performance and aim to put the innocent party in the same position they would have been in if the contract had been performed.

Question 29

Under what circumstances can damages be awarded for loss of chance?

Answer 29

Damages for loss of chance can be awarded if the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition. The courts are reluctant to treat the loss as too speculative and will award damages based on the expectation interest, even if the precise quantification of loss may not be straightforward.

Question 30

What is the purpose of nominal damages in the law of contract?

Answer 30

Nominal damages are a token amount awarded to acknowledge that there has been a breach of contract in cases where no other remedy is available. They are awarded even if the claimant has not suffered any loss by reason of the breach.

Question 31

Can damages be recovered on behalf of another party or for losses suffered by another party?

Answer 31

The general rule is that damages cannot be recovered on behalf of another party or for losses suffered by another party. There are exceptions to this rule, but they are not considered in this context. The issue of privity of contract is relevant to this matter.

Question 32

What is the principle of restitution in contract law?

Answer 32

Restitution provides a remedy when there is a total failure of consideration. It occurs when one party has provided something of value under the contract but has received nothing in return. In such cases, the court may use the principles of restitution to prevent a party from benefiting from the lack of consideration

Question 33

How does the principle of restitution operate in cases of unjust enrichment?

Answer 33

The principle of restitution operates to reverse the unjust enrichment of one of the parties. It allows the court to compensate the claimant based on the defendant’s unjust enrichment by holding the defendant accountable for the profit they have made as a result of breach.

Question 34

What is the restitution interest and when can it be claimed?

Answer 34

The restitution interest represents the interest a claimant has in the restoration of benefits acquired by the defaulting party at the claimant’s expense. It can be claimed in exceptional circumstances where other remedies are inadequate.

Question 35

What are the requirements for a trader to repair or replace faulty goods?

Answer 35

According to section 23(2)(a), the trader must repair or replace the goods within a reasonable time and without significant inconvenience to the consumer. The determination of what is reasonable and significant takes into account the nature of the goods and the purpose for which they were acquired.

Question 36

What is the purpose of a liquidated damages clause in a contract?

Answer 36

A liquidated damages clause makes clear to a party what is at stake if it fails to comply with its obligations in the contract. It helps the party take the risk into account when determining the price for the contract.

Question 37

What is the purpose of contractual damages according to the ‘no windfall’ principle?

Answer 37

The purpose of contractual damages, according to the ‘no windfall’ principle, is to compensate the claimant for their loss. Damages cannot put the claimant in a better position than if the contract had been performed.

Question 38

In which industries are liquidated damages clauses commonly used?

Answer 38

Liquidated damages clauses are very common in the construction and technology industries. They are used to deal with the consequences of non-performance, such as delay.

Question 39

What is the difference between specific performance and an injunction as remedies?

Answer 39

Specific performance is an order requiring a party to carry out its obligations under a positive term of the contract, while an injunction is a court order restraining a party from breaching a negative term. Specific performance is awarded in exceptional cases where damages would be an inadequate remedy, such as when a unique item is involved. Injunctions are also awarded in exceptional cases where damages would be inadequate, such as when an employee goes to work for a competitor.

Question 40

What must the claimant show to recover the profit made by the defendant from the breach of contract?

Answer 40

The claimant must show that they have a legitimate interest in preventing the defendant’s profit-making activity and that no other remedy is adequate. The defendant has the burden of proving that the claimant would not have recouped the expenditure if the contract had been properly performed.

Question 41

How does the principle of restitution differ from the expectation and reliance interests in contract law?

Answer 41

The expectation interest focuses on the party’s right to receive the benefit they expected from the contract. The reliance interest aims to compensate the party for losses incurred due to their reliance on the contract. In contrast, the principle of restitution measures damages by restoring to the claimant a benefit acquired by the defaulting party at their expense. Restitution is only awarded in exceptional cases when other remedies are inadequate.

Question 42

What conditions must be met for a clause to be considered a penalty?

Answer 42

If a clause is a secondary obligation, it will not be considered a penalty if it protects a legitimate business interest and imposes a detriment that is not disproportionate to protect that interest. The courts will hold such a clause as a valid liquidated damages clause.

Question 43

Can the court intervene in relation to liquidated damages clauses?

Answer 43

While the starting point of contract law is to support parties’ agreements, there are instances where the court will intervene. The court can strike down a liquidated damages clause if it requires the party in breach to pay an excessive sum that becomes a ‘penalty’.

Question 44

What is a liquidated damages clause and why is it useful?

Answer 44

A liquidated damages clause is a clause in a contract that stipulates a certain sum to be payable on a particular breach of contract. It allows the parties to agree on the consequences of a breach in advance, providing greater certainty and reducing the need for costly litigation to determine damages.

Question 45

What is the restitutionary measure in contract law?

Answer 45

The restitutionary measure in contract law refers to compensation for the ‘restitution’ interest, which is the interest a claimant has in the restoration of benefits acquired by the defendant at the claimant’s expense. It is a third possibility for compensatory purposes.

Question 46

What are the remedial options available to consumers under the Consumer Rights Act 2015 for non-conforming goods?

Answer 46

Under the Consumer Rights Act 2015, if goods sold to a consumer fail to meet the requirements of satisfactory quality, fitness for purpose, or correspondence with description, the consumer has three remedial options: the short-term right to reject, the right to repair or replacement, and the right to a price reduction or final right to reject.

Question 47

What is the difference between a primary and secondary obligation in relation to liquidated damages clauses?

Answer 47

A clause is considered a primary obligation if it furthers the commercial objective of the contract. It is considered a secondary obligation if it is triggered by a breach of contract to compensate the innocent party.

Question 48

What is the key point made by Lord Reed in Morris-Garner v One Step (Support) Ltd?

Answer 48

Lord Reed emphasized that common law damages for breach of contract cannot be awarded merely for the purpose of depriving the defendant of profits made as a result of the breach, except in exceptional circumstances.

Question 49

What is the test for determining if a liquidated damages clause is penal?

Answer 49

The courts have developed a test to determine if a liquidated damages clause is penal. If the clause requires the party in breach to pay an excessive sum that becomes a ‘penalty’, the court may intervene. The test has evolved through case law and considers whether the sum is excessive in relation to the loss suffered.

Question 50

What is the difference between a liquidated damages clause and a penalty clause?

Answer 50

A liquidated damages clause stipulates a certain sum payable on a particular breach of contract. A penalty clause is a liquidated damages clause that requires the party in breach to pay an excessive sum, making it a penalty. In such cases, the court will not uphold a penalty clause and will assess damages based on normal principles instead.

Question 51

What is the short-term right to reject under the Consumer Rights Act 2015?

Answer 51

The short-term right to reject is available to consumers for 30 days from the time ownership has passed, the goods have been delivered, and the trader has notified the consumer that the required steps have been taken. During this period, the consumer can reject the goods and get a refund of the purchase price.

Question 52

What is the test for determining whether a liquidated damages clause is a valid clause or a penalty?

Answer 52

The test is derived from the Supreme Court decisions of ParkingEye Limited v Beavis [2015] UKSC 67 and Cavendish Square Holdings BV v Talal El Makdessi [2015] UKSC 67. The test involves determining whether the clause is a primary or secondary obligation and assessing whether the detriment imposed is out of proportion to any legitimate interest of the innocent party.

Question 53

What is an ‘efficient breach’ and why does it not justify the award of damages on a restitutionary measure?

Answer 53

An ‘efficient breach’ is a breach where the breaching party deliberately breaches the contract to enter into a more profitable contract elsewhere, putting it out of their power to perform the original contract. An efficient breach alone does not justify the award of damages on a restitutionary measure.

Question 54

What is the purpose of a prohibitory injunction?

Answer 54

A prohibitory injunction is a court order that restrains a party from breaching a negative term of the contract. It is awarded in exceptional cases where damages would be an inadequate remedy, such as when an employee goes to work for a competitor. A prohibitory injunction is more powerful than the original term of the contract.

Question 55

What factors determine whether a clause is considered a penalty?

Answer 55

The Makdessi approach considers whether a clause is a primary or secondary obligation. If it is a primary obligation, it will not engage the penalty rule and will be valid. If it is a secondary obligation, the clause will be considered a penalty if it imposes a detriment that is out of proportion to any legitimate interest of the innocent party in the performance of the primary obligation.

Question 56

What are the remedial options available to consumers under the Consumer Rights Act 2015 for non-conforming digital content?

Answer 56

For non-conforming digital content, consumers have two remedial options under the Consumer Rights Act 2015: the right to repair or replacement and the right to a price reduction. These options are available within six months from the day the digital content was supplied.

Question 57

What is the burden of proof in determining whether a liquidated damages clause is a penalty?

Answer 57

The burden of proof is on the person alleging that the clause is a penalty to prove this.

Question 58

What is the purpose of an account of profits in exceptional cases?

Answer 58

The purpose of an account of profits in exceptional cases is to compensate the claimant for the profit made by the defendant from the breach of contract. It is a way of preventing the defendant from benefiting from their breach.

Question 59

What is the impact of the law on penalties on freedom of contract?

Answer 59

The law on penalties is a clear interference with freedom of contract. It will not be invoked lightly by the court to strike down a clause in a contract freely negotiated between parties of equal bargaining power.

Question 60

What is the right to repair or replacement for non-conforming digital content under the Consumer Rights Act 2015?

Answer 60

The right to repair or replacement for non-conforming digital content requires the trader to provide the repair or replacement within a reasonable time and without significant inconvenience to the consumer. However, the consumer cannot require repair or replacement if it is impossible or disproportionate based on the nature and purpose of the digital content.

Question 61

What are the criteria for determining whether the damages stipulated in a liquidated damages clause are excessive?

Answer 61

The criteria involve considering the legitimate business interest served and protected by the clause and assessing whether the detriment imposed is extravagant, exorbitant, or unconscionable.

Question 62

Under what circumstances are specific performance and prohibitory injunctions granted?

Answer 62

Specific performance and prohibitory injunctions are discretionary and equitable remedies. They will not be granted if damages are deemed appropriate and adequate. Specific performance may be appropriate when the subject matter of the contract is unique, while prohibitory injunctions are granted when there is a need to restrain a party from breaching a negative term. The court exercises discretion based on well-established principles.

Question 63

What is the right to a price reduction for non-conforming digital content under the Consumer Rights Act 2015?

Answer 63

The right to a price reduction for non-conforming digital content is available when repair or replacement is impossible or when the trader has failed to provide repair or replacement within a reasonable time and without significant inconvenience to the consumer.

Question 64

What is the purpose of liquidated damages clauses in contracts?

Answer 64

Liquidated damages clauses allow parties to agree in advance on the consequences of a breach of contract. By deciding ‘in advance’ what damages are payable, the parties can organize their affairs with greater certainty and reduce the need for costly litigation to determine the amount of damages.

Question 65

What are positive terms and negative terms in a contract?

Answer 65

Positive terms require a party to do something, while negative terms require a party not to do something. Positive terms involve obligations to perform certain actions, while negative terms involve restrictions on certain actions.

Question 66

What is the right to a refund under the Consumer Rights Act 2015?

Answer 66

The right to a refund is available to consumers when the trader had no right to supply the digital content that was supplied. The consumer is entitled to receive a refund of all money paid for the digital content, and the refund must be given within 14 days using the same payment method used for the original purchase.

Question 67

What is the difference between specific performance and damages as remedies?

Answer 67

Specific performance is an order requiring a party to carry out its obligations under a positive term of the contract, while damages provide compensation for a party’s failure to fulfill its obligations. Specific performance is awarded in exceptional cases where damages would be an inadequate remedy.

Question 68

What is the advantage of a court order for specific performance?

Answer 68

A court order for specific performance requires a party to carry out its obligations under a positive term of the contract. Breaching such an order has more severe consequences than breaching the contract itself, as it can be treated as contempt of court and lead to imprisonment. This makes it unlikely for a party to refuse compliance with an order for specific performance.

Question 69

What is the legal position if non-compliant digital content causes damage to a device or other content?

Answer 69

According to the Consumer Rights Act 2015, if non-compliant digital content causes damage to a device or other digital content, the consumer is entitled to either repair or compensation. This right applies when the trader supplied the digital content, the damaged device or content belongs to the consumer, and the damage would not have occurred if the trader had exercised reasonable care and skill.

Question 70

What is a prohibitory injunction and how does it relate to breach of contract?

Answer 70

A prohibitory injunction is a court order that restrains a party from breaching a negative term of the contract. Similar to an order for specific performance, breaching a prohibitory injunction can be punished as contempt of court.

Question 71

What are the remedial options available to consumers under the Consumer Rights Act 2015 for non-conforming services?

Answer 71

or non-conforming services, consumers have two remedial options under the Consumer Rights Act 2015: the right to require repeat performance and the right to a price reduction. The right to require repeat performance allows the consumer to request the supplier to provide the service again within a reasonable time and without significant inconvenience. The right to a price reduction is available when repeat performance is impossible or when the supplier has failed to provide repeat performance within a reasonable time and without significant inconvenience.

Question 72

When are orders for specific performance or prohibitory injunctions not granted?

Answer 72

Orders for specific performance or prohibitory injunctions will not be granted if damages are considered appropriate and adequate. The court will assess whether the subject matter of the contract is unique or irreplaceable, or if an award of damages would be ineffective in providing adequate compensation. Additionally, these remedies are discretionary and equitable, meaning the court considers all relevant circumstances and exercises discretion based on established principles.

Question 73

What is the standard test case of the Consumer Rights Act 2015?

Answer 73

The standard test case of the Consumer Rights Act 2015 involves a consumer buying a kettle from a trader. If the kettle is non-compliant within a day or two, the consumer may reject the kettle and get a refund, accept a replacement, or insist on repair within 30 days. However, if the problem arises after the short-term right to reject has expired, the consumer is likely to be satisfied with an exchange or refund.

Question 74

What are the principles specific to the grant of an order for specific performance?

Answer 74

Specific performance will not be awarded if it would cause undue hardship on the defendant. A promise given for no consideration is not specifically enforceable, even if made as a deed. Specific performance will not be awarded for breach of contracts of employment or for obligations that require constant court supervision. It will also not be awarded for contracts that are not binding on both parties.

Question 75

What is the difference between liquidated damages and unliquidated damages?

Answer 75

Liquidated damages are predetermined damages specified in a contract, while unliquidated damages are damages assessed in the normal way, without a predetermined amount.

Question 76

What is the purpose of an interim injunction in a breach of contract case?

Answer 76

An interim injunction in a breach of contract case is sought to prevent the defendant from terminating the agreement and withholding the supply. It is a temporary court order that aims to maintain the status quo until the case is resolved.

Question 77

What are the principles specific to the grant of a prohibitory injunction?

Answer 77

The court has the power to decide the extent of any prohibitory injunction it grants and may limit it to what it considers reasonable in the circumstances. Prohibitory injunctions are granted only when it is just and convenient to do so. The court looks at the substance of the proposed remedy, not just the wording of the injunction. The court will consider all relevant circumstances and exercise discretion based on established principles.

Question 78

How does an interim injunction differ from an order for specific performance

Answer 78

An interim injunction is a temporary court order that restrains a party from breaching a negative term of the contract. On the other hand, an order for specific performance requires a party to carry out its obligations under a positive term of the contract. An interim injunction is sought to maintain the status quo, while an order for specific performance aims to enforce the contract.

Question 79

When are orders for specific performance or prohibitory injunctions not appropriate remedies?

Answer 79

Orders for specific performance or prohibitory injunctions will not be granted if damages are deemed appropriate and adequate. They are unlikely to be appropriate when the subject matter of the contract is not unique or irreplaceable, or when damages can provide adequate compensation. The availability of these remedies is discretionary and depends on the specific circumstances of each case.

Question 80

What is the test for determining whether a liquidated damages clause imposes a detriment out of proportion to any legitimate interest of the innocent party?

Answer 80

The test involves considering the legitimate business interest served and protected by the clause and assessing whether the detriment imposed is extravagant, exorbitant, or unconscionable. The burden of proof is on the person alleging that the clause is a penalty.

Question 81

What is the purpose of a court order requiring the defendant to carry out its obligations under a positive term of the contract?

Answer 81

The purpose of a court order requiring the defendant to carry out its obligations under a positive term of the contract is to ensure that the defendant fulfills their contractual obligations.

Question 82

What is the purpose of a guarantee in a contract?

Answer 82

A guarantee is a promise by a party to ensure that another party carries out its obligations, or a promise to fulfill those obligations itself if the other party does not do so. It provides additional protection to the party owed the obligation.

Question 83

How is the expectation interest calculated in contracts involving defective building works?

Answer 83

The usual method of calculating the expectation interest in contracts involving defective building works is the cost of cure. This represents the cost of substitute or remedial work required to put the claimant in the position they would have been in had the contract been properly performed.

Question 84

What is the difference between a guarantee and an indemnity?

Answer 84

A guarantee is a promise to ensure that another party carries out its obligations, while an indemnity is a promise to reimburse someone in the event that they suffer a stated loss. A guarantee’s obligation is defined by the obligated party’s obligation, while an indemnity’s obligation is legally independent of the obligated party’s obligation.

Question 85

What are the practical implications of the differences between a guarantee and an indemnity?

Answer 85

Firstly, the substance of the provision matters more than the heading ‘guarantee’ or ‘indemnity’. Secondly, if the obligated party’s obligation ceases, a guarantee’s obligation also ceases, while an indemnity remains in force. Thirdly, changes to the contract may discharge a guarantee but not an indemnity. Lastly, guarantees require certain formalities, while indemnities do not.

Question 86

What is the purpose of an indemnity in a contract?

Answer 86

An indemnity is a promise to reimburse someone in the event that they suffer a stated loss. It provides additional protection to the party suffering the loss.

Question 87

What are the differences between a guarantee and an indemnity in terms of discharge and changes to the contract?

Answer 87

If there is a change to the contract between the obligated party and the party owed the obligation, a guarantee would almost always be discharged, while an indemnity would remain in force. Additionally, if the obligated party’s obligation ceases, a guarantee’s obligation also ceases, but an indemnity remains in place.

Question 88

What are the formalities required for executing a guarantee?

Answer 88

A guarantee must be in writing and signed by the guarantor. In contrast, an indemnity does not have such formal requirements

Question 89

Can both a guarantee and an indemnity be given at the same time?

Answer 89

Yes, it is possible for both a guarantee and an indemnity to be given at the same time. This provides the party owed the obligation with the benefit of both forms of additional protection.

Question 90

Which of the following is not a mechanism for calculating expectation interest?

Loss of reputation

Loss of amenity

Cost of cure

Diminution of value

Answer 90

Loss of reputation

This is the correct answer. Expectation interest can be calculated using one of the following mechanisms: cost of cure, diminution in value or loss of amenity

Question 91

What is the aim of an award of damages for breach of contract?

Answer 91

An award of damages is aimed at compensating the innocent party for the damage or loss they have suffered as a result of the other party’s breach of contract

Question 92

In what circumstances will damages for loss of chance be awarded?

Answer 92

Damages will be awarded for loss of chance if the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition

Question 93

What is the test for factual causation in contract law?

Answer 93

The test is whether the defendant’s actions were a dominant or effective cause of the loss

Question 94

Which of the following is the most accurate summary of the description of damages which are not too remote, as per Hadley v Baxendale?

Answer 94

The damages which arise naturally according to the usual course of things from the breach, or those which the parties contemplated at the time they made the contract would probably be caused by a breach of contract.

Question 95

What happens if a claimant fails to mitigate their losses following a breach of contract by the other party?

Answer 95

The claimant will not be able to recover the losses attributable to the failure to mitigate

Question 96

What principle emerged from the court’s decision in C & P Haulage v Middleton regarding reliance interest?

Answer 96

An innocent party cannot recover expenses that would have been wasted whether or not the breach of contract occurred

Question 97

Under what circumstances will a remedy of an account of profits be awarded for a breach of contract?

Answer 97

In exceptional circumstances where traditional remedies are inadequate

A further requirement is that the claimant must show that they have a legitimate interest in depriving the defendant of his profit

Question 98

What is the time limit under the Consumer Rights Act 2015 for exercising the short-term right to reject goods that are non-conforming?

Answer 98

30 days running from the time that: (i) ownership has passed (or, in the case of contracts for hire or the like, possession has been transferred) and (ii) the goods have been delivered and (iii) in cases where the trader is required to install the goods or to take other action to enable the consumer to use the goods, the trader has notified the consumer that the required steps have been taken

Question 99

What remedy is available to a consumer under the Consumer Rights Act 2015 where the digital content supplied is non-conforming and it is impossible to replace it?

The consumer has a right to require repeat performance

The consumer has a right to a price reduction

The consumer has a right to reject the digital content

The consumer has a right to repair of the digital content

Answer 99

The consumer has a right to a price reduction

Question 100

Which of the following is not a remedy available to a consumer under the Consumer Rights Act 2015 where the goods supplied are non-conforming?

The short-term right to reject

The right to repair or replacement

The right to a price reduction or the final right to reject

The right to repeat performance

Answer 100

The right to repeat performance

Question 101

What is a liquidated damages clause?

Answer 101

A clause which stipulates a certain sum of money which is payable in the event of a particular breach of contract

Question 102

What happens if a court finds that a liquidated damages clause is a penalty?

Answer 102

The liquidated damages clause will be struck down and the claimant will be entitled to unliquidated damages assessed by the court using the normal rules of contract law

Question 103

What is a secondary obligation in the context of the judgment in Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis?

Answer 103

It is an obligation triggered by breach of contract to compensate the innocent party

Question 104

What is a prohibitory injunction?

Answer 104

It is an order restraining a party from breaching a term in a contract which requires him not to do something

Question 105

4 bars to recession?

Answer 105

(a) Affirmation. The innocent party on discovering the misrepresentation may elect to treat the
contract as continuing – and doing nothing may amount to affirmation. Once the innocent
party has affirmed the contract they cannot then change their mind and rescind.
(b) Undue delay.
(c) Where an innocent purchaser has acquired an interest in the subject matter of the
contract before purported rescission of the contract.
(d) Where it is impossible substantially to restore goods or property.