Remedies Flashcards
What are 7 main types of remedies for breach of contract?
- damages
- liquidated sums and penalties
- specific performance
- Injunctions
- Duty to mitigate
- Indemnities
- Guarantees
What are 3 ways in which damages may be awarded in contact law?
- liquidated damages clause
- claim for a debt
- unliquidated damages
What is a liquidated damages clause?
Where parties to a contract have inserted a clause which sets out how much money is payable on breach of contract.
What is the penalty rule following Makdessi?
The focus of the prevailing test following Makdessi is now whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when viewed in the context of the innocent party’s legitimate interest in the performance of the contract.
- breach of contract
- no justification of liquidated damages clause (e.g. no legitimate interest)
- Clause is excessive and/ or unconscionable -> disproportionate to commercial interest.
The penalty rule in Makdessi looks to evaluate whether there was a ‘legitimate interest’ in inserting a liquidated damages clause - what does this refer to?
primary commercial purpose of the contract for the innocent party - does the liquidated damages clause protect this?
If the liquidated damages clause deters a party from breach -> may be justified
Damages in contract law can be awarded when there is a claim for debt. When does this scenario arise?
- party fails to pay an agreed amount for the services or goods provided
- common in delivery contracts
- innocent party has the right to claim this fixed amount as debt
What are unliquidated damages (as opposed to liquidated ones)?
the sum of money that cannot be foreseen or assessed by a fixed formula. It is established by a judge in a court.
When will there likely be unliquidated damages?
- no liquidated damges clause
- dealing with more than simple debt - e.g. B2B services have been provided and not paid for.
How will the courts establish the sum of unliquidated damages?
- Expectation loss
Putting C in the position they would have been in but for the loss.
Damages compensate for the loss suffered.
- Cost of cure or diminution value
Putting C in the position they would have been in but for the loss WHERE the contract has already been performed but not to the right standard.
Common in construction contracts.
Defective performance; needs correction.
What is meant by ‘expectation interest’?
the party’s interest in being in as good a position as he or she would have been in had the contract been performed. Expectation interest is anticipated by net profits and losses less any costs or losses, which are used to gauge the appropriate measure of damages.
What is the difference between ‘cost of cure’ and diminution value?
Cost of cure -> how much it costs to to remedy defective performance (e.g. ceiling painted wrong colour -> CoC = cost of repainting the right colour)
Diminution value -> awarded when CoC is not awarded; difference between value of goods received and expected value.
If cost of cure (repair) is unreasonable and there is no diminution value, what will D be awarded?
Neither CoC nor DV.
May be awarded nominal damages or damages for inconvenience (where contract is one for pleasure such as a pool)
What are reliance loss damages used for?
to recover expenses incurred by innocent party up to the point when the contract was breached.
Used when C is undertaking a ‘venture’ and breach puts a stop to this venture.
Used when not possible to predict possible losses - presumption that venture would at least breakeven so C recovers lost expenses.
Can damages be awarded for non-financial losses?
Yes
When can damages be awarded for non-financial losses?
- major/important part of the contract
- used to give pleasure/ relaxation/ peace of mind
- rare in B2B contracts
- e.g. ‘loss of amenity’
- or mental distress caused
