Remedies Flashcards
What is the primary remedy for breach of contract?
Damages
What is the aim of an award of damages?
To compensate the claimant for the damage, loss or injury they have suffered due to the defendant’s breach
What is not the aim of an award of damages?
To punish the defendant for the breach
What happens if the claimant has not suffered any damage, loss or injury as result of the breach? Are they entitled to damages?
Yes - but damages will only be nominal to acknowledge there has been a breach
What is the default approach to damages that the court will try to do?
They will try to put the innocent party in the same position post-breach that they should have been in had the contract been performed
ie putting them in the position ‘they expect to be in’
What three mechanisms are there for calculating the expectation interest?
- cost of cure
- diminution in value
- loss amenity
How will expectation interest in relation to cost of cure be calculated?
By considering the cost of substitute or remedial work required to put the claimant in the position they would have been in had the contract been performed properly
In relation to the cost of cure, are there any requirements for how the claimant must act?
The claimant must act reasonably in relation to the defective work
How will expectation interest in relation to diminution in value be calculated?
Calculated by reference to the difference in value between the performance received and that promised in the contract
How will expectation interest in relation to loss of amenity be calculated?
Calculated by considering the non-economic loss of pleasure - reflecting value lost to them
Are there situations where loss of amenity is unlikely to be an appropriate way to calculate damages?
Commercial settings - very unusual for it to be used
What is the reliance interest approach to calculating damages?
Alternative way of calculating damages.
Allows claimant to recover expenses which have been incurred in preparing for, or in part performance of, the contract which have been rendered pointless by the breach
Aims to put the claimant in the position they would have been in had they never contracted
When is a reliance interest calculation for damages most likely to be used by the court?
When award of expectation damages is difficult because it is highly speculative
Does reliance interest allow recovery of all expenditure lost due to contact?
No - only allows recovery of wasted expenditure
And only expenditure prior to breach - not that incurred as a consequence of breach
What is the general rule in awarding damages for mental distress?
No damages will be awarded for mental distress, anguish or annoyance caused by breach of contract
What is the exception to the general rule that damages will not be awarded for mental distress?
Will be compensated:
- where contract’s whole purpose was provision of pleasure, relaxation and peace of mind
- where a major object of the contract was to provide pleasure, relaxation and peace of mind
What is the general rule in relation to damages for loss of reputation?
General rule is damages are not awarded for loss of reputation
What is the exception to the general rule that damages will not be awarded for loss of reputation?
Will be available if contract has implied term of trust and confidence which has been breached and has caused financial loss
What is the rule in relation to damages for loss of chance/opportunity?
It is recoverable where it is quantifiable in monetary terms and there was a real and substantial chance that opportunity may have come to fruition.
Courts will award based on expectation interest
What must the chance be to obtain damages for loss of opportunity?
Real and substantial
What should the claimant do if the chance of obtaining the benefit is 50% or greater?
They should obtain expectation loss in full rather than damages for loss of chance as they will succeed in recovering expectation loss if it can be proved on the balance of probabilities
What is the general rule in relation to recovering damages on behalf of another?
General rule is that damages cannot be recovered on behalf of another party/for losses suffered by another party
What is the rule in relation to causation and damages?
Damages can only be recovered where they are caused by the breach
How does a claimant prove causation for damages?
Must establish:
- factual causation - whether the breach by the defendant has, as a matter of fact, cause the loss suffered by the claimant
- legal causation - whether the defendant should be held responsible for loss which has, as a matter of fact, been caused by the breach
When will legal causation not be proved in relation to damages?
If there is a novus cactus intervenes
What is the law in relation to remoteness and damages?
Losses cannot be recovered if too remote ie losses which neither:
- arise naturally according to the usual course of things from the contract
- nor were or should have been in the contemplation of both parties
What is the law in relation to mitigation and damages?
The injured party should take reasonable steps to minimise effect of the breach.
If they do not, losses attributable to failure to do so are not recoverable
Can damages ever put the claimant in a better position than they would have been had the contract been performed?
No - principle of no windfall
When can a claimant claim restitution ie the benefits the defaulting party has gained from breach?
- must be an inadequacy of other remedies
- must be legitimate interest in depriving defendant of benefit of breach
- only in exceptional circumstances
- an efficient breach (puts party breaching in better position that if there had been no breach) alone is not enough
When will a claimant be able to claim restitution for unjust enrichment?
Where there has been a total failure to provide consideration ie one party provides something of value under contract but has received nothing in return
What is the different approach to remoteness in Transfield Shipping case? What is the approach best limited to?
Assessing remoteness by asking question of whether in objective terms defendant had assumed responsibility
Should be confined to context of specific industries
What is a liquidated damages clause?
A clause which stipulates a certain sum which is to be payable on a particular breach
Will the court uphold a liquidated damages clause?
The starting point is yes
What is the commercial advantages of a liquidated damages clause?
Provides certainty for when breach occurs
When might the court intervene in relation to a liquidated damages clause?
They might intervene when they consider the clause to be a penalty clause
What is a penalty clause?
A liquidated damages clause which requires the party in breach to pay an excessive sum, such that it becomes a penalty and therefore will not be upheld
If a liquidate damages clause is found to be a penalty clause will the party be awarded no damages?
No. Instead of the award of damages under the clause, the party will be entitled to damages assessed by the court for compensation of breach
Who bears the burden of proof of proving a clause is a penalty clause?
The person who is seeking to prove it is a penalty clause
When will a clause not be a penalty clause?
It will not be penalty clause if it is a primary obligation
It will not be a penalty clause if it is a secondary obligation and it protect a legitimate business interest and imposes a detriment which is not disproportionate to protect legitimate interest
What is meant by a clause is a primary obligation?
Clause is primary if it is part of the primary obligations in the commercial context of the contract ie furthers the commercial objective of the contract
What is meant by a clause is a secondary obligation?
Clause is a secondary obligation if it is an obligation triggered by breach of contract to compensate the innocent party
What is a positive term?
A term which requires a party to do something
What is a negative term?
A term which requires a party not to do something
What is specific performance?
Specific performance is an order issued by the court to the defendant requiring it to perform its obligations under a positive term of the contract
What is a prohibitory injunction?
A court order restraining a party from breaching a negative term of contract
Why might a party be more willing to comply with an order for specific performance/prohibitory injunction when the same obligations exist under the contract and it is refusing to carry them out?
May be more willing to do them as breach of specific performance or prohibitory injunction carries more severe consequences than breach of contract. You would be in contempt of court which could lead to imprisonment
When will an order for specific performance or prohibitory injunction be granted?
It will only be granted where damages are not an appropriate remedy.
It will need to be proved that the subject matter of the contract is unique or irreplaceable or that damages would provide inadequate compensation
What is the consequence of specific performance and prohibitory injunction being discretionary remedies?
It means that there are no clear criteria which if satisfied would entitle a party to the injunction.
It is at the court’s discretion
What is the consequence of specific performance and prohibitory injunction being an equitable remedy?
Means equitable principles will apply:
- court will take into account conduct of claimant - ‘he who comes to equity must come with clean hands’
- action must be brought with reasonable promptness - ‘delay defeats equity’
What principles will be applied in granting specific performance?
- SP will not be awarded where it causes undue hardship on the defendant
- a promise given for no consideration its not specifically enforceable, even if made as a deed
- SP will not be awarded for breach of contracts of employment
- SP will not be awarded for contracts for services if there has been a breakdown of trust and confidence between the parties or if the court would need to consider subjective opinions regarding performance
- SP will not be awarded for breach of obligation to perform a series of acts which would require constant supervision of the court
- SP will not be awarded for breach of a contract which is not binding on both parties so if a contract is voidable at instance of one party then SP not available eg minors’ voidable contracts
What condition will be required for a prohibitory injunction be granted in addition to damages being inadequate?
Must be just and convenient
What is a guarantee?
A guarantee is a promise by one party to ensure that another party carries out its obligations, or a promise to fulfil those obligation itself if that other party does not do something
What is an indemnity?
An indemnity is a promise to reimburse someone in the event that they suffer a stated loss?
Is a guarantee a primary or secondary obligation?
It is a secondary obligation, it is attached and dependent on the underlying obligation
What are the consequences of a guarantee being a secondary obligation?
It’s existence is dependent on the existence of the underlying obligation.
If the underlying obligation is extinguished, so is the guarantee.
The guarantor can never owe more than the underlying obligation
What formalities are required for a guarantee?
It must be in writing and it must be signed by the guarantor
Is an indemnity a primary or secondary obligation?
A primary obligation
What are the consequences of an indemnity being a primary obligation
It stands alone. If the underlying obligation ceases to exist the indemnity can still exist.
An indemnity can mean a party is liable for more than the underlying obligation.
Are any formalities required to create an indemnity?
No
