Remedies Flashcards
What is the purposes of damages for breach of contract?
Compensate the C for the damage, loss or injury they have suffered as a result of D’s breach; not punishment
What damages are recoverable where the C has not suffered any loss by reason of breach?
Damages recoverable will be purely nominal (a very small token amount to acknowledge there has been a breach in a case where no other remedy available)
What does it mean to ‘compensate’ the innocent party? What interest does this protect?
To put them in the same position post-breach that they should have been if contract performed; protects the expectation interest
What are the 3 alternative mechanisms used to calculate the expectation interest?
- Cost of cure (substitute/remedial work required)
- Diminution in value (difference between performance received and promised in contract)
- Loss of amenity (non-economic loss of pleasure)
What is the cost of cure?
Represents the cost of substitute/remedial work required to put C in position they would have been in had contract been properly performed
Common in defective works (not constructed to specification)
In the case of awarding damages for cost of cure, what must the C do in respect of defective works? What happens if they do not?
- Must act reasonably e.g. McGlinn - C found to have acted unreasonably in demolishing and rebuilding entire property to cure defective works for purely aesthetical reasons
- Costs limited to those which would have been incurred in remedying original defects
What is diminution in value?
The difference in value between the performance received and that promised in the contract
Is rare in practice
What is loss of amenity and what losses will it be used for?
Reflection of non-economic loss of pleasure in not getting what is contracted for - used where loss is not economic value but does have a value somewhat
E.g. Ruxley - pool built to depth of 6ft rather than specified 7ft6’ but can still be used - Ruxley should still have a remedy available but for the non-economic loss (cost of cure would have been extravagant and potentially not used for rebuilding, whereas diminution of value was £0 as same value either way)
In what settings is loss of amenity not appropriate?
Commercial settings
How to decide between the three? What should the question be?
- Cost of cure and diminution of value will likely produce the same outcome - only when there is a disparity where breach relates to asset where there is a dispute re particular specification required by purchaser (e.g. Ruxley pool)
- Question should be: in what position would C have been if contract had been properly performed
Example of calculating expectation interest
- EP creating new TV show - selling to channel for £100,000
- Expected spending £40,000 on production and museum for venue for £30,000
- Museum pulls out in breach, TV channel cancels contract
- At point of breach, EP spent £10,000 on production
What are the damages on basis of expectation interest?
**Damages on basis of expectation interest are £40,000** (difference between expected net profit of £30,000 [£100,000 income - £40,000 production costs - £30,000 museum] and actual profit of -£10,000) = expectation interest
If they were only awarded £30,000 here, they would have £20,000 (£10,000 less than the expectation interest of £40,000!) i.e. £10,000 less than what they were expecting to make
What is the reliance interest/measure?
Alternative to expectation interest/measure
Allows C to recover expenses which have been incurred in preparing for or in part performance of the contract which has been rendered pointless by the breach
What is the difference between the expectation and reliance interest?
- Reliance interest is backward looking and aims to put C in position they would have been if they had never contracted
- Expectation interest is forward looking
E.g. agree to purchase a painting - then pay a framer £400 to prepare frame particularly suited to painting - then painting seller pulls out after destroying painting (£400 would be reliance interest)
Why would a court award reliance interest over expectation interest?
If expectation damages are highly speculative the C will be limited to their reliance loss
Re painting/frame example - may be impossible to calculate expectatio interest; no equivalent painting so no ‘cure’ and hard to put a figure on dimunition in value or loss of amenity - can at least say £400 was wasted
Does the reliance interest cover all types of expenditure?
Only wasted expenditure
Re painting/frame example - cannot recover £400 if you are going to buy an alternative painting elswhere to use frame for
Are reliance losses incurred prior to or as a consequence of the breach?
Prior to breach - losses incurred remedying defective performance are therefore not reliance losses
E.g. Anglia TV - D (film star) refused to perform in film and film had to be abandoned - C did not claim on expectation measure (profit would have made from film) because they could not figure out what it would be, so instead claimed on expenses of £2,750 (money incurred on director, stage manager etc.) -
Example of calculating reliance interest
- EP creating new TV show - unable to say what income it will generate
- Spending £40,000 on production and museum for venue for £30,000
- Museum pulls out in breach, TV channel cancels contract
- At point of breach, EP spent £10,000 on production
What are the damages on basis of reliance interest?
£10,000 - money spent on production so far
Expectation of £40 and £30k irrelevant
Cf expectation interest would have secured £40,000 damages
What types of loss have special rules?
3 things: ____ distress, loss of ____ , loss of _____
- Mental distress
- Loss of reputation
- Loss of chance
What is the general rule for damages re mental distress?
Damages will not be awarded for mental distress, anguish or annoyance caused by breach
What are the exceptions for the general rule on damages for mental distress?
- Cases involving contracts whose whole purpose was the provision of pleasure, relaxation and peace of mind
- For non-pecuniary loss where a major object of the contract was to provide pleasure etc.
What is the general rule and exception for damages re loss of reputation?
- Damages will not be awarded for loss of reputation
- Exception in Malik: employee worked for corrupt/dishonest bank which collapsed and this harmed employment prospects - HOL found employee had basis of cause of action against employer for loss caused by way busines was run - due to contract of employment which contained implied term of trust and confidence; employer obligated to carry out work honestly - damages limited to C’s financial loss which suffered due to inability to obtain alternative employment
What 2 things are needed for recovering damages for loss of chance?
2 things needed
Is recoverable if:
- Lost chance is quantifiable in monetary terms and
- Real and substantial chance opportunity might have come to fruition
What if the loss of chance is too speculative? Does it matter if quantification is too imprecise?
Will courts try to award damages?
- If too speculative, damages cannot be awarded
- Courts are reluctant to find this however and will award damages based on expectation interest even if precise quantification of loss may not be straightforward or even if ‘chance’ was less than 50%
Chaplin - C denied in breach of contract the chance of going through to the final round of a contest - she had less than a 50% chance of winning and yet could be compensated for loss of chance of winning the competition (chance had to be real and substantial)
What are the basic rules of caustion, remoteness and mitigation in context of damages?
- Damages can only be recovered if they are caused by the breach
- Damages cannot be recovered if they are too remote from the breach
- Damages can be reduced if the C has failed to take reasonable steps to mitigate losses
How is a causal link established between D’s breach of contract and C’s loss?
C must establish…
- Factual causation - breach was a ‘dominant’ or ‘effective’ cause of loss (common sense approach)
- Legal causation - D should be held responsible and no novus actus interveniens
If the intervening event (novus actus interveniens) is likely to happen, what will the effect be on the chain of causation?
If likely to happen, it will generally not break chain
Lambert - dealer supplied defective trailer coupling to customer who went on using it after it was obviously broken until there was an accident…
- Factual causation established = coupling defect caused accident
- Legal causation not established = customer’s use of coupling not something which objectively one would deem ‘likely to happen’ (COC broken!)
What is the restriction imposed by remoteness of damage?
Not all losses flowing from breach are recoverable
What are the two limbs of the Hadley v Baxendale rule on remoteness of damage?
1. Losses fairly and reasonably considered arising nautrally - the ‘usual course of things’; loss recoverable if deemed a normal type of loss which would follow from breach (not knowledge of the parties)
2. Losses to have reasonably been in contemplation of both parties at the time of contracting as the probable result of the breach - particular D had sufficient actual knowledge of special circumstances to be aware of losses that are too unusual/far-reaching to satisfy the first limb
I.e. 1) Naturally occurring losses that should/would have been known and risked by parties at time of dealing about and 2) Unusual losses but both parties reasonably knew they could happen through communication of particular information
E.g. Hadley - broken mil-shaft delayed in transport by D carrier, resulted in considerable losses for C because no spare shaft available. Losses not available because 1) spare shaft would usually be available in this type of breach and 2) D not aware that mill could not function without shaft (but if communiated would have been different)
At what point in time will ‘reasonable contemplation of the parties be judged?
Judged at time of contracting rather than at time of breach
Test for the limbs on the case of Victoria Laundry
- Ordered large boiler to be delivered 5 June - delayed until 8 November
- Claimed for profit of extra business from extra boiler and loss of highly lucrative dyeing contracts that would have been obtained
- Claimant could recover the extra laundry business (was in the usual course of things)
- Claimant could not recover lucrative dyeing contracts - D had no notice of this
Summary of remedies in relation to contracts for goods
Consumer buys kettle which does not work = can simply reject and get refund within 30 days or exchange or insist on (non-disproportionate repair. But if problem only comes to light when short-term right to reject not available anymore…
- Consumer must give trader opportunity to repair/replace kettle
- If customer wants price reduction or rejection, this will not be available until trader has had opportunity to repair or replace faulty kettle
Summary of remedies in relation to contracts for digital content
What remedial options are available under the CRA for contracts for services?
- The right to require repeat performance (within reasonable time and w/o significant inconvenience) unless impossible
- The right to price reduction (only where repeat performance impossible/trader has failed to provide within a reasonable time and w/o significant inconvenience)
