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FLK1 - Contract Law > Remedies > Flashcards

Remedies Flashcards

1
Q

when are damages available?

A

for all breaches of contract

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2
Q

if there has been no loss, what damages will be awarded?

A

nominal damages only

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3
Q

what is the aim of damages?

A

The aim of damages is to compensate for the loss the innocent party has suffered as a result of a breach of contract

Damages aim to put the claimant, as far as money can do it, in the position the claimant expected to be in if the contract had been properly performed.

The purpose is not (usually) to punish the defendant

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4
Q

what are the types of damages?

A

o Nominal
o Substantial

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5
Q

what must claimants do in relation to their loss?

A

Claimants must take reasonable steps to mitigate their loss.

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6
Q

when are nominal damages awarded?

A

Nominal damages are awarded when there has been a breach but the claimant has not suffered any loss.

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7
Q

when are substantial damages awarded?

A

Substantial damages will be awarded to compensate for the loss the claimant has suffered

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8
Q

re: damages

what will the claimant need to prove?

A

It must be proven that the compensation claimed is a result of the particular breach of contract

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9
Q

re: damages

what is expectation loss? What is its aim?

A

This is the standard way to assess damages for breach of contract.

Its aim is to compensate for the loss of bargain / benefit the innocent party would have received if the contract had been fulfilled

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10
Q

re: damages

what is the best way to approach an SBAQ when assessing expectation loss?

A
  1. what is the actual position of the claimant after the breach?
  2. what position would the claimant be in if the breach had not taken place?

the court is likely to award the difference between these two figures

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11
Q

re: damages

what are the types of damages that can be awarded?

A

expectation loss and reliance loss

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12
Q

re: damages

what is reliance loss?

A

The compensates the injured party for expenses they incurred (rather than profits) in reliance on the contract being performed. This is also known as wasted expenditure.

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13
Q

re: damages

how is expectation loss calculated?

A

the claimant’s actual position after the breach is compared with the position they would have been in had the contract been properly performed

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14
Q

re: damages

when can reliance loss be claimed?

A

A claimant may claim reliance loss if they are unable to calculate their expected profits or if expectation profits are too speculative

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15
Q

re: damages

give an example of reliance loss

A

Anglia Television v Reed - D was an actor who refused to carry on with a contract. C was forced to abandon the production. C claimed damages for all the expenditure they had wasted (i.e. director’s fees, designer’s fees). They did not claim damages on an expectation loss basis because they did not know what profit (if any) the show would make.

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16
Q

re: damages

what is pecuniary loss?

A

loss of value or money

These are losses that are easy to translate into financial terms i.e. lost profit or the amount of damage to a property

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16
Q

re: damages

what are the types of recoverable loss?

A

pecuniary and non-pecuniary losses

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17
Q

re: damages

when might non-pecuniary loss be awarded?

A

these are less common in contract law, but damages for a non-pecuniary loss might be awarded for loss of enjoyment/distress/disappointment if the object of the contract was to provide pleasure or peace of mind i.e. a holiday or wedding contract

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18
Q

re: damages

what is non-pecuniary loss?

A

These are things such as physical inconvenience, distress, disappointment pain and suffering i.e. that cannot be easily assessed in financial terms

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19
Q

re: damages

what will be a bar to damages?

A

if the loss is too remote and/or if the claimant has failed to mitigate their loss

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20
Q

re: damages

how is remoteness of damages approached?

A
  1. was the particular loss in reasonable contemplation of the parties at the time?

If the particular loss would be an inevitable or natural consequence of the breach, then parties will be deemed to have had it in their reasonable contemplation at the time of the contract and so the loss would be recoverable.

  1. if the particular loss was not in reasonable contemplation, then you must consider what the defendant actually knew at the time i.e. did they know of any special circumstances that meant the particular loss would be a likely consequence of the breach?

a key consideration re: (2) is whether the defendant had told the claimant about any special circumstances

if the defendant did know of any special circumstances, the loss will not be too remote and damages can be recovered. If they did not know, the loss will be too remote.

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21
Q

re: damages

what is the position in relation to the extent of loss? Give an example

A

So long as the type of loss is not too remote, the extent of the loss is not relevant

i.e. if physical injury or damage was within the contemplation of the parties, recovery is not limited because the degree of physical injury or damage could not have been anticipated

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22
Q

re: damages

give an example in relation to remoteness of damages

A

Rudi sold a camera for £100 and gave the buyer a one-year guarantee. It broke one month later. Unbeknownst to Rudi, the buyer bought the camera to photograph a wedding and lost £2k profit.

Rudi would need to pay for the repair but the £2k loss of profit would be too remote because the buyer did not tell Rudi about the wedding contract before buying the camera.

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23
Q

re: damages

what loss can a claimant not claim?

A

Claimants will not be allowed to claim for any part of the damage that was due to their failure to take reasonable steps the mitigate their loss

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24
Q

re: damages

what is the position in relation to mitigation of loss?

A

Claimants must take reasonable steps to mitigate their loss. Claimants can only claim for loss they have attempted to mitigate. It doesn’t matter if their attempts don’t actually mitigate their loss so long as they have tried.

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25
Q

re: damages

who holds the burden of proof in relation to mitigation of loss?

A

The burden is on the defendant to show that the claimant has failed to mitigate their loss

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26
Q

re: damages

give examples of where a claimant has attempted to mitigate their loss

A

o claimant dismissed from job - they look for alternative work.
o defendant refused to deliver goods to claimant - defendant should look for similar goods elsewhere
o defendant started a painting job and leaves it unfinished - claimant should look for someone else to finish the job at a reasonable price and obtain two or three quotes and accept the cheapest

27
Q

re: damages

how can damages be quantified?

A

o Loss of profit
o If the work is defective, the normal measure of the loss is the cost of putting it right (cost of cure)
o If goods are defective, the starting point is that difference in value between the goods as they are and as they were expected to be

27
Q

re: damages

what is meant by quantification of damages? what is the key principle?

A

i.e. measuring the loss in financial terms

The key principle is about putting the claimant in the same position as they would have been had the contract been properly performed

28
Q

re: damages

what clauses may feature in contracts in relation to payments for breach? What is the court’s involvement in relation to these clauses and why?

A

There is often a clause in commercial contract which states the compensation that is to be paid in the event of a particular breach.

If the matter comes before the court, it will need to determine whether this is a specified damages clause or penalty clause.

The distinction needs to be made because a penalty clause is not enforceable, whereas a specified damages clause is.

28
Q

re: damages

what can affect the quantification of damages? Give an example.

A

If the court consider the cost of cure would be unreasonable against the benefit obtained by the claimant, they may not award cost of cure. For example, if the purpose of the work was to provide the claimant with pleasure and amenity, the court may award loss of amenity rather than cost of cure. If there was no loss of pleasure or amenity, the court may award nothing.

Conversely, if the cost of cure is expensive but there was a critical reason the work be completed a certain way, the courts are more likely to award cost of cure.

example - a man had a swimming pool built in his garden. This was built 8 inches too shallow. Cost of cure would be £21k. The court held the claimant’s true loss was loss of amenity, and awarded £2.5k. If the pool was for an Olympic swimmer and the specific dimensions were particularly different, the court may have awarded cost of cure.

29
Q

re: damages

what is the test to determine whether a clause is a penalty clause?

A

o Does the clause impose a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the contract.

30
Q

re: damages

what is another name for a specified damages clause?

A

liquidated damages clause

31
Q

re: damages

what is a specified damages clause? what is its effect?

A

a genuine attempt to pre-estimate the loss that is likely to be caused by the breach

The clause is binding and the sum specified is the amount that will be paid regardless of the actual loss suffered (i.e. the usual rules on measure of damages, remoteness etc do not apply)

32
Q

re: damages

what is a penalty clause? what is its effect?

A

an attempt to put pressure on a party to perform the contract because the sum stipulated is extravagant or disproportionality high

A penalty is unenforceable. The court is free to assess damages in the usual way (i.e. measure, remoteness and mitigation)

33
Q

re: damages

what is a summary of remoteness of damages?

A

the loss must be a natural consequence of the breach or otherwise the defendant must have known at the time of the contract of special circumstances making the loss a likely consequence of the breach.

34
Q

what are performance remedies? list them

A

these are remedies that make the defendant do what they agreed to do:
o Action for an agreed sum
o Specified performance
o Injunction

35
Q

explain an action for an agreed sum

A

An action for an agreed sum is a legal remedy that compels a defendant to pay a sum of money that is already due under a contract. It involves suing for a fixed amount of money that is owed. This is normally the price of goods or services supplied under a contract.

The claimant can also claim interest

36
Q

when is the remedy ‘action for an agreed sum’ available?

A

Money has to be owed and the date for payment must have past

37
Q

why is an action for an agreed sum advantageous?

A

because issues around proving loss and remoteness drop away

38
Q

what is specific performance?

A

this is an equitable remedy which involves asking the court for an order requiring actual performance of the contract

38
Q

what are alternative names for ‘actions for an agreed sum’?

A

These are sometimes called actions in debt or actions for the price

39
Q

when are equitable remedies available?

A

they will only be awarded if it is just and equitable to do so. The claimant must come with clean hands and it must not cause disproportionate hardship to the defendant.

equitable remedies are (generally) not an alternative to damages, they are only granted if damages are not an adequate remedy

40
Q

is specific performance an effective remedy in relation to breach of contract?

A

it depends on the nature of the contract.

Where the contract is for goods, specific performance is less common because the buyer could get damages and buy them elsewhere

Specific performance also isn’t normally used for contracts for service (i.e. employment contracts)
because these contracts depend on trust and confidence and it would be inappropriate to force parties to work together where the relationship has broken down

41
Q

give an example where an order for specific performance may be granted

A

the claimant buys a house. The defendant has changed their mind and refused to transfer. The claimant could seek damages, but the law accepts the claimant wanted that specific house and so damages would not be adequate. The claimant could get a court order requiring the seller to transfer the house to her.

42
Q

what is an injunction?

A

this is an equitable remedy which restrains the defendant from doing something they have agreed not to do

43
Q

when will an injunction not be granted? Give an example.

A

An injunction will not be granted if it would compel the defendant to do acts that they could not be ordered to do by specific performance

43
Q

what is the basis for a claim in restitution?

A

a claimant will have a claim in restitution where the defendant has received a benefit at the expense of the claimant and the benefit was unjust.

There need not be a breach of contract or any contract at all.

44
Q

re: restitution

explain ‘total failure of consideration’

A

one party (the payer) has paid money to the other party (the payee) and the payee has not done any of what they were supposed to do under the contract.

if the payee starts the job and doesn’t finish, the payer cannot bring a claim as there has not been a total failure of consideration. They would need to bring a claim for damages instead.

44
Q

what are two instances which may give rise to a claim in restitution?

A

o Where money has been paid by one party and there has been a total failure of consideration; and
o Where one party has done work for the other or supplied goods and wants to be compensated for this

45
Q

re: restitution

if there has been a total failure of consideration, what remedy can the claimant seek?

A

the claimant could bring a restitution claim for the money they have already paid the defendant. If they can purchase similar goods/service but have to pay more, they will need to bring a claim for damages of expectation loss as well as, or instead of, restitution

46
Q

re: restitution

when might ‘compensation for work done or goods supplied’ be relevant?

A

o Where the contract was broken
o Where a contract was never formed

47
Q

re: restitution

in relation to compensation for work done/goods supplied where the contract is broken, what can the claimant do? Give an example.

A

The claimant can either:
o Make a restitutionary claim for a reasonable sum; or
o Damages (i.e. net loss of profit on the project)

example - Gavin agrees to build a garage for Ray. Gavin does some work and then Ray tells him to stop as he has changed his mind. Ray is in breach of contract. Gavin can sue for damages or he can bring a claim in restitution for a reasonable sum.

48
Q

re: restitution

in relation to compensation for work done/goods supplied where the was never a contract, how might this situation arise and what is the claimant entitled to?

A

where someone does work for someone before the contract is finalised and then the contract is not formed (i.e. due to breakdown). This often happens in building work where negotiations are complex but they want to start to project.

The claimant is entitle to quantum meruit only.

49
Q

re: restitution

what is quantum meruit?

A

a reasonable sum of money to be paid for services rendered or work done

50
Q

re: restitution

what are restitutionary damages?

A

Restitutionary damages aim to undo unjust enrichment. They seek to recoup benefits which have accrued to a wrongdoer, which can exceed the loss to the person who has been wronged

51
Q

re: restitution

how are restitutionary damages and normal damages different?

A

resitutionary damages seek to recoup benefits which have accrued to a wrongdoer, which can exceed the loss to the person who has been wronged whereas normal damages compensate for the loss suffered

52
Q

re: restitution

what are examples of restitutionary damages?

A

account of profit
negotiating damages

53
Q

re: restitution

explain account of profit

A

An account of profits is a legal remedy that requires a person to give up profits they’ve made through wrongdoing or by withholding money or property from another person. It’s an equitable remedy that’s often used when the parties are in a fiduciary relationship

this is not particularly common.

54
Q

re: restitution

explain negotiating damages

A

This is where the claimant has not suffered financial loss but they have lost the opportunity to negotiate a release fee relating to a restriction in the contract

55
Q

re: restitution

when would negotiating damages be allowed?

A

o It must be unfair to allow the defendant to take the full benefit of their breach of contract
o These damages are not to be awarded as an alternative to conventional damages.
o They are not to be awarded if the claimant has suffered financial loss
o They would only be awarded where the opportunity to negotiate a release fee is lost

56
Q

what is meant by a third party claim for a breach and when may this be possible?

A

when a non-defaulting party brings a claim against a third party in the event of a breach. This may be possible in relation to:
o Guarantee
o Indemnities

57
Q

what is an example of a guarantee and indemnity?

A

guarantee = ‘let him have the goods. If he does not pay you, I will’

indemnity = let him have the goods, I’ll ensure you are repaid’

58
Q

what is a guarantee? what obligation does it impose?

A

A contract of guarantee is when one person (the guarantor) guarantees that if another person (the debtor) does not pay back money owed then the guarantor will pay the money instead i.e. rent agreements and a parent is a guarantor

This creates a secondary obligation

59
Q

what are the requirements for the guarantee?

A

the guarantee must be evidenced in writing or evidenced by a written note or memorandum and must be signed by the guarantor. The evidence may comprise of a series of documents.

NB: the guarantee must be in writing but the original contract between the debtor and creditor need not.

the written evidence must have existed before the creditor seeks to enforce the contract

60
Q

what is the effect of the guarantee is not evidenced in writing?

A

it will be void and completely ineffective

61
Q

what is an indemnity? What obligation does this impose?

A

where one party promises to reimburse pound-for-pound the other party in respect of a known loss/liability arising under a contract.

this is a primary obligation and so does not need to be evidenced in writing.

FLK1 - Contract Law (6 decks)

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