Remedies Flashcards
Remedies available for breach of contract
- Specific performance: requiring the defendant to carry out his undertaking exactly according to the terms of the contract
- Injunction: preventing the defendant from doing something which the contract says he cannot do.
- Damages: the principal remedy. Aim is to compensate for the damage/loss/injury it has suffered as a result of the defendant’s breach.
The purpose of damages in the law of contract
To compensate, not to punish
- A claimant who has not suffered any loss by reason of the breach is entitled to a judgment but the damages will be purely nominal.
- aims to put the innocent party in the same position post-breach as they should have been in had the contract been performed (sometimes called protecting the party’s ‘expectation interest’)
No windfalls
The court will look at the events taking place after the breach so as to ensure the innocent party does not receive a windfall i.e. a better result than if the contract had been performed
Plantation Holdings v Dubai Islamic Bank: to compensate the developer other than in nominal damages would have put the developer in a better position that it would have expected had the contract been performed.
Three mechanisms for calculating expectation interest
- Cost of cure
- Diminution in value
- Loss of amenity
Cost of cure
- The usual method of calculating expectation interest in contracts involving defective works (e.g. where a building is not built to the contract specification)
- The cost of cure represents the cost of substitute or remedial work required to put the claimant in the position he would have been in had the contract been properly performed.
Diminution in value
May be calculated by reference to the difference in value between the performance received and that promised in the contract.
Loss of amenity
Where there had been a breach of performance resulting in loss of expectation of performance, satisfaction of a personal preference or a pleasurable amenity, but there had been no diminution in value, the court could award modest damages to compensate the claimant.
- A reflection of the court’s growing willingness to accept that a consumer should have an available remedy where their loss is not economic in value, but nevertheless has value to them.
Applying the mechanisms for calculating the expectation interest
- Loss of amenity arises in fairly rare circumstances.
- Distinguishing between diminution of value and cost of cure is only relevant where there is disparity between them.
- ask: what is the claimant’s expectation loss? In what position would the claimant have been in had the contract been properly performed?
The reliance interest
- An alternative basis for the assessment of damages is the reliance measure.
- Allows the claimant to recover the expenses which have been incurred in preparing for, or in part performance of, the contract which have been rendered pointless by the breach.
- Backwards looking (unlike the expectation measure, which is forwards looking) as it aims to put the claimant in the position they would be in had they never contracted.
- Only allows recovery of wasted expenditure, not all expenditure.
- e.g. Anglia Television v Reed: claimants engaged the defendant to star in a film and at the last moment, in breach of contract, the defendant refused to perform so the claimants had to abandon the film. The claimants did not claim on the basis of expectation measure (what they would have made if she had starred in the film) but on the reliance measure in damages for the fees incurred for a director, stage manager etc which had been wasted.
- Reliance losses are losses incurred prior to breach, not those incurred after.
- The defendant may seek to prove that the expenditure would have been wasted anyway.
Types of loss that have special rules
- Loss of reputation
- Loss of chance
- Mental distress
Damages for mental distress
- General rule is that damages will not be awarded in relation to mental distress/anguish/annoyance (Addis v Gramophone)
- Initially, such compensation was limited to cases involving contracts where the purpose was the provision of pleasure, relaxation and peace of mind (Jarvis v Swan Tours)
- More recently, the HoL have allowed damages for non-pecuniary loss (e.g. loss of amenity) where a major object (though not the whole purpose) of the contract was to provide pleasure, relaxation and peace of mind.
Damages for loss of reputation
- General rule that damages will not be awarded for loss of reputation.
- However, Malik v Bank of Credit and Commerce International: employee claimed that having worked for BCCI, which had allegations of corruption and dishonesty, had adversely affected his employment prospects. The HoL found for the claimant, based on the fact that contracts of employment contain an implied term of trust and confidence that the employer should carry out its work in an honest way. Damages were limited to the claimant’s financial loss in not being able to find alternative employment.
Damages for loss of chance
The loss of opportunity is recoverable in damages if the lost chance is quantifiable in money terms and there was a real and substantial chance that the opportunity might have come to fruition. Otherwise, it will be treated as too speculative.
Damage on behalf of another
General rule is that damages cannot be recovered on behalf of another party/for losses suffered by another party.
Causation
The claimant must establish a causal link between the defendant’s breach of contract and his loss
(a) Whether the breach by the defendant in fact caused the loss suffered by the claimant (factual causation)
(b) Whether as a matter of law the defendant should be held responsible (legal causation)
