Remedies - damages and penalties Flashcards
What is a liquidated damages clause?
It stipulates a certain sum which is to be payable on a particular breach of contract.
Why is it advantageous to have a liquidated damages clause?
it fixed the amount that will be due for breach as a debt arising under the contract without the claimant having to deal with uncertainty
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 the clause will not be upheld.
Apart from damages, what other remedies are available for a breach of a contract?
- prohibitory injunctions
- specific performance
Negative and positive terms
positive = requires a party to do something
negative = requires a party NOT to do something
What is specific performance?
an order that is issued by the court to the defendant, requiring it to carry out its obligations under a positive term of the contract
What is a prohibitory injunction?
court order restraining a party from breaching a negative term
Is an order for specific performance / prohibitory injunction always available in the case of a breach of a positive term /
negative term?
No
an order for specific performance or a prohibitory injunction will not be granted if damages are an appropriate and adequate remedy
what needs to be proved to show that damages are inadequate in the specific performance context
that the subject matter of the contract is unique or irreplaceable, or that an award of damages would be ineffective to provide adequate compensation
what type of remedy is a specific performance and a prohibitory injunction?
- discretionary (court can consider all relevant circumstances)
- equitable (originate from the courts of equity, and equitable
principles apply eg conduct of claimant)
What is a guarantee
a promise by a party to ensure that another party carries out its obligations, or a promise to fulfil those obligations itself if that other party does not do so
What’s the difference between guarantee and indemnity?
If A’s obligation ceases, for example because the contract between A and B is set aside. If C has provided a guarantee, then C’s obligation under the guarantee will also cease, because it is dependent on A’s obligation. If C provided an indemnity, this would remain in place.
What is an indemnity
a promise to reimburse (repay) someone in the event that they suffer a stated loss
What are the formalities for executing a guarantee?
- must be in writing
- signed by guarantor
not the same case for indemnity!
