Remedies for Breach Flashcards
1
Q
What is the main remedy for breach of contract?
A
Damages
Other remedies include action for an agreed sum, termination of the contract, specific performance and injunctions, and restitution.
2
Q
What right does a breach of any term of the contract give to the innocent party?
A
The right to claim damages
Damages may be nominal if no loss has been suffered.
3
Q
What must a claimant prove to recover damages?
A
That loss has been suffered as a result of the defendant’s breach and the loss must not be too remote
Types of loss and remoteness are discussed later in the chapter.
4
Q
What is the object of awarding damages?
A
To compensate the claimant for their loss, not to punish the defendant.
5
Q
Can punitive damages be awarded in contractual claims?
A
No, they cannot be awarded as a general rule.
6
Q
What happens if the claimant has not suffered any loss?
A
Only nominal damages (usually about £5–£10) will be awarded.
7
Q
In the example of the decorator, why would the claimant not sue for breach?
A
Because they have not suffered any loss.
8
Q
What was the outcome of the commercial case Obagi v Stanborough (Developments) Ltd?
A
Nominal damages of £5 were awarded, and the claimant had to pay the defendant’s costs.
9
Q
What is the rule at common law regarding damages for breach of contract?
A
The party must be placed in the same situation as if the contract had been performed.
10
Q
What is expectation loss?
A
Loss of the benefit which the claimant would have obtained had the contract been properly performed.
11
Q
How is damages assessed on an expectation loss basis?
A
By compensating the claimant for their lost expectation.
12
Q
What is the basic rule for awarding damages for defective goods?
A
The difference in value between the actual value of the goods and the value they would have had if not defective.
13
Q
What is the basic rule for awarding damages for defective services?
A
The cost of putting the work right (cost of cure).
14
Q
What was the dilemma in Ruxley Electronics v Forsyth?
A
Whether to award nothing, the cost of cure, or a sum between those figures.
15
Q
What did the House of Lords decide in Ruxley Electronics v Forsyth?
A
To award £2,500 as representing the true loss suffered due to loss of amenity.
16
Q
What is reliance loss?
A
Damages covering the expenses incurred in reliance on the contract.
17
Q
In Anglia Television v Reed, why did Anglia claim damages on a reliance loss basis?
A
They did not know what profit they would have made if the contract had been performed.
18
Q
What did the Court of Appeal hold in Anglia Television v Reed regarding pre-contract expenditure?
A
That all wasted expenditure could be recovered, including pre-contract expenditure.
19
Q
What must a claimant prove to obtain damages?
A
That they have suffered loss due to the defendant’s breach.
20
Q
What was the outcome in Omak Maritime Ltd v Mamola Challenger Shipping Co?
A
The owners could not recover damages for wasted expenditure due to having mitigated their loss.
21
Q
What is the outcome regarding damages for wasted expenditure in the case discussed?
Omak
A
The owners could not recover damages for wasted expenditure due to re-chartering the vessel at a higher rate, mitigating their loss.
This highlights the principle of mitigation in contract law.
22
Q
What types of loss can a claimant recover damages for in a contract?
A
- Personal injury
- Damage to property
- Loss of profit
- Loss of opportunity
- Mental distress and disappointment (in limited situations)
23
Q
What is the significance of the case Chaplin v Hicks?
A
The court awarded damages for a lost opportunity when the claimant was not informed about an audition time, affecting their chance to win.
This case illustrates the principle of lost opportunity in contract law.
24
Q
True or False: Damages for mental distress are commonly awarded in contract cases.
A
False
Courts are reluctant to award damages for mental distress in contract cases due to concerns about excessive claims.
25
What was the court's decision in Addis v Gramophone Co Ltd regarding mental distress?
The House of Lords refused to award damages for mental distress suffered due to an unfair dismissal.
## Footnote
This reflects the traditional approach to mental distress in contract law.
26
In what situations can damages for mental distress be awarded in contract law?
When the contract's main object is to provide peace of mind, such as hospitality and holiday contracts.
## Footnote
The case of Jarvis v Swans Tours illustrates this principle.
27
What did the House of Lords rule in Farley v Skinner regarding damages?
Damages for non-pecuniary loss can be awarded if peace of mind is an important object of the contract.
## Footnote
The claimant was awarded damages due to incorrect information affecting their property purchase.
28
What is the remoteness rule in contract law?
Parties will not be awarded damages for loss that is too remote a consequence of the breach.
## Footnote
This rule prevents unfair liability for all potential losses following a breach.
29
What does the remoteness rule established in Hadley v Baxendale state?
Damages should be such that they arise naturally from the breach or were contemplated by both parties at the time of the contract.
## Footnote
This case is foundational in understanding the remoteness of damages.
30
What are the two limbs of the remoteness rule from Hadley v Baxendale?
* Limb 1: Loss arising naturally from the breach
* Limb 2: Unusual loss contingent on special circumstances known to both parties
31
What was the significance of the case Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc?
Scottish Power was not liable for all losses due to lack of knowledge about the claimant's specific business needs.
## Footnote
This case illustrates the importance of knowledge of special circumstances in applying the remoteness rule.
32
What did the Court of Appeal decide in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd regarding damages?
The defendant was liable for ordinary business profit loss but not for lucrative contracts due to lack of knowledge about special circumstances.
## Footnote
This case further illustrates the application of the remoteness rule.
33
What did the House of Lords clarify in Koufos v C Czarnikow Ltd regarding the remoteness test?
The remoteness test in contract is not the same as in tort; it should focus on reasonable contemplation of the parties.
## Footnote
This reinforces the distinction between contract and tort law concerning liability.
34
What phrase did the House of Lords disapprove in The Heron II?
‘reasonably foreseeable’
## Footnote
The House of Lords reinstated the phrase ‘within the reasonable contemplation of the parties’ from Hadley v Baxendale.
35
What is the remoteness test in tort compared to contract according to Lord Reid in The Heron II?
The remoteness test in tort imposes a wider liability than in contract
## Footnote
In tort, damage which is reasonably foreseeable is actionable, even in unusual cases.
36
In the context of contracts, what can parties do to address unusual loss?
Point out the possibility of such loss before the contract is made
## Footnote
This is feasible because parties are usually aware of each other's identities.
37
What did Lord Reid state about the degree of probability needed for loss to be within reasonable contemplation?
Whether the loss is ‘of a kind which the defendant… ought to have realised was not unlikely to result from [the] breach’
## Footnote
This emphasizes the need for parties to consider potential consequences when forming contracts.
38
What was the main issue in Parsons (Livestock) Ltd v Uttley Ingham Ltd?
Whether the illness and death of the pigs was too remote a consequence of the breach
## Footnote
The case involved a defective hopper installation affecting stored pig food.
39
What did Lord Denning suggest about the contract test of remoteness?
It should be limited to cases of economic loss
## Footnote
For physical damage, the tort test of reasonable foreseeability should apply.
40
What was the conclusion of the Court of Appeal in Parsons v Uttley Ingham regarding loss recovery?
If a type of loss is within the parties’ contemplation as a serious possibility, then all loss of that type is recoverable
## Footnote
This applies even if the extent of the loss was not contemplated.
41
What distinction did Stuart-Smith LJ recognize in Brown v KMR Services Ltd regarding types of loss?
Loss of ordinary business profits is different in kind from that flowing from a contract with very high profits
## Footnote
This distinction helps clarify the remoteness test in damages.
42
What is the standard rule for assessing remoteness of loss according to the Court of Appeal in John Grimes Partnership Ltd v Gubbins?
Whether the loss claimed was of a kind which would have been within the reasonable contemplation of the parties at the time the contract was made
## Footnote
This applies unless exceptional circumstances dictate otherwise.
43
What does the mitigation rule require from a claimant?
To take reasonable steps to ensure losses are kept to a minimum
## Footnote
Claimants cannot recover damages for losses they could have avoided.
44
In the context of mitigation, what should Sheila do after being dismissed from her job?
Look for suitable alternative employment as a dental assistant
## Footnote
This illustrates an example of a claimant mitigating their loss.
45
What happens if a claimant fails to mitigate their loss?
The court will not award damages for that part of the loss caused by the claimant’s failure to mitigate
## Footnote
The onus is on the party in breach to prove that mitigation was possible.
46
What is the basic rule for assessing damages in breach of contract?
Damages are assessed by reference to the time of the breach
## Footnote
The claimant should act quickly to mitigate losses, especially when market prices fluctuate.
47
True or False: The remoteness rule in contract law limits the amount of damages that may be recovered.
True
## Footnote
This rule is crucial in determining recoverable damages for breach of contract.
48
Fill in the blank: In The Achilleas case, the House of Lords decided that the claimant could not recover damages for loss of the _______.
lucrative charter
## Footnote
This loss was deemed too remote due to market volatility.
49
What principle did Lord Hoffman suggest should be examined in cases like The Achilleas?
The nature of the obligation assumed by the contracting party
## Footnote
This approach moves beyond the orthodox remoteness analysis.
50
What is the principle of mitigation in contract law?
The claimant should take reasonable steps to mitigate their loss.
51
In the case of Golden Strait Corporation v Nippon Yusen Kubishiki Kaisha, what did the House of Lords state about damages?
Damages should reflect the loss suffered.
52
What is a specified damages clause?
A genuine attempt to pre-estimate the loss likely to be caused by the breach.
53
What is a penalty clause?
An attempt to put pressure on a party to perform the contract, which is unenforceable.
54
When might the innocent party argue that a clause is a penalty?
If the claimant's actual loss is greater than the amount stated in the clause.
55
What guidelines did Lord Dunedin provide for distinguishing between specified damages clauses and penalty clauses?
* If the sum is extravagant compared to the greatest loss conceivable
* If the breach is only about not paying money and the sum is greater than owed
* If a single lump sum is payable for multiple events, it is presumed to be a penalty.
56
What did the Privy Council emphasize about specified damages clauses in Philips Hong Kong Ltd v Attorney-General of Hong Kong?
Certainty is important in commercial contracts.
57
What was the decision in Azimut-Benetti SpA v Healey regarding the clause for liquidated damages?
The clause was a liquidated damages clause, not a penalty.
58
What two questions does the Supreme Court consider when determining if a clause is a penalty?
* Whether the provision provides an exorbitant alternative to ordinary damages
* Whether the clause is penal based on its impact on the contract-breaker.
59
In ParkingEye Ltd v Beavis, why was the £85 fee for overstaying considered enforceable?
ParkingEye had a legitimate interest in regulating the efficient use of the car park.
60
What is the nature of an action for an agreed sum?
A straightforward claim for the amount due, not a damages claim.
61
What must occur for a party to bring a claim for an agreed sum?
The duty to pay must have arisen.
62
What are the two main circumstances allowing a party to terminate a contract?
* Breach of condition
* Serious breach of an innominate term.
63
What happens if a breach does not automatically terminate the contract?
The innocent party can choose to affirm or discharge the contract.
64
What is the consequence of affirming a contract after a breach?
The innocent party cannot change their mind and terminate later.
65
In the example of Barot and Attwal, what choice does Barot have after Attwal breaches a condition?
Barot can affirm the contract or treat it as terminated.
66
What must a party do to mitigate their loss after a breach?
Take reasonable steps to reduce their loss.
67
What does termination of a contract discharge parties from?
Future contractual obligations.
68
What can a party do if they suffer loss due to a breach of contract?
They can sue for damages
## Footnote
A party is entitled to the excess as damages if it costs more than the outstanding payment to complete the work.
69
What is required for a party to mitigate their loss after a breach of contract?
They must take reasonable steps to reduce their loss
## Footnote
This may include getting quotes from reputable builders.
70
What does termination of a contract discharge parties from?
Future contractual obligations
71
In case of a breach of contract, what must the innocent party decide if they want to terminate?
The kind of term broken
72
What happens if the innocent party affirms the contract?
The contract continues, and both parties must perform their obligations
73
What is the effect of terminating a contract?
The contract ends and future obligations are discharged
74
When can a buyer reject goods after a breach of contract?
If the seller breaches specific sections of the Consumer Rights Act 2015 or Sale of Goods Act 1979
75
What is an anticipatory breach?
A party gives advance warning that they will not perform their contractual obligations
76
What are the two options available to the innocent party if there is an anticipatory breach?
* Terminate the contract and sue for damages immediately
* Treat the contract as continuing and wait for performance
77
What is specific performance?
An order of the court requiring a party to perform its contractual obligations
78
What is a key characteristic of specific performance as a remedy?
It is discretionary
79
Under what condition is specific performance typically not granted?
When damages are an adequate remedy
80
What is a situation where specific performance might be granted?
For the sale of a unique item, like a valuable painting
81
Why are contracts involving services often not granted specific performance?
They depend on trust and confidence, which may be broken
82
What is an injunction?
A court order that can be prohibitory or mandatory
83
What must the court consider when granting an injunction?
Whether the injunction would compel the defendant to do acts not allowed by specific performance
84
What is the general idea behind a restitution remedy?
To prevent one party from being unjustly enriched at the expense of another
85
When can a payer bring an action in restitution?
When there has been a total failure of consideration
86
What constitutes a total failure of consideration?
When the payee has not performed any part of their contractual obligations
87
What happens if the buyer has accepted the goods under the Sale of Goods Act?
The buyer may lose the right to reject the goods
88
What is an example of a situation that leads to a total failure of consideration?
If a seller refuses to deliver goods after receiving payment
89
What must be true for a claim in restitution to be valid?
There must be a breach of contract or no contract in existence
90
What is a claim in restitution?
A claim to recover money or compensation when one party has received a benefit at the expense of another party without a proper legal basis.
## Footnote
This typically occurs when there has been a breach of contract or a total failure of consideration.
91
In situation 1, what can Shakira claim if she has paid £500?
Shakira can bring a claim in restitution to recover the £500.
## Footnote
If she can buy similar goods for £500 or less, she will not need any other remedy.
92
What happens if Bill has to pay more than £800 for painting his house?
Bill will need to bring a damages action as well as, or instead of, restitution.
## Footnote
This applies if the painter abandoned the job after starting, as it does not amount to total failure of consideration.
93
What does 'quantum meruit' refer to?
A reasonable sum for work done or goods supplied when a contract has been breached.
## Footnote
It is a basis for recovery in restitution claims.
94
Can a party recover payment for work done if a contract was never formed?
Yes, they may be able to bring a claim in restitution for a reasonable sum for work done or goods supplied.
## Footnote
This principle was illustrated in the case of British Steel Corp v Cleveland Bridge.
95
What is the traditional purpose of an award of damages in contract law?
To compensate the claimant for the loss suffered due to the defendant's breach.
## Footnote
This can be measured through expectation or reliance loss.
96
What are restitutionary damages?
Damages awarded based not on the loss to the claimant, but on the gains made by the defendant.
## Footnote
They can be awarded in exceptional cases where the claimant has no discernible financial loss.
97
What was the outcome of Attorney-General v Blake regarding profits made from a breach of contract?
The Crown was entitled to the profits from Blake's autobiography despite not suffering financial loss.
## Footnote
This case illustrates the principle of accounting for profits in exceptional circumstances.
98
In Wrotham Park Estate Co Ltd v Parkside Homes Ltd, what type of damages were awarded?
Negotiating damages were awarded to compensate for the loss of opportunity to negotiate a release fee.
## Footnote
This occurred despite no discernible financial loss from the breach.
99
What is a contract of guarantee?
A contract where one person guarantees payment if another person defaults on a debt.
## Footnote
It is a secondary obligation dependent on the debtor's default.
100
What is the key difference between guarantees and indemnities?
Guarantees are secondary obligations, while indemnities create primary obligations to reimburse for losses.
## Footnote
Indemnities do not require written evidence to be enforceable.
101
What is the most appropriate remedy for Alison in the painting contract scenario?
Damages – she should receive £500 for the work completed.
## Footnote
She cannot recover the full £2,000 due to partial performance.
102
What remedy should Sumi seek against Cave Builders for a complete failure of consideration?
An action in restitution to recover the £1,000 paid in advance.
## Footnote
Cave Builders did not start the work at all.
103
What should Shell Ltd do when Bean & Co refuses to pay after delivery?
An action for the agreed sum, as payment was due within seven days of delivery.
## Footnote
This reflects the terms of their contract.
104
What remedy is appropriate for Arcos Ltd when there was no agreed price for the manufactured engine parts?
Restitution – quantum meruit for a reasonable sum for the work done.
## Footnote
This applies when a contract has not been finalized.
105
What should be done if payment for the agreed sum is not made within seven days of delivery?
An action for the agreed sum as payment should have been made within seven days of delivery.
106
What is the most appropriate remedy for breach of contract in terms of payment for work done?
An action in restitution for a quantum meruit payment.
107
What is the main focus of remedies available for breach of contract?
The main focus is on damages.
108
What is the aim of awarding damages in breach of contract cases?
To compensate a party for loss caused by the other party’s breach.
109
What must be considered regarding the loss when awarding damages?
The loss must not be too remote.
110
What is the general method of achieving the aim of damages?
By trying to put the innocent party in the position it would have been in if the contract had been properly performed.
111
What case illustrates the complexities of achieving the aim of damages?
The Ruxley v Forsyth case.
112
What should you consider when drafting a contract regarding breach compensation?
Whether to insert a clause specifying the amount of compensation payable in the event of a breach.
113
What is the difference between a specified damages clause and a penalty?
A specified damages clause outlines compensation for breach, while a penalty imposes an excessive charge not related to the loss.
114
Fill in the blank: The aim in awarding damages is to _______ a party for loss caused by the other party’s breach.
[compensate]
115
True or False: The loss caused by a breach of contract can be too remote when awarding damages.
True
116
What might you need to draft effectively in a contract?
An effective clause for compensation in the event of a breach.
