REMEDIES FOR BREACH OF CONTRACT

Question 1

WHAT IS A REMEDY?

Answer 1

A remedy is what the court gives the party who has suffered through non-performance of the contract

Question 2

WHAT ARE THE TWO MAIN REMEDIES FOR BREACH OF CONTRACT?

Answer 2

• The common law remedy of damages
• Equitable remedies including specific performance and injunction

Question 3

WHAT IS THE CONTRACTUAL MEASURE OF DAMAGES?

Answer 3

The courts’ approach to the awarding of damages in contract law was explained by Parke B in Robinson v Hardman [1848]:

‘the rules of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed’

This has further been considered and confirmed in subsequent cases including:

• Farlery v Skinner [2001] – Lord Scott said that the injured party ‘is entitled… to the benefit of his bargain’
• Bunge SA v Nidera SA [2015] – Lord Sumption confirmed that the ‘fundamental principle of the common law of damages is the compensatory principle’

Question 4

WHAT ARE PECUNIARY DAMAGES?

Answer 4

Pecuniary damages generally aim to compensate the injured party for their financial losses. In determining the exact sum that the claimant will recover, the courts will have regard to the main ways in which loss is calculated:

1. Loss of bargain/expectation loss
2. Reliance loss

Question 5

HOW ARE DAMAGES AWARDED IN RESPECT OF ‘LOSS OF BARGAIN/EXPECTATION LOSS’?

Answer 5

Damages here are awarded to put the claimant, financially, into the position that they would have been in had the contract been properly performed

Question 6

IN SALE OF GOODS CASES, WHAT ARE THE DAMAGES AWARDED IN RESPECT OF ‘LOSS OF BARGAIN/EXPECTATION LOSS’?

Answer 6

Damages will often be the difference between the agreed contract price and the actual market price on the day on which the goods should have been delivered; the court aims to give the injured party what they should have had and therefore compensates for the cost of replacement.

If the price of goods has gone down, the damages will be nominal – this is referred to as the market price rule.

Question 7

HOW ARE DAMAGES AWARDED IN RESPECT OF ‘RELIANCE LOSS’?

Answer 7

In some instances, it may be impossible to accurately quantify what the loss of bargain has actually cost.

Instead, the award can be based upon reliance, being the sums spent by the injured party in reliance on the other party fulfilling their obligations.

These are called consequential losses as they are losses that have been incurred as a consequence of relying on the other party’s original contractual promise

Question 8

WHAT ARE NON-PECUNIARY DAMAGES?

Answer 8

In some situations, compensation for non-pecuniary losses (such as mental distress) will also be recoverable

Question 9

WHAT DID ADDIS V GRAMOPHONE CO LTD [1909] HOLD IN RESPECT OF AWARDING NON-PECUNIARY DAMAGES?

Answer 9

Damages for distress resulting from wrongful dismissal (a breach of the employment contract) could not be recovered

Question 10

WHAT ARE THE TWO KEY EXCEPTIONS TO THE RULE IN ADDIS V GRAMOPHONE CO LTD [1909]?

Answer 10

I. Where the object of the contract is to provide pleasure, relaxation, peace of mind or freedom from distress, damages are recoverable

II. Where the breach causes physical inconvenience and discomfort, which leads to mental suffering, damages are recoverable.

Question 11

WHAT FOUR THINGS MUST A CLAIMANT SHOW IF THEY ARE TO BE AWARDED DAMAGES?

Answer 11

• That there was a breach of contract
• That the breach caused the loss complained of
• That the loss was not too remote from the breach of contract
• That they have attempted to mitigate the losses that they are claiming

Question 12

WHAT IS THE FIRST POINT TO CONSIDER WHEN DETERMINING WHETHER TO AWARD DAMAGES?

Answer 12

Whether the breach of contract actually caused the loss claimed for

Question 13

WHAT IS THE BASIC RULE IN RESPECT OF ‘REMOTENESS’ WHEN DETERMINING WHETHER TO AWARD DAMAGES?

Answer 13

The basic rule, established in Hadley v Baxendale [1854], is that the person in breach will be liable for losses which:

• A reasonable person would have anticipated as being a reasonably foreseeable result of the breach
• The defendant has been specifically warned by the claimant

All other losses will be considered too remote from the breach for the defendant to be liable.

Question 14

WHAT DOES ‘MITIGATION OF LOSSES’ MEAN IN RESPECT OF ‘REMOTENESS’ WHEN DETERMINING WHETHER TO AWARD DAMAGES?

Answer 14

This limits the amount of damages the claimant may be awarded. They must keep their losses to a minimum and cannot claim for any loss that could reasonably have been avoided.

The key question is determining whether the innocent party has acted reasonably.

Question 15

WHAT ARE THE THREE EQUITABLE REMEDIES TO BREACH OF CONTRACT?

Answer 15

1. Specific performance
2. Injunction
3. Consumer rights remedies

Question 16

WHAT IS A DECREE OF SPECIFIC PERFORMANCE?

Answer 16

A court order compelling the performance of the contract

Question 17

WHAT ARE THE FIVE KEY PRINCIPLES IN WHICH DISCRETION IS EXERCISED IN RESPECT OF SPECIFIC PERFORMANCE?

Answer 17

• Specific performance will not be ordered where damages would be an adequate remedy
• Specific performance will not be granted if constant supervision by the court would be needed to ensure compliance with the order
• It is generally not available in relation to a contract of personal services i.e employment
• It is subject to the principle of mutuality
• The party seeking the remedy must have conducted themselves properly.

Question 18

WHAT IS AN INJUNCTION?

Answer 18

A court order instructing someone to refrain from an action.

Question 19

WHEN WILL AN INJUNCTION NOT BE GRANTED?

Answer 19

An injunction will not be ordered where:

1. damages would be an adequate remedy.
2. it would have the effect of forcing the performance of a personal services contract, since it would be an indirect way of ordering the specific performance of a personal service contract

Question 20

IN RESPECT OF GOODS CONTRACTS, WHAT DOES SS20-22 CONSUMER RIGHTS ACT 2015 SAY IN RESPECT OF SHORT TERM RIGHT TO REJECT, WITHIN THE FIRST 30 DAYS OF OWNERSHIP?

Answer 20

The consumer has a 30-day window within which to exercise their initial right to reject goods which breach any of the implied terms. The time limit begins once the consumer has gained ownership or possession of the goods and will be put on hold whilst any repair or replacement is being attempted.

Rejection allows the consumer to treat the contract as having ended.

The consumer is entitled to a refund – which must be provided to them within 14 days from the date when the agreement to refund is made.

Question 21

IN RESPECT OF GOODS CONTRACTS, WHAT DOES S23 CONSUMER RIGHTS ACT 2015 SAY IN RESPECT OF THE RIGHT TO REQUEST A REPLACEMENT OR REPAIR?

Answer 21

The consumer can require the trader to repair or replace the faulty goods. The trader is required to:

• Replace the item or attempt a repair within a reasonable period
• Do so without causing significant inconvenience to the consumer
• Bear any of the costs incurred in attempting the repair/replacement

Meanwhile, the consumer must allow the trader a reasonable time to repair/replace before asking for the alternative option

Question 22

IN RESPECT OF GOODS CONTRACTS, WHAT DOES S24 CONSUMER RIGHTS ACT 2015 SAY IN RESPECT OF THE RIGHT TO A PRICE REDUCTION, OR TO FINALLY REJECT THE GOODS?

Answer 22

The final remedy option set out in s24 Consumer Rights Act 2015 is the right to either:

• Keep the goods by insist on a price reduction
• Finally reject the goods

With the price reduction option, the consumer can keep the goods and Consumer Rights Act 2015 permits the deduction to be anything up to and including the full amount of the price.

With the final right to reject under s20 Consumer Rights Act 2015, the consumer’s rejection allows them to receive a full refund which must be provided to them within 14 days from the date when the agreement to refund is made.

Question 23

IN RESPECT OF SERVICES CONTRACTS, WHAT DOES S55 CONSUMER RIGHTS ACT 2015 SAY IN RESPECT OF THE RIGHT TO REPEAT PERFORMANCE?

Answer 23

This remedy will apply where the initial service was not performed with the use of reasonable care and skill (s49 CRA 2015) in order to ensure that the contract has been performed correctly.

Here, the trader is required to perform the service again, at their own cost, within a reasonable period, and without significantly inconveniencing the consumer.

Question 24

IN RESPECT OF SERVICES CONTRACTS, WHAT DOES S56 CONSUMER RIGHTS ACT 2015 SAY IN RESPECT OF THE RIGHT TO A PRICE REDUCTION?

Answer 24

Where the repeat performance remedy is not available, or where the initial service what not performed within a reasonable time (s52 CRA 2015), the consumer has a right to require the trader to reduce the price by an amount appropriate to the severity of the breach – this can be up to 100% of the amount paid.

Any refund must be provided to the consumer within 14 days from the date when the agreement to refund is made.

Question 25

IN RESPECT OF DIGITAL CONTRACTS, WHAT DOES S43 CONSUMER RIGHTS ACT 2015 SAY IN RESPECT OF THE RIGHT TO REPAIR OR REPLACEMENT?

Answer 25

To ‘repair’ in this context meant to ensure that the digital content conforms with the contract.

The repair or replacement must be completed within a reasonable period without causing significant inconvenience to the consumer.

The trader must bear any of the costs incurred in attempting the repair/replacement which the consumer is required to allow the trader a reasonable time to repair/replace.

Question 26

IN RESPECT OF DIGITAL CONTRACTS, WHAT DOES S44 CONSUMER RIGHTS ACT 2015 SAY IN RESPECT OF THE RIGHT TO PRICE REDUCTION?

Answer 26

If the repair or replacement cannot be carried out, then a price reduction becomes an alternative option.

With the price reduction option, the consumer can keep the goods and CRA 2015 permits the deduction to be anything up to and including the full amount of the price.

Any refund must be provided to the consumer within 14 days from the date when the agreement to refund is made.

Question 27

IN RESPECT OF DIGITAL CONTRACTS, WHAT DOES S45 CONSUMER RIGHTS ACT 2015 SAY IN RESPECT OF THE RIGHT TO A REFUND?

Answer 27

This remedy is only available when the term that has been breached is the trader’s right to supply the digital content.

Any refund must be provided to the consumer within 14 days from the date when the agreement to refund is made.

Question 28

IN RESPECT OF DIGITAL CONTRACTS, WHAT DOES S46 CONSUMER RIGHTS ACT 2015 SAY IN RESPECT OF REMEDY FOR DAMAGE TO DEVICE OR TO OTHER DIGITAL CONTENT?

Answer 28

If the digital content in question causes damage to the consumer’s device or to any of the consumer’s other digital content, and where the trader has failed to use reasonable care and skill to prevent this happening, the consumer is entitled to receive either an offer from the trader to repair the damage or compensation for the damage.

Any refund must be provided to the consumer within 14 days from the date when the agreement to refund is made.