Remedies MCQs Flashcards
A caterer contracts with a wholesale food supplier to supply and deliver the ingredients she requires to cater for an event. The caterer will make £800 profit from the event. The event organiser has told the caterer that if the event goes well, she would use the caterer for five future contracts which would generate £5,000 profit for the caterer. The caterer has not told this to anyone. In breach of contract the wholesale food retailer does not deliver any of the ingredients to the caterer on the day of the event as agreed. At such short notice the caterer does not have time to source alternative fresh ingredients and prepare the food. The event organiser refuses to go ahead with the event (this is justified in accordance with the terms of the contract) and awards the five future contracts to a different caterer. Which one of the following statements best explains the likely position as to the damages the caterer can recover from the wholesale food supplier?
The caterer can claim the £5,000. She will not be able to claim the £800 as this is too remote.
The caterer can claim the £800 in damages. She will not be able to claim the £5,000 as this is too remote.
The caterer cannot claim either the £800 or the £5,000 in damages as both are too remote.
The caterer can claim both the £800 and the £5,000 in damages.
The caterer can claim the £800 in damages. She will not be able to claim the £5,000 as this is too speculative.
The caterer can claim the £800 in damages. She will not be able to claim the £5,000 as this is too remote.
Correct. This answer reflects the correct application of remoteness of damage to the facts. The other answers are incorrect. The damages are not too speculative (they are quantified). There is a causal link between the breach and both losses. The £800 loss would be recoverable under limb 1 of Hadley v Baxendale [1854] EWHC J70. The £5,000 loss would not be recoverable under limb 1 of Hadley v Baxendale as it is not a loss in the usual course of things. The £5,000 loss would not be recoverable under limb 2 of Hadley v Baxendale because this loss is not in the reasonable contemplation of the wholesale food supplier on these particular facts.
A printing press, decided to expand its business and ordered a large printer from a specialist retailer. Unfortunately when the printer arrived, it was faulty and Kate had to wait 3 months for a replacement. Kate would like to claim for (i) the loss of the extra printing business that she could have taken on with immediate use of the new printer; and (ii) the loss of a number of highly lucrative printing contracts which she could have obtained. What advice would you give the printing press?
The printing press can recover for the ordinary extra printing business that they would have taken on but the lucrative printing contracts would be too remote as the retailer did not have actual knowledge of these.
The printing press cannot recover for the ordinary printing business or the lucrative printing contracts as they are not losses which arise naturally.
The printing press cannot recover for the lucrative printing contracts as it is not a loss which arises naturally.
The printing press cannot recover for the ordinary extra printing business as the retailer did not have actual knowledge of it.
The printing press can recover for both the ordinary extra printing business that they would have taken on and the lucrative printing contracts as the retailer has imputed knowledge of both.
The printing press can recover for the ordinary extra printing business that they would have taken on but the lucrative printing contracts would be too remote as the retailer did not have actual knowledge of these.
A Garden Centre with a large supply of Christmas trees pays a local magazine to advertise their company in the November edition of the publication. A full-page colour advert is designed for the magazine. Shortly before the release date the magazine informs the Garden Centre that the advert will not go into the November edition as a rival Garden Centre has offered them twice the price to advertise their Company instead. Which of the following statements best describes the basis of the assessment of damages the Garden Centre is likely to obtain from the court for breach of contract by the magazine ?
The Garden Centre is likely to obtain an award for reliance interest, being the reasonable pre-contract costs incurred in designing the advert
The Garden Centre is likely to obtain an award for the expectation interest, being the loss in profit suffered as a result of the shortfall in Christmas tree sales
The Garden Centre is likely to obtain an award on a restitutionary basis, because the magazine has contracted with a more lucrative customer
The Garden Centre is unlikely to receive anything as they have been advised that the advert will not appear before the due date for its publication.
The Garden Centre is unlikely to receive anything as the Garden Centre has been advised that the advert will not appear before the due date for its publication and the Garden Centre has taken no steps to mitigate its loss.
The Garden Centre is likely to obtain an award for reliance interest, being the reasonable pre-contract costs incurred in designing the advert
Correct. It is likely that the pre-contract expenses will be awarded. These are relatively easily quantifiable. The court is unlikely to make an award on a restitutionary basis because there are no exceptional circumstances and the usual remedies appear adequate. The court is unlikely to make an award for the expectation interest because it would be hard to calculate and/or speculative.
A dealer supplied a defective cooker to a café owner. The café owner discovered the defect but went on to use the cooker knowing that is was unsafe to do so. The cooker caught fire resulting in personal injury to the café owner and damage to his property. Which one of the following statements best describes the legal position in relation to the damages recoverable by the café owner in a claim against the dealer for breach of contract (assuming a breach of contract is established)?
The café owner will not be able to recover damages for their personal injury or property damage because the losses are too remote.
The café owner will be able to recover damages for their personal injury and property damage.
The café owner will not be able to recover damages for their personal injury or property damage because the dealer’s breach was not the effective cause of the fire.
The café owner will not be able to recover damages for their personal injury or property damage because there is a break in the chain of causation.
The café owner will not be able to recover damages for their property damage because there is a break in the chain of causation. However, the café owner will be able to recover damages for their personal injury.
The café owner will not be able to recover damages for their personal injury or property damage because there is a break in the chain of causation.
Correct. This statement correctly applies the law in relation to factual and legal causation. The defective cooker was the effective cause of the fire (so factual causation is established) but the café owner’s intervening act of using the cooker knowing it is unsafe to do so will break the legal chain of causation as this would not be deemed ‘likely to happen’ (see Lambert v Lewis [1982] AC 255).
A leisure company engages a construction company to build a swimming pool that is 50 metres in length for £100,000. When the pool is finished, it found to be 49 metres long – a breach of contract. The leisure company needs the swimming pool length to be rectified as the current length is unsuitable for swimming competitions. It will cost £110,000 to rectify the issue.
Which one of the following statements best explains the legal position in relation to the measure of recoverable damages?
The leisure company will be able to claim the £110,000.
The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to nominal damages.
The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to damages for the diminution in value of the pool.
The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to damages for its reliance loss.
The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to damages for the loss of amenity.
The leisure company will be able to claim the £110,000.
Correct. This answer reflects the cost of cure which is the default mechanism for calculating expectation loss in a contract for defective works. Although the other answer options sound plausible, they are all incorrect. Cost of cure is reasonable on the facts as it not out of all proportion to the benefit to be obtained. Diminution of value is not a viable alternative to cost of cure as it is too difficult to calculate. Loss of amenity is not a viable alternative to cost of cure as it is not available for commercial contracts of this nature.
A homeowner has built a ‘garden of tranquility’. There are currently building works next to the garden and the homeowner has offered to pay the building contractor £100 a week if they do not use heavy machinery between the hours of 7-10am and 3-6pm. The building contractor agrees to this, and the arrangement works well for the first month but after that the heavy machinery is used during the prohibited times and the homeowner s very upset about this. The homeowner tries to reason with the contractors but then gives up. Six months later, the homeowner becomes aware of the possibility of seeking an injunction and has now applied to the court for a prohibitory injunction. How likely is the court to grant this injunction?
The court is likely to grant an injunction, despite the delay, as it will use its discretion to grant one where it appears to be just and convenient to do so.
The court is likely to grant the injunction because the homeowner has acted in accordance with all the equitable maxims.
The court is unlikely to grant the injunction because of the delay.
The court is unlikely to grant the injunction because the homeowner’s conduct has been poor (they have failed to come to court ‘with clean hands’).
The court is likely to grant the injunction because an award of financial compensation is not an adequate remedy.
The court is unlikely to grant the injunction because of the delay.
This is correct. Any delay in applying for an injunction can damage seriously the prospects of obtaining one. In terms of the other answers, an award of financial compensation would appear to be inadequate. The homeowner has not ‘taken matters into this own hands’. The homeowner has not failed to come to court with clean hands.
A man rents out a room in his flat to a student. The man also lives in the flat. The man hosts loud parties in the flat every week from Thursday to Monday. On 31 March, the student pays the owner of the flat £500 in return for the owner’s promise not to have any parties in the flat on any day during April and May. On 25 May, the owner of the flat starts making preparations to host a party in their flat on 31 May. Which of the following statements best describes how the student might in principle enforce the owner of the flat’s promise?
The student can enforce the owner of the flat’s promise through an order for damages for breach of contract.
The student can ask the police to enforce the contract.
The student can enforce the owner of the flat’s promise through an order for a prohibitory injunction.
The student can enforce the owner of the flat’s promise by seeking to recover the £500 paid in advance to the owner of the flat.
The student can ask the local authority to enforce the contract.
The student can enforce the owner of the flat’s promise through an order for a prohibitory injunction.
Correct. An injunction is an order of the court restraining the defendant from breaching a term of a contract. This option has the advantage (compared to damages) of the fact it can be sought before the actual breach is committed ie before the party takes place. Neither the police nor the local authority are likely to assist in relation to a purely contractual matter. It is unlikely the student can seek to recover the £500 paid in advance to the owner of the flat because it is unlikely that the student will convince the court that the owner of the flat has been unjustly enriched at her expense. Further, there is no total failure of consideration so the money paid in advance will not be recoverable (in any event, recovering the £500 would not be ‘enforcing the promise’ so much as unwinding the transaction).
A games manufacturer’s long awaited computer game is to be released on 10 September. The manufacturer agrees to sell 10,000 games to a retailer at a wholesale cost of £20 each. As the retailer is anticipating large queues and a high volume of sales on the day of advertised release, they have agreed that the games must be delivered on 9 September. Clause one of the contract between the parties (which both parties have signed) indicates in small print that, in the event of late delivery, the manufacturer must pay the retailer £500 every day until delivery is made. The manufacturer delivers the games 2 days late. Based on the above information, which of the following most accurately describes the remedy available to the retailer?
A valid liquidated damages clause has been incorporated into the contract and accordingly the retailer is likely to be awarded £1,000 in damages.
Clause one has been incorporated into the contract but it is likely to be an unenforceable penalty clause because it does not protect a legitimate business interest. The retailer is likely to be awarded nominal damages.
Clause one has been incorporated into the contract but it is void in accordance with the Unfair Contract Terms Act 1977.
Clause one has not been incorporated into the contract. The retailer is likely to be awarded nominal damages.
Clause one has been incorporated into the contract but it is likely to be an unenforceable penalty clause because it provides for a disproportionate sum to be paid. The retailer is likely to be awarded nominal damages.
A valid liquidated damages clause has been incorporated into the contract and accordingly the retailer is likely to be awarded £1,000 in damages.
Correct.
The manufacturer has breached by the contract by delivering the games 2 days late. The clause has been incorporated by signature – in those circumstances, the fact that it is in ‘small print’ is not relevant. The clause is likely to be a valid liquidated damages clause: there is likely to be a legitimate business interest in performance here as the games need to be ready for the sale to coincide with the day of advertised release. Many keen customers will be disappointed and the sales momentum from the release date will be lost. In addition, the detriment imposed by the clause is proportionate to protect the legitimate interest - the amount of £500 would be considered by reference to the value of future retail sales and the value of any loss of reputation. When you consider the loss of goodwill from fans and loss of sales momentum, this is unlikely to be seen as out of all proportion. UCTA does not apply.
A delivery company enters into an agreeement to hire six vans from a company which has a fleet of vans for a period of 3 months. In breach of contract, the company with the fleet of vans fails to make any vans available on the agreed date. What remedy is the court likely to grant the delivery company?
No remedy.
A mandatory injunction.
Damages.
Specific performance.
A prohibitory injunction.
Damages.
Correct. Damages are likely to be awarded, because the delivery company is likely to be entitled to a remedy. There is no reason on these facts to think that a prohibitory injunction is justified – there is nothing relevant to prohibit the delivery company from doing, and damages would appear to be an adequate remedy. There is no reason on these facts to think that a mandatory injunction is justified, and if the intention is to compel the company with the fleet to make vans available, then an order for specific performance is more appropriate – but again, damages would appear to be an adequate remedy, so an order for specific performance will not be granted.
A recruitment company agrees with a web-design company that the web-design company will pay £4,500 to the recruitment company if it engages an IT developer introduced to it by the recruitment company. The terms agreed between the parties provide that the web-design company must tell the recruitment company before it engages the IT developer, and that if it fails to do so, it must pay a sum of £13,500 instead. The web-design company engages the IT developer without telling the recruitment company. How is the court likely to determine the sum to be paid by way of damages?
The court is likely to refuse to award damages on the basis that the clause providing for payment of £13,500 is a penalty clause and it is not possible to predict what would have happened if the web-design company had told the recruitment company before engaging the IT developer.
The court is likely to refuse to award damages on the basis that the clause providing for payment of £13,500 is a penalty clause.
The court is likely to award damages of £13,500 on the basis that the clause providing for payment of that sum is a primary obligation rather than a secondary obligation.
The court is likely to make an award of £4,500 on the basis that the clause providing for payment of £13,500 is a penalty clause.
The court is likely to award damages of £13,500 on the basis that the clause providing for payment of that sum is a lawful liquidated damages clause.
The court is likely to make an award of £4,500 on the basis that the clause providing for payment of £13,500 is a penalty clause.
Correct. In terms of the other answers, the clause is a secondary obligation (not a primary obligation) – it arises upon breach. It is penal, because the detriment it imposes is out of all
proportion to any legitimate interest of the innocent party in the performance
of the primary obligation – the interest in performance appears to be simply to recover the fee of £4,500, and so a penalty of £13,500 (three times that sum) appears disproportionate, on the facts presented. The effect of finding a clause to be penal is that the court will need to assess the damages itself – not that any award at all is refused.
Question 1
A client, a professional tennis player, employed a company to construct a tennis court for
practice purposes. When the tennis court was finished the client discovered the length of
the court was 1cm too short.
In a claim for breach of contract, which of the following measures of damages is a
court most likely to award?
A Consumer surplus
B Difference in value
C Cost of cure
D Distress and disappointment
E Nominal
Answer
Statement C is correct. As the client is a professional tennis player, the dimensions of the court
would be critical. The loss is not just a personal preference that has not been satisfied (so
A is wrong) and the client is likely to use any damages awarded to rebuild the tennis court.
Nominal damages will only be awarded where there is no sustainable loss as a result of the
breach and so E is wrong. Damages for distress only tend to be awarded where the main
purpose of the contract is pleasure/ enjoyment and that is not the case here, so D is wrong.
Statement B is wrong as there may be no, or little, difference in value.
Question 2
A client agreed to buy goods at a price of £1,000, payment on delivery. Delivery to be on
1 October. The seller refused to deliver because the seller knew he could sell the goods to
someone else for £2,300. On 1 October the client could buy similar goods elsewhere for £1,200.
In a claim for breach of contract, which of the following most likely reflects the amount of
damages the client would be awarded by a court?
A The client will be awarded £1,300 by way of damages.
B The client will be awarded £200 plus damages for the distress involved in sourcing the
goods elsewhere.
C The client will be awarded £1,000 damages on a reliance loss basis.
D On 1 October the client could buy similar goods elsewhere and so will be awarded
£200 by way of damages.
E The client will be awarded £2,300 as the aim of damages is to punish the defaulting
party for the breach.
Answer
Statement D is correct. The client will be expected to mitigate their loss by going out into
the marketplace on the date of breach and buying similar goods elsewhere. £200 would
represent the client’s loss of bargain.
Statements A and E are wrong as the aim of damages in contract is to compensate the
innocent party and not to punish the defaulting party.
Statement B is wrong as damages for distress/ disappointment are normally confined to
contracts where the main purpose was to have peace of mind, eg a holiday contract.
Statement C is wrong as £1,000 would over compensate the client for loss of bargain.
Question 3
A client, a joiner, decided to set up his own business. He contracted with a builder to
convert his garage into a workshop. The price was £10,000 and the work was to be
completed by 1 March. However, problems with labour meant that the builder did not finish
the work until 1 June.
Which of the following best describes what the client would be able to recover by way
of damages?
A The loss of profit from cancelled joinery contracts for the period between March
and June.
B All loss of profit from cancelled joinery contracts between March and June including
loss of profit on a special contract he had with a stately home to make bespoke
shelving for its library.
C Loss of profit from cancelled joinery contracts between March and June and the mental
distress caused by the delay in starting the business.
D The expenditure your client wasted between March and June because expectation loss
would be too speculative.
E Nominal damages in recognition that the contract had been breached and the client
had suffered loss as a direct result.
Answer
Statement A is correct. Ordinary loss of profit would be within the reasonable contemplation
of the parties as being a likely consequence of breach and so would not be too remote.
Loss of profit on the special contract would be too remote unless the builder had been told
about it in advance. That is why B is wrong.
C is wrong because damages for distress are typically only awarded where the purpose of
the contract was enjoyment, eg in relation to holidays.
D is wrong as expectation loss (ie loss of profit) is unlikely to be too speculative.
Nominal damages are only awarded where a claimant cannot establish a loss as a result of
the breach and that is why E is wrong.
Question 1
A client contracted to sell a consignment of tracksuits for £10,000, payment to be within
10 days of delivery. The signed contract included the following term: ‘Time for payment shall
be of the essence’ ie a condition of the contract. The client delivered the tracksuits a month
ago but has still not been paid for them.
What is the most appropriate remedy for the client?
A Specific performance
B Injunction
C Damages
D Action for the agreed sum
E Termination
Answer
Statement D is correct. As a fixed amount of money is being claimed, action for an agreed
sum (ie the money owed) is the most appropriate remedy. Action for an agreed sum is a debt
action.
A and B are wrong as monetary compensation will be adequate.
C is wrong. Damages are subject to limitations such as remoteness and mitigation. When a
fixed sum is owed and claimed there are no such issues.
E is wrong because although ‘Time for payment shall be of the essence’ means it is a
condition of the contract it would be too late for our client to terminate. The goods have been
delivered and so there is no future performance to terminate.
Question 2
A company (‘the retailer’) entered into a contract with another company (‘the supplier’) to
buy 30,000 flat- pack boxes at a price of £60,000. The retailer paid £20,000 in advance. When
delivered, the boxes were defective and the supplier was unable to supply replacement
boxes. The retailer rejected the boxes and did not pay the balance of the purchase price. To
avoid incurring further losses, the retailer obtained replacement boxes from another supplier
for £70,000.
Ignoring interest, what sum can the retailer properly claim against the supplier?
A £70,000
B £10,000
C £30,000
D £20,000
E £60,000
Answer
C is correct. The retailer paid £20,000 in advance to the supplier. The supplier gave nothing
in return for that – there was a total failure of consideration and so the retailer is entitled to
be reimbursed £20,000 in restitution. In addition it has cost the retailer an extra £10,000 to
buy similar goods elsewhere and so the retailer would be able to claim that sum as loss of
expectation damages (Chapter 8). The retailer took reasonable steps to mitigate its loss.
A and E are wrong as the retailer would have made a windfall profit as a result of the breach.
B is wrong because it does not take account of £20,000 paid in advance for which the retailer
received nothing in return.
D is wrong as it ignores the extra money the retailer had to pay to buy replacement goods
elsewhere.
