remedies (workbook) Flashcards
What does compensating the innocent party mean?
putting the innocent party in the same position post-breach that they should have been in had the contract been performed
What is another term for compensating the innocent party?
the innocent party’s expectation interest
An example of the expectation interest
what are the 3 mechanisms for calculating the expectation interest?
- cost of cure
- diminution in value
- loss of amenity
what is the usual method of calculating the expectation interest in contracts involving defective works (eg where a building is not built to the contract specification)?
the cost of cure (the cost of substitute or remedial work required to put the claimant in the position they would have been had the contract been performed)
what are the limitations on the cost of cure?
the claimant was found to have acted unreasonably in demolishing and rebuilding an entire property for purely aesthetic reasons, so the damages were limited to the costs for remedying the defects (McGlinn v Waltham)
what is diminution in value?
difference in value between:
the performance received
the performance promised in the contract.
what is loss of amenity?
reflects the loss of non-economic value (e.g., in Ruxley, the depth of the swimming pool - £2,500 award)
example of the reliance interest
what is the reliance interest?
claimant can 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
ie - aims to put the claimant in the position they would have been in had they never contracted
how is the reliance measure different to the expectation measure?
- more cautious
- backwards looking
in the painting example, why might it be impossible to calculate the expectation interest?
- there may be no equivalent painting elsewhere that I want to buy (therefore no ‘cure’)
- it could be difficult to put a figure on diminution in value or loss of amenity
what does the reliance interest only allow the recovery of?
wasted expenditure
example of reliance measure: Anglia TV v Reed
Facts: The claimants engaged the defendant to star in a film which they were making. At the last
moment, in breach of contract, the defendant refused to perform in the film, and the claimants
had to abandon the film because they were unable to find a replacement actor. The claimants did not claim on the basis of the expectation measure (ie for the profit they would have made if the defendant had performed in the film) because they simply could not say what that would be – it was too speculative, too hard to predict. Instead, they claimed and obtained damages in respect of expenses of £2,750 in fees incurred for a director, a stage manager and others, which had been wasted by reason of the defendant’s refusal to perform, even though these expenses had been incurred before the contract was made.
Held: The claimants were entitled to these damages on the basis of the ‘reliance measure’.
what else do reliance losses not include?
losses incurred prior to breach (not those
incurred as a consequence of breach). Losses incurred remedying defective performance are not, therefore, reliance losses.
what is the restitution interest?
represents the interest a claimant has in the restoration to them of benefits (eg profit) which the defaulting party has acquired at the claimant’s expense
key case for restitution: Attorney-General v Blake
Facts: Blake, a former member of the intelligence services, broke his undertaking not to divulge any official information gained as a result of his employment by publishing his memoirs, No Other Choice. The Crown sought to recover the royalties he was to be paid by his
publishers.
Held: Their Lordships confirmed that, in general, damages were measured by the claimant’s loss,
but held that in an exceptional case the court can require the defendant to account to the
claimant for benefits received from a breach of contract.
In determining whether to order an account for profits, Lord Nicholls (with whom Lord Goff and
Lord Browne-Wilkinson agreed) stated:
“An account of profits will be appropriate in exceptional circumstances. Normally the remedies of [compensatory] damages, specific performance and injunction, coupled with the
characterisation of some contractual obligations as fiduciary, will provide an adequate response to breach of contract. It will only be in exceptional cases, where those remedies are
inadequate, that any question of accounting for profits will arise. No fixed rules can be
prescribed. The court will have regard to all the circumstances, including the subject matter of
the contract, the purpose of the contractual provision which has been breached, the
circumstances in which the breach occurred, the consequences of the breach and circumstances in which relief is being sought. A useful general guide, although not exhaustive, is whether the claimant had a legitimate interest in preventing the defendant’s profit-making activity and, hence, in depriving him of his profit.”
The Crown was held to have such a ‘legitimate interest’ in Blake and no other remedy
was adequate on the facts. If restitutionary damages had not been awarded, the Crown would have recovered nothing, since they had suffered no loss.
what type of breach alone will not justify restitutionary damages?
an ‘efficient breach’:
(a) the breach was cynical and deliberate;
(b) the breach enabled the defendant to enter into a more profitable contract elsewhere; and
(c) by entering into a new and more profitable contract, the defendant put it out of his power to
perform the contract with the claimant.
example of when restitutionary damages were not awarded: Experience Hendrix LLC v PPX
in this case, the improper granting of licences in relation to recordings made by the guitarist Jimi Hendrix was not an ‘exceptional’ case and the court therefore refused to order an account of profits.
this case was nowhere near as sensitive as national security (like in AG v Blake)
in the case of Morris-Garner v One Step, which element of the decision in Blake was emphasised?
the ‘exceptional’ nature of the case
Lord Reed: “Common law damages for breach of contract cannot be awarded merely for the purpose of depriving the defendant of profits made as a result of the breach, other than in exceptional circumstances.”
special rules for particular types of loss
- mental distress, anguish or annoyance
- loss of reputation
- loss of chance
what is the general rule wrt damages for mental distress, anguish, annoyance, injury to feelings?
damages will not be awarded
e.g., the House of Lords refused to uphold an award which had been made in relation to the ‘harsh and humiliating’ way in which the claimant had been dismissed from his job (Addis)
what are the exceptions to the general rule wrt damages for mental distress, anguish, annoyance, injury to feelings?
- contracts whose whole purpose
was the provision of pleasure, relaxation and peace of mind (Jarvis v Swan Tours) - where a major object (though not the whole purpose) of the contract was to
provide pleasure, relaxation and peace of mind (Farley v Skinner (No. 2))
what is the general rule wrt loss of reputation?
damages will not be awarded
what are the exceptions to the general rule wrt loss of reputation?
Malik v Bank of Credit and Commerce International (BCCI):
an employee had worked for the BCCI, which collapsed in 1991, amidst allegations that the bank had operated in a corrupt and dishonest manner. The employee claimed that having worked for BCCI had adversely affected his employment prospects.
HELD: The House of Lords found that the employee did have the basis for a cause of action against his former employer for the loss caused by the way it was alleged that its business had been run. This was based on the fact that contracts of employment contain an implied term of trust and confidence such that the employer is under an obligation to carry out its work in an honest way.
Damages were awarded but were limited to the claimant’s financial loss, which was suffered due to an inability to obtain alternative employment resulting from breach of this implied term.
can damages be recovered for loss of chance?
yes, if:
- the lost chance is quantifiable in monetary terms; and
- there was a real and substantial chance that the opportunity might have come to fruition (otherwise the opportunity will be seen as ‘too speculative’)
key case on damages for loss of chance: Chaplin v Hicks
the claimant was denied, in breach of contract, the chance to go through to the final round of a contest. The court held that she could be compensated for the loss of the chance of winning the competition. The courts have clarified that to claim loss of chance, the chance must be ‘real and substantial’. Applying Chaplin, awarding loss of chance may be appropriate in the context of losing the chance of ‘winning’ along with other competitors.
Note also that in Chaplin, the claimant had a less than 50% chance of winning. Where the
chance of winning or obtaining the benefit is 50% or greater, the claimant should seek to recover
their expectation loss in full and they will succeed if this can be proved on the balance of
probabilities.
what is the general rule wrt damages on behalf of another?
damages cannot be recovered on behalf of another party/for losses suffered by another party, but there are exceptions (see ‘privity of contract’)
3 basic rules in relation to causation, remoteness and mitigation
- Damages can only be recovered if they are caused by the breach.
- Damages cannot be recovered if they are too remote from the breach.
- Damages can be reduced if the claimant has failed to take reasonable steps to mitigate its losses.
what is factual causation in contract?
Whether the breach by the defendant has factually caused the loss suffered by the claimant.
- common sense approach
- dominant or effective cause of the loss
what is legal causation in contract?
Whether the defendant should be held responsible for loss which has factually been caused by its breach
- novus actus interveniens will break the chain of causation
- even if factual causation has been established
what might constitute a novus actus interveniens?
a dealer supplied a defective trailer coupling to a customer who went on using it, after it was obviously broken, until there was an accident. the customer’s use of the coupling was not something which objectively one would deem ‘likely to happen’. It therefore was treated as breaking the chain of causation and the dealer was held not liable for the accident.
summary of options available to the consumer for non-conformity
(a) The short-term right to reject
(b) The right to repair or replacement
(c) The right to a price reduction or the final right to reject.
Remedies in relation to contracts for digital content
