Unit 16- Damages, liquidated damages Flashcards
When can someone claim damages?
If performance of the contract does not take place at all, or is late or defective
What is the general principle in breach of contract
Full compensation of the damages deriving from the breach of contract
(Put them in the position they would have been if the breach had not occurred
What does compensation cover
-The loss which the aggrieved party has suffered
-The gain which it has been deprived of
What is foreseeability?
In awarding damages, the courts compensate the aggrieved party only for those injuries which were foreseeable or within the contemplation of the parties at the same time the contract was made
What two types of injuries are deemed foreseeable
- Injuries which will flow naturally from the breach in the ordinary course of events
- Injuries which arise from the aggrieve party’s special needs of circumstances of which the other contracting party has acknowledged or has reason to know
What is duty to mitigate damages
The innocent party should not be allowed to recover damages that could have been prevented through reasonable actions or by taking advantage of opportunities
What are the consequences of failure to comply with duty?
Gains that the aggrieved party could have made by reasonable effort are deducted from the amount that it could otherwise recover
What are liquidated damages clauses?
Parties to a contract agree, as one of the terms of their agreement, that in the event of a breach, the culpable party should pay a specified amount to injured party.
What are the functions of writing in liquidated damages clauses?
- Convenient method of determining the amount to be paid in the event of a breach
- Coercing a party to perform its obligation
- Diminish the amount of loss to be borne by a party in breach
What is the common law approach to liquidated damages clauses?
A liquidated damages clause will not be enforced if its purpose is to punish the wrongdoer/ party in breach rather than compensate the injured party (penalty clause).
What is the difference between a penalty clause and a liquidated damages clause
Penalty clause: their function is to punish the wrongdoer rather than compensate the injured party
Liquidated damages clause: purpose is to establish a genuine pre-estimate of the potential loss or harm that may result from the breach.
What is the civil law approach
Civil law systems tend to prioritise the full compensation for actual damages suffered by the innocent party – as a result liquidated damages clauses are often viewed with skepticism
