Remedies Notes

• 1. Parties

  2. Valid Contract?: valid offer, valid acceptance, ICLR/capacity, consideration.

  3. Terms

  4. Breach

  5. Condition / Warranty / Innominate Term?

  - Condition: ‘goes to root of the contract’ (Poussard v Spiers & Pond: actress obliged to play in operetta from 1^st night).

  • effect of breach: innocent party can –

    • 1. treat contract as repudiated (i.e. terminate) parties released from future obligations (i.e. contract price).

      • OR can affirm: both parties remain bound to perform obligations can sue for damages for breach.

    • 2. claim damages.

  • ss12-15 Sale of Goods Act 1979 implied terms:

    • s12(1): seller has right to sell goods. s12(5A): condition.

    • s13(1): goods correspond with description s13(1A): condition.

    • s14: quality/fitness

      • s14(2): goods of satisfactory quality (when sold in course of business).

        • s14(2A): standard – what RP would regard as satisfactory taking a/c of description, price etc.

        • s14(2B): inc. (a) fitness for all purposes for which goods of that kind commonly supplied; (b) appearance/finish; (c) no minor defects; (d) safety; (e) durability.

        • s14(2c): unless brought to buyer’s attention / examines.

      • s14(3): fitness for particular purpose made known by buyer to seller (unless buyer did not rely / unreasonable to rely on skill/judgment of seller).

      • s14(6): s14(2) + s14(3) conditions.

    • s15: samples – bulk will correspond with quality.

    • exception: breach so slight that unreasonable to reject + buyer not dealing as consumer warranties (s15A).

  - Warranty: does NOT ‘go to root of contract’ (Bettini v Gye: singer obliged to take part in 6 days of rehearsals before 1^st show).

  • effect of breach: innocent part can claim damages only.

  - Innominate term: dep. on seriousness of effect of breach (Hong Kong Fir Shipping Co v Kawasaki Kisen Kaishi Ltd).

  • ss13-15 Supply of Goods and Services Act 1982 implied terms (not specified [Treitel]: innominate).

    • s13: supplier will carry out service with reasonable care + skill (when acting in course of business).

    • s14: supplier will carry out in reasonable time (when acting in course of business).

    • s15: party contracting with supplier will pay reasonable charge (when not determined by contract).

  6. Valid Liquidated Damages Clause?

  - Structure: requirements for valid clause –

  • Incorporation?

    • 1. notice at time/before contract (Olley v Marlborough Court).

    • 2. document has legal effect: a. signature (L’Estrange v Graucob); or b. reasonable notice.

  • Construction?: valid LDC or penalty clause (see Dunlop Pneumatic Tyre Co v New Garage Motor Co test).

  • Unfair Contract Terms Act 1977 (UCTA): only applies to exemption clauses.

  • Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR): only apply to ‘consumers’ – Reg 3 (consumer: natural person acting for purposes outside business – Reg 2).

  - Liquidated damages clause vs. penalty clause.

  • LDC: genuine pre-assessment of loss flowing from breach valid + binding.

  • penalty clause: disproportionate compensation, intended as punishment, not connected to loss unenforceable.

    • Sch 2 para 1(e) UTCCRs 1999: any requirement of customer to pay disproportionate compensation unfair term – struck out.

  - Test: Dunlop Pneumatic Tyre Co v New Garage and Motor Co, [Ld Dunedin]:

  • 1. label inconclusive.

  • 2. penalty: payment in terrorem (to intimidate); LDC: genuine pre-estimate of loss.

  • 3. judged at time of making contract, NOT breach.

  • penalty clause if: does not take a/c of severity of breach…

    • extravagant/unconscionable compared with greatest conceivable loss penalty.

    • where breach non-payment: if sum stipulated greater penalty.

    • single lump sum payable on any of several possible breaches penalty.

  • but: slight overestimation can be LDC (loss cannot always be accurately predicted).

  7. Unliquidated Damages? determined by court – measure: expectation/reliance/restitution etc.

  - Unliquidated damages: consider when no LDC or LDC struck out as penalty clause.

  • measures: expectation, reliance, restitution, mental distress, loss of reputation, loss of chance.

  - Expectation Interest: damages for loss of gains which they have been deprived of by breach (Robinson v Harman).

  • aim: to put c. in position they would have been if contract had been performed (Robinson v Harman).

    • The Golden Victory: wrongful termination, but then war so would have terminated anyway no damages.

  • 3 mechanisms (Ruxley Electronics & Construction Ltd v Forsyth: swimming pool built 6’9” instead of 7’6” deep):

    • 1. diminution in value: difference in value between what promised + what received.

      • e.g. Ruxley v Forsyth: nothing – still suitable for diving + no effect on market value.

    • 2. cost of cure: cost of substitute work to put c. in position of full performance.

      • NOT awarded where UNREASONABLE: out of proportion to benefit obtained

        • Ruxley v Forsyth: 21k to rebuild pool unreasonable (+ no intention to rebuild).

        • McGlinn v Waltham Contractors: aesthetic problems unreasonable to demolish building.

    • 3. loss of amenity: where no diminution + cost of cure unreasonable.

      • e.g. Ruxley v Forsyth: 2.5k to compensate for slightly shallow pool.

      • commercial setting: unusual but not impossible (Regus Ltd v Epcot Solutions Ltd).

      • c’s intention relevant (Birse Construction v Eastern Telegraph: close to sale no lost amenity).

    • (N.B. most situations: diminution + cost of cure identical just ask what position would c. have been in if contract properly performed – Robinson v Harman).

  • calculation: (position c. would have been in if contract fulfilled) – (position c. is in).

  - Reliance Interest: damages for expenses incurred BEFORE breach (Anglia Television Ltd v Reed).

  • aim: to put c. in position they would have been in had they never contracted.

  • apply when expectation losses too speculative: courts will not award expectation loss.

    • McRae v Commonwealth Disposals Commission: salvage expedition, speculative only reliance loss.

    • CCC Films v Quadrant Films: c. hired 3 films to distribute, never arrived so profit speculative claimed cost of hire...

Buy the full version of these notes or essay plans and more in our GDL Contract Law Notes.