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Remedies Notes

GDL Law Notes > GDL Contract Law Notes

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CONTRACT LAW REMEDIESThe injured party will be awarded a remedy to compensate them for the loss suffered as a result of the breach of contract.The parties may have planned for a breach by including a liquidated damages clause which sets out the sum payable in case of a breach of contract.If there is no liquidated damages clause, the injured party will bring a claim for unliquidated damages.

Liquidated damagesAn agreed amount to be paid upon breach of contract. o

Guidelines per Lord Dunedin in Dunlop Pneumatic Tyres v New Garage:Labelling is inconclusive - doesn't matter if the parties call it a liquidated damages clause as the court will consider substance, not form.If the request to pay was made in terrorem = penalty clause.Court will consider the construction of the contract at the time of contracting.Valid liquidated damages clause = 'genuine pre-estimate of loss...set at the time of contracting' oThe estimate made does not have to coincide with the loss suffered (McAlpine Capital v Tilebox)

Test for penalty clause:

1. Sum to be paid is extravagantly greater than the greatest possible loss that could arise from breach.

2. Sum to be paid is greater than the breach, where the breach is non-payment of money.

3. A single lump sum payable on any of several breaches, notwithstanding the severity of the breach.

4. Even where it is impossible to provide an accurate pre-estimate of loss, the sum stipulated may still be a genuine pre-estimate.


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If any of these apply, the clause will be a penalty clause and it will not be valid.If it's a liquidated damages clause, it will be valid so long as it is not unfair under UTCCR when dealing with business-consumer contracts. oIf invalid, C will claim unliquidated damages.

If it is a penalty clause it is invalid and C will claim for unliquidated damages.

Unliquidated damagesThe measure of damages is assessed by the court. The court aim to compensate C, not punish D. (Robinson v Harman; confirmed in The Golden Victory)GR: C has unfettered right of election on which measure to claim, but he cannot claim both. (Anglia Television v Reed)Expectation Interest o o

Puts C in the position they would have been in had the contract been properly performed. (Robinson v Harman; confirmed in The Golden Victory) Different ways of calculating the expectation interest: cost of cure, diminution in value or loss of amenity.Cost of cure: the cost of remedy work to put C in the position he would be in had the contract been properly performed. Expectation interest measured by cost of cure when dealing with defective works e.g. building works (Birse Construction v Eastern Telegraph)Diminution in value: difference between performance promised and performance received.Cost of cure and diminution in value usually amount to the same.Ruxley v Forsyth: Contract to build a swimming pool with a diving area of 7ft 6in deep for PS17,797. Swimming pool was only 6ft deep - breach of contract. Still suitable for diving and did not affect the market value so no diminution in value. However, the cost of cure was PS21,560. HELD: it would be unreasonable for C to claim the cost of cure - disproportionate. Court considered whether C would actually carry out the remedial work - if unlikely that C intends to remedy then he has lost nothing but the diminution in value, which in this case was nil. It was stated that the cost of cure is not automatically awarded where there is no diminution in value where it


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