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Law Notes Contract Law Notes

Damages Introduction To Remedies Notes

Updated Damages Introduction To Remedies Notes

Contract Law Notes

Contract Law

Approximately 1511 pages

From the AuthorContract law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB contract law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

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INTRODUCTION TO REMEDIES

The principal determinant of the appropriate remedies for a breach of contract cannot be the parties’ intentions at the time that the contract was entered into, as often neither party has thought about or agreed with the other what should happen if one party breaches the contract.

Therefore, when asking what remedy is appropriate, we have to ask what remedy is appropriate to reflect the value of the interest we are protecting (such as the right to contractual performance, or the objects the claimant is trying to achieve by entering into the contract), and the severity of the defendant’s conduct.

We can group remedies into three categories:

  1. Compensatory damages aim to award the claimant the loss that he has suffered as a result of the breach.

  2. Non-compensatory damages have other aims, such as to reflect the bad conduct of the defendant.

  3. Specific remedies, on the traditional view, directly enforce the defendant’s obligations: get him to deliver the goods he contracted to etc.

If you are given numbers in a problem question, work with what you have – don’t make up figures for, e.g. consumer surplus.

A. INTRODUCTORY ISSUES: DAMAGES

Questions about compensatory damages can be approached in six stages:

  1. Has the claimant suffered any loss?

    1. Expectation measure

    2. Reliance measure

  2. Has the claimant suffered an actionable type of loss?

    1. Financial loss

    2. Consumer surplus

    3. Distress caused by unwelcome sensory experience

    4. Distress caused by disappointment that the contact has been breached

    5. Is the breach itself a loss for which damages can be recovered?

  3. Causation: did the breach cause the claimant’s loss?

  4. Reasonable foreseeability: was the type of loss reasonably foreseeable?

  5. Mitigation: has the claimant mitigated his loss?

  6. Did the claimant’s fault contribute to the loss?

Damages for breach of contract convert the defendant’s primary obligation to perform into a secondary obligation to pay damages. They impose obligation on the parties that they had not agreed to or intended.

The following are some basic implications of the COMPENSATORY nature of damages for breach of contract:

(I) THE CLAIMANT CAN ONLY CLAIM FOR HIS OWN LOSS, NOT A THIRD PARTY’S

The claimant must show not only that a breach of contract has occurred, but also that he has suffered loss as a result. The general rule is that the claimant can only recover for his own loss.

  • Cf Alfred McAlpine Construction Ltd v Panatown Ltd [2000] 3 WLR 946 -> occasional circumstances that can claim damages for 3rd party

(II) ONLY THE CLAIMANT’S NET LOSS IS RECOVERABLE

The requirement of mitigation by the claimant will reduce the net loss

(III) DAMAGES FOR BREACH OF CONTRACT ARE NOT PUNITIVE

HL in Addis v Gramophone [1909] held that punitive damages cannot be recovered for a breach of contract.

  • To punish someone, need the safeguards of criminal law – not appropriate for civil system

  • Someone commits tort drops below standard of norms, breach of contract falls below standard of contract that was set by parties

Lavarack v Woods of Colchester [1967] 1 QB 278 -> damages doesn’t include what D would have done more eg throw in a bonus -> assess at the minimum standard

  • Cf Durham Tees Valley Airport Ltd v Bmibaby Ltd [2010] EWCA Civ 485 -> courts can normally work out on the balance of probabilities what D would have done

B. QUANTIFICATION OF DAMAGES

Difficulty of assessment is no bar to recovering compensatory damages. Even where all the claimant has lost is the chance to obtain a benefit (e.g. claimant is deprived of a chance to win a prize), the court will attempt to put a value on this, providing that the claimant can show that he has lost a real or substantial, not merely a speculative, chance (Chaplin v Hicks [1911]).

When ascertaining whether the claimant has suffered a loss, and if so, how much, damages will be assessed as at the date of the breach, unless this would be unjust, in which case the court can fix any other date that would be appropriate (Johnson v Agnew [1980]).

1. THE CLAIMANT’S EXPECTATION INTEREST

The aim of the expectation measure is to put the claimant in the position that he would have been in had the defendant performed his obligations under the contract, but would not have done anything he was not legally obliged to do (Lavarack v Woods [1967]).

  • Robinson v Harman (1848) 1 Exch. 850, 855 per Parke B: “The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed.”

The expectation measure is the primary remedy for breach because it best signifies what is wrong about breaching a contract. By placing the claimant in the position he would have been in if the contract had been performed, it condemns the defendant for failing to carry out the obligations that he undertook. If the primary remedy was removing the profit that the defendant had made from breaching the contract, this would indicate that breaching a contract is wrong only because the defendant made a profit from it.

However, CA in Durham Tees v Bmibaby [2010] decided that the general rule in Lavarack does not hold true in a case where the defendant is under a single obligation (such as to operate two or more aircraft for ten years) but the contract gives him a discretion as to how to perform it (such as by not providing for the number of flights). The court should ask how the contract would have been performed had it not been breached, rather than asking what was the minimum level of performance that the claimant could get away with under the contract.

This is due to the practical problems in determining what the minimum level of performance would have been on the facts, compared with the easier task of determining how...

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