| Liquidated damages -
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. If it is a penalty clause it is invalid and C will claim for unliquidated damages. |
| Unliquidated damages The 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 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 17,797. 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 21,560. 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 would be unjust to do so. Instead, court measured the expectation interest by loss of amenity. C was awarded 2,500. |
| Reliance Interest -
Puts C in the position they would have been in had he never entered into the contract. Reliance loss = C’s expenditure prior to the breach, not as a result of the breach. Courts will not award damages that are highly speculative – C will only be able to claim his reliance interest (McRae v Commonwealth) -
It must be shown that, had the contract gone ahead, C would have been able to recoup the expenditure. C&P Haulage v Middleton – C denied reliance interest because he could not prove that he would have been able to recover his costs if the contract went ahead. He was limited to an award of nominal damages. Burden of proof is on D to prove that C would not have been able to recoup his expenditure if the contract had gone ahead. (Omak Maritime v Mamola Challenger Shipping) |
| Restitution Interest HELD: D required to pay the Crown royalties that he was owed from his publishers. Court held that in exceptional circumstances, D can be required to account for any profit made from the breach. C was said to have a ‘legitimate’ HELD: No restitution as C did not have a legit reason for preventing D from keeping the profit. The circumstances in Blake were exceptional – national security. No restitution for unexceptional commercial breach cases. Mance LJ in Experience Hendrix v PPX Enterprise: We are not concerned with a subject anything like as special or sensitive as national security. The State's special interest in preventing a spy benefiting by breaches of his contractual duty of secrecy, and so removing at least part of the financial attraction of such breaches, has no parallel in this case. |
| Damages for mental distress -
GR: no damages will be awarded for mental distress, anguish or annoyance. Exception: damages may be awarded where a major object of the contract is for the provision of pleasure, relaxation and peace of mind. (Farley v Skinner (No.2)) Unlikely that damages for mental distress would be awarded in a purely commercial context. (Hayes v Dodds) |
| Damages for loss of reputation |
| Damages for loss of chance |
| Causation Link between the breach and the loss suffered. Courts have taken a ‘common sense approach’. (Galoo v Bright) Test: was the breach the ‘dominant’ or ‘effective’ cause of the loss? (Galoo v Bright) -
Novus Actus Interveniens (NAI): If intervening event was likely to happen, then this will not constitute a NAI. (Monarch Steamship v A/B Karslshamns) -
If the intervening event is not something deemed likely to happen, it will break the chain of causation. |
| Remoteness of damage * Only one of the limbs needs to be satisfied. What is in the contemplation of the parties is judged at the time of contracting, not the breach occurs. (Jackson v RBS) Victoria Laundry v Newman Industries: C ordered a boiler from D. C then got a lucrative contract from a third party, but lost the deal because there was a delay in the boiler delivery. HELD: C could claim for the loss of ordinary business under Limb 1 of Hadley v Baxendale as it was a risk arising naturally from the breach. C could not claim for the profit lost form the lucrative contract falling through as...
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