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contract law notes
contract law breach of contract notes
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Damages for breach of contract:There are various different rights/remedies available for breach of contract:
damages
action for agreed sum
restitutionary claims
equitable remedies
damages on proof of breach(as of right)
And, where breach is repudiatory, innocent parties also have the option to terminate or affirm
the contract. If the contract is terminated, both parties' future obligations are discharged.
There will be a repudiatory breach where the term which is broken/breached is a condition or
is an innominate term and the effects of the breach deprive the innocent party of substantially
the whole benefit it was intended it should get from the contract as stated in the case of Hong
Kong Fir Shipping.
The process tto follow;
breach - identify the breach
causation - the breach must have caused loss to the claimant
compensate the claimant for the loss. This involves the need to measure the loss,
ascertain whether all the loss is recoverable.
There are two ways of compensating the claimant for its loss;
identify the compensation principle and basis for compensation
loss of expectation measure and/or wasted expenditure
identify the limits the law places on the rights parties have to claim damages/to be
fully compensated.
remoteness
mitigation
contributory negligence
damages for disappointment and distress
First stage - identify the compensation principle and basis for compensation
focus on the claimant's actual loss
Surrey County Council v Bredero Homes - in this case the council could not recover damages
for breach based on profit instead they were limited to nominal damages as there was no
actual loss.
, But exceptionally an account of profits might be available as a remedy as in Attorney General
v Blake.
Second stage - damages can compensate for losses in broadly two ways;
loss of expectation - 'expectation loss'
difference in value measure
cost of cure measure
wasted expenditure loss
used when expectation loss is too speculative
no wasted expenditure damages if the amount is compensating the claimant for having made
a bad bargain.
Expectation loss -
damages are designed to put the claimant into the position it would have been in had
the contract been properly performed - Robinson v Harman
Difference in value is the difference between value of the promised performance and
value actually recieved
Cost of cure is the cost of repair so that performance can be secured - this is the cost
of putting it right
Thus, with a claim for defective performance, measure is the difference between value
of performance as promised and value actually received. The purchase price does not
feature.
Contracts to supply services - you need to think about what the party has actually lost
as a result of the breach.
Breach by cancellation of contract to supply a service; this involves the difference
between what the contractor expected to receive had contract been properly
performed and what he actually received. If the contract has gone ahead as planned,
the contractor would have received the price. BUT would have needed to cover its
fixed costs and the costs of performing the contract, leaving the net profit. SO the
measure of damages would be the net profit.
Expectation loss measure as cost of cure;
a different measure is to focus on the cost of cure, the cost of reinstatement
this is the cost of putting right a defect or non-performance
an award based on cost of cure can sometimes significantly exceed difference in value
measure
cost of cure is generally appropriate where the party has subjective reasons for
wanting performance over and above any market value of that performance.
This is known as 'consumer surplus'.
The Consumer Surplus -
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