A detailed and concise set of notes covering liquidated and unliquidated damages including cases which have a brief explanation of the key principles and the case itself. Also includes relevant tests and the criteria for them. This is great for someone if they struggle with the differences between ...
Damages
Liquidated- agreed in contract that if a breach of contract arises, the innocent party is
eligible automatically for damages. Upheld by the courts.
Unliquidated- damages assessed by the courts because the parties have not produced a
liquidated damages clauses in the contract or the clause is rendered unenforceable.
Liquidated
Regardless of the actual loss suffered by the claimant, the party that has breached
the contract, only has to pay damages agreed in the contract regardless is this is less
that what they court receive through unliquidated damages.
Balance of risks; liquid v unliquidated
If the courts find that the liquidated damages clause in the contract is a penalty, then
the courts ignore the clause and assess compensation in the usual way .
- Liquidated clauses may use the word or be described as a “penalty.” If the courts
find that the clause is a liquidated damages clause still, then it is upheld.
Substance of clause not the label
Dunlop Pneumatic Tyres v New Garage and Motor Co LTD 1915
- Set down guidelines as to whether a clause was a penalty or a genuine liquidated
damages clause.
- Dunlop guidelines
Is it a penalty intended to frighten offending party or a genuine pre-
estimated of likely loss.
Judged at time of contracting.
If the penalty is extravagant in comparison to the greatest conceivable
loss
If the penalty is a non-payment breach and liquidated damages exceeds
the amount of debt
The penalty is payable for different breeches.
Look at substance of clause not the labels.
Makdessi v Cavendish Square Holdings 2015 SC
- Makdessi was a shareholder- sold part of his shareholding of a group company to
Cavendish.
- Price payable in instalments
- Restrictive covenants agreed, if breached
Final payments not received.
Option to buy remaining shares at net asset value (no goodwill) would be
triggered.
- Lord Dunedins (Dunlop;) ‘quasi-statutory code’ too rigidly applied and never
suggested that they would be applicable to ever case.
- The test: whether the clause imposes detriment on the contract breaker out of
all proportion to any legitimate interest of the innocent party in enforcement of
the primary obligation.
- The clauses were justifiable, and the appeal was allowed.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller harrietmmacpherson. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £7.49. You're not tied to anything after your purchase.
