Abdulalah Al-Jobore
Unit 21 - Aspects of Contract and Business Law
P7 M3
P7 describes the remedies available for breach of contract
M3 analyse the remedies available to a business provider in the event of breach of
contract for the supply of goods or services.
Remedies have exist in the contract to help the injured party/victim of a breach of contract. In some
cases, one of the party might break the terms and conditions of the contract for whatever reason,
therefore as a result, the other party might get damages and injured. Therefore, legally the injured
party will be able to gain some form of compensation as a result of breaching contract. This
compensation is known as a ‘remedy’ which aimed to make sure the injured party has not lost out by
have a compensation as an insurance. Usually there are several written remedies available for
breach of contract within the contract, these are such as award of damage, specific performance,
rescissions, and restitution. In courts, the main remedy available is usually damages which can be
split into two main types: liquidated damages and unliquidated damages.
Liquidated damages
Within commercial contract, it is quite common to include liquidated damages clause since it is a
popular way of dealing with possibility of breach of contract. As the parties of a contract will agree in
advance to pay a particular sum by way of compensation in term of one of the parties breaks the
contract. Therefore, this amount of money is fixed in advance and will be written within the contract
terms and conditions. An example of this is, John has agrees to purchase Elena’s house for £40,000.
As a part of this agreement/contract, he must put down a deposit of £5,000. Both parties has agreed
that if one of them does not follow the terms and conditions of the contract, the other person gets
the £5,000 deposit. Therefore, if John did not follow the terms and condition of the contract and
fails to follow through with the purchase, Elena will be able to keep the £5,000 deposit for herself.
However, if Elena changes her mind and decides not to sell her house to John any more, she must
return the £5,000.
Unliquidated damages
Unliquidated damages are those damages that are not stated or written within the contract in term
of breaching a contract, as both parties has no prior agreement between them as to the amount of
damaged to be awarded. It is can be considered as the sum of money that cannot be foreseen or
assessed by a fixed formula used in the negotiation period of forming a contract/agreement.
Therefore, the judgment on these damages and remedies will be left to the judge or juries as
damages might categorised as unliquidated when the amount of damages is unidentifiable or
subject to unforeseen event which makes the amount of money to pay as compensation not
calculable. A simple example of unliquidated damages is, if Alex agree to lease a store to Smith,
which he intends to sell jewellery. In case of Alex breaches the contract by refusing to lease the store
at the agreed time, it will be difficult to determine what profits Smith will have lost, as the success of
the newly created small businesses will be highly uncertain. Therefore, the remedy will be
considered under the unliquidated damages, as it will be left to judge and juries to decide the
amount of money to be paid to Smith as a compensation.
Furthermore, the reason behind having unliquidated damages is to put the person in the position
they would have been in if the contract was carried out correctly. Therefore, the damages are only
designed to compensate people who have suffered with loss, not as a way of punishing the faulty
party. As the court established a specific guidelines of awarding damages and these include damages
such as: damage can only include sums for financial loss, damage to property, personal injury and
distress, disappointment and upset caused by the claimant. Although, the court states that an
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, Abdulalah Al-Jobore
Unit 21 - Aspects of Contract and Business Law
P7 M3
injured party cannot necessarily claim damages for every kind of loss. This means the consequential
losses as being loses that do not arise naturally, instead arising from special circumstances that the
party in default was not aware of when the contract was entered into. For example, the court will
not accept your claim for damages for loss of money wasted due of the defendant’s breach of
contract. Although they will not be compensated for damages, the court will allow the
claimant/plaintiff to recover only the money they have essentially wasted due to the breach of
contract, but no more money will awarded except this.
Mitigation of loss
When one of the parties breaks the contract, the injured/damaged party has a great responsibly to
mitigate or reduce the seriousness of their loss once the breach of contract and damages has
occurred. Therefore, the law implies that the victim party cannot avoid to take unreasonable steps
that increases it is loss. Therefore, the idea of mitigation of loss is that the party who has suffered
loss has to take reasonable actions to regain as much as of their loss as possible if the contract is in
breach. So, for example, think of a tenant/renter who aggress with the landlord to rent a house for a
year, but after only one month, he moves and stops paying the rent. In this case, the landlord have
the right to sue the tenant for breach of contract: however, the landlord have duty to mitigate
damages making a reasonable attempt to find a replacements tenant for the remainder of the years.
This is because the landlord cannot simply let the house lie empty for the rest eleven months and
the then suing the tenant for eleven months’ rent.
Rejection
The injured or damaged party who faces a breach of contract, by law it may be able to reject the
entire contract. Good examples of the rejection remedies are these examples when a party can
reject the entire contract in such as circumstance where the other party fails to follow the terms of
contract because of inability to deliver on time, delivering the wrong quantity or delivering poor
quality goods. Although the party are legally allowed to reject the goods in these circumstances, the
damaged/ injured party still allowed claim damages with compensation.
Lien
A lien is a right that entitles a party to keep possession of property/goods belonging to another
person until the contract fees has been paid. However, this does not gives the lien holder an
automatic right to sell the assets/goods or the property belonging to the other party of the contract.
An example of this would be where a person leaves his/her car set to repairs by a mechanical. Once
the contract is formed and stated that the car will be repaired and the owner will pay for the
services, the car mechanical will now has a lien over the car and have the right to retain possession
of it until the person pays off the services fee.
Resale
Under the law of sales, in some situation in which the buyer might wrongfully reject the acceptance
of goods or fails to make a payment due on or before the delivery of the goods or repudiates, the
aggrieved/ injured seller have the right to take back or withhold delivery of the goods, to resell them
in a commercially reasonable manners. This to make sure the seller can recover the difference
between the contract price and the resale price as well as the incidental damages, less expenses as
result of breach of the contract by the buyer. Although this allows the seller to resell the goods, the
seller is still have the right to claim damages.
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