Contract Remedies Introduction

1. Contract Remedies Introduction A contract remedy compensates a Claimant for his losses. A Claimants loss includes any harm to the person or property of the claimant including diminution of the Claimants assets caused by the breach of contract

2. Damages Three methods of calculating damages in a contract claim • Expectation Loss (Loss of a Bargain) • Reliance Loss • Restitution

3. Expectation Loss This type of calculation intends to put a claimant in to the position he or she would have been had the contract been performed. Example You buy a car from a car dealer and the car dealer cancelled your order at the last minute, you will have lost the benefit of using the car, but also you have lost a chance to use it for your business until you are able to get another car. Here you will have lost profit as a result of the breach of contract. Calculating Expectation Loss • Difference in Value; or • Cost of Cure

4. Expectation Loss Jacob and Young v Kent [1921] 230 NY 239 - Are the damages out of proportion for all the loss? Ruxley Electronics and Construction Limited v Forsyth [1996] 1 AC 344 - The cost of cure method must only be used when it is reasonable and the court should consider if the Claimant intends to use any money award to repair the defect

5. Reliance Loss This method of calculation attempts to put a claimant in to the same financial position he or she would have been in had the contract NOT been made. Example A claimant will be awarded the money they have spent in reliance of the contract. McRae v Commonwealth Disposals Commission 84 CLR 377

6. Restitution The Claimant wants to claim back the benefit given to the Defendant which was conferred to him when performing the contract. Example Where a customer has paid in advance for a product which is not delivered. Here the claimant will be entitled to his money back.

7. Choosing Between Expectation, Reliance and Restitution? The Claimant chooses the method on which to base his claim The Defendant is NOT entitled to insist one method is used over another

8. Loss of a Chance? Used where a Claimant cannot prove the loss he or she has suffered the Claimant can sue for a lost chance.Chaplin v Hicks [1911] 2 KB 786Difference between the Chaplain case and the McRae case?

9. Remoteness of Damages A Claimantcan recover damages that are not too REMOTE Hadley v Baxendale [1854] 9 Ex 341 “Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of things, from such a breach of contract itself, or such as may reasonably be supposed to have been in contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.”

10. Penalty Clauses Where there is a genuine pre-estimate of loss, the clause will be enforceable. If it operates as a penalty clause it will not be.

11. Duty to Mitigate Loss A Claimant MUST take all reasonable steps to mitigate his or her losses What is reasonable is a question of FACT Payzu v Saunders [1919] 2 KB 581 Bamco de Portugal v Waterlow [1932] AC 452

12. When are Damages Assessed? Usually at the time of breach when the damage occurs.

13. Reading YOU MUST READ CHAPTER 5 OF ICSL REMEDIES MANUAL (Pages 24 to 32)