Breach Of Contract

Front 1

What is anticipatory breach?

Back 1

A situation where, prior to the time fore performance, one party demonstrates an unconditional intention not to perform his/her contractual obligations.

Front 2

What is actual breach?

Back 2

A situation where one party does not perform or fully perform their contractual obligations at the time for performance.

Front 3

What did White v Carter establish?

Back 3

That after an anticipatory breach, the innocent party can choose to affirm or terminate the contract. If they choose to affirm, they will be able to claim all the costs incurred, even after the anticipatory breach.

Front 4

Why is the decision in White v Carter controversial?

Back 4

Because it encourages wasteful performance, and caused undue hardship to the contract-breaker.

Front 5

What 2 restrictions are there on the innocent party's right to affirm the contract after anticipatory breach? and in what case were these established?

Back 5

1) The need for cooperation from the guilty party to continue the contract.

2) They must have a legitimate interest in performing the contract (usually found)

Ocean Marine Navigation.

Front 6

What are the consequences of affirmation?

Back 6

-If the party in anticipatory breach does not actually perform at the time for performance, they will have to pay damages for actual breach.
- However, if the injured party subsequently breaches the contract, they will have to pay damages.

Front 7

How is actual breach of contract established?

Back 7

most contractual obligations are strict, so non-compliance will be a breach irrespective of fault.

Front 8

What remedies are available for breach of contract?

Back 8

- Damages are available for all types of breach.

-The innocent party may be able to terminate the contract- but only if a condition has been breached, not a warranty.

Front 9

What is the aim of damages for breach of contract?

Back 9

To put the innocent party in the position they would have been in had the contract been performed- to compensate the injured party rather than punish the guilty one.

Front 10

What are the 3 main types of contractual damages?

Back 10

1) Restitution Interest
2) Reliance Interest
3) Expectation Interest

Front 11

What is the restitution interest?

Back 11

the prevention of unjust enrichment- forcing the defendant to disgorge the value he received from the plaintiff as he failed to perform the promise.

Front 12

What is the reliance interest?

Back 12

Damages for undoing the harm caused to the plaintiff as a result of his reliance on the defendant's promise.

Front 13

What is the expectation interest?

Back 13

Damages to put the innocent party in the position they would have been had the contract been performed.

Front 14

What is 'cost of cure?' and in what case was is not allowed?

Back 14

'Cost of cure' can be claimed instead of the expectation interest, and if the amount required to complete the contract as agreed.

In Ruxley Electronics v Forsyth te HL held that cost of cure would be completely disproportionate, so the claimant was awarded damages for 'loss of amenity'

Front 15

What damages were awarded in AG v Blake?

Back 15

An 'account of profits' were awarded, which were gain based- damages, based on the amount the defendant had gained as a result of the contract breach, as the claimant had not actually suffered any loss- so damages based on that would have been nominal.

Front 16

What damages were awarded in Wrotham Park?

Back 16

The damages were based on a judicial assessment of anticipated profit.

Front 17

What did Lord Hobhouse worry about in Blake?

Back 17

He said that an account of profits should only be awarded in exceptional circumstances, and worried that it would be extended to commercial contracts.
-He thought that awarding non-compensatory damages in commercial law would have far-reaching and disruptive consequences.

Front 18

Was Lord Hobhouse's warning heeded?

Back 18

No, an account of profits was also awarded in the cases of Esso Petroleum v NIAD, and Hendrix, even though they were more commercial contracts, and didn't contain an element of national security.

Front 19

What was stated in Hadley Baxendale regarding remoteness of damage?

Back 19

the damages must be those that may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract, as the probable result of the breach of it.

Front 20

How did Victoria Laundry v Newman industries develop the principle of remoteness?

Back 20

It stated that 'abnormal loss' is only recoverable if it was in the 'reasonable contemplation of the parties.' Therefore, the claimant's were unable to claim damages for loss as a result of their lucrative contract with the ministry of defence, as the defendants could not have reasonably foreseen the loss as a consequence of their breach.

However, if they had informed the defendants of their contract, then they would have been able to claim the damages.

Front 21

What other case concerns the remoteness of damage?

Back 21

Transfield Shipping v Mercator

Front 22

What is the principle of mitigation, and what is the authority?

Back 22

The innocent party cannot claim for any losses that could have been avoided- as long they have acted reasonably in trying to mitigate their loss, it will be sufficient.

British Westinghouse v Underground Electric.

Front 23

Are damages available in contract for disappointment/ distress?

Back 23

Not as a general rule, but in Farley v Skinner, it was found that if an important part of the contract was about pleasure/peace of mind, then damages could be claimed.

The typical type of contract this might arise in is a holiday contract.

Front 24

What is a liquidated damages clause?

Back 24

a genuine pre-estimate f the loss likely to result from a breach of contract.

Front 25

What is a penalty clause?

Back 25

Not a genuine pre-estimate of the loss likely to occur, but a threat to compel the other party to perform.

Front 26

Which case established the difference between a liquidated damages and a penalty clause?

Back 26

Dunlop v New Garage

-If a clause exceeds a genuine pre-estimate then it's likely that it will be struck out and damages will be awarded on the usual principles.
-It will be unenforceable if it is 'extravagant and unconscionable.'

Front 27

At what point is is assessed whether the clause is a liquidated damages clause or a penalty clause?

Back 27

At the time the contract is formed, not at the breach.