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CONTRACT – Remedies (lectures 18 & 19)
MEASURES

NATURE OF COMPENSATION

LIQUIDATED DAMAGES
(fixed sum): planning for
breach – certainty (liquidated),
privacy, cost effective,
amicable (commercial
relationship preserved)
...


Expectation (placed in the same situation
as if the contract had been performed)–
Robinson v Harman

The Test for a Penalty Clause
– Dunlop Pneumatic Tyre v
New Garage
*Terminology inconclusive
*Penalty clause is ‘in terrorem’
*Based on construction of
particular contract, judged at
time of contracting
Valid LDC = genuine preestimate of loss set at the time
of contracting
...
Stipulated sum is
extravagantly greater than the
greatest possible loss
conceivable on breach
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Breach is non-payment of
money and stipulated sum is
greater
...
A single lump sum is payable
on any of several possible
breaches were some are serious
but others trivial
...
Even though loss impossible
to precisely pre-estimate, sum
stipulated may still be a
genuine pre-estimate
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Not a Penalty Clause
*Estimate does not coincide
with actual loss – McAlpine
Capital Porjects v Tilebox
*Acceleration of payment
clause – The Angelic Star
*Deposits generally norecoverable – Workers Trust v
Dojap Investments

*3 alternative measures:
1
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Cost of cure (defective performance has
taken place)
3
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The burden of proof is on party
paying to prove otherwise
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Galoo Ltd v Bright Grahame Murray states that it must
be an effective cause
...
Arising naturally in the usual course of things -imputed
knowledge (normal losses)
...
Reasonably in the contemplation of the parties (ie in special
circumstances) – actual knowledge (abnormal losses)
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*Application of the test: Victoria Laundry v Newman
Industries; Heron II (the loss was not unlikely due to the d’s
action/breach); Balfour Beatty v Scottish Power (the specific
type of loss was unrecoverable as not foreseeable by d); The
Achilleas
MITIGATION

*Except where trying to escape a bad
bargain – c & p haulage v middleton

*Technically no obligation to mitigate, but losses resulting
from failure to mitigate is not recoverable
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*Pre-contractual expenses available –
Anglia TV v Reed
Restitution (where D has wrongly
enriched himself
...

*Account of profits are available where:
exceptional circumstances, damages
inadequate, c has legitimate interest in
preventing the d’s profit-making activity
*Successful application of AG v Blake was
seen in Esso v Niad; cf with AB Corp v
CD Co (damages were adequate),
Experience Hendrix v PPX Enterprises
(not exceptional circumstances), WWF v
WWF (not exceptional circumstances)
Other awards:
*Generally there is no damages for mental
distress – Addis v Gramophone Company
Ltd; Johnson v Unisys Ltd
*Contract for pleasure/relaxation/peace of
mind – Jarvis v Swans Tours (whole
purpose); Farley v Skinner (major object)

UNLIQUIDATED
DAMAGES (unknown
amount)
...
Also Barclay’s Bank plc v
Fairclough
EQUITABLE REMEDIES
*Specific performance is an order of a court which requires a
party to perform a specific act– cooperative insurance society
ltd v Argyll stores (holdings) ltd
*Injunction (requires a party to do or refrain from doing
specific acts)– Evening Standard v Henderson
*Rescission (bringing parties back to position in which they
were before entering into the contract, if possible)
*Rectification (ct corders change in a written doc to reflect
what it ought to have said in the first place)

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