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Remedies I (Unliquidated damages - where either... (Damages assessed by…
Remedies I
Unliquidated damages - where either...
i) No liquidated damages clause in contract
ii) Liquidated damages cause struck out as penalty
Damages assessed by court - compensation, not punishment
Basis of assessment
Expectation - Robinson v Harman (1848)
Basic position
Wronged party "to be placed in the same situation... as if the contract had been performed" - per Parke B
Compensation as fundamental principle
Golden Straight Corporation v Nippon Yusen Kubishika Kaisha, "The Golden Victory" (2007)
Bunge SA v Nidera BV (2015) - confirmed compensatory principle - court had to take account of effect of subsequent events on loss - clarified principle applies t one-off sale contracts as well as for supply of goods or services over time
Plantation Holdings (FZ) LLC v Dubai Islamic Bank PJSC (2017)
"the claimant ought not to be allowed to recover a windfall"
Claimant was property developer - sought $2bn in damages on basis that defendant bank had wrongly taken possession of its land - court found evidence that development would have failed financially, and even though bank was in breach at time, their right to take possession would have arisen later - did not have to compensate anything more than nominal damages
Three alternative methods to calculate expectation interest - sometimes little difference in outcome
Difference in value
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Cost of cure
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Loss of amenity
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Reliance - Anglia Television v Reed (1972)
Puts claimant in position as if had not contracted
Claimant has an "unfettered" choice between reliance and expectation loss - per Denning LJ
No double recovery
Not about expenses occurred as consequence of breach
Answers loss where expectation damages too speculative - McRae v Commonwealth Disposals (1951)
Pre-contractual expenses available - Anglia TV v Reed
Does not override contractual expectation
Reliance as a species of expectation - Omak Maritime Ltd v Mamola Challenger Shipping Co Ltd (The Mamola Challenger) (2010)
Defendant must prove claimant's loss would have happened even if they had not breached the contract
Rebuttable presumption that claimant would have recouped expenditure incurred in reliance on defandant's performance of the contract - Yam Seng Pte v International Trade Corporation (2013)
Claimant cannot escape a bad bargain - C&P Haulage v Middleton (1983)
Restitution - AG v Blake (2000)
Account of profit - deprivation of gains made in breach of contract
Available in exceptional circumstances
Where traditional remedies inadequate - in this case, if restitutionary damages had not been awarded, the Crown would have recovered nothing, since no loss
Claimant had "legitimate interest in preventing the defendant's profit-making activity" - per Lord Nicholls
Indicated that so-called "efficient breach" would not be exceptional enough - does not in itself suffice that breach is cycnical and deliberate, that it enables defendant to enter into a more profitable contract elsewhere, or that by entering into the new contract the defendant puts it out of his power to perform contract with claimant
Application of AG v Blake
Esso v Niad (2001) - successful - could not say how much money it had lost, and had legitimate interest in preventing Niad from profiting, as threatened to undermine whole "Pricewatch" scheme"
Not exceptional/traditional remedies inadequate
AB Corp v CD Co (The "Sine Nomine") (2002) - exceptional nature of Blake emphasised - damages deemed adequate and no legitimate interest
Experience Hendrix v PPX Enterprises (2003) - "we are not concerned with a subjec anything like as special and sensitive as national security" - per Mance LJ
WWF v WWF (2006)
Other types of loss
Generally no damages for mental distress
Addis v Gramphone Company Ltd (1909)
Johnson v Unisys Ltd (2001)
Loss of reputation - falls within expectation loss - Malik v BCCI (1997)
Loss of chance - falls within expectation loss - Chaplin v Hicks (1911)
Liquidated damages
A specified sum payable as compensation for breach
Benefits
Privacy
Cost effective
Amicable - commercial relationship preserved
Certainty - "liquidated"
Law on penalties
A liquidated damages clause which takes effect as a penalty is not enforceable under English law
Old law
Dunlop Pneumatic Tyre Co v New Garage and Motor Co (1915) - test based on whether the clause in question is a genuine prestimate of loss or requires a payment which is extravagant, unconscionable and designed to act as a deterrent
New law
ParkingEye Limited v Beavis (2015) - example of what constitutes legitimate interest - £85 parking charge exceeded any loss but legitimate as a means of influencing conduct of motorists
Cavendish Square Holdings BV v Talal El Makdessi (2015)
Makdessi agreed to sell advertising company to Cavendish - retained 20% shareholding with option for C to purchase later, and remained on board - part of purchase prive was to be paid in instalments following completion
Sale and purchase agreement contained restrictive covenant, preventing Makdessi from competing with the business following completion - if he did breach, would not be...
i) Entitled to receive the final two instalments of the deferred consideration
ii) Cavendish could exercise option to buy remaining shares but at price which excluded the good will of the business
Did commit breach - damage actually caused to company roughly $500k - but he lost out on $44m in deferred payments and tens of millions on share
Supreme Court agreed that the default clauses were not penal and reformulated genuine pre-estimate of loss test
Lord Neuberger - "The true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The innocent party can have no proper interest in simply punishing the defaulter. His interest is in performance of some appropriate alternative to performance."
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