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Liquidated Damages & Remedies - Coggle Diagram
Liquidated Damages & Remedies
Liquidated Damages: Damages which have been stipulated by a clause in the contract
Liquidated Damages Clause is the clause that specifies damages (starting position is the clause will apply)
Test to see if clause will be upheld: Cavendish v Makdessi
Is the clause primary (furthers commercial objective of the contract) or secondary (compensatory)? primary clauses will always be allowed but secondary you go to the next stage
Does it impose a detriment out of all proportion to any legitimate interest of the innocent party in the performance of primary obligation? Look at: Are any legitimate business interests served by protecting the clause and is it extravagant, exorbitant or unconscionable? Burden of proof on party alleging it is a penalty
If they fail part 1 and 2 of the test the courts can 'strike down' the clause and use usual methods to calculate damages
Specific performance
Order issued by the court requiring D to carry out obligations under a positive term. Different as you can be held in contempt of court and get prison time if you disobey
Adderley v Dixon- both only available where damages are inadequate and the subject matter is unique or irreplaceable
Principles when granting specific performance:
Not awarded where it would cause undue hardship on D (Patel v Ali)
Promise must be given for no consideration
Not awarded for breach of contract for employment or where there has been a breakdown of trust
Not awarded where it would need constant supervision from the courts
Not awarded where contract not binding on both parties (voidable contract with a minor)
Prohibitory injunctions
A court order restraining a party from breaching a negative term. If you disobey you can be held in contempt of court and face prison time.
S37 Senior Courts Act 1981- only granted where just and convenient
Prohibitory injunction or specific performance?
When deciding if a term is positive or negative the courts look at substance and not form (wording)
Guarantee & Indemnity
Guarantee: A promise by a party to ensure that another party carries out it's obligations, or a promise to fulfil those obligations itself if that other party does not do so
Indemnity: A promise to reimburse someone in the event that they suffer a stated loss
Difference:
Where contract set aside, guarantee ceases to exist because the original obligation does not exist anymore, indemnity would however remain in place
Same applies for if there was a change to the contract
Guarantees have more formalities: it must be in writing and signed by the guarantor