Chapter 13 Guidance on answering the questions in the book

Damages

1. Where contract law awards reliance damages, restitution or account of profits for breach of contract, to what extent, if any, is the protection of the performance interest undermined?

See 13.2. Expectation damages for not receiving due performance

13.3 The role of the reliance measure

13.4 Restitution of benefits conferred

13.5 Account of profits and loss of bargain.

This question invites you to consider the availability of, and circumstances in which courts will award, damages measured other than by reference to the claimant's expectation.  The issues you need to address include:

  • What are punitive damages?  How would they be measured (compare with expectation)?  When, if ever, are they available (note the possible ramifications of Kuddus v. Chief Constable of Leicestershire Constabulary (2001))? It may be that some other measures achieve the same aim as punitive damages, albeit indirectly, eg substantial non-pecuniary damages, account of profits.
  • What are reliance damages?  How would they be measured (compare with expectation)?  When, if ever, are they  available (note the issue of 'circumventing bad bargains')?
  • What are restitutionary damages? How would they be measured (compare with expectation)?  When, if ever, are they available (note the uncertainty here and, again, the issue of 'circumventing bad bargains')?
  • What is an account of profits?  How would it be measured (compare with expectation)?  When, if ever, is it available (note Attorney-General v. Blake (2001))?
    • What is the justification for this exceptional measure of damages for breach of contract? 
    • To what extent does it derogate from the protection of an innocent party's performance interest (consider the extent to which expectation damages themselves may derogate from the protection of an innocent party's performance interest)?
  • What are loss of bargain (or Wrotham Park) damages? How would they be measured and how do they relate to an account of profits? When, if ever, are they available?

2. ‘Monetary awards for breach of contract should do no more, and no less, than compensate the innocent party for her loss.’ To what extent is this true? To what extent should it be true?  What other considerations, if any, affect the selection of remedies for breach?

See 13.2 Expectation damages for not receiving due performance.

This is essentially a re-run of question 1, with the focus on the derogation from the protection of the performance interest.  What constitutes compensatable 'loss' under the expectation measure (see notes to question 3)?

3. 'Contract law recognises non-pecuniary loss reluctantly and only within narrow confines.' Discuss

See 13.2.4 The problem of non-pecuniary loss.

There is clearly an overlap here with question 2.  The issues you should consider include:

  • Why is contract law reluctant to recognise non-pecuniary loss?
  • What is the general rule on recovery for non-pecuniary loss?  What are the exceptions to the rule?  What is the scope of the exceptions?
  • What is the significance of Ruxley v. Forsyth (1996) and McAlpine v. Panatown (2001)?
  • How do rules such as that on causation and remoteness apply?
  • Is the current law satisfactory?  Why or why not?  Can you outline any desirable reforms?

4. Ken employed Lou to install a new kitchen and add an extension to the living room: he paid Lou £30,000 on completion. Advise Ken on the following facts:

(a) Ken is very annoyed to find that the plasterwork in the extension has been painted a slightly different shade from that stipulated. Ken has rejected Lou's offer to redo the plasterwork for an extra £3,000 and hired Milo to redo the plasterwork for £6,000.

Has Lou breached the contract?  If so, what damages would Ken seek?  What are the arguments for and against Ken's claim?  Does Ruxley v. Forsyth apply?  Should Ken have accepted Lou's offer to redo the plasterwork?

(b) Completion is delayed, necessitating Ken and his family staying an extra month with Ken's in-laws in very cramped accommodations which causes great discomfort and distress all around. Moreover the delay meant that Ken had to pay £500 for an alternative venue for his friend’s wedding, which Ken had offered to hold at his house.

Can Ken claim for his and his family's physical discomfort and distress?  What about the cost of hiring a wedding venue?  Is either loss too remote?

(c) After a few weeks, Lou's faulty wiring in the kitchen caused small sparks which ignited a gas leak that Ken had been meaning to fix for some time. The ensuing fire resulted in £15,000 worth of damage to the kitchen.

Can Ken claim £15,000 for the damage to the kitchen?  What of Ken's role in the fire? 

(d) What difference would it make if Ken has not yet paid?

The question is then, whether Ken would be obliged to pay in circumstances (a) to (c) above. If payment is only due on completion, then the entire obligations rule and the substantial completion exception apply.  It will be a moot point whether (a) and (b) above would amount to substantial completion; (c) is a stronger case of non-substantial completion, allowing Ken to withhold payment.  Spell out the alternative consequences.  Would Lou be able to claim restitution for the work done?

5. Bugbusters won a major contract to clean 40 hospitals undertaking to meet 10 specified targets. Bugbusters instructed its workers to meet only six of the targets, saving £30,000 over six months. The hospitals are outraged when they learn of the breach, but it is impossible to prove whether any additional infections have resulted. Advise the hospitals.

There is a clear breach by Bugbusters.  What damages can the hospitals claim when no provable loss has resulted?  Specifically:

  • Can the hospitals claim an account of profits?  Is this an exceptional case where the hospitals have a special interest in preventing Bugbusters from profiting by its own breach?
  • Can the hospitals seek punitive damages?  Is this a particularly reprehensible breach and requires deterrence?
  • Can the hospitals seek restitution for partial failure of consideration (see dicta in Attorney-General v. Blake)?