Chapter 14 Guidance on answering the questions in the book

Specific and agreed remedies

1. 'Co-operative Insurance Society Ltd v. Argyll Stores (Holdings) Ltd (1998) has tipped the balance too far in favour of the contract breaker.' When are specific performance and injunctions available, and when should they be?

See 14.2 Specific enforcement.

This question invites you to critically analyse the restrictions on the availability of specific performance and injunctions using the Argyll Stores case as a focal point for discussion.

  • Is each limitation on the availability of specific remedies justifiable? Keep in mind the counter-arguments in favour of specific remedies.
  • How, if at all, is each limitation illustrated by the Argyll Stores case?
  • How are all the relevant factors weighed to reach a conclusion in the Argyll Stores case (note the different conclusions reached by CA and HL)? 
  • Do you agree with the outcome?
  • How, if at all, might the law on the availability of specific performance be improved?

2. 'Contract parties enter contracts to get performance and not damages for non-performance. Therefore, specific performance, and not damages, should be the main remedy for breach.' Discuss.

See 14.2 Specific enforcement, especially 14.2.4 Should specific enforcement be more widely available?.

This question overlaps with question 2.  Some questions you may wish to consider:

  • What arguments support the current law which treats damages, and not specific performance, as the primary remedy for breach?
  • Critically analyse these justifications.  Do you find them persuasive?  Can they explain the major features of the law on damages and on specific performance (eg restrictions on availability or measure of damages)? 
  • Is there nevertheless a shift towards greater protection of the performance interest in the law on damages (eg increasing recognition of non-pecuniary loss, Panatown etc.)?

3. Explain and distinguish each of the following, giving examples:

  1. An exemption clause and a penalty clause.
  2. A penalty clause and a liquidated damages clause.
  3. A deposit and a part payment.

What is the test of enforceability in each case?

See 14.3 Agreed remedies.

This is a fairly straightforward question requiring you to compare and contrast the definitions of the clauses in (a) and (b), and the payments in (c). 

What legal controls are there on the enforceability of clauses in (a) and (b)? 

When can restitution be claimed of the payments made in (c)?

4. Should parties have greater freedom to agree on the consequences of breach?

See 14.3 Agreed remedies.

This question invites you to assess the legal controls on the enforceability of agreed remedies clauses.  Some issues you may consider include:

  • What are the main types of remedies for breach (termination, damages, specific performance)?  Give examples of how parties can expressly stipulate for them (don't forget exemption clauses)? 
  • What restrictions are there on such agreed remedies (you may have to sketch the restrictions on exemption clauses in broad outlines)?  Are the restrictions justifiable?  Do you have any suggestions for improving the law?
  • Note that parties can agree remedies indirectly by careful drafting of primary (obligation) terms, eg stipulating conditions, stipulating payment on an event which does not constitute a breach of contract.  Give some examples.  To what extent, if at all, are they controlled by the law?  How do these controls compare with the law's control of secondary terms?  What conclusions can you draw from your answers?

5. Are the following terms in a contract between Nick and Olga enforceable? What further facts do you need to know?

(a) A term stipulating that 'if Olga breaches clause 8 then Nick can specifically enforce the term or is entitled to the sum of £50,000 as Nick chooses.'

See 14.2.5 Can parties agree to specific performance or an injunction?

14.3.2 Payments on breach: liquidated damages and penalties.

The first option is effectively an agreement for specific performance.  To what extent are such agreements enforceable?  The second option is an agreed sum. What is the test of its enforceability?  Might courts restrain Nick’s exercise of discretion?  If so, on what basis? Consider the impact of Cavendish v Makdessi on the penalty rule.

(b) A term stipulating that 'On the occurrence of circumstances specified in clause 8, not being a breach of contract, Olga must pay Nick £50,000.'

See 14.3.2 Payments on breach: liquidated damages and penalties.

What rules, if any, constrain the enforceability of such a clause?  The answer is not the same as in (a). 

6. What protection do consumers have against unfair agreed remedies clauses?

See 14.3.4 Protection for consumers

Consider the scope of the protections offered by the Consumer Rights Act 2015.