Chapter 9 Outline answers to end-of-chapter questions

Remedies Part I: Compensatory damages following a breach

1. Bodgit Builders Ltd contracts to build a garage for Aaliyah at a price of £5000. The contract specifies that the garage is to be 7m long. However, when the building is completed, it is only 6m 70cm long. Aaliyah wants to claim £4000 in damages, which is the amount required to correct the breach of contract. There is no difference in value between the garage that was built and the garage specified in the contract. Advise Aaliyah.

Introduce your short answer by identifying the issue and your approach to the answer. This is a clear breach and the key issue is the availability for damages given that there is no difference in value.

Start your main body with the general aim of damages based on the comment from Robinson v Harman (1848). Explain what it means in practice.

Provide some examples of the different ways of reflecting the innocent party’s lost bargain such as the difference in value and cost of reinstatement. 

Apply the points to the scenario – that Aaliyah would argue that she should be entitled to the cost of reinstatement to reflect her lost bargain resulting from the breach.

Now turn to the key case of Ruxley Electronics v Forsyth [1996]. Explain the case and the key points from the reasoning – these relate to the cost of reinstatement being denied if unreasonable and the intention to use any award being relevant to whether there was any loss to compensate. Mention the application of in later cases too (Birse Construction v Eastern Telegraph [2004] and Harrison v Shepard Homes [2011]).

Apply these points to the question. There is a strong argument in favour of the cost of reinstatement being refused and nominal damages being awarded instead.

Now address the award of £2500 for loss of amenity in Ruxley. Explain the basis of it with reference to the consumer surplus value.

Apply the loss of amenity point to Aaliyah’s facts.

Finally conclude on the low likelihood of Aaliyah being awarded the £4000 and comment on the possibility of some damages for loss of amenity.

2. Critically evaluate the principle that damages for lost enjoyment or peace of mind arising from a breach are only available when one of those intangible benefits was an important purpose of the contract.

Introduce your answer by identifying briefly that the availability of such damages is quite limited and that it is necessary to detail the relevant case law to evaluate the position.

Start the main body with the general aim of damages (Robinson v Harman (1848)) and how this compensatory aim is primarily for financial losses but that non-financial loss was recognised in some early cases without any issues.

Then turn to the key case of Jarvis v Swan Tours [1973] with reference to its scope based on the reasoning from Lord Denning MR. This can be related to the consumer surplus value. Also, address the significance of the comments by Bingham LJ in Watts v Morrow [1991] on policy and the limit illustrated by Alexander v Rolls Royce Motor Cars [1996].

Commence some evaluation of the strict requirement of the ‘very object’ of the contract and the need to protect the expectation interest of the innocent party, i.e. how the requirement serves to inform the expectation interest in this context. You can also raise the award for loss of amenity in Ruxley Electronics v Forsyth [1996] as an inconsistency.

Now move on to the leading case of Farley v Skinner [2001] and how the requirement was slightly relaxed. Explain the key points from the reasoning and how it was applied in Hamilton v David & Snape [2003] and Herrmann v Withers [2012].

Continue your evaluation by discussing whether the awards should be limited to when such a benefit is an important object of the contract as opposed to an object of the contract that is not important compared to other objectives but is obvious to the parties.

Finally, provide a conclusion that relates to the question directly. Could it be that the availability of such damages might be better based on the question of whether the relevant benefit lost was (objectively to both parties) a serious possibility of a potential breach? Or based on both parties objectively contemplating a consumer surplus value when entering the contract?

3. Should the decision in Addis be re-examined in light of more recent developments?

Introduce your answer by identifying the relevant issue of damages for harmed reputation, for the manner of the breach and the wider question of punitive damages, along with your approach.

Start the main body of your answer with a detailed account of the Addis case – the principles and reasoning.

On the harmed reputation point, contrast it with the more recent Malik v Bank of Credit and Commerce International [1998]. Provide some evaluation on how the claim was framed in terms of financial loss resulting from a breach and contrast it with Addis – that the harmed reputation did not result from the breach itself.

This takes you to the other point in Addis about the liability for the manner of the breach and Johnson v Unisys [2001].

Continue your evaluation making the point about liability for the manner of the breach would recognise an obligation that that parties had not agreed to and how this prevents punitive damages.

Finally, conclude with reference to the extent to which the principles from Addis should be re-examined – a lot depends on the court’s willingness to adhere to the compensatory aim of damages. On this, greater depth would be informed by Morris-Garner v One-Step (Support) Ltd [2018] (from Chapter 11) on the importance of damages being compensatory.