Commercial Litigation: Damages and Other Remedies for Breach of Contract

84 Pages·2011·3.03 MB·English

by  Rachel Burnett

C
A Thorogood Special Briefing

COMMERCIAL
LITIGATION

The Consequences of Breach of Contract

– Damages and Other Remedies

Rachel Burnett
Inside front cover
A Thorogood Special Briefing
COMMERCIAL
LITIGATION
The Consequences of Breach of Contract
– Damages and Other Remedies
Rachel Burnett
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The author
Rachel Burnett, Solicitor, BA Hons, DTech hc,
CITP, FBCS, ACIL
Rachel Burnett’s career combines both a technical and business background
within the IT industry and in legal practice. Originally an IT professional after
graduating from Exeter University, she worked for large corporate organisa-
tions in system development and project management. She qualified as a solicitor
and joined one of the first niche IT law practices. Rachel is Head of the IT/IP
team and a Partner at Paris Smith LLP solicitors, following several years as a
partner in City of London law firms.
Rachel has been awarded an Honorary Doctorate in Technology from
Southampton Solent University, and is an Associate Lecturer in law with the
Open University.
Rachel was President of the British Computer Society 2007-2008. She is a livery
member of the City of London Information Technologists’ Company, and a member
of the Law Society of England and Wales.
Rachel is author of IT Contracts: Effective Reviewing, Negotiating and Drafting,
and Commercial Contracts: Legal Principles and Drafting Techniques, both
published by Thorogood. She is author of Outsourcing IT: The Legal Aspects
(Gower 2009) and co-author of Drafting and Negotiating ComputerContracts(Tottel
2005), both in their second editions, and author of the IT Law Guides series
published for the Institute of Chartered Accountants. She writes on IT law for
journals and professional publications, including as a regular columnist for the
IMIS Journaland BCS IT Now, and is an experienced presenter both in the UK
and abroad.
[email protected]
A THOROGOOD SPECIAL BRIEFING iii

Contents
The author...................................................................................................iii
1
INTRODUCTION 1
Contract breach and remedies...................................................................2
Contract or tort............................................................................................3
This Report...................................................................................................4
2
ALTERNATIVES TO LITIGATION FOR
BREACH OF CONTRACT 5
Contractual alternatives to litigation.........................................................7
Procedural alternatives to litigation........................................................11
3
BASIC PRINCIPLES 15
Repudiatory breach...................................................................................16
Anticipatory breach...................................................................................17
Risks for the innocent party.....................................................................17
Contractual right of termination..............................................................19
Basis for damages .....................................................................................20
Objective of damages................................................................................20
Loss or damage suffered...........................................................................21
Causation....................................................................................................22
Public policy...............................................................................................22
Limitation....................................................................................................23
Foreseeability of loss.................................................................................23
Expectation loss.........................................................................................25
Reliance loss...............................................................................................25
A THOROGOOD SPECIAL BRIEFING v
COMMERCIAL LITIGATION: THE CONSEQUENCES OF BREACH OF CONTRACT – DAMAGES AND OTHER REMEDIES
4
MEASURING DAMAGES 27
Compensation as if the contract had been performed..........................28
Intervening events.....................................................................................29
Indirectloss or damage.............................................................................29
Time for assessment .................................................................................30
The rule against double counting............................................................31
Foreign currency.......................................................................................31
Deposits and part payments ....................................................................32
Liquidated damages..................................................................................32
Mitigation...................................................................................................33
Contributory negligence...........................................................................34
5
SPECIFIC KINDS OF AWARDS 35
Loss of a Chance........................................................................................36
Disappointment or mental distress..........................................................37
Loss of amenity..........................................................................................40
6
OTHER REMEDIES 43
Claim for an agreed sum...........................................................................44
Restitution...................................................................................................45
Equitable remedies....................................................................................48
Specific performance ...............................................................................49
Injunctions..................................................................................................49
Rescission...................................................................................................51
Rectification................................................................................................53
Declaratory judgment...............................................................................55
Account of profits......................................................................................55
APPENDIX
LIST OF CASES AND STATUTES 57
List of cases cited.......................................................................................58
List of statutes mentioned.........................................................................60
vi A THOROGOOD SPECIAL BRIEFING
A Thorogood Special Briefing
Chapter 1
Introduction
Contract breach and remedies
Contract or tort
This Report
COMMERCIAL LITIGATION: THE CONSEQUENCES OF BREACH OF CONTRACT – DAMAGES AND OTHER REMEDIES
Chapter 1
Introduction
The law on remedies for breach of contract is technical and complex, built mainly
from legal precedent. This Report aims to provide advice, guidance and
remedies for those who deal directly with contracts and contractual problems
(in businesses and other organisations) as well as for those whose work is affected
by the contents of a contract. It is relevant for drafting and negotiating contract
terms as well as for problems arising from performance of the contract.
Contract breach and remedies
A breach of contract occurs when one of the parties to a contract fails to carry
out its obligations as set out in the contract (in other words, it has broken the
terms of what the parties agreed). The contract itself may contain terms entitling
the defaulting party to put matters right by rectifying the breach, and it may
choose to do this. If not, there are various legal ‘remedies’ available to the party
injured by the breach, who may take legal action accordingly to obtain redress.
‘Remedies are the law’s response to a wrong (or, more precisely, to a cause of
action).’1
Most frequently this will be to obtain financial compensation, but there are other
remedies applicable in certain circumstances.
The remedies available, the kinds of damages that may be claimed, and the princi-
ples establishing how much compensation the innocent party is entitled to claim,
have largely developed (and continue to develop) through precedents set by the
courts from previous rulings. The current trend in the courts is to develop
judgments according to the actual facts of the particular case rather than to
develop and apply broad principles.
The principles are described in this Report, illustrated throughout by relevant
cases, and sometimes with apposite quotations from the actual judgments.
1 Mr Justice Roth in Luxe Holding Ltd v Midland Resources Holding Ltd [2010] EWHC 1908 (Ch)
2 A THOROGOOD SPECIAL BRIEFING