Contract Law – Prepare 4 8.11.21
Unit 4 – Damages
Video 1 – Remedies for Breach Termination
Terminating a Contract
Main remedy for breach of contract is damages
Here we are looking at what happens when C is able to exercise their right to terminate a
contract
Contract terms can be categorised according to their importance
Those terms which give C the right to bring the contract to an end if they’re broken are
called conditions – important terms of the contract
Terms which, if broken, don’t give C the right to terminate the contract are called
warranties – these terms aren’t central to the main purpose of the contract, but are
collateral to it
Residual category of terms remains, where the right to terminate depends upon the nature
of the breach rather than just the fact of the breach
o We can’t tell at the point of the contract whether breach of the term gives the right
to terminate
o Instead, we must wait and see whether the breach is serious enough – innominate
terms C can claim damages if any of these types of term are broken
Consequences of Terminating a Contract
E.g. B engaged A to build a house for him, where A carries out all 4 stages of building for B
who agreed to pay for each stage in advance
All goes fine to start with, as B pays the price for Stage 1 and A completes it – this occurs
until Stage 3 when B pays but A breaches a condition of Stage 3
B has the choice whether to treat the contract as terminated, but he doesn’t have to if she
doesn’t want to
B could limit himself to a claim for damages for the breach (say £1,000) and then carry on
“business as usual” – but what if he does treat the contract as at an end?
o Immediate consequence is that both parties are discharged from future performance
of the contract – B doesn’t have to pay anymore, A doesn’t have to do any more
building work
It’s not A’s breach which brings the contract to an end, rather its B’s decision to treat the
breach as bringing the contract to an end – it’s up to B if she wants to treat the contract as
ending – she can choose not to exercise her right to terminate it, and continue if she wants
The termination only operates from that point – it discharges both parties, but only from
obligations arising after that point
o What termination doesn’t do is “unscramble” the contract in relation to the
obligations which have accrued up to termination
The position in damages where a contract is terminated – if the breach of contract itself
causes B any loss, B can sue for that loss
o If it will cost him more than the outstanding payment for Stage 4 = the money saved
to get the work completed
1
, Contract Law – Prepare 4 8.11.21
B is entitled to the excess as damages, though B must mitigate (take reasonable steps to
reduce) his loss
o e.g. B would be expected to get a few quotes to complete the work from reputable
builders and then accept the cheapest of those
Video 2 – Remedies Which Make D Perform the Contract
Introduction
Instead of damages, a remedy may include making D do what they agreed to do
o Includes action for an agreed sum (suing for money you’re owed), and equitable
remedies
All remedies here are all ways of getting D to do what he was contracted to do
o Different to damages, which is a compensation for defective or failed performance
Legal sources of the various remedies are very different
Actions in Debt/Actions for the Price
Actions for an agreed sum comes from common law and are generally less complex, legally
and factually, than claims for damages
o This is simply suing for an amount of money due – normally the price of goods or
services supplied under a contract
o Much more direct remedy than a claim for damages, C isn’t asking to be
compensated for not getting money, they’re just suing for their money
Once money has been owed and C established their right to the money, they can claim it –
no need to prove loss or showing that it’s too remote
Specific Performance
C asks the court not for compensation, but for an order requiring actual performance –
doing what they agreed to do
E.g. it might be used to order someone to transfer a property which they agreed to transfer
but are now refusing to
o As a remedy, this is attractive – it means C gets what they bargained for
Generally speaking, it was only where the common law remedy was inadequate that you’d
have to go to the courts of equity and ask them for a remedy that would “do more perfect
justice” than a simple award of damages would achieve
Specific performance is an equitable remedy, which is usually available if damages aren’t
o As its equitable, it isn’t available “as of right”, it’s in the discretion of the court
o In contrast, we have damages, where, if C can establish their loss according to the
rules of law, they are entitled to damages as of right
When is remedy in damages likely to be regarded as inadequate?
o Most common example is purchases of land – you wanted that house, not its value
o Best outcome would then be to get a court order requiring the seller to transfer the
house to you
Specific performance is common in contracts for the sale of land
It is rare in the sale of goods, where you can’t generally get specific performance
2
Unit 4 – Damages
Video 1 – Remedies for Breach Termination
Terminating a Contract
Main remedy for breach of contract is damages
Here we are looking at what happens when C is able to exercise their right to terminate a
contract
Contract terms can be categorised according to their importance
Those terms which give C the right to bring the contract to an end if they’re broken are
called conditions – important terms of the contract
Terms which, if broken, don’t give C the right to terminate the contract are called
warranties – these terms aren’t central to the main purpose of the contract, but are
collateral to it
Residual category of terms remains, where the right to terminate depends upon the nature
of the breach rather than just the fact of the breach
o We can’t tell at the point of the contract whether breach of the term gives the right
to terminate
o Instead, we must wait and see whether the breach is serious enough – innominate
terms C can claim damages if any of these types of term are broken
Consequences of Terminating a Contract
E.g. B engaged A to build a house for him, where A carries out all 4 stages of building for B
who agreed to pay for each stage in advance
All goes fine to start with, as B pays the price for Stage 1 and A completes it – this occurs
until Stage 3 when B pays but A breaches a condition of Stage 3
B has the choice whether to treat the contract as terminated, but he doesn’t have to if she
doesn’t want to
B could limit himself to a claim for damages for the breach (say £1,000) and then carry on
“business as usual” – but what if he does treat the contract as at an end?
o Immediate consequence is that both parties are discharged from future performance
of the contract – B doesn’t have to pay anymore, A doesn’t have to do any more
building work
It’s not A’s breach which brings the contract to an end, rather its B’s decision to treat the
breach as bringing the contract to an end – it’s up to B if she wants to treat the contract as
ending – she can choose not to exercise her right to terminate it, and continue if she wants
The termination only operates from that point – it discharges both parties, but only from
obligations arising after that point
o What termination doesn’t do is “unscramble” the contract in relation to the
obligations which have accrued up to termination
The position in damages where a contract is terminated – if the breach of contract itself
causes B any loss, B can sue for that loss
o If it will cost him more than the outstanding payment for Stage 4 = the money saved
to get the work completed
1
, Contract Law – Prepare 4 8.11.21
B is entitled to the excess as damages, though B must mitigate (take reasonable steps to
reduce) his loss
o e.g. B would be expected to get a few quotes to complete the work from reputable
builders and then accept the cheapest of those
Video 2 – Remedies Which Make D Perform the Contract
Introduction
Instead of damages, a remedy may include making D do what they agreed to do
o Includes action for an agreed sum (suing for money you’re owed), and equitable
remedies
All remedies here are all ways of getting D to do what he was contracted to do
o Different to damages, which is a compensation for defective or failed performance
Legal sources of the various remedies are very different
Actions in Debt/Actions for the Price
Actions for an agreed sum comes from common law and are generally less complex, legally
and factually, than claims for damages
o This is simply suing for an amount of money due – normally the price of goods or
services supplied under a contract
o Much more direct remedy than a claim for damages, C isn’t asking to be
compensated for not getting money, they’re just suing for their money
Once money has been owed and C established their right to the money, they can claim it –
no need to prove loss or showing that it’s too remote
Specific Performance
C asks the court not for compensation, but for an order requiring actual performance –
doing what they agreed to do
E.g. it might be used to order someone to transfer a property which they agreed to transfer
but are now refusing to
o As a remedy, this is attractive – it means C gets what they bargained for
Generally speaking, it was only where the common law remedy was inadequate that you’d
have to go to the courts of equity and ask them for a remedy that would “do more perfect
justice” than a simple award of damages would achieve
Specific performance is an equitable remedy, which is usually available if damages aren’t
o As its equitable, it isn’t available “as of right”, it’s in the discretion of the court
o In contrast, we have damages, where, if C can establish their loss according to the
rules of law, they are entitled to damages as of right
When is remedy in damages likely to be regarded as inadequate?
o Most common example is purchases of land – you wanted that house, not its value
o Best outcome would then be to get a court order requiring the seller to transfer the
house to you
Specific performance is common in contracts for the sale of land
It is rare in the sale of goods, where you can’t generally get specific performance
2
