CONTRACT LAW EXAM QUESTIONS
WITH CORRECT DETAILED ANSWERS
Robinson v Harman - Answer-"The rule of the common law is, that where a party
sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be
placed in the same situation, with respect to damages, as if the contract had been
performed"
Ruxley Electronics v Forsyth - Answer-Was no able to recover cost of cure as this was
unreasonable, but was able to claim damages for loss of amenity
Anglia Television v Reed - Answer-Damages were given for the reliance interest instead
of the expectation interest because it was impossible to calculate how much they would
have made from the show but it was not too remote that by the breaking of the contract ,
expenses had already been incurred
Omak Maritime v Mamola Challenger - Answer-Could not recover damages for wasted
expenditure as the owners had mitigated their loss by re-chartering and as a result had
not suffered any loss
Chaplin v Hicks - Answer-Damages can be awarded for loss of opportunity
Addis v Gramophone Co Ltd - Answer-Reflects usual approach of court that damages
will not be awarded for mental distress or disappointment
Jarvis v Swan Tours - Answer-Damages may also be recovered for mental distress,
injured feelings and loss of enjoyment but only if the contract was designed to give
pleasure, comfort or
enjoyment to the injured party
Farley v Skinner - made it clear the sole object need not be pleasure, enjoyment or
peace of mind
Remoteness rule - Answer-A party will not be awarded damages for loss which is too
remote a consequence of the breach - established in Hadley v Baxendale and means
that the loss has to have been within the reasonable contemplation of the parties at the
time of the contract
Often said to be two limbs:
- loss which arises naturally from the breach will normally be within the parties
reasonable contemplation
- unusual loss will be within contemplation only if the special circumstances which gave
rise to the loss are known to both parties at the time the contract is made
,Victoria Laundry v Newman Industries - Answer-Application of Hadley v Baxendale -
acknowledged that the knowledge needed for limb two could be imputed or actual
knowledge
Parsons Livestock v Uttley Ingham - Answer-Court decided that if the defendant can
contemplate the type of loss as a serious possibility, then all loss of that type is
recoverable even though the extent of the loss could not have been contemplated
British Westinghouse v Underground Electric Railways - Answer-There is a requirement
that the claimant should mitigate their loss - the claimant should take reasonable steps
to ensure that losses are kept to a minimum and they cannot recover damages for
losses which they could have avoided by taking reasonable steps
Specified damages clause - Answer-a genuine attempt to pre-estimate the loss which is
likely to be caused by the breach - this is binding and the sum specified is the amount
paid regardless of the loss
Penalty clause - Answer-an attempt to put pressure on a party to perform the contract -
unenforceable and court is free to assess damages in the usual way
Guidelines for deciding whether something is a penalty or specified damages clause -
from Dunlop Pneumatic Tyre - Answer-If the sum stated in the clause is extravagant
and unconscionable in amount in comparison with the greatest loss that could
conceivably be proved then it's a penalty
If the breach consists only in not paying a sum of money then if the sum stated in the
clause is greater than the amount which ought to have been paid it's a penalty
If a single lump sum is payable on the happening of one or more of several events,
some of which may cause serious and some minor damage, it's presumed to be a
penalty
Clause can be a specified damages clause even if it is difficult or impossible to pre
estimate precisely the loss which might be caused by the breach
Cavendish Square v Makdessi - Answer-A provision could not be a penalty unless it
provided an exorbitant alternative to ordinary damages
Second question was whether the clause was penal and no whether it was a pre
estimate of loss
When can a claimant bring an action for an agreed sum? - Answer-If the contract
provides that one party shall pay a definite sum of money to the other, then if the duty to
pay has arisen but the layer refuses to pay, the payee can bring an action for the
agreed sum
, When can a party terminate the contract? - Answer-Two main circumstances:
Where there is a breach of a condition
Where there is a very serious breach of an innominate term (called a repudiatory
breach)
Anticipatory Breach - Answer-If a party gives advance warning that they are not going to
perform their contractual obligations when they fall due to
Specific Performance - Answer-An equitable remedy and order of the court which
requires a party to perform its contractual obligations
Not awarded where damages would be adequate or in contracts requiring continuous
supervision by the court
Warner Brothers v Nelson - Answer-Injunction to prevent Bette Davies from acting for
another studio - granted this as court felt it did not stop her earning money in other ways
or force her to work for Warner
Aim of restitution - Answer-Prevent one party being unjustly enriched at the expense of
the other
Quantum Meruit - Answer-A reasonable sum for work done
Three examples of when a claim in restitution can be brought - Answer-If one party to a
contract has paid money to the other, the payer can bring a claim in restitution to
recover the money if the payee is in breach and there has been a complete failure of the
consideration
If one party has agreed to do work for the other and the other is in breach, the party
doing the work may be able to bring a claim for a reasonable sum for work done
If goods have been supplied or work has been done but a contract has not been
formed, the supplier may be a ,e to bring a claim in restitution for a reasonable sum -
British Steel Corp v Cleveland Bridge
Wrotham Park Estate v Parkside Homes - Answer-The claimant had suffered no loss
but damages were awarded on the basis of compensation for the claimant for the
notional loss of the opportunity to bargain where that was the only loss
Guarantee - Answer-A secondary obligation to pay
Indemnity - Answer-Creates a primary obligation - effectively where one party promises
to reimburse the other party in respect of a particular loss arising under contract
WITH CORRECT DETAILED ANSWERS
Robinson v Harman - Answer-"The rule of the common law is, that where a party
sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be
placed in the same situation, with respect to damages, as if the contract had been
performed"
Ruxley Electronics v Forsyth - Answer-Was no able to recover cost of cure as this was
unreasonable, but was able to claim damages for loss of amenity
Anglia Television v Reed - Answer-Damages were given for the reliance interest instead
of the expectation interest because it was impossible to calculate how much they would
have made from the show but it was not too remote that by the breaking of the contract ,
expenses had already been incurred
Omak Maritime v Mamola Challenger - Answer-Could not recover damages for wasted
expenditure as the owners had mitigated their loss by re-chartering and as a result had
not suffered any loss
Chaplin v Hicks - Answer-Damages can be awarded for loss of opportunity
Addis v Gramophone Co Ltd - Answer-Reflects usual approach of court that damages
will not be awarded for mental distress or disappointment
Jarvis v Swan Tours - Answer-Damages may also be recovered for mental distress,
injured feelings and loss of enjoyment but only if the contract was designed to give
pleasure, comfort or
enjoyment to the injured party
Farley v Skinner - made it clear the sole object need not be pleasure, enjoyment or
peace of mind
Remoteness rule - Answer-A party will not be awarded damages for loss which is too
remote a consequence of the breach - established in Hadley v Baxendale and means
that the loss has to have been within the reasonable contemplation of the parties at the
time of the contract
Often said to be two limbs:
- loss which arises naturally from the breach will normally be within the parties
reasonable contemplation
- unusual loss will be within contemplation only if the special circumstances which gave
rise to the loss are known to both parties at the time the contract is made
,Victoria Laundry v Newman Industries - Answer-Application of Hadley v Baxendale -
acknowledged that the knowledge needed for limb two could be imputed or actual
knowledge
Parsons Livestock v Uttley Ingham - Answer-Court decided that if the defendant can
contemplate the type of loss as a serious possibility, then all loss of that type is
recoverable even though the extent of the loss could not have been contemplated
British Westinghouse v Underground Electric Railways - Answer-There is a requirement
that the claimant should mitigate their loss - the claimant should take reasonable steps
to ensure that losses are kept to a minimum and they cannot recover damages for
losses which they could have avoided by taking reasonable steps
Specified damages clause - Answer-a genuine attempt to pre-estimate the loss which is
likely to be caused by the breach - this is binding and the sum specified is the amount
paid regardless of the loss
Penalty clause - Answer-an attempt to put pressure on a party to perform the contract -
unenforceable and court is free to assess damages in the usual way
Guidelines for deciding whether something is a penalty or specified damages clause -
from Dunlop Pneumatic Tyre - Answer-If the sum stated in the clause is extravagant
and unconscionable in amount in comparison with the greatest loss that could
conceivably be proved then it's a penalty
If the breach consists only in not paying a sum of money then if the sum stated in the
clause is greater than the amount which ought to have been paid it's a penalty
If a single lump sum is payable on the happening of one or more of several events,
some of which may cause serious and some minor damage, it's presumed to be a
penalty
Clause can be a specified damages clause even if it is difficult or impossible to pre
estimate precisely the loss which might be caused by the breach
Cavendish Square v Makdessi - Answer-A provision could not be a penalty unless it
provided an exorbitant alternative to ordinary damages
Second question was whether the clause was penal and no whether it was a pre
estimate of loss
When can a claimant bring an action for an agreed sum? - Answer-If the contract
provides that one party shall pay a definite sum of money to the other, then if the duty to
pay has arisen but the layer refuses to pay, the payee can bring an action for the
agreed sum
, When can a party terminate the contract? - Answer-Two main circumstances:
Where there is a breach of a condition
Where there is a very serious breach of an innominate term (called a repudiatory
breach)
Anticipatory Breach - Answer-If a party gives advance warning that they are not going to
perform their contractual obligations when they fall due to
Specific Performance - Answer-An equitable remedy and order of the court which
requires a party to perform its contractual obligations
Not awarded where damages would be adequate or in contracts requiring continuous
supervision by the court
Warner Brothers v Nelson - Answer-Injunction to prevent Bette Davies from acting for
another studio - granted this as court felt it did not stop her earning money in other ways
or force her to work for Warner
Aim of restitution - Answer-Prevent one party being unjustly enriched at the expense of
the other
Quantum Meruit - Answer-A reasonable sum for work done
Three examples of when a claim in restitution can be brought - Answer-If one party to a
contract has paid money to the other, the payer can bring a claim in restitution to
recover the money if the payee is in breach and there has been a complete failure of the
consideration
If one party has agreed to do work for the other and the other is in breach, the party
doing the work may be able to bring a claim for a reasonable sum for work done
If goods have been supplied or work has been done but a contract has not been
formed, the supplier may be a ,e to bring a claim in restitution for a reasonable sum -
British Steel Corp v Cleveland Bridge
Wrotham Park Estate v Parkside Homes - Answer-The claimant had suffered no loss
but damages were awarded on the basis of compensation for the claimant for the
notional loss of the opportunity to bargain where that was the only loss
Guarantee - Answer-A secondary obligation to pay
Indemnity - Answer-Creates a primary obligation - effectively where one party promises
to reimburse the other party in respect of a particular loss arising under contract
