Self-test questions: Damages

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. Issy Ltd agrees to repair Victor's broken mill shaft and to return it to Victor within a week. At the time of contracting, Victor points out that he has no spare mill shaft and that he will not be able to operate his mill until the repaired one has been returned. Issy Ltd does not return the repaired shaft until two weeks later. Victor brings an action against Issy Ltd for breach of contract, claiming damages for the loss of profit during the second week, when his mill was closed as a result of Issy Ltd's delay. Issy Ltd argues that the damages claimed by Victor are too remote to be recoverable. In considering the approach taken in Hadley v Baxendale (1854) 9 Ex 341, which one of the following statements concerning Issy Ltd's argument is true?

The damages claimed by Victor are not too remote, because his loss of profit is a natural or normal loss resulting from Issy Ltd's breach of contract. correct incorrect

The damages claimed by Victor are too remote, because his loss of profit is an abnormal loss resulting from Issy Ltd's breach of contract. correct incorrect

The damages claimed by Victor are too remote, because his loss of profit is not within the reasonable contemplation of the parties at the time of contracting. correct incorrect

The damages claimed by Victor are too remote, unless it was an express term of the contract that Victor could recover all losses in the event of delay. correct incorrect

The damages claimed by Victor are not too remote, because his loss of profit is an abnormal loss within the parties' actual knowledge at the time of contracting. correct incorrect

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. A breach of contract occurs when the time for performing a duty under the contract arrives and that duty is not performed. Which one of the following statements most accurately describes the legal consequence of a breach of contract?

Every breach of contract makes the contract-breaker liable to pay damages to the non-breaching party. correct incorrect

Every breach of contract entitles the non-breaching party to terminate the contract. correct incorrect

A breach of contract can automatically bring the contract to an end. correct incorrect

The contract-breaker is not liable to pay damages if the non-breaching party sustains no loss from the breach. correct incorrect

Contract damages are awarded on a punitive basis. correct incorrect

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. Difference in value damages are usually calculated on the basis of the 'market price' rule. In which one of the following situations does that rule apply? Assume all contracts are commercial (business-to-business) contracts.

Under a contract for sale of goods, the buyer accepts the slightly defective goods and claims damages in respect of the minor defects. correct incorrect

Under a contract for sale of goods, the goods are acquired for the purpose of manufacturing machinery and are delivered late. The buyer accepts the goods and claims damages for the profits lost during the period when the machinery should have been in operation. correct incorrect

Under a contract for the sale of goods, the goods for sale are two sports cars tailor-manufactured for the buyer. correct incorrect

Under a contract for sale of goods, the buyer accepts the slightly delayed goods, resells them to a third party, and then claims damages for breach of contract. correct incorrect

Under a contract for the sale of goods, where the goods are specific and unique to the buyer's particular business. correct incorrect

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. Which one of the following statements is consistent with the decision in Farley v Skinner (No. 2) [2001] UKHL 49, [2002] 2 AC 732?

Non-pecuniary loss can never be recovered as damages for a breach of contract even if it is consequent on physical inconvenience caused by the breach. correct incorrect

Non-pecuniary loss may be recovered as damages for a breach of contract only if the very object of the contract is to provide pleasure, relaxation, or peace of mind. correct incorrect

Non-pecuniary loss is generally not recoverable as damages for a breach of contract if the breach relates to a qualified contractual obligation to use reasonable care and skill. correct incorrect

Non-pecuniary loss may be recovered as damages for a breach of contract if the major or important object of the contract is to provide pleasure, relaxation, or peace of mind. correct incorrect

Cost of cure damages will be recoverable only where it is reasonable to award such damages in the sense that the cost of cure is not out of all proportion to the benefit to be obtained. correct incorrect

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. Which one of the following statements in relation to the 'cost of cure' measure of damages in breach of contract cases is not true?

Cost of cure damages are measured by the costs necessary to put the defective performance right. correct incorrect

Cost of cure damages are normally available where the contractual obligation breached is a qualified obligation to use reasonable care and skill. correct incorrect

No cost of cure damages will be awarded where the reinstatement is not intended to be carried out. correct incorrect

Cost of cure damages are available only when not out of all proportion to the benefit to be obtained. correct incorrect

Cost of cure damages were not awarded in Ruxley Electronics and Construction Ltd v Forsyth [1996] 1 AC 344. correct incorrect

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. Ake Ltd enters into a construction contract with Sodje Ltd under which Ake Ltd is to build a warehouse for Sodje Ltd for £200,000. The estimated total cost for Ake Ltd to complete the building work at the time of the contract is £160,000. Due to market changes, however, the estimated total cost of completing the work becomes £220,000 before Ake Ltd starts building. Sodje Ltd then fails to make some prepayments, which entitles Ake Ltd to terminate the contract. Ake Ltd terminates the contract and claims for damages, amounting to £50,000, as wasted expenses incurred in preparation for the building work. Which one of the following statements most accurately summarises the legal position between the two parties?

Ake Ltd is entitled to an award of £50,000 because this reflects expenses incurred for the purpose of performing the contract. correct incorrect

Ake Ltd is entitled to an award of £40,000 because this reflects Ake Ltd's net profit under the contract at the time of making the contract. correct incorrect

Ake Ltd is entitled to £30,000 because this reflects expenses that would have been recouped had the contract been duly performed. correct incorrect

Ake Ltd is entitled to nominal damages only because it would not have made a net profit had the contract been duly performed. correct incorrect

Ake Ltd is not entitled to damages because it entered into a bad bargain. correct incorrect

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. Gains Ltd has a contract with Stack It for the latter to provide and install the equipment in Gains Ltd's new gym, in time for Gains Ltd's much-anticipated grand opening. Stack It knew of the publicity surrounding Gains Ltd's opening and had been selected to provide the equipment after a competitive tendering process. In addition, Eddie (a bodybuilder with an international reputation and a huge social media following) was due to attend the opening of the gym. In breach of contract, Stack It installed less than half of the equipment by the agreed deadline. This meant, on opening, Gains Ltd was significantly short of equipment. In addition, Eddie refused to attend the gym's opening and endorse the gym to his followers once he found out about the lack of equipment and the gym's poor condition. Gains Ltd had made it clear to Stack It at the time of contract formation that it needed the gym to be completed on time because Eddie was due to be at the opening and 20 customers had paid £300 each to 'train with Eddie', which would have resulted in a profit of £3,000 for Gains Ltd. In relation to the legal position between Gains Ltd and Stack It, which one of the following is not true?

In a breach of contract claim, the breach must be shown to be an effective cause of Gains Ltd's losses. correct incorrect

If Stack It can show that a fire had occurred at its supplier's factory, which meant no equipment was available, the contract between Gains Ltd and Stack It will be frustrated or else Stack It will have a claim to have any damages reduced, provided it can show that it exercised reasonable care and skill in attempting to install the equipment. correct incorrect

Gains Ltd can claim the loss of £3,000 profit from Stack It in relation to Eddie's cancelled visit. correct incorrect

Gains Ltd cannot claim damages for the distress suffered by its manager in relation to a social media post that described Gains Ltd's re-opening as a 'big let down'. correct incorrect

Gains Ltd is under an obligation to take reasonable steps to mitigate its loss. correct incorrect

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. Russell Ltd, a telecommunications service provider, intends to purchase a country house for its new headquarters. It employs George Ltd to conduct a survey of a particular property, emphasising the need to look out for any localised traffic problems. George Ltd, in breach of contract, fails to discover that there is a notorious traffic blackspot very close to the country house. Russell Ltd's staff and clients experience appalling traffic congestion in order to get on and off site. Which one of the following damages claims has the best chance of succeeding, on the basis of these facts?

Russell Ltd claims damages for the physical inconvenience suffered by its staff in commuting to and from work. correct incorrect

Russell Ltd claims damages for the reduced productivity of its business. correct incorrect

Russell Ltd claims damages for loss of reputation as a result of the traffic problem. correct incorrect

Russell Ltd claims damages for the disappointment of not being able to locate its headquarters in a country house free from such serious traffic problems. correct incorrect

Russell Ltd claims cost of cure damages. correct incorrect

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. Josh is setting up a launderette business, opening to the public next Tuesday. He agrees to purchase from Keeley six new washing machines at a price of £1,500 each, to be delivered and installed next Monday. Keeley knows that Josh has advertised the opening of his launderette for Tuesday. On the Monday, Keeley telephones Josh and says that she will be unable to deliver the machines until the following week. Josh immediately contacts other suppliers and receives the following offers. Jade offers to deliver and install higher quality washing machines by Monday evening, at a price of £2,000 each. Amir offers a price of £1,250 per machine, provided Josh can arrange delivery (the machines can be picked up immediately). Which one of the following statements is consistent with Josh's duty of mitigation?

Josh is required by the mitigation principle to take Amir's offer. correct incorrect

Josh may take Jade's offer and then claim damages from Keeley. correct incorrect

Josh is required by the mitigation principle to wait for Keeley's delivery because it is unreasonable for Josh to take either Jade's or Amir's offer. correct incorrect

Josh may not take Jade's offer because the price asked for is too high. correct incorrect

Josh has no duty to mitigate. correct incorrect

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. Which one of the following statements concerning the time for assessing damages is not true?

Damages are generally assessed at the time of breach, which usually occurs at the time when performance becomes due. correct incorrect

The time for assessing damages may be postponed to a time subsequent to the time for performance. correct incorrect

Where damages are awarded in lieu of specific performance, damages are assessed at the date on which specific performance becomes impossible. correct incorrect

Damages for breach of contract are available as of right, on proof of breach. correct incorrect

Damages cannot be reduced where subsequent events occur that were known to the court at the date of the hearing and that have reduced the actual loss. correct incorrect

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. Hollie and Kiran enter a commercial contact whereby Hollie is to supply 20 tons of coal per month to Kiran's factory at £300 per ton, by the third day of each month, until either side gives one month's notice to terminate this agreement. At the time of contracting, Hollie knows that Kiran relies on the coal to keep her factory operating. The contract stipulates that, if Hollie is late in delivering a particular month's consignment, she will pay to Kiran 'by way of compensation, a sum of £75 for each full day by which delivery is delayed'. Hollie is eight days late in delivering the February consignment and, as a result, Kiran suffers a loss of £1,000. Kiran claims damages for this loss. Which one of the following statements most accurately describes the position between Hollie and Kiran?

Kiran is not entitled to £1,000 as damages, because the compensation clause in the contract is a liquidated damages clause and precludes Kiran from claiming her actual loss. correct incorrect

Kiran is entitled to £1,000 as damages, because the compensation clause in the contract is a penalty clause and is thus wholly unenforceable and Kiran's actual loss is not too remote to be recoverable. correct incorrect

Kiran is not entitled to £1,000 as damages, because this loss is too remote to be recoverable. correct incorrect

Kiran is entitled to £1,000 as damages, because Kiran is entitled to claim her actual loss where it is greater than the stipulated sum in the contract. correct incorrect

Kiran is not entitled to any damages on the information available, because the compensation clause is an unenforceable penalty clause and the £1,000 loss is too remote. correct incorrect

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. Margot is due to open a hotel. Bowie Ltd is due to supply and install various items of furnishing in the hotel bedrooms. Due to major supply issues and staff shortages, Bowie Ltd was unable to start the work and has missed certain contractual deadlines. Margot intends to bring a claim for damages. Which one of the following statements concerning Margot's duty of mitigation is not true?

Margot will herself be in breach of contract if she fails to take reasonable steps to avoid the loss flowing from the breach. correct incorrect

If Margot takes reasonable steps to avoid, and successfully wipes out, the loss flowing from the breach, Margot will be entitled to only nominal damages for that breach. correct incorrect

If Margot takes reasonable steps in an attempt to avoid the loss flowing from the breach and these reasonable steps result in increased loss, Margot might be entitled to recover that increased loss. correct incorrect

If this were a case of anticipatory repudiatory breach, and Margot had accepted the breach as terminating the contract, the loss sustained would be subject to the mitigation principle from the moment of that acceptance and it is not possible to wait until the date for performance due under the contract before mitigating. correct incorrect

If Margot fails to take reasonable steps to mitigate her loss, she is not likely to succeed in her claim in respect of any part of the damage which is due to her failure to take such steps. correct incorrect

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. Hyacinth Café has employed Chelsea Ltd to complete extensive landscaping services in its large customer garden. Chelsea Ltd claims to have completed the work, but it is below standard and Hyacinth Café intends to make a claim for damages. In relation to Hyacinth Café's claim for damages, which one of the following is not true?

Hyacinth Café is entitled to claim the loss of profits associated with its planned outdoor summer 50^th anniversary celebration, which Chelsea Ltd was made aware of prior to the formation of the contract and which Hyacinth Café has now been forced to cancel following the breach. correct incorrect

The compensatory aim of contractual damages is to put Hyacinth Café into the position in which it would have been had the contract been properly performed and the breach not occurred. correct incorrect

The general principle is that damages are to be assessed at the time of breach (or when the loss is suffered), which usually occurs at the time when performance became due. correct incorrect

Non-pecuniary losses are generally not recoverable in a claim for breach of contract. correct incorrect

Hyacinth Café is entitled to claim all financial losses flowing from the breach, regardless of foreseeability. correct incorrect

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. Which one of the following statements concerning the recoverability of reliance loss is true?

Reliance loss must be claimed where it is difficult to prove expectation loss under the contract. correct incorrect

Reliance loss must be claimed where expectation loss relates only to a loss of a chance of making a profit. correct incorrect

The non-breaching party may recover both reliance loss and the net profit expected under the contract at the same time. correct incorrect

The non-breaching party may freely choose to recover reliance loss where reliance loss is higher than expectation loss. correct incorrect

Reliance loss is not a recognised form of recovery in English law, unless the parties' contract permits it by an express term. correct incorrect

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. In relation to a claim for damages for a breach of contract, which one of the following is not true?

As a general rule, damages cannot be recovered in contract for losses that do not affect a pecuniary interest of the claimant and, to this extent, contractual damages may under-compensate that claimant. correct incorrect

A claimant is under a duty to mitigate its loss, which means if it has not minimised its loss, damages will be reduced either fully or in part. correct incorrect

The distinction between contractually agreed damages clauses that will be enforced and those that will not is expressed as a distinction between liquidated damages clauses (enforceable) and penalty clauses (unenforceable). correct incorrect

If the claimant takes reasonable steps in an attempt to minimise its loss, but these reasonable steps result in increased loss, the claimant might be able to recover for that increased loss. correct incorrect

In a contractual claim, the availability of apportionment for the claimant's contributory negligence is dependent on the nature of the obligation broken by the defendant, i.e. whether the defendant's breach is strict or qualified. correct incorrect