Chapter 9 Multiple-choice questions

Damages for breach of contract
. According to the compensation principle, the non-breaching party is normally entitled to recover as loss of profit any profit made from the breach by the contract-breaker.

. The purpose of awarding contractual damages is generally to put the non-breaching party into the position it would have been in had the contract been performed as agreed.

. A agrees to repair B's broken mill shaft and to return it to B within a week. At the time of contracting, B 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. A does not return the repaired shaft until two weeks later. B sues A for breach of contract, claiming damages for the loss of profit during the second week, when his mill was closed as a result of A's delay. A argues that the damages claimed by B 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 A's argument is true?

. In general, the test of remoteness of damages in contract is stricter than the test of remoteness of damages in tort.

. Following the decision of the House of Lords in Transfield Shipping Inc. v Mercator Shipping Inc., The Achilleas [2008] UKHL 48, [2009] 1 AC 61, the courts have dispensed with the traditional approach of assessing remoteness of damages under the rules of Hadley v Baxendale (1854) 9 Ex 341 and instead adopt an approach based on whether one party 'assumed responsibility' for the losses of the other party.

. Under a contract for the sale of goods, where the buyer unreasonably refuses to accept the goods and the seller resells the goods to a third party at the contract price, the seller is entitled to claim damages for loss of profit if market supply of the goods in general is greater than demand.

. 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?

. In order to recover damages for a breach of contract, the non-breaching party must show that the breach is the only effective cause of its loss.

. 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/B2B contracts.

. Which of the following statements are consistent with the decision in Farley v Skinner (No. 2) [2001] UKHL 49, [2002] 2 AC 732? [Please select all that apply.]

. Where loss is caused by a breach of a strict contractual obligation and by the contributory negligence of the non-breaching party, the damages payable by the contract-breaker cannot be reduced proportionately according to the provisions of the Law Reform (Contributory Negligence) Act 1945.

. Which of the following statements in relation to the 'cost of cure' measure of damages in breach of contract cases are true? [Please select all that apply.]

. A Ltd enters into a construction contract with B Ltd under which A is to build a warehouse for B for £200,000. The estimated total cost for A 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 A starts building. B then fails to make some prepayments, which entitles A to terminate the contract. A 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?

. A, the owner of a vessel, enters into an agreement with a charterer, B, for the charter of the vessel. A spends money preparing the vessel before B subsequently, in breach of contract, repudiates the agreement. However, A is then immediately able to enter into a new agreement with another charterer, C, and due to an upturn in the market rate, receives a much greater profit than that which she would have received under the agreement with B. Regardless of the greater profit received, A will always be entitled to recover the wasted expenditure in reliance on the agreement with B.

. According to Ruxley Electronics and Construction Ltd v Forsyth [1996] 1 AC 344, non-pecuniary loss is generally recoverable where cost of cure damages are not available.

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

. A Ltd, a telecommunications service provider, intends to purchase a country house for its new headquarters. It employs B to conduct a survey of a particular property, emphasising the need to look out for any localised traffic problems. B, in breach of contract, fails to discover that there is a notorious traffic blackspot very close to the country house. A 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 most chance of succeeding, on the basis of the above facts?

. It was established in Ruxley Electronics and Construction Ltd v Forsyth [1996] 1 AC 344 that 'cost of cure' damages are generally not available where there is no difference in value between the actual performance and the contract performance.

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

. It is well established that a wrongfully dismissed employee may claim damages for financial loss caused by difficulty in obtaining alternative employment as a result of the manner of the dismissal.

. Which of the following statements concerning the time for assessing damages are true? [Please select all that apply.]

. A and B enter a contact whereby A is to supply 20 tons of coal per month to B'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, A knows that B relies on the coal to keep his factory operating. The contract stipulates that, if A is late in delivering a particular month's consignment, he will pay to B 'by way of compensation, a sum of £75 for each full day by which delivery is delayed'. A is eight days late in delivering the February consignment and, as a result, B suffers a loss of £1,000. B claims damages for this loss. Which one of the following statements most accurately describes the position between A and B?

. In Makdessi v Cavendish Square Holding BV [2015] UKSC 67, [2015] 3 WLR 1373, the Supreme Court stated that the scope of the penalty rule applies in circumstances concerning agreed damages clauses that are payable on breach and is not concerned with payments concerning primary contractual obligations.

. Where part of the contract price is paid in advance as a deposit, the payment is normally not recoverable in the event of breach of the contract by the payor, even if the payee has not suffered any loss as a result of the breach.

. Which of the following statements concerning duty of mitigation following a breach of contract are true? [Please select all that apply.]

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