Contracts: remedies n9 1: I on The concept of damages is central to the topic of contract remedies,Damagescan be defined as 'money awarded by a court in compensation for loss or injury', The term should not be confused with the word damage, which means 'loss or harm which is actionable in law', 1 Read the first two paragraphs of the text. Which of the key terms in the second paragraph is a synonym for damages? 2 Read through the whole text quickly and decide whether these statements are true or false. 1 According to the foreseeability rule, damages are awarded when it can be proven that harm or injury could have been seen or known in advance by the breaching party when the agreement was made. 2 Reliance damages are recovered when the breaching party is forced to give up profits it acquired under the breached contract. 3 Exemplary damages are collected from the breaching party as a kind of punishment for particularly objectionable behaviour. ,
Transcript
Contracts:remedies
n9 1: I onThe concept of damages is central to the topic of contractremedies,Damagescan bedefined as 'money awarded by a court in compensation for loss or injury', The term shouldnot be confused with the word damage, which means 'loss or harm which is actionablein law',
1 Read the first two paragraphs of the text. Which of the key terms in the secondparagraph is a synonym for damages?
2 Read through the whole text quickly and decide whether these statements aretrue or false.
1 According to the foreseeability rule, damages are awarded when it can beproven that harm or injury could have been seen or known in advance by thebreaching party when the agreement was made.
2 Reliance damages are recovered when the breaching party is forced to giveup profits it acquired under the breached contract.
3 Exemplary damages are collected from the breaching party as a kind ofpunishment for particularlyobjectionable behaviour.
,
fixedthe
known as
s:3 Match these types of damages (1-7) with their definitions (a-g).
1 expectation damages / 'benefit of the bargain' damages a compensation agreed upon by the partiesand set forth in the contract that must be
paid by one or the other in the event thatthe contract is breached
b compensation determined by the amountof benefit unjustly received by the
breaching partyc compensation for losses which are as a
result of special facts and circumstances
relating to a particular transaction whichwere foreseeable by the breaching partyat the time of contract
d compensation which seeks to put thenon-breaching party in the position hewould have been had the contract been
performede compensation for a loss that is the
natural and logical result of the breachof contract
f compensation which is imposed by thecourt to deter malicious conduct in thefuture
g compensation necessary to reimburse thenon-breaching party for efforts expendedor expenses incurred in the reasonable
belief that the contract will be performed
2 general/actual damages
3 liquidated/stipulated damages
4 reliance damages
5 restitution damages
6 special/consequential damages
7 punitive/exemplary damages
4 What types of damages are distinguished in your jurisdiction? Write theequivalent names in the list in Exercise 3. Unit6 Contracts:remedies
E
q2:The following text is an excerpt from a contract forms book typically consulted by lawyerswhen drafting a contract. It is an introduction to the concept of liquidated damages. Italso provides information about the elements of a liquidated damages clause, issuesrelevant for enforceability, and how the courts tend to rule in such cases.
5 Readthe first paragraph. How are liquidated damages clauses defined?
6 Read through the whole text quickly. Then match these headings (a-d) with thesections they belong to (1-4).
a Liquidated damages provisions distinguished from penalty clausesb Relationship between the stipulated amount and the damages sustainedc Components of a liquidated-damages clause
d Definition of liquidated damages
Contractual remedies:
Liquidated damages
1) ,'.., ,
When parties enter into a contract, they oftenwish to calculate the damages which wouldarise for one or both of the parties in the eventthat there is a breach of contract by the otherparty. Provisions in a contract stipulating theamount required to compensate an injuredparty in the event of a breach are referred to as
'liquidated damages' clauses. The purpose ofliquidated damages clauses is for the non-breaching party to avoid the costs which arisein the difficult task of proving the amount ofthe loss actually incurred. Such clauses areenforceable where they are carefully drafted tocompensate the non-breaching party for theloss caused by the breach.
2) " ,..........
A contractual party may, in certain instances,try to make certain that the other partyperforms its contractual undertakings byincluding provisions which, in reality, constitutea penalty for failure to perform. In contrast to aliquidated damages clause, a penalty clause isnot intended to cOmpensate the injured partyfor anticipated loss arising fmm the breach. Onthe contrary, the purpose of p~nalty provisionsis to serve as a det~rr~nt to breach in that it
prc)\Tid~sfor dalnages which. the parties knowe%8'.telldfar. beyond that which would normally
tl1enon,-br.eaching party for its
In many jurisdictions, the will sever thepenalty clause from the contract, h6ldingit tobe unenforceable as a penalty. Th~J:'esult is thatthe non-breaching party is forced to prove itsloss in accordance with the general principlesof contractual remedies. In light of the above, itis crucial when drafting a damages clause that itcontains the elements of an enforceableliquidated damages clause as opposed to anunenforceable penalty.
3) ..............
Historically, an enforceable liquidated damagesclause will include the following elements:
a) the anticipated damages from the relevantbreach are uncertain in amount or difficult
to prove;
b) an intent by the parties to determine thedamages in advance; and
c) a stipulated amount which is reasonable, notconsiderably disproportionate to thepresumed loss or injury.l
The recent tendency of the courts is to giveless or no weight to the subjective intent of theparties. Instead, the courts take intoconsideration all three elements, together withother factual circumstances, such as the relative
bargaining power of the parties, to determinethe reasonableness of the clause at issue.
The primary issue for the court to decide is
that of reasonableness of the prescribed amountof damages in proportion to the presumed lossfor the non-breaching party. As such, the court
1 Elements a) and c) are apparently contradictory. However, in practice, precedent determines
what amounts to a penalty clause, and lawyers take this into account when drafting contracts.
,
must assess whether the fixed amount is a
realistic attempt to calculate the actual damageswhich may result from the breach, or whetherthe amount represents a penalty the non-breaching party is attempting to impose on thebreaching party.
4) .., '......
The courts generally look to the time ofcOlltract in detexmilling the reasonableness ofthe damages set forth in it. Consequently, theactual loss incurred is immaterial, provided thedJ,l1:lages at the time of contract represent a
reasonable prediction. Of course, the breachiIlgparty has a very difficult argument to makeregarding unreasonableness where the predictedamount is close to the actual loss.The UniformCommercial Code in the United States, incontracts for the sale of goods, permitsliquidated damages clauses which prescribeamounts reasonable considering the actual loss.In rare cases, where the non-breaching partyincurs no actual damages, the courts will notenforce a liquidated damages clause.
7 Decide whether these statements are true or false.
1 A penalty provision is included in an agreement in order to compensate the
non-breaching party for anticipated losses resulting from a breach.2 Courts will generally strike down a penalty provision, leaving the injured party
no further means of recovering damages from the breaching party.3 Recently, courts have tended to place little importance on the intentions of
the contracting parties when reaching decisions concerning liquidateddamages.
4 The court's decision whether the stipulated damages are intended as apenalty or not depends largely on the reasonableness of the amount.
S Do you have an equivalent to the Uniform Commercial Code in yourjurisdiction?
9 Find words or phrases in the text which match these definitions.
1 failure to perform provisions of a contract without a legal excuse (section 1):b , " of c..,..,.., , ,
2 to pay damages to the person harmed (section 1):c "..,..".., an L..,.., , p, , , ,....
3 the relative strength to influence the setting of contract terms (section 3):b,.." " ", p, " " ",....
4 the part of the contract in question (section 3):c, , ".. .., at i , , , ,
"9 io1:
Unit 6 Contracts: remedies
E
10 Underline phrases referring to the actions and rulings of the court in the texton pages 80-81.
11 Decide which of these verbs can be used in place of the underlined words in
the box on page 81. Is the meaning the same as the original phrase or does itchange?
agrees is hesitant to
is unwilling to
12 The concept of liquidated damages can be found in jurisdictions allover the
world. However, the practice of the court striking down a penalty provision is anapproach followed mainly in Anglo-American countries, and is not characteristic
of every jurisdiction. What is the practice in your own jurisdiction? You mayneed to research this information.
overturned rejected reversed rules
.nl 1: h
Remediesfor breach of contract and their enforcement differ from jurisdiction tojurisdiction. You will hear a law student talking about a type of remedy in Denmark as
part of a university seminar on contract remedies in Europe.
13 ~ ~ Listen to the first part of the student's talk. Decide whether thesestatements are true or false.
1 Specific performance means that the breaching par~y is ordered to fulfil theoriginal obligations of the contract.
2 Specific performance can be applied in all breach of contract cases.
3 There are four types of cases where specific performance can be applied.
14 ~ ~ Listen to the rest of the talk and complete the notes about the five
situations where specific performance can be applied, using no more thanthree words in each space.
1 Goods already........................2 Goods procured from .....................
3 Only a is needed
4 Involves of pledged security
5 When breaching party needs to be stopped from performingon non-breaching party
acts
2: ng on
The speaker in the previousmaking informationlistening to
back to
know this, and
paraphrase) in
,
15 Read this excerpt from the transcript of the law student's presentation.
Underline important words that are repeated more than once, as well as anyparaphrases of ideas which serve to repeat a previous idea.
ng 1:16 Prepare a brief talk on an aspect of contract remedies in your jurisdiction.
Make use of repetition and paraphrasing to reinforce important ideas andmake them easier for your listener to understand and remember. You should
structure your talk in three distinct sections and give a brief overview of thepoints you will cover.
3: n ng cThe liquidated damages clause below is part of a construction industry agreement.
17 Read the clause and answer these questions.
1 Why do you think such clauses would be of particular importance in the
construction industry?2 What does the legal expression time is of the essence in the first line
mean?
3 How much would the owner be entitled to receive as damages if the work
were not completed in ten days as agreed, but rather in 15 days?4 In the event of a breach of this clause, how will the owner receive
compensation?
FAILURE TO FINISH THE WORK ON TIMEIt is mutually agreed by and between the parties hereto that time is of the essence and thatin the event of the Contractor's failure to complete the contract within the time stipulatedand agreed upon, the Owner will be damaged thereby; and because it is difficult todefinitely ascertain and prove the amount of such damages, inclusive of expenses forinspection, necessary traveling expenses and other similar expenses, it is hereby agreedthat the amount of such damages shall be the liquidated sum ofTwo Thousand Dollars($2,000.00) per calendar day for each day of delay in finishing the Work in excess of thenumber of working days prescribed; and the Contractor hereby agrees that such sum shallbe deducted from amounts due the contractor under the contract or, if no amount is due theContractor, the Contractor hereby agrees to pay to the Owner as liquidated damages, andnot by way of penalty, such total sum as shall be due for such delay, calculated as aforesaid.
Unit 6 Contracts: remedies
~
18 For each of these words, find the italicised word or expression in the clause onpage 83 that most closely matches its meaning.
1 in the form of
2 specified in writing3 more than
4 jointly5 is owed to
6 including
7 as stated above
8 subtracted from
ni 2:In the following dialogue, an attorney, Mrs Hayes,is consulted by a client, Mr Anderson,who has been having difficulties in connection with a contractual agreement. In order toestablish the facts of the case, the attorney asks a number of questions. She also informsthe client about the various remedies which may be available to him.
19 ~:;: Listen to the first part of the lawyer-client interview. Why couldn't the clientdeliver the website to the customer on time?
20 ~:;: Listen to the second part of the interview. What is the lawyer going to donext?
21 ~:;: Listen to both parts again and tick the questions asked by the lawyer.
1 Did they not deliver on time or did they deliver something that didn't work?2 What are some of the features of the website you designed?
3 Did you draft the contract yourselves or did you engage an attorney?4 Were you able to deliver your website on time?
5 Did you get in touch with anyone besides your cousin, say,another programmer here in town?
6 How much do programmers get paid per hour in New York?7 Did they know what your deadline was?8 Do you expect to lose the customer as a result of this?
22 Choose the correct answer to each of these questions.
1 What was wrong with the software program delivered to the client?a It was completed too late to meet the deadline.
b It didn't work on all of the ferry company's PCs.
c It wasn't designed in accordance with the specifications of the client.
2 According to the lawyer, what should her client have done to mitigate hisdamages?a He should have offered his customer less than a 10% discount.
b He should have looked for a cheaper local programmer.c He should have had an attorney draw up the contract.
3 Provided the contract doesn't waive the right to consequential damages, under
which circumstances might the client be entitled to receive such damages?a If the reputation of the client in his town suffers
b If the quality of the software turns out to be unsuitable for the purposesof the customer
c If the loss of the customer and the necessity to grant a discount couldhave been foreseen
,4 Why can't the client expect to be awarded punitive damages?
a Weight gain does not qualify as emotional injury.
b Punitive damages are not awarded in a breach of contract case of this type.c The possibility of personal injury was not foreseen in the contract.
23 Work in small groups and discuss the case. What do you think would be thelikely outcome?
DDDD
DDDD
: In.I h c
In the previousdialogue,the attorneyconductsa successfulinterviewwith a client. Insuchan interview,the primaryaimsof a lawyerareto establisha goodworkingrelationship,to ascertainthe facts of the case,and to developa theoryof the legal issuesinvolved.Theseobjectivescanbestbe achievedthrough anawarenessof the stagesof aclient interviewand the effective useof questions.
24 Completethe spaces(1-5) in the table using these stages in a client interview(a-e).
a Establishing facts and chronology of eventsb Concluding the interview
c Getting an overview of the cased Identifying issues, developing and supporting a theorye Introduction
Unit 6 Contracts: remedies
E
n9 2: In.I h c e
25 With a partner, take turns conducting a lawyer-client interview. Eachof you will play the role of lawyer and question the other about the facts ofa case.
While in the role of lawyer, follow the outline of a lawyer-client interview in the
table above and use the sample phrases provided whenever possible. Takenotes on the information you receive from your client.
When playing the role of client, respond to the questions posed by the lawyeras best you can, inventing details when necessary. Do not give all of the
information at once; your task is to give your partner practice in posingquestions and gathering information.
Student A: Turn to page 305.Student B: Turn to page 306.
n9: n n c eSubsequent to an important meeting or phone call with a client, a lawyer will generallymake detailed notes on what was discussed and agreed upon. These notes may then formthe basis of a follow-up email or letter summarising the contents of the discussion.
26 Read the follow-up email on page 87, which was written after the interview youheard in Listening 2, and answer these questions.
1 What do you think is the purpose of this email?
2 Find one factual mistake and one additional piece of information in the
email. Read the transcript of the interview on page 268 to check youranswers.
3 Underline the phrases which are used to ask the client to provide material toserve as evidence in the case.
4 Underline phrases referring to the actions and rulings of the court.
,
Dear Mr Anderson
1 As a follow-up to our meeting on June 24 at my office, allow me to summarise what wediscussed at that time.
2 According to the facts as I understand them, you are involved in a contractual dispute with thesoftware-design company Glaptech concerning work you commissioned in order to fulfil acontract between you and a ferry company. The agreement that you concluded with the ferrycompany states that you would provide them with a website no later than 15 May of this yearwhich would, among other things, enable customers to book a ferry passage online. Yourcontract states that this online booking feature would work for 'all customers using modernhome computers'. You commissioned Glaptech to write a software program for the onlinebooking feature to be incorporated into the website you designed. However, Glaptech deliveredan unsatisfactory program to you, which contained unnecessary code and was not compatiblewith Macintosh computers. As a result, it was necessary to have Glaptech's program rewritten.For this reason, you requested an extension of three weeks from the ferry company. Thisextension was granted to you in exchange for a 20% discount on your work. The programmer youfound to do the repair work charged a higher than normal rate, which meant that the work on thewebsite as a whole resulted in a financial loss for you. Furthermore, you fear that the fact thatyou delivered your work late might result in the loss of a customer as well as damage to yourprofessional reputation.
3 You requested information from me regarding the recovery of damages. If you do in fact lose along-standing customer, there is a chance that you may be able to recover consequentialdamages. However, proving that the defendant could have foreseen this loss will be difficult. Itis also unlikely that you will be able to recover the full amount you spent to pay the relativelyhigh-priced programmer who repaired the faulty program. Since you were obliged to make areasonable effort to solve the problem as inexpensively as possible and you found anotherprogrammer without shopping around locally, it might be argued that you did not take sufficientsteps to mitigate your damages. It would be necessary for us to show the court that anotherprogrammer would have charged more or less the same as the programmer you hired and wouldhave done the same quality work. If we cannot do this, you will only be able to recover what alocal programmer would have charged for the work. Nevertheless, it appears that your chancesof recovering the discount that you gave to the ferry company are good, because your contractwith Glaptech does not waive consequential damages. It will be necessary to show thatGlaptech could have foreseen that you would have to give your customer a discount if theprogram they designed was unsatisfactory and had to be fixed, thus forcing you to deliver thegoods late.
4 While I believe your chances of recovering some damages are good, the amount will ultimatelydepend on what we are able to prove in court. The courts in our jurisdiction tend to strictlyconstrue contracts between commercial parties and are generally hesitant to awardconsequential damages unless the plaintiff can clearly demonstrate that the loss wasforeseeable to the defendant. The court will look at the course of dealings between you andGlaptech, as well as any documentation you can produce which indicates that Glaptech couldhave reasonably foreseen the loss.
5 At this stage in the matter, it would be helpful if you could give me any documents orinformation which relate to the dispute. Naturally we will require a copy of the contractconcluded with Glaptech. In addition, it would be extremely useful if you could providedocuments indicating the nature and extent of your previous business relationship with the ferrycompany, as well as anything that would bear witness to the poor quality of the faulty softwareprogram provided by Glaptech.
6 Once I have received the contract from you, I will prepare the complaint, which I should be ableto file within the week.
7 I will keep you informed of the progress of the case. Please do not hesitate to contact me if youhave any questions.
Yours sincerely
Clare Hayes
Unit 6 Contracts: remedies
~
27 Match each of these functions (a-g) with the paragraphs (1-7) in the email.
a a summary of the facts of the caseb an outline of actions to be undertaken next
c a discussion of legal issues involved in the cased a closing line referring to the next contact with the client
e a reference to the day, location and general subject of the interviewf a request for further information or evidence from the client
g an assessment of how successful the case will likely be in court
28 Using the notes you have taken and the information included on your role cardin Exercise 25, write an email to the client you interviewed.
ng $
. b hDifferent types of breach of contract can be distinguished, among them anticipatorybreach, material breach and immaterial breach.
29 This letter of advice deals with a case of anticipatory breach. Read the
first paragraph and underline the sentence that expressly states thepurpose of the communication.
,
30 Read the whole letter and answer these questions.
1 In your own words, summa rise the legal issue raised by the case referred to in the above letter bycompleting the following sentence:The issue in the instant case is whether...
2 In your own words, summarise the two options the client has under the law by completing thefollowing sentences:
The non-breaching party in this case has two options: firstly, ...Secondly, ...
3 In your own words, say how the reliance principle relates to the case.
Under the reliance principle, ...
31 Underline the sentences in the letter which refer to the actions and rulings of the court.
Yl1i~~
To improve your web-based tsearch skills, visit www.cambridge.orgjeltjlegalenglish.click onResearchTasks and choose Task 6.
Unit6 Contracts: remedies
E
Vocabulary: distinguishing meaning Which word each group is the odd oneout? You may need to consult a dictionary to distinguish the differencesmeaning.
verb + a clause6 insert a clause7 sever a clause8 draft a clause9 enforce a
d expecte determine
f
gh
Collocations with damages and a clause 2 The verbs in the box commonlycollocate with either damages or a clause. correct noun.
1.2 a clause
Vocabulary:word choice Choose the correct word or phrase to complete eacnsentence in this liquidated damages clause.
LIQUIDATED DAMAGES FOR DELAYS
Contractor understands and acknowledges that time shall be 1) on ;(iJJl in the essenceof this contract and agrees that the damages that may 2) cause I result from I bring about any
delay in finishing the work or parts 3) thereby I thereof I therein will be difficult, if not impossible,
to 4) change I avoid I ascertain. Thus, Contractor agrees that if the work and all parts thereof are
not completed 5) in I at Ion or before the dates stipulated for completion thereof, as extended in
the manner specified 6) herein I hereof I hereafter, Contractor 7) shall I may I should pay to
owner as stipulated, agreed and liquidated damages and not as a penalty, the amount stated on
the cover sheet for each calendar day in which the work or any portion thereof remains
uncompleted after such completion date as so extended.
Vocabulary: adjective plus noun Look at the following adjective-nouncombinations from Reading 4 (1-6). each of the adjectives (in italics)with its synonym
