Damages can be:
- Liquidated (where a fixed amount is set by the parties).
- Unliquidated (where the court decides the amount of the award).
But not a:
- Penalty clause (an amount agreed in advance which has a similar effect
to a fine). Often the amount payable is excessive, and the courts hold
these to be illegal – Dunlop v New Garage.
Regarding penalty clauses, note that:
- The use of the words ‘penalty clause’ or ‘liquidated damages’ is not
conclusive. - An obligation to pay an amount of money which is ‘extravagant and
unconscionable’ compared to the value of the contract may be an
indication that a clause is a penalty clause.
Liquidated damages may be:
- substantial (a normal claim)
- nominal (a minimum amount)
- exemplary (an unusually large amount).
Basis of assessment
Two different methods of assessment:
- Expectation basis: the normal contractual basis for breach of contract,
which compensates for loss of bargain – Robinson v Harman. - Reliance basis: the usual tort basis, found in misrepresentation, putting
the claimant back to the position before the contract was formed.
The ‘market rule’ allows the difference between what would have been paid
and what the item would now cost to buy on the open market. Contributory
negligence does not apply to breach of contract – Basildon D C v J E Lesser
(Properties) Ltd.
Mental distress and non-pecuniary loss
Damages are given for:
- Disappointment, vexation and mental distress, and when there is no
precise measure of the amount lost – Jarvis v Swann Tours, Jackson v
Horizon Holidays, Chaplin v Hicks, Thake v Maurice. - But not awarded for injury to feelings for wrongful dismissal under
contracts of employment – Addis v Gramophone Co Ltd, Bliss v S E
Thames Regional Health Authority.
Remedies 231