In part one of this two-part series I told you that I had employed a decorator who hung my wallpaper upside down.
You can imagine my dismay and the awkward conversation that then ensued. I have to say at the start of this article, which is going to look at damages and equitable remedies, that the decorator was mortified and immediately offered to return and hang more wallpaper at his expense.
So all was well, but part one established that a valid legally binding contract was in place between us, therefore, we are going to look at what recourse I would of had if the decorator had not taken responsibility.
Once a valid contract has been made it can be ended or ‘discharged’ in one of four ways, by:
1. Performance – both parties do what they have agreed ie. the decorator decorates my room and I pay him
2. Frustration – the contract is impossible to fulfil, through no fault of either party for example, an outdoor event that has to be cancelled due to bad weather or one of the parties dies or the content/subject of the contract is made illegal (unlikely in the case of decorating)
3. Agreement – both parties agree, before either of them has done anything, that they will not fulfil the contract
4. Breach – when one of the parties fails to completely or satisfactorily do what they agreed, such as hanging wallpaper the right way up!
When a contract is discharged by one of the first three ways then that’s the end of the matter. However, when there is a breach of contract the innocent party will want the problem sorted out. Often this can be achieved by both parties agreeing between themselves, however, when this is not possible the innocent party can take the other party to court.
If a dispute goes to court because a contract has been breached, then its terms and conditions will need to be established as they define what remedies are available. Conditions are in fact a type of term which can be made orally as well as being the annoying and lengthy small print that so many of us fail to read when signing up to agreements. Let’s consider an overview of ‘terms’ first:
The result of negotiations between parties as they are forming a contract may or may not become a term of the contract. For example, the decorator told me that he could do the work whilst I was away on holiday and as this was really convenient it was part of why I agreed. It was not a specific ‘term’ of the contract but what is called a ‘representation’.
Representations are statements made to encourage the offeree to make a contract but they do not form part of the actually contract itself unlike terms. In my case, it was clearly agreed that I would supply the wallpaper so that was a term of the contract.
Terms can be ‘express’ or ‘implied’. We looked at these words in part one, but here they have different meanings. Express terms are specifically inserted into a contract whereas implied terms are not, although some implied terms may still legally apply. The fact that I was required to supply the wallpaper was an express term. However, it was not specifically stated that the decorator would carry out the work with reasonable care and skills, but as this is contained within the Supply of Goods and Services Act 1982, it is an implied term due to the statute.
Now let’s move onto the two main types of terms, conditions and warranties:
Conditions ‘go to the root of the contract’, in other words, they are fundamental.
Warranties are less important than conditions and are considered to be secondary.
Let’s say that I had stipulated that my room must be decorated by 29th August but that it wasn’t finished until 30th August. The completion date is likely to be a condition of the contract. However, if we had agreed that the room would be completed by 5pm on 29th August and it wasn’t finished until 5.15pm then this is likely to be considered a warranty. This is because whilst the 15 minutes delay might be disappointing it is relatively trivial in relation to the overall service provided.
There’s lots of complicated and confusing terminology when it comes to legal matters. The reason that we need to know the differences, is because the options for sorting out problems, known as remedies, depends on which bit of the contract has been breached, for example, a representation, condition or warranty. There are two categories of remedies, legal damages and equitable remedies and if there is a clash between them, then equity will take priority.
Legal damages allows the innocent party to be awarded monetary damages.
Equitable remedies are awarded when legal damages are insufficient.
If there is a breach in conditions, warranties or representation then equitable remedies are available. Legal damages can be awarded if conditions or warranties have been breached but only if there is a breach in conditions can the contract be discharged and the innocent party released from the contract.
Legal damages are the basic remedy for breaches and aim to restore the innocent party to the financial position they would have been in if the contract had been fulfilled as expected.
Let’s flip our scenario and image that I had failed to supply the wallpaper for the decorator and as a consequence the work was delayed. In this situation I would be in breach of a condition of the contract and the decorator could be awarded damages. The value of damages is known as ‘loss of the bargain’ and includes the refund of any monies the innocent party has paid plus any ‘consequential losses’.
Damages could be awarded to the decorator for the loss of a day’s work because I could have reasonable foreseen that the work couldn’t be done if the wallpaper wasn’t supplied. This would be an example of consequential losses called ‘normal losses’. If the consequential losses are ‘abnormal’ then their value will not be awarded as they are losses that could not be reasonable foreseen by the defendant at the time the contract was formed.
Equitable remedies are only available at the discretion of the court and are usually either:
1. Specific performance – requires contractual obligations to be performed. For example, the decorator could have been required to re-wallpaper the wall at his own expense.
2. Injunction – requires that something happens or stops happening. Let’s say I’d been making excessive negative postings on social media then the decorator could seek an injunction to stop me.
Equitable remedies are only granted if the innocent party hasn’t unduly delayed bring the case to court and has acted fairly. They will not be granted if the order will cause undue hardship or needs constant supervision by the court.
As it was my contract was discharged by performance without the need for any court involvement, damages or equitable remedies. My room is now beautifully decorated and just need s a carpet, which surely couldn’t be fitted upside down?!
Gill Myers is a self-employed accounts consultant. She has taught AAT qualifications since 2005 and written numerous articles and e-learning resources.