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Natashah K Mapingere
23900329

LS110 Law of contract

Term C 2023
Term Project 1
23 January 2024

Introduction
Looking the facts of the above case , it is right for Mes Galeadou to be seeking
advise concerning (a) extent of damages for loss of business (b) how to quantify
loss and c) the rules relating to penalty clauses and liquidated damages. The
following discussion wil consider each term in relation to the case in question.

Extent of the damages for loss of business

Mrs Galeadou and Manda Hill Fashions will have to look at the nature of the breach
so as to know the extent of damages for loss of business. The extent of damages for
the loss of business would be decided basing on the principles of compensatory
damages. Compensatory damages as explained by Elliott, & Quinn (2007), "they
are intended to put the non -breaching party in the position they would have been if
the contract had been performed as agreed". For compensatory damages to be
awarded the breach can either be direct or consequential. In reference to the case,
actual or direct breach did occur. The breach of contract came from the other party
Serios International Limited as they performed defectively hence a direct breach.

Looking further into the case, Manda Hill Fashions and Mrs Galeadou can base their
claim on the fact that Serios International Limited breached contract terms of time.
Common law has the principle that late performance is at all times is a breach of a
contract as long it is not remote ( Stone 2009). Serios International was supposed to
deliver the suits on the 20th but delivered the suits 2 months late. Hence Nrs
Galeadou can rely on the fact that Serios International delivered the suits late in
determining the extent of damages for loss of business.

Furthermore,in order to determine the extent of their loss of business, Manda Hill
Fashions will have to retrace their steps and make sure that, they did take
reasonable steps to minimize the impact of the breach (Elliott, &Quinn ,2007). These
are mitigating factors . If it is discovered that Manda Hill Fashions did not take
reasonable efforts to mitigate their losses, the extent of damages will rewarded by
the court will be reduced . More information will be needed to prove this than the
information initially given.
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The court will look at if the breach was foreseeable on both contracting parties.
Foreseeablity stems from the principle of remoteness which avoids a defendant
being burdened with unnecessary monetary debts to compnsate a party for losses
that did not directly result from them (Charman, 2007).. To determine the
foreseeabllity of a breach, the court will establish if the defendant knew of any
special instructions or requirements pertaining as to why the claimant is contracting
in the first place (Stone, 2009). If the defendant had such information such as the
defendants' performance was urgent or they had a business opportunity or deadline
it is concluded that the defendant did foresee such a breach if they were to not
perform as agreed , they are liable for damages (Stone, 2009) In this cse, Serios
International did have the knowledge of the contract being urgent and that the
Manda Hill Fashions had a business opportunity they were looking to take advantage
of. Therefore, they could be warded a large amount of money in damages

Last but not least, Mrs Galeadou and Manda Hill Fashions will have to decide if they
want to claim damages based on loss of expectation or reliance loss. To decide on
this they have to know the difference between the two, their advantages and
disadvantages and how they are calculated by the court . Loss of expectation is used
by courts to calculate damages they can award the plaintiff by putting them in the
position they would have if the contract was performed as agreed (Stone, 2009).
Hences it looks at what the non-breaching party's position would be had they
received the agreed performance (Elliott, & Quinn ,2007). The courts will look at the
principle of breach date rule that is the time the contract was breached. If the loss
was caused by failure to meet the expected date and disadvantaged the plaintiff the
breach date rule will apply (Elliott, &Quinn 2009).
Whereas, reliance loss aims to put the claimant in the position they were in before
the formation of the contract (Elliott, & Quinn, 2009). In calculating damages based
on reliance loss, the courts look at the plaintiffs' expenditure and the losses they
incurred because of the breach (Stone, 2009). It is imperative for Mrs Galeadou to
note that they cannot claim damages basing on both reliances but only one. Also ,
they should know that reliance as a base awards less money and that it is mainly
mainly used in tort law seeing thst their case is one (Elliott, & Quinn ,2007).

How to quantify loss

To reasonably quantity loss , evidence such as financial records, market analysis,
expert testimony and other relevant documents will be required to support the
calculation of damages and the extent of loss (Stone, 2009). Hence Manda Hill
Fashions and Mrs Galeadou will have to present this documents in their claim for
damages.

Another way to quantify their loss is to look at the type of losses they incurred . It is
important to note that Manda Hill Fashions suffered percuniary loss which relates ti
physical and economic loss and in this case it was monetary loss (Charman,
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2007).From the case, Manda Hill Fashions lost a business opportunity , probably lost
profits and incurred some financial loss especially considering they probably had
paid K1 000 000 or half the price wanting to pay the other half for the suits on
delivery of which were delivered late. However whether they had paid the full amount
for the purchase of the suits is not clear but in reference to most businesses contract
such as these, a party usually pays half and then the other half in delivery. Also, they
lost a business opportunity of selling the suits to companies who were attending the
National Agricultural show. Therefore all these facts will be used to quantify their
loss.

In reference to the point above, Manda Hill Fashions will have to know that the
courts will look at 3 common law principles that help quantify loss namely
causation,remoteness and mitigation (Elliott,& Quinn, 2007). In terms of causation,
the court will look at if Serios International 's breach is the sole cause of Manda Hill
Fashions' loss and most importantly if it is the effective cause of their loss.
Furthermore, the courts will look at if the defendants it being Serios International's
breach is too remote to blame it for loss of Manda Hill Fashions. If both Causation
and remoteness are found in favour of the plaintiff ( Manda Hill Fashions), their loss
will be found quite large and the damages awarded might be a large amount of
money. The opposite is trues if causation and remoteness are found present.
Mitigation has been discussed in the second section above.

Liquidated damages and Penalty clauses

Looking at the fact that Manda Hill Fashions put the amount of damges they require
for late delivery (liquidated damages) it is fair for Mrs Galeadou to know the
difference between liquidated damages and Penalty clauses so as to have an idea of
what the courts might scrutinize in terms of the liquidated damages.

Liquidated damages are when a contract puts a term of an amount of damages

required from another contracting party in the contract in case of a breach ( Elliott,
&Quinn 2009). The amount should be reasonable and genuine and not in the aim of
punishing or burdening a breaching party. Hence a penalty clause in a contract is an
amount that is extreme and is not proportional to the damages likely to have been
sufferd by the non - breaching party (Elliott, &Quinn 2009). The presumption by
courts in commercial contracts is that amount of damages written in a a contract are
not penalty clauses where the parties have comparable bargaining power .

Hence, the court might conclude that their amount of K10 000 per every week of late
delivery is very much reasonable and not a penalty clause. This is for various
reasons. Mainly because, Manda Hill Fashions lost a business opportunity and most
had paid either K1 000 000 or the half of it remaining the other half to be paid on
delivery for the suits. Therefore made sense for them to want that type of amount for
damages to be paid every week.
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Conclusion

In summary of the above given advise, Manda Hill Fashions might be able to
successfully claim their damages. Howey some aspects might need more
information to be given to see if they can be warded a large amount of damges
especially looking at the rule of evidence and mitigating factors.

Reference List

R. Stone. (2009). The Modern Law of Contract (8th ed). London: Routledge
Publishing.
C Elliot, &, F. Quinn.(2009). Contract Law (7th ed). Pearson Longman:London.
M. Charman. (2007) . Contract Law (4th ed). London: Wilan Publishing