1.

One of the most fundamental ways in which they diverged was in the establishment
of judicial decisions as the basis of common law and legislative decisions as
the basis of civil law.
2. Common law is generally uncodified: this means that there is no comprehensive
compilation of legal rules and statutes.
3. This is referred to as the principle of the ‘separation of powers’ and is the basis for
the rule of law in many jurisdictions where the legislature makes laws, the executive
arm of government governs the state and introduces laws and the judiciary interprets
laws. A good example of this is the Constitution of the United States of America,
where the Legislative, Executive and Judicial branches of government are kept
distinctly separate.
4. Judicial precedent (also known as case law, or judge-made law) is based on the
doctrine of stare decisis, From the Latin phrase 'stare decisis et non quieta movere'
which translates as to 'stand by decisions and not disturb settled matters'
5. Stare decisis represents the policy of the courts to abide by or adhere to principles
established by decisions in earlier cases. This means that the decision of a higher
court within the same jurisdiction acts as binding authority on a lower court within
that same jurisdiction. The decision of a court of another jurisdiction can only act as
persuasive authority if any authority at all. For instance, every court lower than the
Supreme Court in the UK must follow a decision of the Supreme Court: however, the
High Court in Singapore might find that same Supreme Court decision only
‘persuasive’ on the issue.

6. European nations that join the EU there by adopt all EU Law to date (the acquis
communautaire), namely: treaty provisions, regulations, directives, decisions, and
precedents.
7. The UN Convention on Contracts for the International Sale of Goods (CISG;
Vienna Convention),

8. lex mercatoria principle is the Latin expression for a body of trading principles used by
merchants throughout Europe in the mediaeval period. Literally, it means 'merchant law' and
is sometimes known in English as the 'Law Merchant'. Lex Mercatoria evolved as a
system of custom and practices, which was enforced through a system of merchant
courts along the main trade routes.

9. The common law of contract originated with the (now-defunct) writ of assumpsit,
which was originally a tort action based on reliance. Contract law falls within the general
law of obligations, along with tort, unjust enrichment, and restitution.
10. Contract law is based on the principle expressed in the Latin phrase ‘pacta sunt
servanda’, (agreements must be kept).
11. In the common law tradition, not all agreements are necessarily
contractual, as the parties generally must be deemed to have an intention to
be legally bound. For example, a ‘gentlemen’s agreement’ is one which is
not intended to be legally enforceable, and which is ‘binding in honour’ only.

12. The promisor and the promisee. The promisor is the party that makes the
promise, while the promisee is on the receiving end of the promise.
13. Agency: sometimes, a company will act through another individual or another company
called an agent, who is authorised to act on behalf of another (called the principal) to
create legal relations with a third party.

Agency represents a legal relationship between the principal and the agent. Therefore,
an agency agreement is a legal contract creating a fiduciary relationship, whereby the
principal agrees that the actions of the agent will bind the principal to agreements made
by the agent, as if the principal had himself personally made those later agreements.

14. Making or formatting contract: the common law focuses on four basic principles:

Offer, Acceptance, intention to create legal relations and Consideration.

Civil law focuses on whether or not the agreement has a legal cause or purpose, and on
elements necessary to demonstrate that the agreement was the result of an exercise of
the parties’ free will.

15. A contract can be made orally or in writing, or can come into existence through the
conduct of the parties.

16. contracts that require particular formalities to be valid, these contracts are detailed
in many common law jurisdictions in what is known as the Statute of Frauds (so-
named as it is intended to prevent fraud by someone claiming there is an oral
contract)

17. Under common law jurisdictions, the law recognises a legally binding contract
when the parties have:

• made an agreement through offer and acceptance; AND

• provided consideration; AND

• shown an intention to create a legal relationship.

If one element is missing, an enforceable contract does not exist.

18. A civil law contract does not require the element of consideration : instead, the contract
must have a legal purpose or cause (ie. the reason for the parties entering the
agreement must be legal).

19. civil law contracts require the presence of a subject matter or purpose of the contract.
 This subject matter or purpose, also known as ‘the object’; of the contract in civil law
jurisdictions,is usually the agreed upon good or service for which the parties are
contracting. For example, the ‘purpose’ of a contract for a sale of goods is the purchase
of the respective goods. Likewise, the purpose of a rental agreement is for the use of the
premises.

20. A gratuitous contract is one where the person performing the contract does so simply
to benefit the other party and takes no personal benefit or advantage from the contract.

21. An onerous contract, on the other hand, is one for which consideration will be given.
For example, a contract, such as a sale of goods, in which both parties expect to receive
an advantage in exchange for the service or item they provide.

22. An offer is made by one person, the offeror and addressed to another, the offeree. An
offer becomes an agreement when it is accepted by the party to whom it is made, the
offeree.

Article 2.1.2 of PICC makes the point clear:

“A proposal for concluding a contract constitutes an offer if it is sufficiently definite

and indicates the intention of the offeror to be bound in case of acceptance.”

23. A statement which is less than an offer is known in contract law as an invitation to treat
or ‘mere puff’. An invitation to treat differs from an offer in that the intention is to invite
negotiations towards making a contract, rather than providing exact terms of a contract
and, therefore, an invitation to treat does not have the legal force of an offer:

• an invitation to treat is not enforceable;

• an invitation to treat cannot be accepted to form a binding agreement.

24. The Carlill v Carbolic Smoke Ball case is an illustration of a unilateral contract: C
was not bound to accept the offer but did so by buying and using the smoke ball in
response to the advertisement, and by doing so, CSBC was bound by its promise of
reward.

25. In this case, B is making an offer himself and so becomes an offeror; his response is
termed a counter-offer.

26. For acceptance to be valid, the law requires:

• the method of acceptance is consistent with the offer; AND

• it matches exactly the terms of the offer; AND

• it is communicated to the offeror, though there are a few notable exceptions

discussed below.

27. A counter-offer must be contrasted with a mere query for information about the terms
of the offer.

28. One illustration of the importance of this is resolving disputes in the so-called ‘battle of
the forms’ cases. Here, parties negotiate using their own standard-form contracts. Each
 party wishes to convince the other that the contract should be based on its standard
terms, and will endeavor to get the other party to agree to this. The reality can be that
neither agrees to the other’s form, though they think they have reached an agreement.
However, closer inspection of the two forms can reveal differences in obligations. Whose
form represents the contract?

The established principle is the ‘last shot’ doctrine. This says that the contract is based
on the form which is the last to be put forward without objection by the other party.
However, cases have shown that this is not always so easily applied.

Under German law the solution is the so-called ‘knock out’ rule, which provides that
general conditions only become part of the contract to the extent that they are common
in substance. If they differ then they are ‘knocked out’, leaving a gap which is filled by
default rules (equivalent to implied terms under the common law).

In France, the current approach is a result of the reform of the French Code Civil
concerning contracts, a key feature of which is the regulation of ‘unfair contract terms’.

The reform limits the new regime to ‘standard-form’ contracts (‘contrats d’adhésion’).
These are defined as contracts whose general terms and conditions (and not only their
‘essential terms’, as was initially envisaged) are not subject to negotiation and are
determined by one of the parties in advance.

29. Communication of acceptance can be through an agent on behalf of the offeree, but it
must be authorised.

30. The postal rule does not apply to revocation of an offer, which can only be effective
when it is communicated to the offeree.

31. ‘Subject to contract’ is a well-established device that makes acceptance conditional on

a specific stipulated event or events. It is used particularly in land and property sales. As
the parties come close to concluding the sale of the property, the buyer will usually agree
to the sale ‘subject to contract’. This means that on the happening of the stipulated
future event, the acceptance will be valid. This event is usually the exchange of written
contracts. Once this occurs, acceptance automatically occurs, and a binding contract
exists.

32. Definition of consideration is ‘the giving of a benefit, or a suffering of a detriment or a

promise of either of these’. Consideration ‘must be sufficient though it need not be
adequate’.

Consideration is provided by the promisee.

The promisee must provide something of economic value, but the actual value of the
consideration is not important. In the example above, if A freely promises his new Rolls
Royce car to B for £10, (clearly well below the market value), the promise is still
enforceable because it is the fact of economic value rather than the amount that is
relevant. It is not the place of the courts to correct a bad deal!

33. In civil law jurisdictions, the idea of ‘consideration’ is dealt with slightly differently: there
is no need for an actual ‘bargain’ (i.e., consideration); however, there must be a legal
 reason for the contract to exist; this is the cause or causa.

34. Under the Italian Civil Code, the requirement of the causa corresponds to the essence of
the contract and needs to be legal (i.e., it must not violate mandatory provisions).

35. Under French law cause has a number of functions:

 It allows the courts to prevent contracts from taking effect if the goal that the parties
pursue with the contract cannot be realised. Art 1131 of the Code Civil states that an
obligation without cause may not have any effect and the courts can, therefore, regard
such contracts as being void. This analysis is usually undertaken on an objective basis.

 It prevents prohibited or immoral contracts from being valid. Art 1133 Code Civil
provides, ‘A cause is unlawful when it is prohibited by law, when it is contrary to good
morals or to public policy’.

36. A peppercorn is a metaphor 1 for a very small payment, a nominal consideration, used
to satisfy the requirements for a legal contract (Consideration) and it is sufficient as
consideration.

37. For the consideration to be enforceable, there needs to a temporal link between the
consideration and the promise, in that they were agreed at the same time.

If A, unsolicited, generously tidied B’s Garden and later, out of gratitude, was promised
payment by B, A would not be able to enforce it. A’s consideration is described as past
consideration and is insufficient in law as it is not given in response to any
promise of B.

38. Pinnel’s rule that part payment of a debt cannot extinguish the obligation to pay the
whole.

39. The motive of liberality2 (causa donandi) being regarded as constituting a sufficient
causa.

40. Equity is the jurisdiction of the court to decide a case to ensure that a fair result is
achieved despite the existence of established common law principles.

41. Pages: 89-90-91. Estopple.

42. The duty to inform during negotiations was developed in French case law and is
expanded upon in the reform. As part of the changes, if a party knows of information and
knows that the information is of decisive importance to the willingness of the other party
to contract, then the first party must provide the other party with the information. This
only applies to information that the other party legitimately does not know or where one
party is in a relationship of confidence with the other. This duty cannot be restricted or
excluded. Failure to satisfy this requirement may allow the court to set aside the contract
on the basis of no consent.
It remains very difficult to hold a party liable when no contract is reached at the end. Damages in this regard
are limited to those incurred during negotiations, excluding loss of opportunity and loss of profit.

1
‫ مجاز‬،‫استعارة‬
2
‫السخاء‬
43. Contract law in all jurisdictions is not interested in the subjective understanding of the
ordinary man, but rather the objective meaning of the words used by the parties.

What is decisive in this analysis is what the words or actions of one party suggest to a
reasonable person in the position of the other party.

44. Sometimes contracts contain an event or state of affairs which must occur, (unless its
non-occurrence is excused), before performance under a contract becomes due; ie.
these are conditions which must be satisfied before any contractual duty exists. These
are known as ‘conditions precedent’.

If the condition precedent is not fulfilled, then it is possible that the rest of the obligations
in the contract fall away entirely and thus the contract comes to an end. An example
might be the obligation to provide a performance bond (issued by a bank to guarantee
satisfactory completion of a project by a contractor); since this depends on a bank that is
not a party to the contract the provision is unenforceable. Thus, if the bank does not give
the performance bond and, therefore, the condition precedent is not satisfied, the
contract does not come into existence.

45. A ‘condition subsequent’ refers to an event or state of affairs that if it occurs, or fails to
continue to occur, brings about the end of the legal rights and obligations in the contract.

Put simply, a condition precedent initiates a duty and a condition subsequent brings a
duty to an end.

46. The most common forms of conditions precedent- In English law- are:

 Parties can agree on one or several condition(s) precedents for a contract (there
could be also conditions subsequent).

 In order for such condition(s) to be valid, said event shall be future and uncertain.

 It can depend solely on one party’s will (but such condition shall be reasonably
interpreted and in practice is usually avoided unless acceptable compensation is
also provided for).

47. Representation is a statement or conduct that does not amount to a contractual term,
but nonetheless might induce the party to whom it was made to enter into a contract. A
representation does have legal significance: if it is untrue, it can give rise to an action for
misrepresentation. A false representation can entitle the innocent party, the representee,
to sue for a remedy in misrepresentation.

48. In interpreting a contract, the courts aim to understand the common intention of the
parties when they entered the contract.

Interpretation can take two different forms:

 the subjective interpretation: a search for what the parties intended, their ‘real’ intention.

 the objective interpretation: a reliance on what was stated in the contract. The objective
interpretation means that the parties can rely only on the words used.

49. This tension between subjective and objective intent is visible in Article 1188 of the
 French Code Civil which states:

 “A contract is to be interpreted according to the common interest of the parties

rather than stopping at the literal meaning of its terms.

 Where this intention cannot be discerned, a contract is to be interpreted in the

sense which a reasonable person placed in the same situation would give it.

50. Culpa in contrahendo is a Latin expression meaning "fault in conclusion of a contract".

It is an important concept in contract law for many civil law countries, which recognize a
clear duty to negotiate with care, and not to lead a negotiating partner to act to his
detriment before a firm contract is concluded.

51. a representation is an assertion as to a fact that is given to induce another party to

enter into a contract.

52. A warranty is an assurance or promise in a contract that a certain fact or situation is

true, the breach of which may give rise to a claim of damages.

53. Indemnity is compensation for damages or loss; it may also refer to an exemption from
liability for damages. The concept of indemnity is based on a contractual agreement
made between two parties, in which one party agrees to pay for potential losses or
damages incurred by the other party.

54. The difference between terms which are regarded as ‘conditions’ is that the breach of
an obligation or term which is a condition entitles the innocent party not only to claim
damages, but also to terminate the contract. A warranty, entitles the innocent party to
claim damages only.

55. The difference between a term as a condition, and a term as a warranty depends on
whether the term is essential to the main purpose of the contract. If the obligation is
essential, then it is a condition (even if it is called ‘warranty’ in the contract), while an
obligation that is collateral3 or tangential4 to the main purpose of the contract is a
warranty.

56. An innominate term is an intermediate term which cannot be defined as either a

‘condition’ or a ‘warranty’ A complex term which, if breached, could lead to severe or
minor consequences for the innocent party. The consequences of breach of such a term
will be equivalent to either breach of condition.

57. or warranty depending on the actual severity for the innocent party.

58. Sources of implied terms: There are three sources of implied terms: legislation;
custom; and decision of a judge.

59. This implied term requires that the seller of the goods actually has the right to sell the
goods.

60. Implied term about description, SOGA Section 13(1) states: “Where there is a contract
for the sale of goods by description, there is an implied term that the goods will
3
‫عرضي‬
4
‫ضمانة‬
 correspond with the description.”

61. Buyer beware! The principle of Caveat emptor or ‘let the buyer beware’ is that the
buyer is responsible for checking the goods and contract and making sure they are
suitable. As such, if the buyer is aware of a defect, or should reasonably be aware of it
because he had the opportunity to examine the goods or had a sample, then he cannot
rely on this defect to refuse the contract: This is made clear in Section 14(2C) of SOGA:

“The term implied by subsection (2) above does not extend to any matter making the
quality of goods unsatisfactory:

 which is specifically drawn to the buyer’s attention before the contract is made,

 where the buyer examines the goods before the contract is made, which that
examination ought to reveal, or

 in the case of a contract for sale by sample, which would have been apparent
upon a reasonable examination of the sample.”

This is also dealt with in Article 35(3) of the CISG

“The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for
any lack of conformity of the goods if, at the time of the conclusion of the contract, the
buyer knew or could not have been unaware of such lack of conformity.”

62. An exclusion clause is a term in a contract which excludes a party’s liability for a
breach of contract in certain events.

63. A limitation clause is a term in a contract which limits a party’s liability for a breach of
contract in certain events, for example:

“Refunds are limited to the value of the goods purchased.”

Where the CISG applies to a transaction, Article 6 provides:

“The parties may exclude the application of this Convention or, subject to Article 12,
derogate from or vary the effect of any of its provisions.”

64. A signature will not bind the buyer in all circumstances. Where the buyer can show that
the document is fundamentally different to that which he thought he was signing, he may
raise the defense of non est factum, which translates as ‘it is not my deed’. The
defense will only be available in limited circumstances.

Also, where there has clearly been a misrepresentation or fraud as to the effect of the
exclusion clause, the ‘signature’ rule will not apply.

65. Contra proferentem is an approach to interpretate the contract. This rule entails that an
ambiguity in a written contract must be interpreted against the party who drafted it. This
is intended to give the drafter an incentive to ensure that clear terms are used in the
contract. Hence, the person seeking to rely on an exemption clause must prove that the
words clearly cover the alleged breach.

66. Negligence, in common law, means failing to reach the standard of care required by the
 law.

The law on excluding liability for negligence is as follows:

 Section 2(1) provides that any contractual term or notice excluding or restricting
liability for death or personal injury caused by negligence is void
(inoperative).

 Section 2(2) provides that an exclusion clause or notice excluding liability for other
loss or damage may be upheld if it is reasonable.

67. Vitiating factors are certain factors may arise which, in the eyes of the law, render the
contract ineffective in some way. These factors can arise before, or at the time of
making the contract.

68. A misrepresentation is a false statement of fact made by one party to the other, which
induces that other party to enter into the contract. Misrepresentation, where a party
makes certain pre-contractual statements that are discovered to be false.

The statement must be false to be actionable.

 The representor telling a ‘half-truth’. This is when some of the statement made is
true, but the significance or meaning of it is distorted because the whole truth is
not revealed. In these circumstances, it may be a misrepresentation;

 ‘Continuing representations’: this is when a statement is true at the time it was

made, but circumstances before the making of the contract later negate it. In With
v O’Flanagan (1936), a doctor wished to sell his medical practice, and made
representations regarding its value. The doctor then became ill and was unable to
pay as much attention as he had been doing. The value of the practice fell. This
fact was not disclosed at the time of sale. The original statement was held to be a
misrepresentation;

 contracts of the utmost good faith (uberrimae fidei): these are contracts where
there is a full duty to disclose. Examples are contracts of insurance, contracts
between business partners, or in any confidential relationship, such as that of
solicitor and client.

69. A contract entered into as a result of any type of misrepresentation is voidable; this
means that the innocent party can either accept the contract or rescind (consider it void
and reject) it.

70. Rescission terminates the contract and aims to put the parties in the position they were
in before the contract was made.

 restitution is impossible. As the aim of rescission is to put the parties back in the
position they were in before the contract was made, it must be possible to do so
when a party exercises his right to rescind. If the subject matter of the contract
has been destroyed, then clearly it cannot be restored to the owner. This will also
be true if the subject matter has been radically and permanently altered.
  if an innocent third party has acquired an interest in the property, (bought the
goods from the representee), it will prevent the innocent party from rescinding the
contract.

71. Damages for misrepresentation are assessed on the basis of tort, which is different to
how damages are normally assessed for breach of contract.

72. Vitiating factors between civil and common laws:

Civil law doctrine and codes treat any phenomena that affect consent or assent as a
vice5 that vitiates the ‘intent or will to contract’, which is required for the formation of the
contract.

The vices recognised by legislation vary somewhat from jurisdiction to jurisdiction. But
generally, they include error/mistake, fraud, threat/violence.

In Article 1109, the French Code Civil provides:

“There is no valid consent, where the consent was given only by mistake, or where it was
extorted by duress or caused by fraud.”

As in common law, these vices may be invoked only as a defence, generally referred to
as an exception, by the party to the contract which has suffered them.

73. The duty to disclose

The revised French law introduced a general obligation of information prior to the
execution of the contract which is reciprocal for the parties. Any information known by a
party, which is of decisive importance for the consent of the other party, and is in direct
and necessary link with the content of the contract or the quality of the parties, must be
disclosed to the other party.

Article 1112(1) of the 2016 Ordinance also incorporates into the Civil Code the ‘devoir
d’information’ (duty to inform), which hitherto formally existed only in French
jurisprudence. The codified version of this duty, however, will impose a broader duty than
that previously existing in case law and applies to all types of contracts.

From now on, a party will be required to share with the other party during negotiations
any information that the first party knows concerning the subject matter of the contract to
the extent such information would be determinative or critical (‘déterminante’) to
obtaining the other party’s consent to enter into the agreement, if the counterparty ‘trusts’
the counterparty or is ignorant of the relevant information.

This duty does not extend to the estimation of the value of the subject matter of the
contract. The party claiming that the other should have provided information will have the
burden of proof that such information was owed to him by the other party.

Given the broad and undefined scope of this duty of pre-contractual information, it is
noteworthy that the new Article 1112 provisions regarding the duty to inform specifically
provide that parties can neither limit nor contract away this duty. Additionally, pursuant to
Article 1130 et seq., a breach of this duty to inform (whether or not intentional) may lead
5
‫ عيب‬،‫نقيصة‬
 to the cancellation of the contract on a theory of lack of consent. While the 2016
Ordinance confirms that parties have a duty to inform, it introduces new uncertainty
about the lengths that the parties will be required to go to satisfy their information
obligations to one another under the Civil Code.

Should a party be in breach with this obligation, the other party may claim for damages
and, in case of fraud, even for the nullity of the contract.

Although there is no general duty to disclose under German law, a duty to disclose
does exist where a party relies on the knowledge or expertise of the other party or where
there is an existing relationship based on mutual trust and good faith. Pursuant to §123,
BGB keeping silent about a matter renders the contract voidable.

74. The reason is that a mistaken contract is treated as though it never existed – this is
referred to as a void contract, or a contract that is voidable for mistake, and can
lead to drastic consequences.

75. Types of Mistakes: There are different categories of mistake:

 signing a contract in mistake;

 common mistake – both parties make the same mistake;

 mutual mistake – the parties have agreed to different obligations;

 unilateral mistake – one party is mistaken, and the other party knows this.

76. Defence: It is not my deed (non est factum) This defence is an exception that allows a
party to escape the usual consequence of his signature.

77. Here the parties made an oral agreement which they later put in writing. When a party
believes the written form incorrectly states what was orally agreed, it will allege wrong
transcription and seek a remedy from the court to correct it. The remedy is known as
rectification. The court will only allow it if there is convincing evidence that the written
agreement is wrong. This remedy is an equitable remedy and as such is available at the
court’s discretion.

78. In civil law ‘error’ implies an error or mistake in the knowledge of a fact (factual mistake)
or about the applicable law (legal mistake). Error vitiates consent only when:

 the error concerns a cause without which the obligation would not have been
incurred, and

 that cause was known or should have been known to the other party.

79. In Germany, under §119–122 BGB:“§119, the starting point is different, because the
law on mistake is applied to declarations of will rather than contracts. A declaration of
will has an internal aspect (the intention) and an external one (how it is expressed, for
example in words or conduct). It is the objective expression of the will (as a recipient
would have viewed it) that is effective, rather than the subjective intention in the mind of
its author. This objective expression must, however, be compared with the subjective
intention to ascertain whether there is a lack of intention (Willensmangel).
80. The common principle is that all jurisdictions will find a contract unenforceable if it
contravenes a statute, public policy or good morals.

81. The consequences of illegality are diverse. The general rule is that the contract will be
unenforceable. A particular statutory regime may, however, permit one of the parties to
obtain some form of remedy.

82. Economic duress: This type of duress occurs with one party taking unfair advantage of
the other’s financial difficulties during the course of making or renegotiating a contract.

83. Undue influence has been developed by principles of equity and fairness.

84. Unconscionability is a doctrine in contract law that describes terms that are so
extremely unjust, or overwhelmingly one-sided in favour of the party who has the
superior bargaining power, that they are contrary to good conscience.

Typically, an unconscionable contract will be held to be unenforceable because no

reasonable or informed person would otherwise have agreed to it. The perpetrator of the
conduct is not allowed to benefit, because the consideration offered is lacking, or is so
obviously inadequate, that to enforce the contract would be unfair to the party seeking to
escape the contract.

85. Discharge Agreement: Parties can agree to discharge a contract. This agreement is
itself a contract and must satisfy the conditions of contract including valid consideration
by both parties.

Where both parties have an outstanding obligation, the requirement of consideration

is simply satisfied by the mutual promise to abandon obligations.

86. Where one party has only partly performed the contract, the other party, rather than
reject the work done, may accept that part of the performance which has been carried
out. The other party is entitled to payment on an ‘as much as is deserved’ (quantum
meruit) basis.

87. In French, force majeure is also known as cas fortuit.

88. ‘Damages’ is the legal term for a court award of monetary compensation.

The object of awarding damages is normally to put the injured party in the same position
as if the contract had been performed, so the claimant is entitled to claim for what he
would have expected to get if the contract had gone ahead (less any money already
received).

89. This is different to the position in the law of tort, where the aim is to put the claimant in
the position he would have been in if the tort had never been committed.

90. Claims in contract are for actual loss. The injured party can never get more in damages
than the loss which he has suffered. If the party has suffered no loss and sues, he will
get only nominal damages – it is not unknown for this to be as little as £2 – and may
not get his costs. The intention behind the award of damages is not to punish the party
who is in breach of contract but simply to compensate the injured party.
91. It is said that the party is entitled to its expectation loss. For example, if a party
expected to make a profit from a contract, it can sue for this expectation.

R was held liable for these expenses. The court noted that though ATV did not have any
expectation losses, they had wasted expenditure in relying on R’s performance of the
contract; hence, the term reliance loss. The injured party can elect to sue for either
expectation or reliance loss.

92. The principle of remoteness of damage prevents a defendant from being made
responsible for every consequence that might arise from the defendant’s breach of
contract.

The test for remoteness: the rule in Hadley v Baxendale

The test for deciding between losses which will be compensated and those which are too
remote is known as the rule in Hadley v Baxendale (1854): The test is that such losses
are recoverable if they may fairly and reasonably be considered as falling within the
following limbs: (‘Limbs’ in this context are arguments or grounds for appeal)

(a) Arising naturally from the breach (ie. according to the usual course of things);

(b) Having been in the contemplation of both parties at the time they made the
contract.

93. Specific performance: This is a decree issued by the court or tribunal ordering the
defendant to perform a promise that he has made. It is relatively rare. When a party
seeks specific performance, the court has the power to award damages either instead of
or as well as ordering specific performance.

There are two principles that limit the scope of an award of specific performance:

a) It will not be awarded where damages are adequate;

b) It is given at the court’s discretion.

94. An injunction is a decree by the court ordering a person to do or not to do a certain act.
To the extent that an injunction is granted to require a party to honour a contract
promise, it is similar to specific performance and is governed by the same requirements
of equity. Sometimes an injunction is granted to stop a party from doing something that
breaches his contractual promise; for example, in restraint of trade clauses, an injunction
might be granted to stop an employee working for his employer’s business rival. Again,
such an injunction is subject to the requirements of equity.

95. Notice: French law requires a party to give notice to the defaulting party of the failure to
perform the obligation and request performance. A creditor puts the debtor on notice by
sending a letter or a sommation by bailiff demanding performance.

96.