Question 1

The traditional approach taken from Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd - whether the predominant function of a clause was to deter a party from breaking the contract or to compensate the innocent party for breach - leads to satisfactory results in a vast majority of cases.

Accepted Answer

The traditional approach from Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd provides a clear framework for distinguishing between penalties and liquidated damages, which generally leads to satisfactory outcomes by focusing on the intent and effect of the clause.

Question 2

Which of the below is a clause triggered by breach (e.g. concerns a secondary obligation) and thus gives rise to the question of whether it was a penalty or liquidated clause?&#10;A) B can park at a car park for 2 hours for free; however, if he stays for longer than two hours, he must pay a parking charge of &#163;85.&#10;B) B promises that if he resumes his career as professional footballer, he will pay &#163;500 to his insurers.&#10;C) B promises, that if C catches the flu after using his product, he will pay her &#163;100.&#10;D) B promises that the price of the contract will be adjusted in the event of his becoming a defaulting shareholder.

Accepted Answer

This choice involves a clause that is triggered by a breach (staying longer than the allowed time), leading to a secondary obligation (paying a parking charge), which raises the question of whether it is a penalty or a liquidated damages clause.

Question 3

The court can partially enforce a clause which is considered to be penal.

Accepted Answer

Courts generally do not enforce penal clauses because they are seen as punitive rather than compensatory. Instead, courts enforce clauses that are deemed to be liquidated damages, provided they are a reasonable pre-estimate of the loss and not punitive in nature.

Question 4

The court is bound to respect agreed specific performance clauses.

Accepted Answer

Courts are not automatically bound to enforce specific performance clauses just because they are agreed upon in a contract. The decision to grant specific performance is at the court's discretion, depending on the circumstances of the case and the nature of the contract.

Question 5

Which of the following are true of or relevant to a court's assessment of a forfeiture clause? Please select all that apply.&#10;A) The seriousness of the breach.&#10;B) The clause cannot be partially enforced.&#10;C) There must have been a breach of contract.&#10;D) The deposit must be 'reasonable'.

Accepted Answer

The answer of Which of the following are true of...

Deck 26: Agreed Remedies