Question Tag: Liquidated Damages

a) Essential rules concerning transfer of risk in the sale of goods:

• Intent to Transfer Risk: The risk in the goods in a contract of sale is transferred to the buyer when the parties intend it to be transferred. (3 marks)
• Default Position: Unless a different intention appears, the goods are at the seller’s risk until the property in them passes to the buyer, after which the goods are at the buyer’s risk. (3 marks)
• Fault-Based Risk: Where delivery of the goods has been delayed through the fault of either the buyer or the seller, the goods are at the risk of the party at fault as regards any loss, damage, or deterioration which might not have occurred but for the delay. (3 marks)
• Bailee’s Liability: The duties or liabilities of either seller or buyer as a bailee of the goods of the other party or any destruction, loss, or deterioration of or damage to the goods caused by the fault of either party are not affected by anything in the law. (3 marks)

(Total: 12 marks)

b)

i) Liquidated damages: Liquidated damages refer to a specific figure agreed upon by the parties themselves as a reasonable pre-estimate of the loss brought by a breach of contract rather than as a penalty for breach. Liquidated damages have three main features:

• There is a specific figure.
• This specific figure is agreed to by the parties themselves.
• This specific figure, which is agreed to by the parties themselves, is a reasonable pre-estimate of the loss occasioned by a breach of contract. (4 marks)

ii) Quantum meruit: Quantum meruit means “as much as it is worth.” It is not a claim for damages under a contract but an award to compensate a person in certain circumstances where a contract either never existed or subsequently ceased to exist, or where the contract has been breached, thereby preventing a party from performing under it. The claimant may be rewarded for their work or goods as much as they are worth in terms of reasonable value. (4 marks)

(Total: 20 marks)