HDC Heating Ltd ("HDC") is a business specialising in the supply and installation of oil-based heating systems in commercial premises. Harry, the owner and managing director of HDC, is seeking your advice regarding some problems he is having with one of his customers.

Last week, HDC supplied and installed a heating system in a new hotel that Dreams Hotels Ltd ("Dreams"), owner of a nationwide chain of hotels, was planning to open at the end of next month. Two nights ago, the oil tank situated on the roof of the hotel started to leak and it was not until the next morning that the leak was discovered. An inspection revealed that the cause of the leak was a tap on the tank not being carefully tightened on installation.

Dreams has contacted Harry and angrily explained to him that it has had to cancel 750 worth of bookings as it will be unable to open the hotel as scheduled. In addition, Dreams has had to cancel the launch evening it had planned which was going to feature an acoustic concert by a well-known singer. Dreams estimates that it would have made 5,000 on the launch night from the sale of food and drink. Harry says he had no idea about the launch evening but Dreams has disputed this, pointing out that the event was extensively advertised in the local press and on its website.

Dreams has already engaged the services of another contractor to fix the leak. It was the first company that Dreams found online and, despite charging a high price for the job, Dreams felt that it had to act quickly to minimise any further contamination of the land.

In addition to this, Harry tells you that he had agreed a completion date with Dreams for the installation of the heating system but he was three days late in completing the work. Dreams has pointed to a clause in their standard terms for commissioning contractors (a copy of which Harry signed on HDC's behalf) entitled "Agreed Compensation for Delay", which states that the contractor will pay Dreams 3,000 for each day of delay in completing the installation.

Advise Harry, explaining whether and on what basis HDC may be liable to pay damages to Dreams.

• identify the terms (express/implied) that HDC may have breached;

• explain the aim of an award of damages for breach of contract;

• explain whether the "Agreed Compensation for Delay" clause would be an enforceable specified damages clause or a penalty; and

• consider and, where relevant, apply the rules on remoteness of loss and mitigation.

Please define important terms and relevant legal principles, cite authorities and apply the principles to the facts as you do so and conclude.