REMEDIES FOR BREACH
OF CONTRACT
-
damages
specific performance
injunctions
agreed sum
quantum meruit
3 types of damages
General damages
Special damages
Nominal damages
Robinson v Harman 1848
‘The rule of the common law is, that
where a party sustains a loss by reason
of a breach of contract, he is, so far as
money can do it, to be placed in the
same situation, with respect to
damages, as if the contract had been
performed.’
Damages may be recoverable for
the following types of loss
i. financial
ii. physical inconvenience or discomfort
iii. distress or annoyance caused directly by the
physical loss caused by the breach
iv.disappointment or distress where the sole or important
object of the contract was to provide enjoyment,
peace of mind or to prevent distress
v. loss of reputation
vi.loss of opportunity where not too speculative to
calculate damages on the expectation basis
How to ‘quantify’ the
amount of damages
• Diminution in value method or
• Cost of cure (re-instatement) method or
• Consumer surplus method
Relevant factors when
quantifying damages
i. whether the innocent party has attempted to
‘mitigate’ his loss.
ii. whether the loss in question was actually
‘caused’ by the breach of contract.
iii. the issue of ‘remoteness’ of the loss from the
breach.
Addis v Gramophone Co Ltd
1909
This case has been taken as authority
for the proposition that damages are not
recoverable for disappointment, hurt
feelings, loss of reputation or distress
caused by the breach. However, since
this case a series of ‘exceptions’ have
developed to allow recovery of
damages for loss which may not be
seen as purely financial.
Loss of reputation
Malik v Bank of Credit and Commerce
International SA 1998
Aerial Advertising Co v Batchelors Peas
Ltd (Manchester) 1938
Substantial ‘physical
inconvenience or
discomfort’
Hobbs v L & S W Railway 1875
Bailey v Bullock 1950
Watts v Morrow 1991
Watts v Morrow 1991
Mr and Mrs Watts employed Mr Ralph
Morrow FRICS a surveyor to survey the
house for them. He reported that the house
would not need any major repairs, something
Mr and Mrs Watts wished to avoid at all costs.
On the basis of this report they put in an offer
of £177,500 and were successful. They soon
discovered that the house needed lots of
substantial repairs so sued the surveyor for
breach of contract for the negligent survey.
Trial judge’s assessment of
damages
On pure financial loss, the trial judge used the
cost of cure approach and awarded special
damages of £33,961.35 – the cost of the
repairs
For distress and inconvenience, he awarded
them what he called ‘modest’ damages of
£4000 each under this head ie. £8000.
Ralph Gibson LJ on damages
His Lordship concluded, after a survey of leading
cases re surveys negligently performed, that the
amount of damages for financial loss should be
calculated on the diminution in value basis ie.
£15,000 plus interest. He also said that damages
were only recoverable for ‘distress caused by the
physical consequences of the breach’ - not
available for distress per se. Thus, he awarded
them the modest sum of £750 general damages
under this head, plus interest at 15%.
Points raised in the case
i. the 2 main heads of damages at work
ii. the interplay between cost of cure and diminution in
value
iii. the approach to physical discomfort and distress
caused by physical discomfort
iv. the link between breach of contract and what physical
discomfort the breach ‘caused’
v. mitigation points – that it is based on reasonableness
–
vi. vi. that in this case they did not succeed in getting
damages for pure distress because this was not seen
by his lordship as part of the surveying contract, either
expressly or by implication.
Jarvis v Swan Tours Ltd 1973
In this case the plaintiff booked a 2 week
Christmas skiing holiday for £63.45. The court
held that there was a breach of contract and that
he was entitled to be compensated for his
disappointment and distress for the loss of his
holiday and loss of facilities that had been
promised in the brochure. He was awarded the
amount he had paid for this holiday, financial loss,
plus an additional £60 to compensate him for his
disappointment.
Knott v Bolton 1995
Originally, this ability to be awarded
damages for disappointment per se, only
applied where the ‘sole object’ of the
contract was to provide enjoyment, peace
of mind or prevent distress. Thus, in Knott v
Bolton 1995 a contract with an architect to
design a house for a couple who
contemplated that it would be their ‘dream
home’ did not qualify.
Farley v Skinner 2001
In this case the claimant who was starting his
retirement had employed a surveyor to
survey a house he intended to buy and to
report, inter alia, whether the house would be
affected by aircraft noise. He said it would not
be affected, but it was. The House of Lords
held that the claimant was entitled to
damages for the significant interference with
his enjoyment of the property caused by the
noise.
Lord Steyn
Counsel for the defendant had argued that the
plaintiff could only succeed if the sole object
of the contract had been for pleasure. Lord
Steyn noted that their argument was
strengthened by Knott v Bolton, but stated
that:
‘It is sufficient if a major or important object of
the contract is to give pleasure, relaxation or
peace of mind. In my view, Knott v Bolton
was wrongly decided and should be
overruled.’
Ruxley Electronics and
Construction Ltd v Forsyth 1994.
In the House of Lords, Lord Mustill said that there were
not 2 alternative measures of damages, cost of cure or
diminution in value. Rather, he said that there was one,
the true loss suffered by the claimant. He said that
although quite often in commercial contracts the loss to
the claimant is clearly ‘pecuniary’, in consumer
contracts quite often the loss to the claimant is difficult
to see in monetary terms. This was because the loss
may be manifested in non-monetary terms such as
pleasure, which is by definition subjective. This is what
is known as the ‘Consumer Surplus’.
Diesen v Samson 1970
In this Scottish case, the Sheriff stated that in
‘non-commercial’ contracts, if the court thinks
injured feelings were in the contemplation of the
parties in the event of breach of contract, then
damages could be awarded. Clearly in this case,
it must have been in the contemplation of both
parties that if the photographer did not turn up
then the bride would have injured feelings if she
had no photographs of her wedding day. As such
a moderate sum of £30 was awarded in damages.
McRae v Commonwealth
Disposals Commission 1951
The High Court in Australia said that it would
be too speculative to try to assess
expectation loss in terms of lost profit since
the contract had not detailed the size of the
tanker or how much oil it still contained. So
instead the court awarded ‘reliance’ loss
damages – the expenses the plaintiff had
incurred in going to search for the tanker. In
addition, they awarded damages based on
the ‘restitutionary interest’.
Working out expectation
damages
Chaplin v Hicks 1911
and
Allied Maples Group Ltd v Simmons &
Simmons 1995
A case on causation
C & P Haulage v Middleton 1983
Cases on restitutionary
damages
Surrey County Council v Bredero Homes
Ltd 1993
Attorney General v Blake 1998
Cases on remoteness of
damage
The key cases here are:
Hadley v Baxendale 1854
and
Victoria Laundry v Newman Industries Ltd
1949.
Specific performance,
injunctions, agreed sum
and quantum meruit shall
be discussed in a separate
lecture.