Remedies for Breach of Contract in the UK

Remedies – Breach Of Contract
Introduction				Reliance loss is also known as wasted expenditure
There are various remedies available to an				loss and arises when the claimant has incurred out
innocent party where there has been a breach of				of pocket or wasted expenditure in preparation of
contract. The main remedy (and the most well				or partial performance of the contract. The
known) is damages. However there are suite of				purpose of reliance loss is the same as
remedies available at law that are available in				expectation loss in that it is designed to put the
certain situations, to grant an appropriate remedy				claimant in the same position they would have
to the success claimant.				been in before the contract was entered into.
1. Unliquidated Damages				Where expectation loss can not be recovered,
				reliance loss will be claimed.c. Restitution
Unliquidated damages are assessed by the court
and are designed to compensate the innocent				Restitution is where the claimant has conferred a
party for any losses incurred as a result of a				benefit on the defendant in performing their
breach of contract. However, where loss can not				contractual duties and wants to claim that benefit
be proved, the innocent party will only be entitled				back. An example of this is where the claimant
to claim nominal damages. In the case of Surrey				has paid in advance for goods which have not
CC v Bredero Homes (1993), damages were not				been delivered.
awarded defendant who had failed to comply with				The loss is measured with regard to the value of
planning permission because the council had not				the actual benefit as opposed to the
suffered any loss. This can be contrasted with the				claimant’s loss, but will only be permitted if
case of Chaplin v Hicks (1911) where the court				there is a serious breach and a total failure of
awarded damages to the claimant for the loss of				consideration.
a chance to win a competition.				The purpose of a claim under this heading is to
Unliquidated damages are not a means by which				put both parties into the position they would have
to punish the defendant and punitive damages will				been in had the contract never been entered into,
not be awarded for a breach of contract. They				although in some situations the claimant may be
are also not a way to recover any gain made by				placed in a better position.
the defendant as a result of a breach.				The claimant is entitled to choose the basis upon
Loss includes any harm or damage to the				which to make their claim, but there are certain
claimant themselves or any of their property,				restrictions. Where the claimant has made a
including any reduction of value of such property				‘bad bargain’ they will not be entitled to
caused by the breach of contract. However, in				claim damages for a reliance loss, putting them in
calculating the loss and awarding damages, if the				a better position than they would have been in
claimant has obtained any benefit from the				had the contract been performed. In any event, it
breach the court will not usually allow the claimant				is for the defendant to prove that the claimant
to be put in a better position than they would				has made a bad bargain. In the case of C and P
have been had the breach not occurred.				Haulage v Middleton (1983), the claimant had hired
Therefore, any benefit received must be set off				a garage for 6 months and it was agreed that
against the loss.				any improvements would be the property of the
There are three ways of calculating loss and				defendant. When the defendant breached the
which one is used will depend upon the type of				contract, the claimant sued for the cost of the
loss incurred and which one will be best for the				improvements. The court held that even if the
claimant.a. Expectation Loss				contract had not been breached, the expenditure
				would have been wasted.
Expectation loss is also known as loss of bargain.				In some situations it may also be possible to
This is the traditional basis upon which damages				recover twice for the same loss under the
are assessed and is designed to put the claimant				various bases as outlined above, as long as the
in the same position they would have been had				loss itself is not duplicated.
the contract had been performed.				In general though, the claimant will seek damages
There are two ways of quantifying the damages				assessed on the expectation basis as this usually
for expectation loss. The cost of cure measure				proves to be more profitable.
or the difference in value measure. Which method				2. Liquidated Damages
is used depends on various factors including the
reason for the performance; the impact of the				Liquidated damages refers to damages set by the
claimant’s attempts to mitigate their loss; and				parties themselves where they decide upon a
whether the court believes that the claimant will				fixed sum being payable in the event of a breach
carry out the cure if awarded on this basis. In the				of contract. Where the sum is a genuine
case of Radford v De Froberville (1977), there				pre-estimate it will be enforced by the court.
was a contract for the sale of land which required				However, where is it not a genuine pre-estimate
a wall to be built to separate the land from that				it will be regarded as a ‘penalty’ which will
of the claimant. The claimant genuinely wanted				not be enforced by the court. Unliquidated
the wall to be built and was entitled to recover				damages will be awarded instead.
the cost of building a wall from the defendant. It				The case of Dunlop Pneumatic Tyres Ltd v New
was irrelevant that the land had not reduced in				garage and Motor Co. (1915) set down guidelines
value. This can be contrasted with the case of				to distinguish between liquidated damages and
Tito v Waddell (no 2) (1977) where the court				penalties. The court was of the view that the
refused to award damages to the claimant to				sum will be a penalty where:
replant land after a mining company had failed to				- it is extravagant and unconscionable;
do it because they were not convinced that the				- a larger sum will be payable where the smaller
claimant intended to use the money for this				sum is not paid; and
purpose. Therefore, damages were assessed on				- the same sums will be payable whether the
the basis of the difference in value of the land.				breach is minor or major.
There are a number of limitations on the principle				3. Equitable Remedies
of expectation:
(i) Remoteness of damage				There are a range of equitable remedies available
Where a claimant’s losses are too remote,				which are designed to remedy a breach of
damages can not be recovered. They must be				contract and enforce contractual obligations.
“within the reasonable contemplation” of				However, such remedies are discretionary and will
the parties. The application of remoteness can				not be granted as of right, but various factors will
either be from imputed or actual knowledge. In				be taken into consideration in deciding whether to
The Heron II (1969), damages were awarded for				exercise this discretion, including:
losses arising from the late delivery of sugar to				- Mutuality;
Basra. The House of Lords held that the parties				- Supervision;
must have been aware that the price of sugar				- Impossibility;
might fluctuate.				- Hardship;
With actual knowledge, any knowledge of any				- Conduct of the claimant;
special circumstances needs to be precise. In the				- Vagueness; and
case of Simpson v L and NWR (1876) it was held				- Mistake.
that the defendant was liable for the loss caused				There are two types of equitable remedies
to the claimant when he delivered goods to the				available.a. Specific Performance
Newcastle Show Ground the day after the show
had finished. This can be contrasted with the case				Specific performance is where the court orders
of Horne v Midland Railway (1873) where the				the defendant to fulfil their contractual obligations.
defendants were not held liable for the				The purpose of specific performance is to put the
exceptionally high loss of profit due to late				parties in the position they would have been in
delivery of goods as they could not have				has the contract been performed.b. Injunctions
contemplated this.
(ii) Type of loss				An injunction is a court order ordering a
Pecuniary loss is the usual ground upon which				defendant wither to do or not to do a certain act.
damages are awarded for breach of contract.				There are three types of injunctions available to a
However, damages for non-pecuniary loss are				claimant in the event of a breach of contract:
sometimes awarded in certain circumstances,				(i) Prohibitory injunction
such as:				This requires the defendant not to do something.
- Pain and suffering as a result of a physical injury;				(ii) Mandatory injunction
- Physical inconvenience;				This requires the defendant to do something.
- Damage to a commercial reputation; and				(iii) Interlocutory injunction
- Any distress caused to the claimant.				Injunctions granted prior to the final hearing are
(iii) Mitigation				designed to maintain the status quo between the
The claimant is under a duty to mitigate their loss,				parties up until the final hearing.
but only once there has been a breach of				Conclusion
contract. Where a claimant has managed to avoid
any losses, they can not recover damages for				As can be seen, damages is the usual remedy
that.				sought in the event of a breach of contract, with
(iv) Causation				equitable remedies being sought where damages
The breach of contract which occurs must have				will be inadequate to compensate the claimant for
caused and preceded the loss. It is possible for				their losses. The way in which the claimant’s
the chain of causation to be broken by a third				losses are calculated is for the claimant
party, but only if it is unforeseeable.				themselves to decide.
b. Reliance loss

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Remedies for Breach of Contract in the UK